CREDIT AGREEMENT

            This CREDIT AGREEMENT, dated as of August 1, 2002, is among Pepco
Holdings,
Inc. ("PHI"), Potomac Electric Power Company ("PEPCO"), Delmarva Power & Light
Company
("DPL"), Atlantic City Electric Company ("ACE" and, together with PHI, PEPCO and
DPL,
each a "Borrower" and collectively the "Borrowers"), various financial
institutions (together with
their respective successors and assigns, each a "Lender" and collectively the
"Lenders") and
Bank One, NA, a national banking association having its principal office in
Chicago, Illinois, as
administrative agent.

            The parties hereto agree as follows:

                                                                   ARTICLE I

                                                                DEFINITIONS

            1.1     Definitions. As used in this Agreement:

             "ACE" is defined in the preamble.

             "ACE Sublimit" means the lesser of (a) $300,000,000, as such amount
is reduced from
time to time pursuant to Section 2.5, and (b) the maximum amount of short-term
debt that ACE
is authorized to have outstanding by governmental authorities having
jurisdiction over ACE.

             "Administrative Questionnaire" means an administrative
questionnaire, substantially in
the form supplied by the Agent, completed by a Lender and furnished to the Agent
in connection
with this Agreement.

             "Advance" means a borrowing hereunder (i) made by the Lenders on
the same
Borrowing Date or (ii) converted or continued by the Lenders on the same date of
conversion or
continuation, consisting, in either case, of the aggregate amount of the several
Loans of the same
Type made to the same Borrower and, in the case of Eurodollar Loans, for the
same Interest
Period.

             "Affected Lender" is defined in Section 3.7.

             "Affiliate" of any Person means any other Person directly or
indirectly controlling,
controlled by or under common control with such Person. A Person shall be deemed
to control
another Person if the controlling Person owns 10% or more of any class of voting
securities (or
other ownership interests) of the controlled Person or possesses, directly or
indirectly, the power
to direct or cause the direction of the management or policies of the controlled
Person, whether
through ownership of stock, by contract or otherwise.

             "Agent" means Bank One in its capacity as contractual
representative of the Lenders
pursuant to Article X, and not in its individual capacity as a Lender, and any
successor Agent
appointed pursuant to Article X.

             "Aggregate Commitment" means the aggregate of the Commitments of
all the Lenders,
as reduced from time to time pursuant to the terms hereof.

             "Agreement" means this Credit Agreement.

             "Agreement Accounting Principles" means generally accepted
accounting principles as
in effect from time to time, applied, with respect to each Borrower, in a manner
consistent with
that used in preparing such Borrower's financial statements referred to in
Section 5.4.

             "Alternate Base Rate" means, for any day, a rate of interest per
annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds
Effective Rate for
such day plus 0.5%.

             "Applicable Margin" means, with respect to Eurodollar Advances to
any Borrower at
any time, the percentage rate per annum which is applicable at such time with
respect to
Eurodollar Advances to such Borrower in accordance with the provisions of the
Pricing
Schedule.

             "Arranger" means Banc One Capital Markets, Inc., a Delaware
corporation, and its
successors, in its capacity as Lead Arranger and Sole Book Runner.

             "Assignment Agreement" means an agreement substantially in the form
of Exhibit C.

             "Authorized Officer" means, with respect to any Borrower, any of
the President, any
Vice President, the Chief Financial Officer, the Treasurer or any Assistant
Treasurer of such
Borrower, acting singly.

             "Bank One" means Bank One, NA, a national banking association
having its principal
office in Chicago, Illinois, in its individual capacity, and its successors.

             "Borrower" is defined in the preamble.

             "Borrowing Date" means a date on which an Advance is made
hereunder.

             "Borrowing Notice" is defined in Section 2.8.

             "Business Day" means (i) with respect to any borrowing, payment or
rate selection of
Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks
generally are
open in Chicago and New York for the conduct of substantially all of their
commercial lending
activities, interbank wire transfers can be made on the Fedwire system and
dealings in United
States dollars are carried on in the London interbank market and (ii) for all
other purposes, a day
(other than a Saturday or Sunday) on which banks generally are open in Chicago
for the conduct
of substantially all of their commercial lending activities and interbank wire
transfers can be
made on the Fedwire system

             "Capitalized Lease" of a Person means any lease of Property by such
Person as lessee
which would be capitalized on a balance sheet of such Person prepared in
accordance with
Agreement Accounting Principles.

             "Capitalized Lease Obligations" of a Person means the amount of the
obligations of such
Person under Capitalized Leases which would be shown as a liability on a balance
sheet of such
Person prepared in accordance with Agreement Accounting Principles.

             "Change in Control" means an event or series of events by which (a)
any Person, or two
or more Persons acting in concert, acquire beneficial ownership (within the
meaning of Rule
13d-3 of the SEC under the Securities Exchange Act of 1934) of 30% or more (by
number of
votes) of the outstanding shares of Voting Stock of PHI; or (b) individuals who
on the date of the
closing of (and after giving effect to) the Merger Transactions were directors
of PHI (the
"Approved Directors") shall cease for any reason to constitute a majority of the
board of
directors of PHI; provided that any individual becoming a member of such board
of directors
subsequent to such date whose election or nomination for election by PHI's
shareholders was
approved by a majority of the Approved Directors shall be deemed to be an
Approved Director,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as
a result of an actual or threatened solicitation of proxies or consents for the
election or removal
of one or more directors by any Person, or two or more Persons acting in
concert, other than a
solicitation for the election of one or more directors by or on behalf of the
board of directors.

             "Closing Date" means the date on which all conditions precedent to
the making of the
initial Credit Extension have been satisfied.

             "Code" means the Internal Revenue Code of 1986.

             "Commitment" means, for each Lender, the obligation of such Lender
to make Loans,
and participate in Letters of Credit, in an aggregate amount not exceeding the
amount set forth
on Schedule 2 or as set forth in any Assignment Agreement relating to any
assignment that has
become effective pursuant to Section 12.3.2, as such amount may be modified from
time to time
pursuant to the terms hereof.

             "Conectiv" means Conectiv, a Delaware corporation.

             "Contingent Obligation" of a Person means any agreement,
undertaking or arrangement
by which such Person assumes, guarantees, endorses, contingently agrees to
purchase or provide
funds for the payment of, or otherwise becomes or is contingently liable upon,
the obligation or
liability of any other Person, or agrees to maintain the net worth or working
capital or other
financial condition of any other Person, or otherwise assures any creditor of
such other Person
against loss, including any comfort letter, operating agreement, take or pay
contract, application
for a letter of credit or the obligations of any such Person as general partner
of a partnership with
respect to the liabilities of such partnership; provided that Contingent
Obligations shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business.
The amount of any Contingent Obligation shall be deemed equal to the stated or
determinable
amount of the primary obligation of such other Person or, if such amount is not
stated or is
indeterminable, the maximum reasonably anticipated liability of such Person in
respect thereof.

             "Controlled Group" means all members of a controlled group of
corporations or other
business entities and all trades or businesses (whether or not incorporated)
under common
control which, together with any Borrower or any of its Subsidiaries, are
treated as a single
employer under Section 414 of the Code.

             "Conversion/Continuation Notice" is defined in Section 2.9.

             "Credit Extension" means the making of an Advance or the issuance
of, or extension of
the expiry date for or increase in the amount of, a Letter of Credit.

             "Default" means an event described in Article VII.

             "DPL" is defined in the preamble.

             "DPL Sublimit" means the lesser of (a) $300,000,000, as such amount
is reduced from
time to time pursuant to Section 2.5, and (b) the maximum amount of short-term
debt that DPL is
authorized to have outstanding by governmental authorities having jurisdiction
over DPL.

             "Environmental Laws" means any and all federal, state, local and
foreign statutes, laws,
judicial decisions, regulations, ordinances, rules, judgments, orders, decrees,
plans, injunctions,
permits, concessions, grants, franchises, licenses, agreements and other
governmental restrictions
relating to (i) the protection of the environment, (ii) the effect of the
environment on human
health, (iii) emissions, discharges or releases of pollutants, contaminants,
hazardous substances
or wastes into surface water, ground water or land, or (iv) the manufacture,
processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants,
hazardous substances or wastes or the clean-up or other remediation thereof.

             "ERISA" means the Employee Retirement Income Security Act of 1974.

             "Eurodollar Advance" means an Advance which, except as otherwise
provided in
Section 2.11, bears interest at the applicable Eurodollar Rate.

             "Eurodollar Base Rate" means, with respect to a Eurodollar Advance
for the relevant
Interest Period, the applicable British Bankers' Association Interest Settlement
Rate for deposits
in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time)
two Business
Days prior to the first day of such Interest Period, and having a maturity equal
to such Interest
Period, provided that (i) if Reuters Screen FRBD is not available to the Agent
for any reason, the
applicable Eurodollar Base Rate for the relevant Interest Period shall instead
be the applicable
British Bankers' Association Interest Settlement Rate for deposits in U.S.
dollars as reported by
any other generally recognized financial information service as of 11:00 a.m.
(London time) two
Business Days prior to the first day of such Interest Period, and having a
maturity equal to such
Interest Period, and (ii) if no such British Bankers' Association Interest
Settlement Rate is
available to the Agent, the applicable Eurodollar Base Rate for the relevant
Interest Period shall
instead be the rate determined by the Agent to be the rate at which Bank One or
one of its
Affiliate banks offers to place deposits in U.S. dollars with first-class banks
in the London
interbank market at approximately 11:00 a.m. (London time) two Business Days
prior to the first
day of such Interest Period, in the approximate amount of Bank One's relevant
Eurodollar Loan
and having a maturity equal to such Interest Period.

             "Eurodollar Loan" means a Loan which, except as otherwise provided
in Section 2.11,
bears interest at the applicable Eurodollar Rate.

             "Eurodollar Rate" means, with respect to a Eurodollar Advance for
the relevant Interest
Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable
to such Interest
Period, divided by (b) one minus the Reserve Requirement (expressed as a
decimal) applicable to
such Interest Period, plus (ii) the Applicable Margin.

             "Excluded Taxes" means, in the case of each Lender or applicable
Lending Installation,
the Issuer and the Agent, taxes imposed on its overall net income, and franchise
taxes imposed
on it, by (i) the jurisdiction under the laws of which such Lender, the Issuer
or the Agent is
incorporated or organized or (ii) the jurisdiction in which such Lender's, the
Issuer's or the
Agent's principal executive office or such Lender's applicable Lending
Installation is located.

             "Existing Credit Facilities" means (i) the Credit Agreement dated
as of June 30, 2000
among PEPCO, various financial institutions, and Bank One, as agent, as amended
and restated
as of June 29, 2001, (ii) the Credit Agreement (364-Day) dated as of April 6,
2001 among
Conectiv, various financial institutions and Bank One, as administrative agent,
(iii) the Credit
Agreement (Five Year) dated as of February 4, 1998 among Conectiv, various
financial
institutions and Bank One (then known as The First National Bank of Chicago), as
administrative agent, (iv) the 364-Day Credit Agreement dated as of November 16,
2001 among
Potomac Capital Investment Corporation, various financial institutions and The
Bank of Nova
Scotia, as administrative agent, and (v) the Credit Agreement (Three-Year) dated
as of January
31, 2000 among DPL, various financial institutions and First Union National
Bank, as
administrative agent.

             "Existing Letter of Credit" means a letter of credit listed on
Schedule 7.

             "Extension Request" means a request to extend the Facility
Termination Date for a
Borrower substantially in the form of Exhibit E.

             "Facility Fee Rate" means, at any time for any Borrower, the
"Facility Fee Rate"
applicable for such Borrower at such time in accordance with the provisions of
the Pricing
Schedule.

             "Facility Termination Date" means, with respect to any Borrower,
July 30, 2003 or
any earlier date on which such Borrower's Sublimit is reduced to zero or the
obligations of the
Lenders to make Credit Extensions to such Borrower is terminated pursuant to
Section 8.1.

             "Federal Funds Effective Rate" means, for any day, an interest rate
per annum equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published for such
day (or, if such day is not a Business Day, for the immediately preceding
Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such
day on such transactions received by the Agent from three Federal funds brokers
of recognized
standing selected by the Agent in its sole discretion.

             "Floating Rate Advance" means an Advance which, except as otherwise
provided in
Section 2.11, bears interest at the Alternate Base Rate.

             "Floating Rate Loan" means a Loan which, except as otherwise
provided in Section 2.11,
bears interest at the Alternate Base Rate.

             "FRB" means the Board of Governors of the Federal Reserve System
and any successor
thereto.

             "Granting Lender" is defined in Section 12.5.

             "Indebtedness" of a Person means, without duplication, such
Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
Property or services
(other than accounts payable arising in the ordinary course of such Person's
business payable on
terms customary in the trade), (iii) obligations, whether or not assumed,
secured by Liens or
payable out of the proceeds or production from Property now or hereafter owned
or acquired by
such Person, (iv) obligations which are evidenced by notes, bonds, debentures,
acceptances or
similar instruments, (v) obligations of such Person to purchase accounts,
securities or other
Property arising out of or in connection with the sale of the same or
substantially similar
accounts, securities or Property, (vi) Capitalized Lease Obligations, (vii) net
liabilities under
interest rate swap, exchange or cap agreements, obligations or other liabilities
with respect to
accounts or notes, (viii) obligations under any Synthetic Lease which, if such
Synthetic Lease
were accounted for as a Capitalized Lease, would appear on a balance sheet of
such Person, (ix)
unpaid reimbursement obligations in respect of letters of credit issued for the
account of such
Person and (x) Contingent Obligations in respect of Indebtedness of the types
described above.

             "Intangible Transition Property" means assets described as
"bondable transition
property" in the New Jersey Transition Bond Statute.

             "Interest Period" means, with respect to a Eurodollar Advance, a
period of one, two,
three or six months commencing on a Business Day selected by the applicable
Borrower
pursuant to this Agreement. Such Interest Period shall end on the day which
corresponds
numerically to such date one, two, three or six months thereafter, provided that
if there is no such
numerically corresponding day in such next, second, third or sixth succeeding
month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding
month. If an Interest Period would otherwise end on a day which is not a
Business Day, such
Interest Period shall end on the next succeeding Business Day, provided that if
said next
succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the
immediately preceding Business Day. No Borrower may select an Interest Period
which ends
after the scheduled Facility Termination Date.

             "Issuer" means Bank One in its capacity as issuer of Letters of
Credit hereunder.

             "LC Fee Rate" means, at any time for any Borrower, the "LC Fee
Rate" applicable for
such Borrower at such time in accordance with the provisions of the Pricing
Schedule.

             "LC Obligations" means, with respect to any Borrower at any time,
the sum, without
duplication, of (a) the aggregate undrawn stated amount of all Letters of Credit
issued for the
account of such Borrower at such time plus (b) the aggregate unpaid amount of
all
Reimbursement Obligations of such Borrower at such time.

             "Lender" is defined in the preamble.

             "Lending Installation" means, with respect to a Lender, the office,
branch, subsidiary or
affiliate of such Lender specified as such in its Administrative Questionnaire
or otherwise
selected by such Lender pursuant to Section 2.17.

             "Letter of Credit" means any letter of credit issued pursuant to
Section 2.19.1 and any
Existing Letter of Credit.

             "Letter of Credit Application" is defined in Section 2.19.3.

             "Letter of Credit Sublimit" means the lesser of $300,000,000 and
the amount of the
Aggregate Commitment.

             "Letter of Credit Payment Date" is defined in Section 2.19.5.

             "Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment,
deposit arrangement, encumbrance or preference, priority or other security
agreement or
preferential arrangement of any kind or nature whatsoever (including the
interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement, but
excluding the interest of a lessor under any operating lease).

             "Loan" means, with respect to a Lender, any loan made by such
Lender pursuant to
Article II (or any conversion or continuation thereof).

             "Loan Documents" means this Agreement, any Note, any Letter of
Credit and any Letter
of Credit Application.

             "Material Adverse Effect" means, with respect to any Borrower, a
material adverse effect
on (i) the business, Property, financial condition or results of operations of
such Borrower and its
Subsidiaries taken as a whole, (ii) the ability of such Borrower to perform its
obligations under
the Loan Documents or (iii) the validity or enforceability of any of the Loan
Documents to which
such Borrower is a party or the rights or remedies of the Agent, the Issuer or
the Lenders against
such Borrower thereunder; provided that in no event shall any Permitted ACE
Asset Sale,
Permitted PHI Asset Sale, Permitted DPL Asset Sale or Permitted PEPCO
Distribution,
individually or in the aggregate, be deemed to cause or result in a Material
Adverse Effect.

             "Material Indebtedness" is defined in Section 7.5.

             "Maturity Date" means, with respect to any Borrower, the scheduled
Facility
Termination Date for such Borrower or such earlier date on which the Obligations
of such
Borrower become due and payable pursuant to Section 8.1.

             "Merger Agreement" means the Agreement and Plan of Merger dated as
of February 9,
2001 among PEPCO, PHI and Conectiv.

             "Merger Transactions" means the merger of a wholly-owned subsidiary
of PHI with and
into PEPCO and the merger of a separate wholly-owned subsidiary of PHI with and
into
Conectiv, in each case substantially on the terms set forth in the Merger
Agreement.

             "Modify" and "Modification" are defined in Section 2.19.1.

             "Moody's" means Moody's Investors Service, Inc.

             "Multiemployer Plan" means a Plan maintained pursuant to a
collective bargaining
agreement or any other arrangement to which any Borrower or any other member of
the
Controlled Group is a party to which more than one employer is obligated to make
contributions.

             "Net Worth" means, with respect to any Borrower at any time, the
sum, without
duplication, at such time of (a) such Borrower's stockholders' equity plus (b)
all Preferred Stock
of such Borrower (excluding any Preferred Stock which is mandatorily redeemable
on or prior to
the scheduled Facility Termination Date) plus (c) all Trust Preferred Securities
of such Borrower
or any of its Subsidiaries.

             "New Jersey Transition Bond Statute" means the New Jersey Electric
Discount and
Energy Corporation Act as in effect on the date hereof.

             "Nonrecourse Indebtedness" means, with respect to a Borrower,
Indebtedness of such
Borrower or any Subsidiary of such Borrower (excluding Nonrecourse Transition
Bond Debt)
secured by a Lien on the Property of such Borrower or such Subsidiary, as the
case may be, the
sole recourse for the payment of which is such Property and where neither PHI
nor any of its
Subsidiaries is liable for any deficiency after the application of the proceeds
of such Property.

             "Nonrecourse Transition Bond Debt" means obligations evidenced by
Transition Bonds
rated investment grade or better by S&P or Moody's, representing a
securitization of Intangible
Transition Property as to which obligations no Borrower nor any Subsidiary of a
Borrower (other
than a Special Purpose Subsidiary) has any direct or indirect liability (whether
as primary
obligor, guarantor, surety, provider of collateral security, through a put
option, asset repurchase
agreement, capital maintenance agreement or debt subordination agreement, or
through any other
right or arrangement of any nature providing direct or indirect assurance of
payment or
performance of any such obligation in whole or in part), except for liability to
repurchase
Intangible Transition Property conveyed to the securitization vehicle, on terms
and conditions
customary in receivables securitizations, in the event such Intangible
Transition Property violates
representations and warranties of scope customary in receivables
securitizations.

"Non-U.S. Lender" is defined in Section 3.5(iv).

             "Note" means any promissory note substantially in the form of
Exhibit C issued at the
request of a Lender pursuant to Section 2.13.

             "Obligations" means, with respect to any Borrower, all unpaid
principal of the Loans to
such Borrower, all Reimbursement Obligations of such Borrower, all accrued and
unpaid interest
on such Loans and Reimbursement Obligations, all accrued and unpaid fees payable
by such
Borrower and all expenses, reimbursements, indemnities and other obligations
payable by such
Borrower to the Agent, the Issuer, any Lender or any other Indemnified Party
arising under any
Loan Document.

             "Other Taxes" is defined in Section 3.5(ii).

             "Outstanding Credit Extensions" means, with respect to any
Borrower, the sum of the
aggregate principal amount of all outstanding Loans to such Borrower plus all LC
Obligations of
such Borrower.

             "Participants" is defined in Section 12.2.1.

             "Payment Date" means the last Business Day of each March, June,
September and
December.

             "PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.

             "PCI" means Potomac Capital Investment Corporation.

             "PEPCO" is defined in the preamble.

             "PEPCO Sublimit" means $300,000,000, as such amount is reduced from
time to time
pursuant to Section 2.5.

             "Permitted ACE Asset Sale" means (a) the sale of the capital stock
or assets of any
Subsidiary of ACE other than a Significant Subsidiary of ACE, provided that the
fair market
value of all sales permitted solely by this clause shall not exceed $10,000,000
in the aggregate
during the term of this Agreement;

            (b)     the sale of the non-strategic generating assets of ACE as
described on Schedule 8;
and

             (c)     the sale or transfer to PHI or a Subsidiary thereof (but
not PEPCO or DPL or a
Subsidiary of either of the foregoing) of any of the generating assets of ACE
described on
Schedule 8.

             "Permitted ACE Liens" means the Lien of the Mortgage and Deed of
Trust dated
January 15, 1937 between ACE and The Bank of New York.

             "Permitted DPL Asset Sales" means the sale of the capital stock or
assets of any
Subsidiary of DPL other than a Significant Subsidiary of DPL, provided that the
fair market
value of all such sales shall not exceed $10,000,000 in the aggregate during the
term of this
Agreement.

             "Permitted DPL Liens" means the Lien of the Mortgage and Deed of
Trust dated
October 1, 1943 between DPL and The Chase Manhattan Bank, as trustee.

             "Permitted PEPCO Distributions" means (a) the dividend of
$400,000,000 by PEPCO to
PHI and the expenditure by PHI of such funds in connection with the Merger
Transactions and
(b) the dividend or distribution by PEPCO to PHI of all of the capital stock of
PCI and Pepco
Energy Services, Inc.

             "Permitted PEPCO Liens" means (a) the Lien of the Mortgage and Deed
of Trust dated
July 1, 1936 from PEPCO to The Bank of New York; and (b) the Lien created by the
$152,000,000 sale/leaseback on November 30, 1994 of PEPCO's control center.

             "Permitted PHI Asset Sale" means the sale of the centralized steam
and chilled water
production facility located on an approximately three-quarter acre site on the
northeastern corner
of the intersection of Atlantic and Ohio Avenues in Atlantic City, New Jersey
and related
distribution facilities.

             "Permitted PHI Liens" means (a) Liens on assets of Conectiv Energy
Supply, Inc. or any
other Subsidiary of PHI (other than a Subsidiary Borrower or any Subsidiary
thereof) which is
engaged primarily in the energy trading business (a "Trading Subsidiary") to
secure obligations
arising under energy trading agreements entered into in the ordinary course of
business
consistent with the past practice of DPL prior to September of 1999 and Liens on
cash collateral
to secure guaranties by PHI or Conectiv of the obligations of any Trading
Subsidiary under such
energy trading agreements, provided that the aggregate amount of all such cash
collateral granted
by PHI and Conectiv shall not at any time exceed $10,000,000; (b) Liens on the
interests of (i)
Conectiv Services, Inc., or any other Subsidiary of PHI (other than a Subsidiary
Borrower or any
Subsidiary thereof) which may hereafter own the stock of CTS (the "CTS Parent"),
in the capital
stock of Conectiv Thermal Systems, Inc. ("CTS"), (ii) CTS in Atlantic Jersey
Thermal Systems,
Inc. ("AJTS"), Thermal Energy Limited Partnership I ("TELP I") and ATS Operating
Services,
Inc. and (iii) AJTS in TELP I, in each case securing Indebtedness of CTS for
which neither PHI
nor any of its Subsidiaries (other than CTS and its Subsidiaries and, solely
with respect to the
pledge of its interest in the capital stock of CTS, the CTS Parent) has any
liability (contingent or
otherwise); (c) Liens granted by a bankruptcy remote Subsidiary (the "SPV") of
PHI to facilitate
a structured financing in an amount not exceeding $200,000,000; (d) Liens on the
stock or assets
of one or more Subsidiaries of PHI, other than PEPCO, DPL or ACE, in favor of
the SPV;
(e) Liens on the assets of Conectiv Bethlehem, Inc. (together with any successor
thereto so long
as the primary business of such successor is the direct or indirect ownership
and development of
the Bethlehem Project (as defined below), "CBI") and other Subsidiaries of PHI,
and/or on the
capital stock of CBI, to finance the development and construction of a mid-merit
electric
generating facility in Bethlehem, Pennsylvania (the "Bethlehem Project"),
provided that (i) the
aggregate principal amount of the Indebtedness secured by such Liens shall not
exceed
$400,000,000 and (ii) such Liens (other than Liens granted by CBI and its
Subsidiaries) shall
only be granted on assets related to the Bethlehem Project; (f) Liens on the
real property known
as Edison Place, located at 701 Ninth Street, Washington, DC 20068, currently
owned by PCI,
securing Nonrecourse Indebtedness (which shall not exceed 90% of the fair market
value of such
real property at the time of the creation of such Liens); and (g) Liens on the
assets of Conectiv
Pennsylvania Generation, Inc. ("CPG") and/or on the capital stock of CPG, or its
successor, to
finance the development and construction of a mid-merit electric generating
facility in the State
of Pennsylvania (the "CPG Project"), provided that (i) the aggregate principal
amount of the
Indebtedness secured by such Liens shall not exceed $400,000,000 and (ii) such
Liens (other
than Liens granted by CPG and its Subsidiaries) shall only be granted on assets
related to the
CPG Project.

             "Person" means any natural person, corporation, firm, joint
venture, partnership, limited
liability company, association, enterprise, trust or other entity or
organization, or any government
or political subdivision or any agency, department or instrumentality thereof.

             "PHI" is defined in the preamble.

             "PHI Sublimit" means $1,000,000,000, as such amount is reduced from
time to time
pursuant to Section 2.5.

             "Plan" means an employee pension benefit plan which is covered by
Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code as to
which any
Borrower or any other member of the Controlled Group may have any liability.

             "Preferred Stock" means, with respect to any Person, equity
interests issued by such
Person that are entitled to a preference or priority over any other equity
interests issued by such
Person upon any distribution of such Person's property and assets, whether by
dividend or upon
liquidation.

             "Pricing Schedule" means Schedule 1 hereto.

             "Prime Rate" means a rate per annum equal to the prime rate of
interest announced by
Bank One or by its parent, Bank One Corporation, from time to time, changing
when and as such
prime rate changes.

             "Property" of a Person means any and all property, whether real,
personal, tangible,
intangible, or mixed, of such Person, or other assets owned, leased or operated
by such Person.

             "Pro Rata Share" means, with respect to any Lender, the percentage
which such Lender's
Commitment constitutes of the Aggregate Commitment (and/or, to the extent the
Commitments
have terminated, the percentage which such Lender's Loans and participation in
LC Obligations
constitutes of the aggregate principal amount of all Loans and LC Obligations).
The initial Pro
Rata Share of each Lender is set forth on Schedule 2.

             "Public Reports" means (a) in the case of PEPCO, (i) its annual
report on Form 10-K for
the year ended December 31, 2001, and (ii) its quarterly report on Form 10-Q
filed with the SEC
on May 10, 2002; (b) in the case of DPL, (i) its annual report on Form 10-K for
the year ended
December 31, 2001, and (ii) its quarterly report on Form 10-Q filed with the SEC
on May 15
2002; (c) in the case of ACE, (i) its annual report on Form 10-K for the year
ended December 31,
2001, and (ii) its quarterly report on Form 10-Q filed with the SEC on May 15,
2002; and (d) in
the case of PHI, (i) its Form 8-K filed with the SEC on June 7, 2002, and (ii)
each of the reports
referred to in clauses (a), (b) and (c) above.

             "PUHCA" means the Public Utility Holding Company Act of 1935.

             "Purchasers" is defined in Section 12.3.1.

             "Reimbursement Obligations" means, with respect to any Borrower at
any time, the
aggregate amount of all obligations of such Borrower then outstanding under
Section 2.19.6 to
reimburse the Issuer for amounts paid by the Issuer in respect of one or more
drawings under
Letters of Credit.

             "Reportable Event" means a reportable event, as defined in Section
4043 of ERISA, with
respect to a Plan, excluding, however, such events as to which the PBGC has by
regulation
waived the requirement of Section 4043(a) of ERISA that it be notified within 30
days of the
occurrence of such event, provided that a failure to meet the minimum funding
standard of
Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event
regardless of
the issuance of any such waiver of the notice requirement in accordance with
either Section
4043(a) of ERISA or Section 412(d) of the Code.

             "Required Lenders" means Lenders in the aggregate having at least
51% of the
Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the
aggregate holding at least 51% of the aggregate unpaid principal amount of the
Outstanding
Credit Extensions to all Borrowers.

             "Reserve Requirement" means, with respect to an Interest Period,
the maximum
aggregate reserve requirement (including all basic, supplemental, marginal and
other reserves)
which is imposed under Regulation D of the FRB on Eurocurrency liabilities.

             "S&P" means Standard and Poor's Ratings Services, a division of The
McGraw Hill
Companies, Inc.

             "SEC" means the Securities and Exchange Commission.

             "Securitization Transaction" means any sale, assignment or other
transfer by a Borrower
or a Subsidiary thereof of accounts receivable or other payment obligations
owing to such
Borrower or such Subsidiary or any interest in any of the foregoing, together in
each case with
any collections and other proceeds thereof, any collection or deposit accounts
related thereto, and
any collateral, guaranties or other property or claims in favor of such Borrower
or such
Subsidiary supporting or securing payment by the obligor thereon of, or
otherwise related to, any
such receivables.

             "Significant Subsidiary" means, with respect to any Borrower, a
"significant subsidiary"
(as defined in Regulation S-X of the SEC as in effect on the date of this
Agreement) of such
Borrower; provided that after consummation of the Merger Transactions, each of
PEPCO, DPL
and ACE shall at all times be a Significant Subsidiary of PHI.

             "Single Employer Plan" means, with respect to a Borrower, a Plan
maintained by such
Borrower or any member of the Controlled Group for employees of such Borrower or
any
member of the Controlled Group.

             "SPC" is defined in Section 12.5.

             "SPV" is defined in the definition of Permitted PHI Liens.

             "Special Purpose Subsidiary" means a direct or indirect wholly
owned corporate
Subsidiary of ACE, substantially all of the assets of which are Intangible
Transition Property and
proceeds thereof, formed solely for the purpose of holding such assets and
issuing Transition
Bonds and, which complies with the requirements customarily imposed on
bankruptcy-remote
corporations in receivables securitizations.

             "Sublimit" means each of the PHI Sublimit, the PEPCO Sublimit, the
DPL Sublimit and
the ACE Sublimit.

             "Sublimit Percentage" means, with respect to any Subsidiary
Borrower, the percentage
which such Subsidiary Borrower's Sublimit is of the aggregate amount of the
Sublimits of all
Subsidiary Borrowers (without regard to the Subsidiary Borrower Sublimit).

             "Subsidiary" of a Person means (i) any corporation more than 50% of
the outstanding
securities having ordinary voting power of which shall at the time be owned or
controlled,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and
one or more of its Subsidiaries, or (ii) any partnership, limited liability
company, association,
business trust, joint venture or similar business organization more than 50% of
the ownership
interests having ordinary voting power of which shall at the time be so owned or
controlled.

             "Subsidiary Borrower" means each of PEPCO, DPL and ACE; and
"Subsidiary
Borrowers" means all of the foregoing.

             "Subsidiary Borrower Sublimit" means the lesser of (a)
$500,000,000, as such amount is
reduced from time to time pursuant to Section 2.5; and (b) the sum of the
Sublimits of all
Subsidiary Borrowers.

             "Substantial Portion" means, at any time with respect to the
Property of any Person,
Property which represents more than 10% of the consolidated assets of such
Person and its
Subsidiaries as shown in the consolidated financial statements of such Person
and its
Subsidiaries as at the last day of the preceding fiscal year of such Person.

             "Synthetic Lease" means (a) a so-called synthetic, off-balance
sheet or tax retention lease
or (b) any other agreement pursuant to which a Person obtains the use or
possession of property
and which creates obligations that do not appear on the balance sheet of such
Person but which,
upon the insolvency or bankruptcy of such Person, would be characterized as
indebtedness of
such Person (without regard to accounting treatment).

             "Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions,
charges or withholdings, and any and all liabilities with respect to the
foregoing which arise from
or relate to any payment made hereunder or under any Note or Letter of Credit
Application, but
excluding Excluded Taxes and Other Taxes.

             "Total Capitalization" means, with respect to any Borrower at any
time, the sum of the
Total Indebtedness of such Borrower plus the Net Worth of such Borrower, each
calculated at
such time.

             "Total Indebtedness" means, with respect to any Borrower at any
time, all Indebtedness
of such Borrower and its Subsidiaries at such time determined on a consolidated
basis in
accordance with Agreement Accounting Principles, excluding, to the extent
otherwise included
in Indebtedness of such Borrower or any of its Subsidiaries, (a) debentures
issued in connection
with Trust Preferred Securities; (b) any Nonrecourse Transition Bond Debt; (c)
any Nonrecourse
Indebtedness listed on Schedule 6; (d) to the extent it constitutes Nonrecourse
Indebtedness, any
Indebtedness secured by liens described in clause (e), (f) or (g) of the
definition of Permitted PHI
Liens; (e) any other Nonrecourse Indebtedness of PHI and its Subsidiaries
(excluding any
Subsidiary Borrower and its Subsidiaries) to the extent that the aggregate
amount of such
Nonrecourse Indebtedness does not exceed $200,000,000; and (f) the amount of any
medium
term notes issued by PCI (but not more than the fair market value of the equity
collateral
accounts in PCI's energy leveraged lease portfolio).

             "Transferee" is defined in Section 12.4.

             "Transition Bonds" means bonds described as "transition bonds" in
the New Jersey
Transition Bond Statute.

             "Trust Preferred Securities" means the securities described on
Schedule 3.

             "Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or a
Eurodollar Advance.

             "Unmatured Default" means an event which but for the lapse of time
or the giving of
notice, or both, would constitute a Default.

             "Utilization Fee Rate" means, at any time for any Borrower, the
"Utilization Fee Rate"
applicable for such Borrower at such time in accordance with the Pricing
Schedule.

             "Voting Stock" means, with respect to any Person, voting stock of
any class or kind
ordinarily having the power to vote for the election of directors, managers or
other voting
members of the governing body of such Person.

            Interpretation.

            (a)     The meanings of defined terms are equally applicable to the
singular and plural
forms of such terms.

            (b)     Article, Section, Schedule and Exhibit references are to
this Agreement unless
otherwise specified.

            (c)     The term "including" is not limiting and means "including
without limitation."

            (d)     In the computation of periods of time from a specified date
to a later specified date,
the word "from" means "from and including"; the words "to" and "until" each mean
"to but
excluding", and the word "through" means "to and including."

            (e)     Unless otherwise expressly provided herein, (i) references
to agreements (including
this Agreement) and other contractual instruments shall be deemed to include all
subsequent
amendments and other modifications thereto, but only to the extent such
amendments and other
modifications are not prohibited by the terms of this Agreement, and (ii)
references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions
consolidating, amending, replacing, supplementing or interpreting such statute
or regulation.

            1.3     Accounting. (a) Except as provided to the contrary herein,
all accounting terms
used herein shall be interpreted and all accounting determinations hereunder
shall be made in
accordance with Agreement Accounting Principles, except that any calculation or
determination
which is to be made on a consolidated basis shall be made for the applicable
Borrower and all of
its Subsidiaries, including those Subsidiaries of such Borrower, if any, which
are unconsolidated
on such Borrower's audited financial statements.

            (b)     If at any time any change in Agreement Accounting Principles
would affect the
computation of any financial ratio or requirement set forth herein with respect
to any Borrower
and either such Borrower or the Required Lenders shall so request, the Agent,
the Lenders and
such Borrower shall negotiate in good faith to amend such ratio or requirement
to preserve the
original intent thereof in light of such change in Agreement Accounting
Principles (subject to the
approval of the Required Lenders); provided that, until so amended, (i) such
ratio or requirement
shall continue to be computed in accordance with Agreement Accounting Principles
as in effect
prior to such change and (ii) such Borrower shall provide to the Agent and the
Lenders financial
statements and other documents required under this Agreement setting forth a
reconciliation
between calculations of such ratio or requirement made before and after giving
effect to such
change in Agreement Accounting Principles.

                                                                  ARTICLE II

                                                               THE CREDITS

            2.1     Commitment. Each Lender severally agrees, on the terms and
conditions set forth
in this Agreement, to make Loans to any Borrower, and to participate in Letters
of Credit issued
upon the request of any Borrower, in amounts not to exceed in the aggregate at
any one time
outstanding the amount of such Lender's Commitment; provided that (i) the
aggregate principal
amount of all Loans by such Lender to any Borrower shall not exceed such
Lender's Pro Rata
Share of the aggregate principal amount of all Loans to such Borrower; (ii) such
Lender's
participation in Letters of Credit issued for the account of any Borrower shall
not exceed such
Lender's Pro Rata Share of all LC Obligations of such Borrower; (iii) the
Outstanding Credit
Extensions to PHI shall not at any time exceed the PHI Sublimit; (iv) the
Outstanding Credit
Extensions to PEPCO shall not any time exceed the PEPCO Sublimit; (v) the
Outstanding Credit
Extensions to DPL shall not at any time exceed the DPL Sublimit; (vi) the
Outstanding Credit
Extensions to ACE shall not at any time exceed the ACE Sublimit; (vii) the
Outstanding Credit
Extensions to all Subsidiary Borrowers collectively shall not at any time exceed
the Subsidiary
Borrower Sublimit; and (viii) the LC Obligations of all Borrowers collectively
shall not at any
time exceed the Letter of Credit Sublimit. Within the foregoing limits, each
Borrower may from
time to time borrow, prepay pursuant to Section 2.7 and reborrow hereunder prior
to the Facility
Termination Date for such Borrower.

            2.2     Required Payments; Termination. All outstanding Advances to
any Borrower and
all other unpaid Obligations of such Borrower shall be paid in full by such
Borrower on the
Maturity Date for such Borrower.

            2.3     Ratable Loans. Each Advance hereunder shall be made by the
Lenders ratably in
accordance with their Pro Rata Shares.

            2.4     Types of Advances. The Advances to any Borrower may be
Floating Rate
Advances or Eurodollar Advances, or a combination thereof, as selected by such
Borrower in
accordance with Sections 2.8 and 2.9.

            2.5     Facility Fee; Utilization Fee; Reductions in Aggregate
Commitment. (a) Each
Borrower agrees to pay to the Agent for the account of the Lenders according to
their Pro Rata
Shares a facility fee at a per annum rate equal to the Facility Fee Rate for
such Borrower on the
daily amount of (i) in the case of PHI, the PHI Sublimit, and (ii) in the case
of each Subsidiary
Borrower, such Subsidiary Borrower's Sublimit Percentage of the Subsidiary
Borrower Sublimit
(in each case regardless of the amount of Outstanding Credit Extensions to such
Borrower);
provided that if the obligations of the Lenders to make Credit Extensions to a
Borrower have
been terminated pursuant to Section 8.1, the facility fee shall be based on the
Outstanding Credit
Extensions to such Borrower. Facility fees payable by each Borrower shall accrue
from the
Closing Date to the Facility Termination Date for such Borrower (or, if later,
to the date all of
such Borrower's Obligations have been paid in full) and shall be payable on each
Payment Date
and on the Facility Termination Date (and, if applicable, thereafter on demand).

            (b)      PHI agrees to pay to the Agent for the account of the
Lenders according to their
Pro Rata Shares a utilization fee, for each day on which the Outstanding Credit
Extensions to
PHI exceed 33-1/3% of the PHI Sublimit, at a rate per annum equal to the
Utilization Fee Rate
for PHI on the Outstanding Credit Extensions to PHI on such day, payable on each
Payment
Date and on the Facility Termination Date for PHI.

            (c)      Each Subsidiary Borrower agrees to pay to the Agent for the
account of the
Lenders according to their Pro Rata Shares a utilization fee, for each day on
which the
Outstanding Credit Extensions to all Subsidiary Borrowers exceed 33-1/3% of the
Subsidiary
Borrower Sublimit, at a rate per annum equal to the Utilization Fee Rate for
such Subsidiary
Borrowers on the Outstanding Credit Extensions to such Subsidiary Borrower on
such day,
payable on each Payment Date and on the Facility Termination Date for such
Subsidiary
Borrower.

            (d)      Any Borrower may permanently reduce such Borrower's
Sublimit, and the
Subsidiary Borrowers acting collectively may reduce the Subsidiary Borrower
Sublimit, in each
case in whole, or in part ratably among the Lenders in accordance with their Pro
Rata Shares,
and in integral multiples of $10,000,000, upon at least five Business Days'
written notice to the
Agent, which notice shall specify the amount of any such reduction, provided
that (i) no
Borrower's Sublimit may be reduced below the amount of the Outstanding Credit
Extensions to
such Borrower and (ii) the Subsidiary Borrower Sublimit may not be reduced below
the amount
of the Outstanding Credit Extensions to all Subsidiary Borrowers. Any reduction
of the PHI
Sublimit or the Subsidiary Borrower Sublimit shall reduce the Aggregate
Commitment by a
corresponding amount. No reduction of a Subsidiary Borrower's individual
Sublimit shall reduce
the Aggregate Commitment except to the extent that such reduction reduces the
amount of the
Subsidiary Borrower Sublimit.

            2.6      Minimum Amount of Each Advance. Each Advance shall be in
the amount of
$10,000,000 or a higher integral multiple of $1,000,000; provided that any
Floating Rate
Advance may be in the amount of the unused Aggregate Commitment or in the amount
of the
applicable Borrower's unused Sublimit.

            2.7      Prepayments. Any Borrower may from time to time prepay,
without penalty or
premium, all outstanding Floating Rate Advances to such Borrower or, in the
amount of
$10,000,000 or a higher integral multiple of $1,000,000, any portion of the
outstanding Floating
Rate Advances to such Borrower, upon notice to the Agent not later than 10:00
a.m. (Chicago
time) on any Business Day. Any Borrower may from time to time prepay, subject to
the
payment of any funding indemnification amounts required by Section 3.4 but
without penalty or
premium, all outstanding Eurodollar Advances to such Borrower or, in the amount
of
$10,000,000 or a higher integral multiple of $1,000,000, any portion of the
outstanding
Eurodollar Advances to such Borrower upon three Business Days' prior notice to
the Agent.

            2.8      Method of Selecting Types and Interest Periods for New
Advances. The
applicable Borrower shall select the Type of Advance and, in the case of each
Eurodollar
Advance, the Interest Period applicable thereto from time to time. The
applicable Borrower shall
give the Agent irrevocable notice (a "Borrowing Notice") not later than 10:00
a.m. (Chicago
time) on the Borrowing Date of each Floating Rate Advance to such Borrower and
three
Business Days before the Borrowing Date for each Eurodollar Advance to such
Borrower,
specifying:

(i)

the Borrowing Date, which shall be a Business Day, of such Advance,

(ii)

the aggregate amount of such Advance,

(iii)

the Type of Advance selected, and

(iv)

in the case of each Eurodollar Advance, the Interest Period applicable thereto.

Not later than noon (Chicago time) on each Borrowing Date, each Lender shall
make available
its Loan or Loans in funds immediately available in Chicago to the Agent at its
address specified
pursuant to Article XIII. The Agent will promptly make the funds so received
from the Lenders
available to the applicable Borrower at the Agent's aforesaid address.

            2.9      Conversion and Continuation of Outstanding Advances.
Floating Rate Advances
shall continue as Floating Rate Advances unless and until such Floating Rate
Advances are
converted into Eurodollar Advances pursuant to this Section 2.9 or are repaid in
accordance with
Section 2.7. Each Eurodollar Advance shall continue as a Eurodollar Advance
until the end of
the then applicable Interest Period therefor, at which time such Eurodollar
Advance shall be
automatically converted into a Floating Rate Advance unless (x) such Eurodollar
Advance is or
was repaid in accordance with Section 2.7 or (y) the applicable Borrower shall
have given the
Agent a Conversion/Continuation Notice requesting that, at the end of such
Interest Period, such
Eurodollar Advance continue as a Eurodollar Advance for a subsequent Interest
Period. Subject
to the terms of Section 2.6 any Borrower may elect from time to time to convert
all or any part of
a Floating Rate Advance into a Eurodollar Advance. Such Borrower shall give the
Agent
irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a
Floating Rate
Advance into a Eurodollar Advance or continuation of a Eurodollar Advance not
later than 10:00
a.m. (Chicago time) at least three Business Days prior to the date of the
requested conversion or
continuation, specifying

(i)

the requested date, which shall be a Business Day, of such conversion or
continuation,

(ii)

the aggregate amount and Type of the Advance which is to be converted or
continued, and

(iii)

the amount of such Advance which is to be converted into or continued as a
Eurodollar Advance and the duration of the Interest Period applicable thereto

            2.10      Changes in Interest Rate, etc. Each Floating Rate Advance
shall bear interest on
the outstanding principal amount thereof, for each day from the date such
Advance is made or is
converted from a Eurodollar Advance into a Floating Rate Advance pursuant to
Section 2.9 to
the date it is paid or is converted into a Eurodollar Advance pursuant to
Section 2.9, at a rate per
annum equal to the Alternate Base Rate for such day. Changes in the rate of
interest on that
portion of any Advance maintained as a Floating Rate Advance will take effect
simultaneously
with each change in the Alternate Base Rate. Each Eurodollar Advance shall bear
interest on the
outstanding principal amount thereof from the first day of each Interest Period
applicable thereto
to the last day of such Interest Period at the Eurodollar Rate applicable to
such Eurodollar
Advance based upon the applicable Borrower's selections under Sections 2.8 and
2.9 and
otherwise in accordance with the terms hereof.

            2.11      Rates Applicable After Default. Notwithstanding anything
to the contrary
contained in Section 2.8 or 2.9, during the continuance of a Default or
Unmatured Default with
respect to a Borrower, the Required Lenders may, at their option, by notice to
such Borrower
(which notice may be revoked at the option of the Required Lenders
notwithstanding any
provision of Section 8.2 requiring unanimous consent of the Lenders to changes
in interest rates),
declare that no Advance to such Borrower may be made as, converted into or
continued as a
Eurodollar Advance. During the continuance of a Default with respect to a
Borrower, the
Required Lenders may, at their option, by notice to such Borrower (which notice
may be revoked
at the option of the Required Lenders notwithstanding any provision of Section
8.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare that (i)
each Eurodollar
Advance to such Borrower shall bear interest for the remainder of the applicable
Interest Period
at the rate otherwise applicable to such Interest Period plus 2% per annum, (ii)
each Floating
Rate Advance to such Borrower shall bear interest at a rate per annum equal to
the Alternate
Base Rate in effect from time to time plus 2% per annum and (iii) the LC Fee
Rate payable by
such Borrower shall be increased by 2% per annum, provided that during the
continuance of a
Default under Section 7.6 or 7.7 with respect to any Borrower, the interest
rates set forth in
clauses (i) and (ii) above and the increase in the LC Fee Rate set forth in
clause (iii) above shall
be applicable to all Outstanding Credit Extensions to such Borrower without any
election or
action on the part of the Agent or any Lender.

            2.12      Method of Payment. All payments of the Obligations
hereunder shall be made,
without setoff, deduction, or counterclaim, in immediately available funds to
the Agent at the
Agent's address specified pursuant to Article XIII, or at any other office of
the Agent specified in
writing by the Agent to the Borrowers, by noon (Chicago time) on the date when
due and shall
be applied ratably by the Agent among the Lenders. Each payment delivered to the
Agent for the
account of any Lender shall be delivered promptly by the Agent to such Lender in
the same type
of funds that the Agent received at its address specified pursuant to Article
XIII or at any
Lending Installation specified in a notice received by the Agent from such
Lender. The Agent is
hereby authorized to charge the account of the applicable Borrower maintained
with Bank One
for each payment of principal, Reimbursement Obligations, interest and fees as
it becomes due
hereunder.

            2.13      Noteless Agreement; Evidence of Indebtedness. (a) Each
Lender shall maintain
in accordance with its usual practice an account or accounts evidencing the
indebtedness of each
Borrower to such Lender resulting from each Loan made by such Lender to such
Borrower from
time to time, including the amounts of principal and interest payable and paid
to such Lender
from time to time hereunder.

            (b)      The Agent shall also maintain accounts in which it will
record (i) the amount of
each Loan to each Borrower made hereunder, the Type thereof and the Interest
Period with
respect thereto, (ii) the amount of any principal or interest due and payable or
to become due and
payable from each Borrower to each Lender hereunder, (iii) the stated amount of
each Letter of
Credit and the amount of the LC Obligations outstanding at any time and (iv) the
amount of any
sum received by the Agent hereunder from each Borrower and each Lender's share
thereof.

            (c)      The entries maintained in the accounts maintained pursuant
to clauses (a) and (b)
above shall be prima facie evidence of the existence and amounts of the
Obligations therein
recorded; provided that the failure of the Agent or any Lender to maintain such
accounts or any
error therein shall not in any manner affect the obligation of the applicable
Borrower to repay the
Obligations of such Borrower in accordance with their terms.

            (d)      Any Lender may request that its Loans to any Borrower be
evidenced by a Note.
In such event, such Borrower shall prepare, execute and deliver to such Lender a
Note payable to
the order of such Lender. Thereafter, the Loans evidenced by such Note and
interest thereon
shall at all times (including after any assignment pursuant to Section 12.3) be
represented by one
or more Notes payable to the order of the payee named therein or any assignee
pursuant to
Section 12.3, except to the extent that any such Lender or assignee subsequently
returns any such
Note for cancellation and requests that such Loans once again be evidenced as
described in
clauses (a) and (b) above.

            2.14     Telephonic Notices. Each Borrower hereby authorizes the
Lenders and the Agent
to extend, convert or continue Advances, effect selections of Types of Advances
and to transfer
funds based on telephonic notices made by any person the Agent or any Lender in
good faith
believes to be acting on behalf of such Borrower, it being understood that the
foregoing
authorization is specifically intended to allow Borrowing Notices and
Conversion/Continuation
Notices to be given telephonically. Each Borrower agrees that upon the request
of the Agent or
any Lender, such Borrower will deliver promptly to the Agent a written
confirmation signed by
an Authorized Officer of such Borrower, of each telephonic notice given by such
Borrower
pursuant to the preceding sentence. If the written confirmation differs in any
material respect
from the action taken by the Agent and the Lenders, the records of the Agent and
the Lenders
shall govern absent manifest error.

            2.15      Interest Payment Dates; Interest and Fee Basis. Interest
accrued on each Floating
Rate Advance shall be payable on each Payment Date, on any date on which such
Floating Rate
Advance is prepaid, whether due to acceleration or otherwise, and at maturity.
Interest accrued
on that portion of the outstanding principal amount of any Floating Rate Advance
converted into
a Eurodollar Advance on a day other than a Payment Date shall be payable on the
date of
conversion. Interest accrued on each Eurodollar Advance shall be payable on the
last day of its
applicable Interest Period (and, in the case of a six-month Interest Period, on
the day which is
three months after the first day of such Interest Period), on any date on which
such Eurodollar
Advance is prepaid, whether by acceleration or otherwise, and at maturity.
Interest on Floating
Rate Advances which are bearing interest at the Prime Rate shall be calculated
for actual days
elapsed on the basis of a 365-day year or, when appropriate, 366-day year. All
other interest and
all fees shall be calculated for actual days elapsed on the basis of a 360-day
year. Interest shall
be payable for the day an Advance is made but not for the day of any payment on
the amount
paid if payment is received prior to noon (Chicago time) at the place of
payment. If any payment
of principal of or interest on an Advance shall become due on a day which is not
a Business Day,
such payment shall be made on the next succeeding Business Day and, in the case
of a principal
payment, such extension of time shall be included in computing interest in
connection with such
payment.

            2.16      Notification of Advances, Interest Rates, Prepayments and
Commitment
Reductions. Promptly after receipt thereof, the Agent will notify each Lender of
the contents of
each notice of reduction in the Aggregate Commitment or any Sublimit, Borrowing
Notice,
Conversion/Continuation Notice and notice of repayment received by the Agent
hereunder. The
Agent will notify each Lender of the interest rate applicable to each Eurodollar
Advance
promptly upon determination of such interest rate and will give each Lender
prompt notice of
each change in the Alternate Base Rate.

            2.17      Lending Installations. Each Lender may book its Loans at
any Lending
Installation selected by such Lender and may change its Lending Installation
from time to time.
All terms of this Agreement shall apply to any such Lending Installation and the
Loans and any
Notes issued hereunder shall be deemed held by each Lender for the benefit of
any such Lending
Installation. Each Lender may, by written notice to the Agent and the Borrowers
in accordance
with Article XIII, designate replacement or additional Lending Installations
through which Loans
will be made by it and for whose account Loan payments are to be made.

            2.18      Non-Receipt of Funds by the Agent. Unless a Borrower or a
Lender, as the case
may be, notifies the Agent prior to the date on which it is scheduled to make
payment to the
Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case
of a Borrower, a
payment of principal, interest or fees to the Agent for the account of the
Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The
Agent may, but shall not be obligated to, make the amount of such payment
available to the
intended recipient in reliance upon such assumption. If a Lender or a Borrower,
as the case may
be, has not in fact made such payment to the Agent, the recipient of such
payment shall, on
demand by the Agent, repay to the Agent the amount so made available together
with interest
thereon in respect of each day during the period commencing on the date such
amount was so
made available by the Agent until the date the Agent recovers such amount at a
rate per annum
equal to (x) in the case of payment by a Lender, the Federal Funds Effective
Rate for such day
for the first three days and, thereafter, the interest rate applicable to the
relevant Loan or (y) in
the case of payment by a Borrower, the interest rate applicable to the relevant
Obligation.

            Letters of Credit.

            2.19.1      Issuance; Existing Letters of Credit. The Issuer hereby
agrees, on the terms
and conditions set forth in this Agreement (including the limitations set forth
in Section 2.1), to
issue standby letters of credit and to renew, extend, increase, decrease or
otherwise modify
Letters of Credit ("Modify" and each such action a "Modification") upon the
request and for the
account of any Borrower from time to time from the Closing Date to the Facility
Termination
Date for such Borrower. No Letter of Credit shall have an expiry date later than
the scheduled
Facility Termination Date. By their execution of this Agreement, the parties
hereto agree that on
the Closing Date (without any further action by any Person), each Existing
Letter of Credit shall
be deemed to have been issued under this Agreement and the rights and
obligations of the issuer
and account party thereunder shall be subject to the terms hereof.

            2.19.2      Participations. Upon the issuance or Modification by the
Issuer of a Letter of
Credit in accordance with this Section 2.19 (or, in this case of the Existing
Letters of Credit, on
the Closing Date), the Issuer shall be deemed, without further action by any
party hereto, to have
unconditionally and irrevocably sold to each Lender, and each Lender shall be
deemed, without
further action by any party hereto, to have unconditionally and irrevocably
purchased from the
Issuer, a participation in such Letter of Credit (and each Modification thereof
and the related LC
Obligations) in proportion to its Pro Rata Share.

            2.19.3      Notice. The applicable Borrower shall give the Issuer
notice prior to
10:00 a.m. (Chicago time) at least three Business Days prior to the proposed
date of issuance or
Modification of a Letter of Credit for the account of such Borrower, specifying
the beneficiary,
the proposed date of issuance (or Modification) and the expiry date of such
Letter of Credit, and
describing the proposed terms of such Letter of Credit and the nature of the
transactions
proposed to be supported thereby. Upon receipt of such notice, the Issuer shall
promptly notify
the Agent, and the Agent shall promptly notify each Lender, of the contents
thereof and of the
amount of such Lender's participation in such proposed Letter of Credit. The
issuance or
Modification by the Issuer of any Letter of Credit shall, in addition to the
conditions precedent
set forth in Article IV (the satisfaction of which the Issuer shall have no duty
to ascertain), be
subject to the conditions precedent that such Letter of Credit shall be
reasonably satisfactory to
the Issuer and that the applicable Borrower shall have executed and delivered
such application
agreement and/or such other instruments and agreements relating to such Letter
of Credit as the
Issuer shall have reasonably requested (each a "Letter of Credit Application").
In the event of
any conflict between the terms of this Agreement and the terms of any Letter of
Credit
Application, the terms of this Agreement shall control.

            2.19.4      Letter of Credit Fees. Each Borrower shall pay to the
Agent, for the account
of the Lenders ratably in accordance with their respective Pro Rata Shares, with
respect to each
Letter of Credit issued for the account of such Borrower, a letter of credit fee
at a per annum rate
equal to the LC Fee Rate in effect from time to time on the amount available
under such Letter of
Credit, such fee to be payable in arrears on each Payment Date. Each Borrower
shall also pay to
the Issuer for its own account (x) a fronting fee in the amount agreed to by the
Issuer and such
Borrower from time to time for each Letter of Credit issued for the account of
such Borrower,
with such fee to be payable in arrears on each Payment Date, and (y) documentary
and
processing charges in connection with the issuance or Modification of and draws
under Letters of
Credit issued for the account of such Borrower in accordance with the Issuer's
standard schedule
for such charges as in effect from time to time.

            2.19.5      Administration; Reimbursement by Lenders. Upon receipt
from the
beneficiary of any Letter of Credit of any demand for payment under such Letter
of Credit, the
Issuer shall notify the Agent and the Agent shall promptly notify the applicable
Borrower and
each Lender as to the amount to be paid by the Issuer as a result of such demand
and the
proposed payment date (the "Letter of Credit Payment Date"). The responsibility
of the Issuer to
the applicable Borrower and each Lender shall be only to determine that the
documents
(including each demand for payment) delivered under each Letter of Credit in
connection with
such presentment shall be in conformity in all material respects with such
Letter of Credit. The
Issuer shall endeavor to exercise the same care in its issuance and
administration of Letters of
Credit as it does with respect to letters of credit in which no participations
are granted, it being
understood that in the absence of any gross negligence or willful misconduct by
the Issuer, each
Lender shall be unconditionally and irrevocably obligated, without regard to the
occurrence of
any Default or Unmatured Default or any condition precedent whatsoever, to
reimburse the
Issuer on demand for (i) such Lender's Pro Rata Share of the amount of each
payment made by
the Issuer under each Letter of Credit to the extent such amount is not
reimbursed by the
applicable Borrower pursuant to Section 2.19.6 plus (ii) interest on the
foregoing amount for
each day from the date of the applicable payment by the Issuer to the date on
which such Lender
pays the amount to be reimbursed by it, at a rate of interest per annum equal to
the Federal Funds
Effective Rate or, beginning on third Business Day after demand for such amount
by the Issuer,
the rate applicable to Floating Rate Advances.

            2.19.6      Reimbursement by Borrowers. Each Borrower shall be
irrevocably and
unconditionally obligated to reimburse the Issuer on or before the applicable
Letter of Credit
Payment Date for any amount to be paid by the Issuer upon any drawing under any
Letter of
Credit issued by the Issuer for the account of such Borrower, without
presentment, demand,
protest or other formalities of any kind; provided that no Borrower shall be
precluded from
asserting any claim for direct (but not consequential) damages suffered by such
Borrower to the
extent, but only to the extent, caused by (i) the willful misconduct or gross
negligence of the
Issuer in determining whether a request presented under any Letter of Credit
issued by it for the
account of such Borrower complied with the terms of such Letter of Credit or
(ii) the Issuer's
failure to pay under any Letter of Credit issued by it for the account of such
Borrower after the
presentation to it of a request strictly complying with the terms and conditions
of such Letter of
Credit. All such amounts paid by the Issuer and remaining unpaid by the
applicable Borrower
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to (x) on
or prior to the date on which the Issuer notifies such Borrower of the amount
paid under any
Letter of Credit, the rate applicable to Floating Rate Advances, and (y)
thereafter, the sum of 2%
plus the rate applicable to Floating Rate Advances. The Issuer will pay to each
Lender ratably in
accordance with its Pro Rata Share all amounts received by it from a Borrower
for application in
payment, in whole or in part, of the Reimbursement Obligation in respect of any
Letter of Credit
issued by the Issuer and any interest thereon, but only to the extent (and, in
the case of interest,
for the period of time) such Lender has made payment to the Issuer in respect of
such Letter of
Credit pursuant to Section 2.19.5.

            2.19.7      Obligations Absolute. Each Borrower's obligations under
this Section 2.19
with respect to each Letter of Credit issued for the account of such Borrower
shall be absolute
and unconditional under any and all circumstances and irrespective of any
setoff, counterclaim or
defense to payment which such Borrower may have or have had against the Issuer,
any Lender or
any beneficiary of any such Letter of Credit. Each Borrower agrees with the
Issuer and the
Lenders that neither the Issuer nor any Lender shall be responsible for, and the
applicable
Borrower's Reimbursement Obligation in respect of any Letter of Credit issued
for the account of
such Borrower shall not be affected by, among other things, the validity or
genuineness of
documents or of any endorsements thereon, even if such documents should in fact
prove to be in
any or all respects invalid, fraudulent or forged, or any dispute between or
among such
Borrower, any of its Affiliates, the beneficiary of any Letter of Credit or any
financing institution
or other party to whom any Letter of Credit may be transferred or any claims or
defenses
whatsoever of such Borrower or of any of its Affiliates against the beneficiary
of any Letter of
Credit or any such transferee. The Issuer shall not be liable for any error,
omission, interruption
or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in
connection with any Letter of Credit. Each Borrower agrees that any action taken
or omitted by
the Issuer or any Lender under or in connection with any Letter of Credit and
the related drafts
and documents, if done without gross negligence or willful misconduct, shall be
binding upon
such Borrower and shall not put the Issuer or any Lender under any liability to
such Borrower.
Nothing in this Section 2.19.7 is intended to limit the right of the applicable
Borrower to make a
claim against the Issuer for damages as contemplated by the proviso to the first
sentence of
Section 2.19.6.

            2.19.8      Actions of Issuer. The Issuer shall be entitled to rely,
and shall be fully
protected in relying, upon any Letter of Credit, draft, writing, resolution,
notice, consent,
certificate, affidavit, letter, cablegram, telegram, facsimile, telex or
teletype message, statement,
order or other document believed by it to be genuine and correct and to have
been signed, sent or
made by the proper Person or Persons, and upon advice and statements of legal
counsel,
independent accountants and other experts selected by the Issuer. The Issuer
shall be fully
justified in failing or refusing to take any action under this Agreement unless
it shall first have
received such advice or concurrence of the Required Lenders as it reasonably
deems appropriate
or it shall first be indemnified to its reasonable satisfaction by the Lenders
against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any
such action. Notwithstanding any other provision of this Section 2.19, the
Issuer shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement in
accordance with a request of the Required Lenders, and such request and any
action taken or
failure to act pursuant thereto shall be binding upon the Lenders and any future
holder of a
participation in any Letter of Credit.

            2.19.9      Indemnification. Each Borrower hereby agrees to
indemnify and hold
harmless each Lender, the Issuer and the Agent, and their respective directors,
officers, agents
and employees, from and against any and all claims and damages, losses,
liabilities, costs or
expenses which such Lender, the Issuer or the Agent may incur (or which may be
claimed
against such Lender, the Issuer or the Agent by any Person whatsoever) by reason
of or in
connection with the issuance, execution and delivery or transfer of or payment
or failure to pay
under any Letter of Credit issued for the account of such Borrower or any actual
or proposed use
of any such Letter of Credit, including any claims, damages, losses,
liabilities, costs or expenses
which the Issuer may incur by reason of or in connection with (i) the failure of
any other Lender
to fulfill or comply with its obligations to the Issuer hereunder (but nothing
herein contained
shall affect any right a Borrower may have against any defaulting Lender) or
(ii) by reason of or
on account of the Issuer issuing any Letter of Credit which specifies that the
term "Beneficiary"
included therein includes any successor by operation of law of the named
Beneficiary, but which
Letter of Credit does not require that any drawing by any such successor
Beneficiary be
accompanied by a copy of a legal document, satisfactory to the Issuer,
evidencing the
appointment of such successor Beneficiary; provided that no Borrower shall be
required to
indemnify any Lender, the Issuer or the Agent for any claims, damages, losses,
liabilities, costs
or expenses to the extent, but only to the extent, caused by (x) the willful
misconduct or gross
negligence of the Issuer in determining whether a request presented under any
Letter of Credit
issued by the Issuer for the account of such Borrower complied with the terms of
such Letter of
Credit or (y) the Issuer's failure to pay under any Letter of Credit issued for
the account of such
Borrower after the presentation to it of a request strictly complying with the
terms and conditions
of such Letter of Credit. Nothing in this Section 2.19.9 is intended to limit
the obligations of any
Borrower under any other provision of this Agreement.

            2.19.10      Lenders' Indemnification. Each Lender shall, ratably in
accordance with its
Pro Rata Share, indemnify the Issuer, its affiliates and its directors,
officers, agents and
employees (to the extent not reimbursed by the applicable Borrower) against any
cost, expense
(including reasonable counsel fees and disbursements), claim, demand, action,
loss or liability
(except such as result from such indemnitees' gross negligence or willful
misconduct or the
Issuer's failure to pay under any Letter of Credit after the presentation to it
of a request strictly
complying with the terms and conditions of such Letter of Credit) that such
indemnitees may
suffer or incur in connection with this Section 2.19 or any action taken or
omitted by such
indemnitees hereunder.

            2.19.11      Rights as a Lender. In its capacity as a Lender, the
Issuer shall have the same
rights and obligations as any other Lender.

            2.20      Extension of Facility Termination Date. Not less than 45
days and not more
than 60 days prior to the Facility Termination Date then in effect with respect
to a Borrower,
provided that no Default or Unmatured Default shall have occurred and be
continuing, such
Borrower may request an extension of such Facility Termination Date by
submitting to the Agent
an Extension Request, which the Agent shall promptly furnish to each Lender.
Each Lender
shall, not less than 30 days prior to the applicable Facility Termination Date
then in effect, notify
such Borrower and the Agent of its election, in its sole and absolute
discretion, to extend or not
extend such Facility Termination Date as requested in such Extension Request.
Notwithstanding
any provision of this Agreement to the contrary, any notice by any Lender of its
willingness to
extend the Facility Termination Date shall be revocable by such Lender in its
sole and absolute
discretion at any time prior to the date which is 30 days prior to the Facility
Termination Date
then in effect with respect to such Borrower. If the then Required Lenders shall
approve in
writing the extension of the Facility Termination Date requested in such
Extension Request, such
Facility Termination Date shall automatically and without any further action by
any Person be
extended for the period specified in such Extension Request; provided that (i)
each extension
pursuant to this Section 2.20 shall be for a maximum of 364 days and (ii) the
Commitment of
any Lender that does not consent in writing to such extension (an "Objecting
Lender") shall,
unless earlier terminated in accordance with this Agreement, expire on the
Facility Termination
Date in effect on the date of such Extension Request (such Facility Termination
Date, if any,
referred to as the "Commitment Expiration Date" with respect to such Objecting
Lender). If, as
of the 30th day prior to the Facility Termination Date then in effect, the
Required Lenders shall
not approve in writing the extension of the Facility Termination Date requested
in an Extension
Request, such Facility Termination Date shall not be extended pursuant to such
Extension
Request. The Agent shall promptly notify (y) the Lenders and the applicable
Borrower of any
extension of a Facility Termination Date pursuant to this Section 2.20 and (z)
such Borrower and
each other Lender of any Lender which becomes an Objecting Lender.

            (b)      Loans owing to any Objecting Lender on the Commitment
Expiration Date with
respect to such Lender shall be repaid in full on or before such Commitment
Expiration Date.

            (c)      The applicable Borrower may, at its sole expense and
effort, upon notice to any
Objecting Lender and the Agent, require such Objecting Lender to assign and
delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 12.3), all its
interests, rights and obligations under this Agreement to an assignee that shall
assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment);
provided that (i) such Borrower shall have received the prior written consent of
the Agent and
the Issuer (unless such Objecting Lender is the Agent or the Issuer, in which
case its consent
shall not be required), which consents shall not unreasonably be withheld, and
(ii) such
Objecting Lender shall have received payment of an amount equal to the
outstanding principal of
its Loans and participations in Letters of Credit, accrued interest thereon,
accrued fees and all
other amounts payable to it hereunder, including amounts payable pursuant to
Section 3.4
(assuming for such purpose, that such Objecting Lenders Loans were prepaid on
the date of such
assignment, from the assignee (to the extent of such outstanding principal and
accrued interest
and fees) or such Borrower (in the case of all other amounts).

            (d)       For a period of 90 days following any extension of a
Facility Termination Date
pursuant to this Section 2.20, the applicable Borrower may, at its sole expense
and effort, upon
notice to the Agent, cause additional banks or other financial institutions to
become parties
hereto as Lenders to replace the Commitments of Objecting Lenders no longer
parties hereto;
provided that the Aggregate Commitment shall not exceed the Aggregate Commitment
existing
prior to such extension. Such additional banks or other financial institutions
shall be subject to
the approval of the Agent and the Issuer (the consent of which will not be
unreasonably
withheld) and shall become parties hereto by executing such supplements hereto
as shall be
satisfactory to such Borrower and the Agent. Upon any such bank or other
financial institution
so becoming a Lender, such Borrower will effect such borrowings and prepayments
as are
necessary to cause all then outstanding Loans and participations in Letters of
Credit to be held
ratably by all Lenders.

                                                               ARTICLE III

                                               YIELD PROTECTION; TAXES

            3.1      Yield Protection. If, on or after the date of this
Agreement, the adoption of any
law or any governmental or quasi-governmental rule, regulation, policy,
guideline or directive
(whether or not having the force of law), or any change in the interpretation or
administration
thereof by any governmental or quasi-governmental authority, central bank or
comparable
agency charged with the interpretation or administration thereof, or compliance
by the Issuer,
any other Lender or any applicable Lending Installation with any request or
directive (whether or
not having the force of law) of any such authority, central bank or comparable
agency:

(i)

subjects the Issuer, any other Lender or any applicable Lending Installation to
any Taxes, or changes the basis of taxation of payments (other than with respect
to Excluded Taxes) to the Issuer in respect of Letters of Credit or to any
Lender in respect of its Eurodollar Loans or its participations in Letters of
Credit, or

(ii)

imposes or increases or deems applicable any reserve, assessment, insurance
charge, special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, the Issuer, any other Lender or
any applicable Lending Installation (other than reserves and assessments taken
into account in determining the interest rate applicable to Eurodollar
Advances), or

(iii)

imposes any other condition the result of which is to increase the cost to the
Issuer, any other Lender or any applicable Lending Installation of issuing or
participating in Letters of Credit or making, funding or maintaining its
Eurodollar Loans or reduces any amount receivable by the Issuer, any other
Lender or any applicable Lending Installation in connection with Letters of
Credit or its Eurodollar Loans, or requires the Issuer, any other Lender or any
applicable Lending Installation to make any payment calculated by reference to
the amount of Letters of Credit issued by it, the amount of its participations
in Letters of Credit or the amount of Eurodollar Loans held or interest received
by it, in each case by an amount deemed material by the Issuer or such other
Lender, and the result of any of the foregoing is to increase the cost to the
Issuer, such other Lender or such applicable Lending Installation of issuing or
participating in Letters of Credit or making or maintaining its Eurodollar Loans
or Commitment or to reduce the return received by the Issuer, such other Lender
or such applicable Lending Installation in connection with such issuing or
participating in Letters of Credit or its Eurodollar Loans or Commitment, then,
within 15 days of demand by the Issuer or such other Lender, the applicable
Borrower (or, if any of the foregoing is not attributable or allocable to a
particular Borrower, PHI) shall pay the Issuer or such other Lender such
additional amount or amounts as will compensate the Issuer or such Lender for
such increased cost or reduction in amount received.

            3.2    Changes in Capital Adequacy Regulations. If the Issuer or
another Lender
determines the amount of capital required or expected to be maintained by the
Issuer or such
Lender, any Lending Installation of such Lender or any corporation controlling
the Issuer or such
Lender is increased as a result of a Change, then, within 15 days of demand by
the Issuer or such
Lender, the applicable Borrower (or, if the amount payable is not attributable
or allocable to a
particular Borrower, PHI) shall pay the Issuer or such Lender the amount
necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which
the Issuer or such Lender determines is attributable to this Agreement, Loans or
Letters of Credit
outstanding hereunder (or participations therein) or its Commitment to make
Loans or to issue or
participate in Letters of Credit hereunder (after taking into account such
Lender's policies as to
capital adequacy). "Change" means (i) any change after the date of this
Agreement in the Risk
Based Capital Guidelines (as defined below) or (ii) any adoption of or change in
any other law,
governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects
the amount of capital required or expected to be maintained by the Issuer, any
other Lender or
any Lending Installation or any corporation controlling the Issuer or any other
Lender. "Risk
Based Capital Guidelines" means (i) the risk based capital guidelines in effect
in the United
States on the date of this Agreement, including transition rules, and (ii) the
corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the
July 1988 report of the Basle Committee on Banking Regulation and Supervisory
Practices
Entitled "International Convergence of Capital Measurements and Capital
Standards," including
transition rules, and any amendments to such regulations adopted prior to the
date of this
Agreement.

            3.3      Availability of Types of Advances. If any Lender notifies
the Agent that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any
applicable law, rule, regulation, or directive, whether or not having the force
of law, or if the
Required Lenders determine that (i) deposits of a type and maturity appropriate
to match fund
Eurodollar Advances are not available or (ii) the interest rate applicable to
Eurodollar Advances
does not accurately reflect the cost of making or maintaining Eurodollar
Advances, then the
Agent shall suspend the availability of Eurodollar Advances and require any
affected Eurodollar
Advances to be repaid or converted to Floating Rate Advances, subject to the
payment of any
funding indemnification amounts required by Section 3.4.

            3.4      Funding Indemnification. If any payment of a Eurodollar
Advance occurs on a
day which is not the last day of an Interest Period therefor, whether because of
acceleration,
prepayment or otherwise, or a Eurodollar Advance is not made on the date
specified by a
Borrower for any reason other than default by the Lenders, the applicable
Borrower will
indemnify each Lender for any loss or cost incurred by it resulting therefrom,
including any loss
or cost in liquidating or employing deposits acquired to fund or maintain such
Eurodollar
Advance.

            3.5      Taxes.

            (i)       All payments by the Borrowers to or for the account of the
Issuer, any other
Lender or the Agent hereunder or under any Note shall be made free and clear of
and without
deduction for any and all Taxes. If a Borrower shall be required by law to
deduct any Taxes
from or in respect of any sum payable hereunder to the Issuer, any other Lender
or the Agent, (a)
the sum payable shall be increased as necessary so that after making all
required deductions
(including deductions applicable to additional sums payable under this Section
3.5), the Issuer,
such Lender or the Agent (as the case may be) receives an amount equal to the
sum it would
have received had no such deductions been made, (b) such Borrower shall make
such deductions,
(c) such Borrower shall pay the full amount deducted to the relevant authority
in accordance with
applicable law and (d) such Borrower shall furnish to the Agent the original
copy of a receipt
evidencing payment thereof within 30 days after such payment is made.

            (ii)      In addition, each Borrower hereby agrees to pay any
present or future stamp or
documentary taxes and any other excise or property taxes, charges or similar
levies which arise
from any payment made by it hereunder or under any Note or Letter of Credit
Application or
from its execution or delivery of, or otherwise attributable to such Borrower in
connection with,
this Agreement, any Note or any Letter of Credit Application ("Other Taxes").

            (iii)      Each Borrower hereby agrees to indemnify the Issuer, each
other Lender and the
Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other
Taxes imposed
on amounts payable under this Section 3.5) paid by the Issuer, such Lender or
the Agent and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto.
Payments due under this indemnification shall be made within 30 days of the date
the Issuer,
such Lender or the Agent makes demand therefor pursuant to Section 3.6.

            (iv)      Each Lender that is not incorporated under the laws of the
United States of
America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not
less than ten
Business Days after the date of this Agreement, (i) deliver to each Borrower and
the Agent two
duly completed copies of United States Internal Revenue Service Form W-8BEN or
W-8ECI
certifying in either case that such Lender is entitled to receive payments under
this Agreement
without deduction or withholding of any United States federal income taxes, and
(ii) deliver to
each Borrower and the Agent a United States Internal Revenue Form W-8BEN or W-9,
as the
case may be, and certify that it is entitled to an exemption from United States
backup
withholding tax. Each Non-U.S. Lender further undertakes to deliver to each
Borrower and the
Agent (x) renewals or additional copies of such form (or any successor form) on
or before the
date that such form expires or becomes obsolete, and (y) after the occurrence of
any event
requiring a change in the most recent forms so delivered by it, such additional
forms or
amendments thereto as may be reasonably requested by any Borrower or the Agent.
All forms or
amendments described in the preceding sentence shall certify that such Lender is
entitled to
receive payments under this Agreement without deduction or withholding of any
United States
federal income taxes, unless an event (including any change in treaty, law or
regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders
all such forms inapplicable or which would prevent such Lender from duly
completing and
delivering any such form or amendment with respect to it and such Lender advises
the Borrowers
and the Agent that it is not capable of receiving payments without any deduction
or withholding
of United States federal income tax.

            (v)      For any period during which a Non-U.S. Lender has failed to
provide a Borrower
with an appropriate form pursuant to clause (iv) above (unless such failure is
due to a change in
treaty, law or regulation, or any change in the interpretation or administration
thereof by any
governmental authority, occurring subsequent to the date on which a form
originally was
required to be provided), such Borrower shall not be required to increase any
amount payable to
such Non-U.S. Lender pursuant to Section 3.5(i)(a) or to otherwise indemnify
such Lender under
this Section 3.5 with respect to Taxes imposed by the United States; provided
that, should a Non-
U.S. Lender which is otherwise exempt from or subject to a reduced rate of
withholding tax
become subject to Taxes because of its failure to deliver a form required under
clause (iv) above,
the applicable Borrower shall take such steps as such Non-U.S. Lender shall
reasonably request
to assist such Non-U.S. Lender to recover such Taxes.

            (vi)      Any Lender that is entitled to an exemption from or
reduction of withholding tax
with respect to payments under this Agreement or any Note pursuant to the law of
any relevant
jurisdiction or any treaty shall deliver to the Borrowers (with a copy to the
Agent), at the time or
times prescribed by applicable law, such properly completed and executed
documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at
a reduced rate.

            (vii)      If the U.S. Internal Revenue Service or any other
governmental authority of the
United States or any other country or any political subdivision thereof asserts
a claim that the
Agent did not properly withhold tax from amounts paid to or for the account of
any Lender
(because the appropriate form was not delivered or properly completed, because
such Lender
failed to notify the Agent of a change in circumstances which rendered its
exemption from
withholding ineffective, or for any other reason), such Lender shall indemnify
the Agent fully for
all amounts paid, directly or indirectly, by the Agent as tax, withholding
therefor, or otherwise,
including penalties and interest, and including taxes imposed by any
jurisdiction on amounts
payable to the Agent under this subsection, together with all costs and expenses
related thereto
(including attorneys fees and time charges of attorneys for the Agent, which
attorneys may be
employees of the Agent). The obligations of the Lenders under this Section
3.5(vii) shall survive
the payment of the Obligations and termination of this Agreement.

            3.6      Mitigation of Circumstances; Lender Statements; Survival of
Indemnity. Each
Lender shall promptly notify the Borrowers and the Agent of any event of which
it has
knowledge which will result in, and will use reasonable commercial efforts
available to it (and
not, in such Lender's good faith judgment, otherwise disadvantageous to such
Lender) to mitigate
or avoid, (i) any obligation of any Borrower to pay any amount pursuant to
Section 3.1, 3.2 or
3.5 and (ii) the unavailability of Eurodollar Advances under Section 3.3 (and,
if any Lender has
given notice of any such event described above and thereafter such event ceases
to exist, such
Lender shall promptly so notify the Borrowers and the Agent). Without limiting
the foregoing,
each Lender shall, to the extent reasonably possible, designate an alternate
Lending Installation
with respect to its Eurodollar Loans to reduce any liability of any Borrower to
such Lender under
Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Advances
under Section 3.3,
so long as such designation is not, in the judgment of such Lender,
disadvantageous to such
Lender. Any Lender claiming compensation under Section 3.1, 3.2, 3.4, or 3.5
shall deliver a
written statement to the applicable Borrower (with a copy to the Agent) as to
the amount due
under the applicable Section, which statement shall set forth in reasonable
detail the calculations
upon which such Lender determined such amount and shall be final, conclusive and
binding on
such Borrower in the absence of manifest error. Determination of amounts payable
under any
such Section in connection with a Eurodollar Loan shall be calculated as though
each Lender
funded its Eurodollar Loan through the purchase of a deposit of the type and
maturity
corresponding to the deposit used as a reference in determining the Eurodollar
Rate applicable to
such Loan, whether in fact that is the case or not. Unless otherwise provided
herein, the amount
specified in the written statement of any Lender shall be payable on demand
after receipt by the
applicable Borrower of such written statement. Notwithstanding any other
provision of this
Article III, if any Lender fails to notify a Borrower of any event or
circumstance which will
entitle such Lender to compensation from such Borrower pursuant to Section 3.1,
3.2 or 3.5
within 60 days after such Lender obtains knowledge of such event or
circumstance, then such
Borrower will not be responsible for any such compensation arising prior to the
60th day before
such Borrower receives notice from such Lender of such event or circumstance.
The obligations
of the Borrowers under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of
the Obligations
and termination of this Agreement.

            3.7      Replacement of Lender. If any Lender makes a demand for
compensation under
Section 3.1, 3.2 or 3.5 or a notice of the type described in Section 3.3 (any
such Lender, an
"Affected Lender"), then PHI may replace such Affected Lender as a party to this
Agreement
with one or more other Lenders and/or Purchasers which are willing to accept an
assignment
from such Lender, and upon notice from PHI such Affected Lender shall assign,
without
recourse or warranty, its Commitment, its Loans and all of its other rights and
obligations
hereunder to such other Lenders and/or Purchasers for a purchase price equal to
the sum of the
principal amount of the Loans so assigned, all accrued and unpaid interest
thereon, such Affected
Lender's ratable share of all accrued and unpaid fees, any amount payable
pursuant to Section 3.4
as a result of such Affected Lender receiving payment of any Eurodollar Loan
prior to the end of
an Interest Period therefor (assuming for such purpose that receipt of payment
pursuant to such
assignment constitutes payment of each outstanding Eurodollar Loan) and all
other obligations
owed to such Affected Lender hereunder.

                                                                 ARTICLE IV

                                                    CONDITIONS PRECEDENT

            4.1      Initial Credit Extension. The obligation of the Lenders
(or, if applicable, the
Issuer) to make the initial Credit Extension hereunder is subject to the
conditions precedent that
the Agent has received (a) evidence, reasonably satisfactory to the Agent, that
(i) the Merger
Transactions have been (or concurrently with the initial Credit Extension will
be) completed; (ii)
all obligations of the Borrowers under the Existing Credit Facilities have been
(or concurrently
with the initial Credit Extension will be) paid in full; and (iii) all fees and
(to the extent billed)
expenses which are payable on or before the date of the initial Credit Extension
to the Arranger,
the Agent or any Lender hereunder or in connection herewith have been (or
concurrently with
the initial Credit Extension will be) paid in full; and (b) each of the
following documents (with
sufficient copies for each Lender):

(i)

Copies of the articles or certificate of incorporation of each Borrower,
together with all amendments thereto, certified by the Secretary or an Assistant
Secretary of such Borrower, and certificates of good standing, certified by the
appropriate governmental officer in the jurisdiction(s) of incorporation of such
Borrower.

(ii)

Copies, certified by the Secretary or Assistant Secretary of each Borrower, of
such Borrower's bylaws and of resolutions of its Board of Directors authorizing
the execution, delivery and performance of the Loan Documents to which such
Borrower is a party.

(iii)

An incumbency certificate from each Borrower, executed by the Secretary or
Assistant Secretary of such Borrower, which shall identify by name and title and
bear the signatures of the officers of such Borrower authorized to sign the Loan
Documents to which such Borrower is a party, upon which certificate the Agent
and the Lenders shall be entitled to rely until informed of any change in
writing by such Borrower.

(iv)

A certificate, signed by an Authorized Officer of PHI, stating that on the date
of the initial Credit Extension no Default or Unmatured Default has occurred and
is continuing with respect to any Borrower.

(v)

A written opinion of internal counsel to PHI, substantially in the form of
Exhibit D-1.

(vi)

A written opinion of internal counsel to PEPCO, substantially in the form of
Exhibit D-2.

(vii)

A written opinion of internal counsel to DPL, substantially in the form of
Exhibit D-3.

(viii)

A written opinion of internal counsel to ACE, substantially in the form of
Exhibit D-4.

(ix)

A written opinion of Covington & Burling, special New York counsel to the
Borrowers, substantially in the form of Exhibit D-5.

(x)

Any Notes requested by a Lender pursuant to Section 2.13 payable to the order of
each such requesting Lender.

(xi)

Copies of all governmental approvals, if any, necessary for any Borrower to
enter into the Loan Documents to which it is a party and to obtain Credit
Extensions hereunder.

(xii)

A letter agreement among PHI, Conectiv and the Issuer pursuant to which PHI
agrees to become a joint account party on all Existing Letters of Credit
originally issued for the account of Conectiv.

(xiii)

   

Such other documents as any Lender or its counsel may reasonably request.

            4.2     Each Credit Extension. Neither the Lenders nor the Issuer
shall be required to
make any Credit Extension to any Borrower unless on the date of such Credit
Extension:

(i)

No Default or Unmatured Default with respect to such Borrower exists or will
result from such Credit Extension.

(ii)

The representations and warranties of such Borrower contained in Article V are
true and correct in all material respects as of the date of such Credit
Extension except to the extent any such representation or warranty is stated to
relate solely to an earlier date, in which case such representation or warranty
shall have been true and correct in all material respects on and as of such
earlier date.

(iii)

All legal matters incident to the making of such Credit Extension shall be
reasonably satisfactory to the Lenders and their counsel.

            Each request for a Credit Extension by a Borrower shall constitute a
representation and
warranty by such Borrower that the conditions contained in Sections 4.2(i) and
(ii) have been
satisfied. Any Lender may require a duly completed compliance certificate in
substantially the
form of Exhibit A from the applicable Borrower as a condition to the making of a
Credit
Extension.

            4.3      Certain Credit Extensions. Neither the Lenders nor the
Issuer shall be required to
make any Credit Extension:

(i)

which would cause the Outstanding Credit Extensions to DPL to exceed
$275,000,000 unless DPL shall have delivered to the Agent a certificate to the
effect that (and attaching copies of) all corporate and governmental approvals
necessary for DPL to have Outstanding Credit Extensions in the applicable amount
have been obtained; or

(ii)

which would cause the Outstanding Credit Extensions to ACE to exceed
$250,000,000 unless ACE shall have delivered to the Agent a certificate to the
effect that (and attaching copies of) all corporate and governmental approvals
necessary for ACE to have Outstanding Credit Extensions in the applicable amount
have been obtained.

                                                                       ARTICLE V

                                            REPRESENTATIONS AND WARRANTIES

            Each Borrower represents and warrants to the Lenders that:

            5.1      Existence and Standing. Such Borrower is a corporation, and
each of its
Subsidiaries is a corporation, partnership or limited liability company, duly
and properly
incorporated or organized, as the case may be, validly existing and (to the
extent such concept
applies to such entity) in good standing under the laws of its jurisdiction (or,
if applicable,
jurisdictions) of incorporation or organization and has all requisite authority
to conduct its
business in each jurisdiction in which its business is conducted, except where
failure to do so
could not reasonably be expected to have a Material Adverse Effect with respect
to such
Borrower.

            5.2      Authorization and Validity. Such Borrower has the power and
authority and legal
right to execute and deliver the Loan Documents to which it is a party and to
perform its
obligations thereunder. The execution and delivery by such Borrower of the Loan
Documents to
which it is a party and the performance of its obligations thereunder have been
duly authorized
by proper corporate proceedings, and the Loan Documents to which such Borrower
is a party
constitute legal, valid and binding obligations of such Borrower enforceable
against such
Borrower in accordance with their terms, except as enforceability may be limited
by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally.

            5.3.      No Conflict; Government Consent. Neither the execution and
delivery by such
Borrower of the Loan Documents to which it is a party, nor the consummation of
the transactions
therein contemplated, nor compliance with the provisions thereof, will violate
(i) any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on such
Borrower or any
of its Subsidiaries or (ii) such Borrower's or any of its Subsidiary's articles
or certificate of
incorporation, partnership agreement, certificate of partnership, articles or
certificate of
organization, bylaws, or operating or other management agreement, as the case
may be, or
(iii) the provisions of any indenture, instrument or agreement to which such
Borrower or any of
its Significant Subsidiaries is a party or is subject, or by which it, or its
Property, is bound, or
conflict with or constitute a default thereunder, or result in, or require, the
creation or imposition
of any Lien in, of or on any Property of such Borrower or any of its Significant
Subsidiaries
pursuant to the terms of any such indenture, instrument or agreement. Except for
an appropriate
order or orders of the SEC under PUHCA, each of which has been issued and is in
full force and
effect (and copies of which have been delivered to the Agent), no order,
consent, adjudication,
approval, license, authorization, or validation of, or filing, recording or
registration with, or
exemption by, or other action in respect of any governmental or public body or
authority
(including the Federal Energy Regulatory Commission), or any subdivision
thereof, is required
to be obtained by such Borrower or any of its Subsidiaries in connection with
the execution and
delivery by such Borrower of the Loan Documents to which it is a party, the
borrowings and
obtaining of Letters of Credit by such Borrower under this Agreement, the
payment and
performance by such Borrower of its Obligations or the legality, validity,
binding effect or
enforceability against such Borrower of any Loan Document to which such Borrower
is a party;
provided that (x) DPL must obtain approval of the Virginia State Corporation
Commission prior
to incurring Outstanding Credit Extensions in excess of $275,000,000, and (y)
ACE must obtain
approval of the New Jersey Board of Public Utilities prior to incurring
Outstanding Credit
Extensions in excess of $250,000,000.

            5.4      Financial Statements. In the case of PHI, the pro forma
consolidated financial
statements for the fiscal year ended December 31, 2001 and the fiscal quarter
ended March 31,
2002, copies of which have been delivered to each Lender, were prepared in
accordance with
Agreement Accounting Principles and fairly present the pro forma consolidated
financial
condition and operations of PHI and its Subsidiaries at the dates thereof and
for the periods then
ended; and in the case of each Subsidiary Borrower, the financial statements
included in such
Subsidiary Borrower's Public Reports were prepared in accordance with Agreement
Accounting
Principles and fairly present the consolidated financial condition and
operations of such
Subsidiary Borrower and its Subsidiaries at the dates thereof and the
consolidated results of their
operations for the periods then ended.

            5.5      No Material Adverse Change. Since December 31, 2001, there
has been no
change from that reflected in the Public Reports (and, in the case of PHI, in
the pro forma
consolidated financial statements referred to in Section 5.4) in the business,
Property, financial
condition or results of operations of such Borrower and its Subsidiaries taken
as a whole which
could reasonably be expected to have a Material Adverse Effect with respect to
such Borrower.

            5.6      Taxes. Such Borrower and its Subsidiaries have filed all
United States federal tax
returns and all other material tax returns which are required to be filed and
have paid all taxes
due pursuant to said returns or pursuant to any assessment received by such
Borrower or any of
its Subsidiaries, except (a) such taxes, if any, as are being contested in good
faith and as to which
adequate reserves have been provided in accordance with Agreement Accounting
Principles and
(b) taxes and governmental charges (in addition to those referred to in clause
(a)) in an aggregate
amount not exceeding $1,000,000. The charges, accruals and reserves on the books
of such
Borrower and its Subsidiaries in respect of any taxes or other governmental
charges are
adequate.

            5.7      Litigation and Contingent Obligations. Except as disclosed
in the Public Reports,
there is no litigation, arbitration, governmental investigation, proceeding or
inquiry pending or,
to the knowledge of such Borrower, threatened against or affecting such Borrower
or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect with respect
to such Borrower or which seeks to prevent, enjoin or delay the making of any
Loans. Other
than any liability incident to any litigation, arbitration or proceeding which
could not reasonably
be expected to have a Material Adverse Effect with respect to such Borrower,
such Borrower has
no material contingent obligations not provided for or disclosed in the Public
Reports.

            5.8      Significant Subsidiaries. Schedule 4 contains an accurate
list of all Significant
Subsidiaries of such Borrower after giving effect to the Merger Transactions,
setting forth their
respective jurisdictions of organization and the percentage of their respective
capital stock or
other ownership interests owned by such Borrower or other Subsidiaries of such
Borrower. All
of the issued and outstanding shares of capital stock or other ownership
interests of such
Significant Subsidiaries have been (to the extent such concepts are relevant
with respect to such
ownership interests) duly authorized and issued and are fully paid and
nonassessable.

            5.9      ERISA. Each Plan complies in all material respects with all
applicable
requirements of law and regulations, no Reportable Event has occurred with
respect to any Plan,
neither such Borrower nor any other member of the Controlled Group has withdrawn
from any
Plan or initiated steps to do so, and no steps have been taken to reorganize or
terminate any Plan.

            5.10   Accuracy of Information. No written information, exhibit or
report furnished by
such Borrower or any of its Subsidiaries to the Agent or to any Lender in
connection with the
negotiation of, or compliance with, the Loan Documents to which such Borrower is
a party
contained any material misstatement of fact or omitted to state a material fact
or any fact
necessary to make the statements contained therein not misleading.

            5.11   Regulation U. Margin stock (as defined in Regulation U of the
FRB) constitutes
less than 25% of the value of those assets of such Borrower and its Subsidiaries
which are
subject to any limitation on sale, pledge, or other restriction hereunder.

            5.12  Material Agreements. Neither such Borrower nor any Subsidiary
thereof is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or
conditions contained in any agreement to which it is a party, which default
could reasonably be
expected to have a Material Adverse Effect with respect to such Borrower.

            5.13   Compliance With Laws. Such Borrower and its Subsidiaries have
complied with
all applicable statutes, rules, regulations, orders and restrictions of any
domestic or foreign
government or any instrumentality or agency thereof having jurisdiction over the
conduct of their
respective businesses or the ownership of their respective Property except for
any failure to
comply with any of the foregoing which could not reasonably be expected to have
a Material
Adverse Effect with respect to such Borrower.

            5.14  Plan Assets; Prohibited Transactions. Such Borrower is not an
entity deemed to
hold "plan assets" within the meaning of 29 C.F.R. Section 2510.3-101 of an
employee benefit plan (as
defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any
plan (within the
meaning of Section 4975 of the Code), and neither the execution of this
Agreement nor the
making of Loans to such Borrower hereunder gives rise to a prohibited
transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code.

            5.15  Environmental Matters. In the ordinary course of its business,
the officers of such
Borrower consider the effect of Environmental Laws on the business of such
Borrower and its
Subsidiaries, in the course of which they identify and evaluate potential risks
and liabilities
accruing to such Borrower and its Subsidiaries due to Environmental Laws. On the
basis of this
consideration, such Borrower has concluded that Environmental Laws are not
reasonably
expected to have a Material Adverse Effect with respect to such Borrower.
Neither such
Borrower nor any Subsidiary thereof has received any notice to the effect that
its operations are
not in material compliance with any of the requirements of applicable
Environmental Laws or
are the subject of any federal or state investigation evaluating whether any
remedial action is
needed to respond to a release of any toxic or hazardous waste or substance into
the
environment, which noncompliance or remedial action could reasonably be expected
to have a
Material Adverse Effect with respect to such Borrower.

            5.16  Investment Company Act. Neither such Borrower nor any
Subsidiary thereof is
an "investment company" or a company "controlled" by an "investment company",
within the
meaning of the Investment Company Act of 1940.

            5.17  Public Utility Holding Company Act. Upon consummation of the
Merger
Transactions, PHI will be a "holding company" within the meaning of PUHCA.

            5.18  Insurance. Such Borrower and its Significant Subsidiaries
maintain insurance
with financially sound and reputable insurance companies on all their Property
of a character
usually insured by entities in the same or similar businesses similarly situated
against loss or
damage of the kinds and in the amounts, customarily insured against by such
entities, and
maintain such other insurance as is usually carried by such entities.

            5.19  No Default. No Default or Unmatured Default exists.

            5.20  Ownership of Properties. As of the Closing Date, such Borrower
and its
Subsidiaries have valid title, free of all Liens other than those permitted by
Section 6.12, to all
the Property reflected as owned by such Borrower and its Subsidiaries in the
March 31, 2002
financial statements of such Borrower referred to in Section 5.4, other than
Property used, sold,
transferred or otherwise disposed of since such date (a) in the ordinary course
of business, (b)
which are not material to the business of such Borrower and its Subsidiaries
taken as a whole or
(c) as otherwise permitted by the terms of the Existing Credit Facilities.

                                                                   ARTICLE VI

                                                                  COVENANTS

            During the term of this Agreement, unless the Required Lenders shall
otherwise consent
in writing:

            6.1      Financial Reporting. Each Borrower will maintain, for
itself and each of its
Subsidiaries, a system of accounting established and administered in accordance
with Agreement
Accounting Principles, and furnish to the Agent (in such number of copies as the
Agent may
reasonably request):

(i)

Within 100 days after the close of each of its fiscal years, an audit report,
which shall be without a "going concern" or similar qualification or exception
and without any qualification as to the scope of the audit, certified by
independent certified public accountants acceptable to the Required Lenders,
prepared in accordance with Agreement Accounting Principles on a consolidated
and consolidating basis (consolidating statements need not be certified by such
accountants) for itself and its Subsidiaries, including balance sheets as of the
end of such period, related profit and loss and reconciliation of surplus
statements, and a statement of cash flows, accompanied by (a) any management
letter prepared by said accountants, and (b) a certificate of said accountants
that, in the course of their examination necessary for their certification of
the foregoing, they have obtained no knowledge of any Default or Unmatured
Default with respect to such Borrower, or if, in the opinion of such
accountants, any such Default or Unmatured Default shall exist, stating the
nature and status thereof; provided that if such Borrower is then a "registrant"
within the meaning of Rule 1-01 of Regulation S-X of the SEC and required to
file a report on Form 10-K with the SEC, a copy of such Borrower's annual report
on Form 10-K (excluding the exhibits thereto, unless such exhibits are requested
under clause (viii) of this Section) or any successor form and a manually
executed copy of the accompanying report of such Borrower's independent public
accountant, as filed with the SEC, shall satisfy the requirements of this clause
(i);

(ii)

Within 60 days after the close of the first three quarterly periods of each of
its fiscal years, for itself and its Subsidiaries, either (i) consolidated and
consolidating unaudited balance sheets as at the close of each such period and
consolidated and consolidating profit and loss and reconciliation of surplus
statements and a statement of cash flows for the period from the beginning of
such fiscal year to the end of such quarter, all certified by its chief
financial officer or (ii) if such Borrower is then a "registrant" within the
meaning of Rule 1-01 of Regulation S-X of the SEC and required to file a report
on Form 10-Q with the SEC, a copy of such Borrower's report on Form 10-Q for
such quarterly period, excluding the exhibits thereto, unless such exhibits are
requested under clause (viii) of this Section.

(iii)

Together with the financial statements required under Sections 6.1(i) and (ii),
a compliance certificate in substantially the form of Exhibit A signed by an
Authorized Officer of such Borrower showing the calculations necessary to
determine such Borrower's compliance with Section 6.13 of this Agreement and
stating that, to the knowledge of such officer, no Default or Unmatured Default
with respect to such Borrower exists, or if any such Default or Unmatured
Default exists, stating the nature and status thereof.

(iv)

As soon as possible and in any event within 30 days after receipt by such
Borrower, a copy of (a) any notice or claim to the effect that such Borrower or
any of its Subsidiaries is or may be liable to any Person as a result of the
release by such Borrower, any of its Subsidiaries, or any other Person of any
toxic or hazardous waste or substance into the environment, and (b) any notice
alleging any violation of any federal, state or local environmental, health or
safety law or regulation by such Borrower or any of its Subsidiaries, which, in
either case, could be reasonably expected to have a Material Adverse Effect with
respect to such Borrower.

(v)

In the case of PHI, promptly upon the furnishing thereof to its shareholders,
copies of all financial statements, reports and proxy statements so furnished.

(vi)

Promptly upon the filing thereof, copies of all registration statements and
annual, quarterly, monthly or other regular reports which such Borrower or any
of its Subsidiaries files with the SEC.

(vii)

In the case of PHI, as soon as PHI obtains knowledge of an actual Change in
Control or publicly disclosed prospective Change in Control, written notice of
same, including the anticipated or actual date of and all other publicly
disclosed material terms and conditions surrounding such proposed or actual
Change in Control.

(viii)

Such other information (including nonfinancial information) as the Agent or any
Lender may from time to time reasonably request.

            Documents required to be delivered pursuant to clause (i), (ii), (v)
or (vi) above may be
delivered electronically and, if so delivered, shall be deemed to have been
delivered on the date
(i) on which the applicable Borrower posts such documents, or provides a link
thereto, on a
website on the internet at a website address previously specified to the Agent
and the Lenders; or
(ii) on which such documents are posted on the applicable Borrower's behalf on
IntraLinks or
another relevant website, if any, to which each of the Agent and each Lender has
access;
provided that (i) upon request of the Agent or any Lender, the applicable
Borrower shall deliver
paper copies of such documents to the Agent or such Lender (until a written
request to cease
delivering paper copies is given by the Agent or such Lender) and (ii) the
applicable Borrower
shall notify (which may be by facsimile or electronic mail) the Agent and each
Lender of the
posting of any documents. The Agent shall have no obligation to request the
delivery of, or to
maintain copies of, the documents referred to above or to monitor compliance by
any Borrower
with any such request for delivery, and each Lender shall be solely responsible
for requesting
delivery to it or maintaining its copies of such documents.

            6.2      Use of Proceeds. Each Borrower will use the proceeds of the
Advances to it for
general corporate purposes. No Borrower will, nor will it permit any Subsidiary
to, use any of
the proceeds of the Advances to it to purchase or carry any "margin stock" (as
defined in
Regulation U of the FRB).

            6.3      Notice of Default. Each Borrower will give prompt notice in
writing to the
Lenders of the occurrence of any Default or Unmatured Default with respect to
such Borrower
and of any other development, financial or otherwise, which could reasonably be
expected to
have a Material Adverse Effect with respect to such Borrower (it being
understood and agreed
that no Borrower shall be required to make separate disclosure under this
Section 6.3 of
occurrences or developments which have previously been disclosed to the Lenders
in any
financial statement or other information delivered to the Lenders pursuant to
Section 6.1).

             6.4      Conduct of Business. Each Borrower will, and will cause
each of its Significant
Subsidiaries (or, in the case of clause (ii) below, each of its Subsidiaries)
to, (i) carry on and
conduct its business in substantially the same manner and in substantially the
same fields of
enterprise as it is presently conducted and (ii) do all things necessary to
remain duly incorporated
or organized, validly existing and (to the extent such concept applies to such
entity) in good
standing as a domestic corporation, partnership or limited liability company in
its jurisdiction of
incorporation or organization, as the case may be, and maintain all requisite
authority to conduct
its business in each jurisdiction in which its business is conducted, except to
the extent, in the
case of all matters covered by this clause (ii) other than the existence of such
Borrower, that
failure to do so would not reasonably be expected to have a Material Adverse
Effect with respect
to such Borrower.

            6.5      Taxes. Each Borrower will, and will cause each of its
Subsidiaries to, timely file
complete and correct United States federal and applicable foreign, state and
local tax returns
required by law and pay when due all taxes, assessments and governmental charges
and levies
upon it or its income, profits or Property, except (a) those that are being
contested in good faith
by appropriate proceedings and with respect to which adequate reserves have been
set aside in
accordance with Agreement Accounting Principles and (b) taxes, governmental
charges and
levies (in addition to those referred to in clause (a)) in an aggregate amount
not exceeding
$1,000,000.

            6.6      Insurance. Each Borrower will, and will cause each of its
Significant Subsidiaries
to, maintain with financially sound and reputable insurance companies insurance
on all of its
Property in such amounts and covering such risks as is consistent with sound
business practice,
and each Borrower will furnish to any Lender such information as such Lender may
reasonably
request as to the insurance carried by such Borrower and its Significant
Subsidiaries.

            6.7     Compliance with Laws. Each Borrower will, and will cause
each of its
Subsidiaries to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions,
decrees or awards to which it may be subject, including all Environmental Laws,
where failure to
do so could reasonably be expected to have a Material Adverse Effect with
respect to such
Borrower.

            6.8      Maintenance of Properties. Each Borrower will, and will
cause each of its
Subsidiaries to, do all things necessary to (a) maintain, preserve, protect and
keep its Property in
good repair, working order and condition, and make all necessary and proper
repairs, renewals
and replacements so that its business carried on in connection therewith may be
properly
conducted at all times, where failure to do so could reasonably be expected to
have a Material
Adverse Effect with respect to such Borrower; and (b) keep proper books and
records in which
full and correct entries shall be made of all material financial transactions of
such Borrower and
its Subsidiaries.

            6.9     Inspection. Each Borrower will, and will cause each of its
Significant Subsidiaries
to, permit the Agent and the Lenders upon reasonable notice and at such
reasonable times and
intervals as the Agent or any Lender may designate by their respective
representatives and
agents, to inspect any of the Property, books and financial records of such
Borrower and each
such Significant Subsidiary, to examine and make copies of the books of accounts
and other
financial records of such Borrower and each such Significant Subsidiary, and to
discuss the
affairs, finances and accounts of such Borrower and each such Significant
Subsidiary with, and
to be advised as to the same by, their respective officers.

            6.10     Merger. No Borrower will, nor will it permit any of its
Significant Subsidiaries
to, merge or consolidate with or into any other Person, except that, so long as
both immediately
prior to and after giving effect to such merger or consolidation, no Default or
Unmatured Default
with respect to such Borrower shall have occurred and be continuing, (i) any
Significant
Subsidiary of a Borrower may merge with such Borrower or a wholly-owned
Subsidiary of such
Borrower and (ii) a Borrower may merge or consolidate with any other Person so
long as such
Borrower is the surviving entity. Nothing in this Section 6.10 shall prohibit
the Merger
Transactions.

            6.11     Sales of Assets. No Borrower will, nor will it permit any
of its Subsidiaries to,
lease, sell or otherwise dispose of any of its assets (other than in the
ordinary course of business),
or sell or assign with or without recourse any accounts receivable, except:

(i)

Any Subsidiary of a Borrower may sell, transfer or assign any of its assets to
such Borrower or another Subsidiary of such Borrower

(ii)

The sale, assignment or other transfer of accounts receivable or other rights to
payment pursuant to any Securitization Transaction.

(iii)

In the case of PHI, any Permitted PHI Asset Sale so long as, at the time thereof
and immediately after giving effect thereto, no Default or Unmatured Default
with respect to PHI exists.

(iv)

In the case of ACE, any Permitted ACE Asset Sale so long as, at the time thereof
and immediately after giving effect thereto, no Default or Unmatured Default
with respect to ACE exists.

(v)

In the case of DPL, any Permitted DPL Asset Sale so long as, at the time thereof
and immediately after giving effect thereto, no Default or Unmatured Default
with respect of DPL exists.

(vi)

So long as no Default or Unmatured Default exists or would result therefrom, the
sale of Intangible Transition Property to a Special Purpose Subsidiary in
connection with such Special Purpose Subsidiary's issuance of Nonrecourse
Transition Bond Debt.

(vii)

In the case of PEPCO, Permitted Pepco Distributions.

(viii)

Any Borrower and its Subsidiaries may sell or otherwise dispose of assets so
long as the aggregate amount of all assets sold or otherwise disposed of in any
fiscal year of such Borrower (other than assets sold or otherwise disposed of in
the ordinary course of business or pursuant to clauses (i) through (vii) above)
does not exceed a Substantial Portion of the Property of such Borrower and its
Subsidiaries.

            6.12      Liens. No Borrower will, nor will it permit any of its
Significant Subsidiaries to,
create, incur, or suffer to exist any Lien in, of or on the Property of such
Borrower or any such
Significant Subsidiary, except:

(i)

Liens for taxes, assessments or governmental charges or levies on its Property
if the same shall not at the time be delinquent or thereafter can be paid
without penalty, or are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with Agreement
Accounting Principles shall have been set aside on its books.

(ii)

Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and
other similar liens arising in the ordinary course of business which secure
payment of obligations not more than 90 days past due or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books.

(iii)

Liens arising out of pledges or deposits under worker's compensation laws,
unemployment insurance, old age pensions, or other social security or retirement
benefits, or similar legislation.

(iv)

Utility easements, building restrictions, zoning laws or ordinances and such
other encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere with the use
thereof in the business of such Borrower and its Significant Subsidiaries.

(v)

Liens existing on the date hereof and described in Schedule 5 (including Liens
on after-acquired property arising under agreements described in Schedule 5 as
such agreements are in effect on the date hereof).

(vi)

Judgment Liens which secure payment of legal obligations that would not
constitute a Default with respect to such Borrower under Article 7.

(vii)

Liens on Property acquired by such Borrower or a Significant Subsidiary thereof
after the date hereof, existing on such Property at the time of acquisition
thereof (and not created in anticipation thereof), provided that in any such
case no such Lien shall extend to or cover any other Property of such Borrower
or such Significant Subsidiary, as the case may be.

(viii)

Deposits and/or similar arrangements to secure the performance of bids, fuel
procurement contracts or other trade contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business
by such Borrower or any of its Significant Subsidiaries.

(ix)

Liens on assets of such Borrower and its Significant Subsidiaries arising out of
obligations or duties to any municipality or public authority with respect to
any franchise, grant, license, permit or certificate.

(x)

Rights reserved to or vested in any municipality or public authority to control
or regulate any property or asset of such Borrower or any of its Significant
Subsidiaries or to use such property or asset in a manner which does not
materially impair the use of such property or asset for the purposes for which
it is held by such Borrower or such Significant Subsidiary.

(xi)

Irregularities in or deficiencies of title to any Property which do not
materially affect the use of such property by such Borrower or any of its
Significant Subsidiaries in the normal course of its business.

(xii)

Liens securing Indebtedness of such Borrower and its Subsidiaries incurred to
finance the acquisition of fixed or capital assets, provided that (i) such Liens
shall be created substantially simultaneously with the acquisition of such fixed
or capital assets, (ii) such Liens do not at any time encumber any property
other than the property financed by such Indebtedness, (iii) the principal
amount of Indebtedness secured thereby is not increased and (iv) the principal
amount of Indebtedness secured by any such Lien shall at no time exceed 100% of
the original purchase price of such property at the time it was acquired.

(xiii)

Any Lien on any property or asset of any corporation or other entity existing at
the time such corporation or entity is acquired, merged or consolidated or
amalgamated with or into such Borrower or any Significant Subsidiary thereof and
not created in contemplation of such event.

(xiv)

Liens arising out of the refinancing, extension, renewal or refunding of any
Indebtedness secured by any Lien permitted by Section 6.12 (v), (vii), (xii) or
(xiii), provided that such Indebtedness is not increased and is not secured by
any additional assets.

(xv)

Rights of lessees arising under leases entered into by such Borrower or any of
its Significant Subsidiaries as lessor, in the ordinary course of business.

(xvi)

In the case of PHI and PEPCO, Permitted PEPCO Liens.

(xvii)

In the case of PHI and DPL, Permitted DPL Liens

(xviii)

In the case of PHI and ACE, Permitted ACE Liens.

(xix)

In the case of PHI, Permitted PHI Liens.

(xx)

Purchase money mortgages or other purchase money liens or conditional sale,
lease-purchase or other title retention agreements upon or in respect of
property acquired or leased for use in the ordinary course of its business by
such Borrower or any of its Significant Subsidiaries.

(xxi)

Liens granted by a Special Purpose Subsidiary to secure Nonrecourse Transition
Bond Debt of such Special Purpose Subsidiary.

(xxii)

Liens, in addition to those permitted by clauses (i) through (xxi), granted by
PHI and its Subsidiaries (other than the Subsidiary Borrowers and their
Subsidiaries) to secure Nonrecourse Indebtedness incurred after the date hereof,
provided that the aggregate amount of all Indebtedness secured by such Liens
shall not at any time exceed $200,000,000.

(xxiii)

Other Liens, in addition to those permitted by clauses (i) through (xxii),
securing Indebtedness or arising in connection with Securitization Transactions,
provided that the sum (without duplication) of all such Indebtedness, plus the
aggregate investment or claim held at any time by all purchasers, assignees or
other transferees of (or of interests in) receivables and other rights to
payment in all Securitization Transactions (excluding any Nonrecourse Transition
Bond Debt), shall not at any time exceed (a) $500,000,000 for PHI and its
Significant Subsidiaries, (b) $300,000,000 for PEPCO and its Significant
Subsidiaries, (c) $300,000,000 for DPL and its Significant Subsidiaries and (d)
$300,000,000 for ACE and its Significant Subsidiaries.

            6.13       Leverage Ratio.  No Borrower will permit the ratio,
determined as of the end of
each of its fiscal quarters, of (i) the Total Indebtedness of such Borrower to
(ii) the Total
Capitalization of such Borrower to be greater than (a) prior to the 90th day
after the issuance of
any Nonrecourse Transition Bond Debt, 0.70 to 1.0 and (b) thereafter, 0.65 to
1.0.

                                                                ARTICLE VII

                                                                  DEFAULTS

            The occurrence of any one or more of the following events shall
constitute a Default with
respect to the Borrower(s) affected thereby (it being understood that (a) any
Default with respect
to a Subsidiary Borrower shall also be a Default with respect to PHI; and (b)
any Default under
Section 7.10 or 7.12 shall be a Default for all Borrowers):

            7.1       Representation or Warranty. Any representation or warranty
made, or deemed
made pursuant to Section 4.2 by or on behalf of such Borrower to the Issuer, the
Lenders or the
Agent under or in connection with this Agreement or any certificate or
information delivered in
connection with this Agreement or any other Loan Document to which such Borrower
is a party
shall be materially false on the date as of which made.

            7.2       Nonpayment. Nonpayment of the principal of any Loan to
such Borrower when
due; nonpayment of any Reimbursement Obligation of such Borrower within one
Business Day
after the same becomes due; or nonpayment by such Borrower of any interest on
any Loan to
such Borrower, or of any facility fee, utilization fee, letter of credit fee or
other obligation
payable by such Borrower under any of the Loan Documents to which it is a party,
within five
days after the same becomes due.

            7.3       Certain Covenant Breaches. The breach by such Borrower of
any of the terms or
provisions of Section 6.2, 6.4 (as to the existence of such Borrower), 6.10,
6.11, 6.12 or 6.13.

            7.4       Other Breaches. The breach by such Borrower (other than a
breach which
constitutes a Default with respect to such Borrower under another Section of
this Article VII) of
any of the terms or provisions of this Agreement which is not remedied within 15
days (or, in the
case of Section 6.9, five Business Days) after the chief executive officer, the
chief financial
officer, the President, the Treasurer or any Assistant Treasurer of such
Borrower obtains actual
knowledge of such breach.

            7.5       Cross Default. Failure of such Borrower or any of its
Significant Subsidiaries to
pay when due any Indebtedness aggregating in excess of $50,000,000 ("Material
Indebtedness");
or the default by such Borrower or any of its Significant Subsidiaries in the
performance (beyond
the applicable grace period with respect thereto, if any) of any term, provision
or condition
contained in any agreement under which any such Material Indebtedness was
created or is
governed, or any other event shall occur or condition exist, the effect of which
default or event is
to cause, or to permit the holder or holders of such Material Indebtedness to
cause, such Material
Indebtedness to become due prior to its stated maturity; or any Material
Indebtedness of such
Borrower or any of its Significant Subsidiaries shall be declared to be due and
payable or
required to be prepaid or repurchased (other than by a regularly scheduled
payment) prior to the
stated maturity thereof; or such Borrower or any of its Significant Subsidiaries
shall not pay, or
admit in writing its inability to pay, its debts generally as they become due.

            7.6       Voluntary Bankruptcy, etc. Such Borrower or any of its
Significant Subsidiaries
shall (i) have an order for relief entered with respect to it under the Federal
bankruptcy laws as
now or hereafter in effect, (ii) make an assignment for the benefit of
creditors, (iii) apply for,
seek, consent to, or acquiesce in, the appointment of a receiver, custodian,
trustee, examiner,
liquidator or similar official for it or a Substantial Portion of its Property,
(iv) institute any
proceeding seeking an order for relief under the Federal bankruptcy laws as now
or hereafter in
effect or seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any
law relating to bankruptcy, insolvency or reorganization or relief of debtors or
fail to file an
answer or other pleading denying the material allegations of any such proceeding
filed against it,
(v) take any corporate, partnership or limited liability company action to
authorize or effect any
of the foregoing actions set forth in this Section 7.6 or (vi) fail to contest
in good faith any
appointment or proceeding described in Section 7.7.

            7.7       Involuntary Bankruptcy, etc. Without the application,
approval or consent of such
Borrower or any of its Significant Subsidiaries, a receiver, trustee, examiner,
liquidator or similar
official shall be appointed for such Borrower or any of its Significant
Subsidiaries or a
Substantial Portion of its Property, or a proceeding described in Section
7.6(iv) shall be instituted
against such Borrower or any of its Significant Subsidiaries and such
appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period
of 30
consecutive days.

            7.8       Seizure of Property, etc. Any court, government or
governmental agency shall
condemn, seize or otherwise appropriate, or take custody or control of, all or
any portion of the
Property of such Borrower and its Significant Subsidiaries which, when taken
together with all
other Property of such Borrower and its Significant Subsidiaries so condemned,
seized,
appropriated, or taken custody or control of, constitutes a Substantial Portion
of its Property.

            7.9       Judgments. Such Borrower or any of its Significant
Subsidiaries shall fail within
60 days to pay, bond or otherwise discharge one or more (i) judgments or orders
for the payment
of money in excess of $50,000,000 (or the equivalent thereof in currencies other
than U.S.
Dollars) in the aggregate or (ii) nonmonetary judgments or orders which,
individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect with
respect to such
Borrower, and, in any such case, there is a period of five consecutive days
during which a stay of
enforcement of such judgment(s) or order(s) is not in effect (by reason of
pending appeal or
otherwise).

            7.10      ERISA. (i) Any Person shall engage in any "prohibited
transaction" (as defined
in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii)
any "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or not waived,
shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise
on the assets of
any Borrower or any other member of the Controlled Group, (iii) a Reportable
Event shall occur
with respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or
commencement of proceedings or appointment of a trustee is, in the reasonable
opinion of the
Required Lenders, likely to result in the termination of such Plan for purposes
of Title IV of
ERISA, (iv) any other member of the Plan shall terminate for purposes of Title
IV of ERISA,
(v) any Borrower or any other member of the Controlled Group shall, or in the
reasonable
opinion of the Required Lenders is likely to, incur any liability in connection
with a withdrawal
from, or the insolvency or reorganization of, a Multiemployer Plan or (vi) any
other event or
condition shall occur or exist with respect to a Plan; and in each case referred
to in clauses (i)
through (vi) above, such event or condition, together with all other such events
or conditions, if
any, could reasonably be expected to have a Material Adverse Effect with respect
to any
Borrower.

            7.11      Unenforceability of Loan Documents. Any Loan Document
shall cease to be in
full force and effect (other than, in the case of a Note, as contemplated
hereby), any action shall
be taken by or on behalf of a Borrower to discontinue or to assert the
invalidity or
unenforceability of any of its obligations under any Loan Document, or any
Borrower or any
Person acting on behalf of a Borrower shall deny that such Borrower has any
further liability
under any Loan Document or shall give notice to such effect.

            7.12       Change in Control. Any Change in Control shall occur; or
at any time after the
consummation of the Merger Transactions, PHI shall fail to own, directly or
indirectly, 100% of
the Voting Stock of each Subsidiary Borrower.

                                                                  ARTICLE VIII

                    ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

            8.1       Acceleration. If any Default described in Section 7.6 or
7.7 occurs with respect to
a Borrower, the obligations of the Lenders (including the Issuer) to make Credit
Extensions to
such Borrower hereunder shall automatically terminate and the Obligations of
such Borrower
shall immediately become due and payable without any election or action on the
part of the
Agent or any Lender. If any other Default occurs with respect to a Borrower, the
Required
Lenders (or the Agent with the consent of the Required Lenders) may terminate or
suspend the
obligations of the Lenders (including the Issuer) to make Credit Extensions to
such Borrower
hereunder, or declare the Obligations of such Borrower to be due and payable, or
both,
whereupon such obligations of the Lenders (including the Issuer) shall terminate
and/or the
Obligations of such Borrower shall become immediately due and payable, without
presentment,
demand, protest or notice of any kind, all of which each Borrower hereby
expressly waives.

            If, within 30 days after termination of the obligations of the
Lenders to make Credit
Extensions to any Borrower hereunder or acceleration of the maturity of the
Obligations of any
Borrower as a result of any Default (other than any Default as described in
Section 7.6 or 7.7)
with respect to such Borrower and before any judgment or decree for the payment
of the
Obligations due shall have been obtained or entered, the Required Lenders (in
their sole
discretion) shall so direct, the Agent shall, by notice to such Borrower,
rescind and annul such
termination and/or acceleration.

            8.2       Amendments. Subject to the provisions of this Article
VIII, the Required Lenders
(or the Agent with the consent in writing of the Required Lenders) and the
Borrowers may enter
into agreements supplemental hereto for the purpose of adding or modifying any
provisions to
this Agreement changing in any manner the rights of the Lenders or any Borrower
hereunder or
waiving any Default or Unmatured Default hereunder; provided that no such
supplemental
agreement shall, without the consent of all of the Lenders:

(i)

Extend the final maturity of any Loan or Reimbursement Obligation or forgive all
or any portion of the principal amount thereof, or reduce the rate or extend the
time of payment of interest thereon or on any facility fees, utilization fees or
letter of credit fees.

(ii)

Reduce the percentage specified in the definition of Required Lenders.

(iii)

Extend the Facility Termination Date for any Borrower, increase the amount of
the Commitment of any Lender hereunder, increase any Sublimit or permit any
Borrower to assign its rights under this Agreement.

            (iv)     Amend this Section 8.2.

No amendment of any provision of this Agreement relating to the Agent shall be
effective
without the written consent of the Agent. No amendment of this Agreement
relating to the Issuer
shall be effective without the written consent of the Issuer. The Agent may
waive payment of
the fee required under Section 12.3.2 without obtaining the consent of any other
party to this
Agreement.

            8.3      Preservation of Rights. No delay or omission of the Agent,
the Issuer or the
Lenders to exercise any right under the Loan Documents shall impair such right
or be construed
to be a waiver of any Default or Unmatured Default or an acquiescence therein,
and the making
of a Credit Extension notwithstanding the existence of a Default or Unmatured
Default or the
inability of the applicable Borrower to satisfy the conditions precedent to such
Credit Extension
shall not constitute any waiver or acquiescence. Any single or partial exercise
of any such right
shall not preclude other or further exercise thereof or the exercise of any
other right, and no
waiver, amendment or other variation of the terms, conditions or provisions of
any Loan
Document whatsoever shall be valid unless in writing signed by the parties
required pursuant to
Section 8.2 and then only to the extent in such writing specifically set forth.
All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be
available to the Agent, the Issuer and the Lenders until the Obligations have
been paid in full.

                                                                  ARTICLE IX

                                                       GENERAL PROVISIONS

            9.1       Survival of Representations. All representations and
warranties of the Borrowers
contained in this Agreement shall survive the making of the Credit Extensions
herein
contemplated.

            9.2       Governmental Regulation. Anything contained in this
Agreement to the contrary
notwithstanding, no Lender shall be obligated to extend credit to any Borrower
in violation of
any limitation or prohibition provided by any applicable statute or regulation.

            9.3       Headings. Section headings in the Loan Documents are for
convenience of
reference only, and shall not govern the interpretation of any of the provisions
of the Loan
Documents.

            9.4       Entire Agreement. The Loan Documents embody the entire
agreement and
understanding among the Borrowers, the Agent and the Lenders and supersede all
prior
agreements and understandings among the Borrowers, the Agent and the Lenders
relating to the
subject matter thereof.

            9.5       Several Obligations; Benefits of this Agreement. The
respective obligations of
the Lenders hereunder are several and not joint and no Lender shall be the
partner or agent of any
other (except to the extent to which the Agent is authorized to act as such).
The failure of any
Lender to perform any of its obligations hereunder shall not relieve any other
Lender from any of
its obligations hereunder. This Agreement shall not be construed so as to confer
any right or
benefit upon any Person other than the parties to this Agreement and their
respective successors
and assigns, provided that the parties hereto expressly agree that the Arranger
shall enjoy the
benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent
specifically set forth
therein and shall have the right to enforce such provisions on its own behalf
and in its own name
to the same extent as if it were a party to this Agreement.

            9.6       Expenses; Indemnification.

            (i)        PHI shall reimburse the Agent and the Arranger for all
reasonable costs, internal
charges and out of pocket expenses (including reasonable attorneys' fees and
time charges of
attorneys for the Agent, which attorneys may be employees of the Agent) paid or
incurred by the
Agent or the Arranger in connection with the preparation, negotiation,
execution, delivery,
syndication, review, amendment, modification and administration of the Loan
Documents. Each
Borrower agrees to reimburse the Agent, the Arranger and the Lenders for all
reasonable costs,
internal charges and out of pocket expenses (including reasonable attorneys'
fees and time
charges of attorneys for the Agent, the Arranger and the Lenders, which
attorneys may be
employees of the Agent, the Arranger or a Lender) paid or incurred by the Agent,
the Arranger
or any Lender in connection with the collection and enforcement of the
Obligations of such
Borrower under the Loan Documents (including in any "work-out" or restructuring
of the
Obligations of such Borrower resulting from the occurrence of a Default with
respect to such
Borrower).

            (ii)       Each Borrower agrees to indemnify the Agent, the
Arranger, each Lender, their
respective affiliates, and each of the directors, officers and employees of the
foregoing Persons
(collectively, the "Indemnified Parties") against all losses, claims, damages,
penalties,
judgments, liabilities and reasonable expenses (including all reasonable
expenses of litigation or
preparation therefor whether or not any Indemnified Party is a party thereto)
which any of them
may pay or incur arising out of or relating to this Agreement, the other Loan
Documents, the
transactions contemplated hereby or the direct or indirect application or
proposed application of
the proceeds of any Credit Extension hereunder except to the extent that they
are determined in a
final non-appealable judgment by a court of competent jurisdiction to have
resulted from the
gross negligence or willful misconduct of the Indemnified Party seeking
indemnification;
provided that no Subsidiary Borrower shall have any obligation with respect to
any of the
foregoing to the extent allocable solely to PHI or another Subsidiary Borrower.
The obligations
of the Borrowers under this Section 9.6 shall survive the termination of this
Agreement.

            9.7       Numbers of Documents. All statements, notices, closing
documents and requests
hereunder shall be furnished to the Agent with sufficient counterparts so that
the Agent may
furnish one to each of the Lenders.

            9.8       Disclosure. The Borrowers and the Lenders hereby (i)
acknowledge and agree
that Bank One and/or its Affiliates from time to time may hold investments in,
make other loans
to or have other relationships with the Borrowers and their Affiliates and (ii)
waive any liability
of Bank One or any of its Affiliates to any Borrower or any Lender,
respectively, arising out of
or resulting from such investments, loans or relationships other than
liabilities arising out of the
gross negligence or willful misconduct of Bank One or its Affiliates.

            9.9       Severability of Provisions. Any provision in any Loan
Document that is held to
be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that
jurisdiction, be
inoperative, unenforceable, or invalid without affecting the remaining
provisions in that
jurisdiction or the operation, enforceability, or validity of that provision in
any other jurisdiction,
and to this end the provisions of all Loan Documents are declared to be
severable.

            9.10     Nonliability of Lenders. The relationship between the
Borrowers on the one hand
and the Lenders and the Agent on the other hand shall be solely that of borrower
and lender.
Neither the Agent, the Arranger nor any Lender shall have any fiduciary
responsibilities to any
Borrower. Neither the Agent, the Arranger nor any Lender undertakes any
responsibility to any
Borrower to review or inform such Borrower of any matter in connection with any
phase of such
Borrower's business or operations. Each Borrower agrees that neither the Agent,
the Arranger
nor any Lender shall have liability to such Borrower (whether sounding in tort,
contract or
otherwise) for losses suffered by such Borrower in connection with, arising out
of, or in any way
related to, the transactions contemplated and the relationship established by
the Loan
Documents, or any act, omission or event occurring in connection therewith,
unless it is
determined in a final non-appealable judgment by a court of competent
jurisdiction that such
losses resulted from the gross negligence or willful misconduct of the party
from which recovery
is sought. Neither the Agent, the Arranger nor any Lender shall have any
liability with respect
to, and each Borrower hereby waives, releases and agrees not to sue for, any
special, indirect or
consequential damages suffered by such Borrower in connection with, arising out
of, or in any
way related to the Loan Documents or the transactions contemplated thereby.

            9.11     Confidentiality. Each Lender agrees to hold any
confidential information which it
may receive from any Borrower pursuant to this Agreement in confidence, except
for disclosure
(i) to its Affiliates and to other Lenders and their respective Affiliates, (ii)
to legal counsel,
accountants and other professional advisors to such Lender or to a Transferee
who agrees to be
bound by the confidentiality restrictions set forth in this Section, (iii) to
regulatory officials
having jurisdiction over such Lender, (iv) to any Person as required by law,
regulation or legal
process, (v) to any Person in connection with any legal proceeding relating to
this Agreement to
which such Lender is a party, (vi) to such Lender's direct or indirect
contractual counterparties in
swap agreements who agree to be bound by the confidentiality restrictions set
forth in this
Section and to legal counsel, accountants and other professional advisors to
such counterparties,
(vii) permitted by Section 12.4, (viii) to rating agencies if required by such
agencies in
connection with a rating relating to the Credit Extensions hereunder, and (ix)
to the extent
required in connection with the exercise of any remedy or any enforcement of
this Agreement by
such Lender or the Agent.

            9.12      Nonreliance. Each Lender hereby represents that it is not
relying on or looking to
any margin stock (as defined in Regulation U of the FRB) for the repayment of
the Credit
Extensions provided for herein.

            9.13      Termination of Existing Credit Facilities. Lenders which
are parties to the
Existing Credit Facilities (and which constitute "Majority Lenders" or "Required
Lenders" under
and as defined in each Existing Credit Facility) hereby waive any advance notice
requirement for
terminating the commitments under the Existing Credit Facilities, and the
applicable Borrower
and applicable Lenders agree that each Existing Credit Facility shall be
terminated on the date of
the initial Credit Extension hereunder (except for any provisions thereof which
by their terms
survive termination thereof).

                                                                   ARTICLE X

                                                                  THE AGENT

            10.1      Appointment; Nature of Relationship. Bank One, NA is
hereby appointed by
each of the Lenders as its contractual representative (herein referred to as the
"Agent") hereunder
and under each other Loan Document, and each of the Lenders irrevocably
authorizes the Agent
to act as the contractual representative of such Lender with the rights and
duties expressly set
forth herein and in the other Loan Documents. The Agent agrees to act as such
contractual
representative upon the express conditions contained in this Article X.
Notwithstanding the use
of the defined term "Agent," it is expressly understood and agreed that the
Agent shall not have
any fiduciary responsibilities to any Lender by reason of this Agreement or any
other Loan
Document and that the Agent is merely acting as the contractual representative
of the Lenders
with only those duties as are expressly set forth in this Agreement and the
other Loan
Documents. In its capacity as the Lenders' contractual representative, the Agent
(i) does not
hereby assume any fiduciary duties to any of the Lenders, (ii) is a
"representative" of the Lenders
within the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is
acting as an
independent contractor, the rights and duties of which are limited to those
expressly set forth in
this Agreement and the other Loan Documents. Each of the Lenders hereby agrees
to assert no
claim against the Agent on any agency theory or any other theory of liability
for breach of
fiduciary duty, all of which claims each Lender hereby waives.

            10.2      Powers. The Agent shall have and may exercise such powers
under the Loan
Documents as are specifically delegated to the Agent by the terms of each
thereof, together with
such powers as are reasonably incidental thereto. The Agent shall have no
implied duties to the
Lenders, or any obligation to the Lenders to take any action hereunder or under
any other Loan
Document except any action specifically provided by the Loan Documents to be
taken by the
Agent.

            10.3      General Immunity. Neither the Agent nor any of its
directors, officers, agents or
employees shall be liable to any Borrower or any Lender for any action taken or
omitted to be
taken by it or them hereunder or under any other Loan Document or in connection
herewith or
therewith except to the extent such action or inaction is determined in a final
non-appealable
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful
misconduct of such Person.

            10.4      No Responsibility for Loans Recitals etc. Neither the
Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain,
inquire into, or verify (a) any statement, warranty or representation made in
connection with any
Loan Document or any borrowing hereunder; (b) the performance or observance of
any of the
covenants or agreements of any obligor under any Loan Document, including any
agreement by
an obligor to furnish information directly to each Lender; (c) the satisfaction
of any condition
specified in Article IV, except receipt of items required to be delivered solely
to the Agent; (d)
the existence or possible existence of any Default or Unmatured Default; or (e)
the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other
instrument or writing furnished in connection therewith. The Agent shall have no
duty to
disclose to the Lenders information that is not required to be furnished by a
Borrower to the
Agent at such time, but is voluntarily furnished by such Borrower to the Agent
(either in its
capacity as Agent or in its individual capacity).

            10.5      Action on Instructions of Lenders. The Agent shall in all
cases be fully protected
in acting, or in refraining from acting, hereunder and under any other Loan
Document in
accordance with written instructions signed by the Required Lenders (or, when
expressly
required hereunder, all of the Lenders), and such instructions and any action
taken or failure to
act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby
acknowledge
that the Agent shall be under no duty to take any discretionary action permitted
to be taken by it
pursuant to the provisions of this Agreement or any other Loan Document unless
it shall be
requested in writing to do so by the Required Lenders. The Agent shall be fully
justified in
failing or refusing to take any action hereunder and under any other Loan
Document unless it
shall first be indemnified to its satisfaction by the Lenders pro rata against
any and all liability,
cost and expense that it may incur by reason of taking or continuing to take any
such action.

            10.6.     Employment of Agents and Counsel. The Agent may execute
any of its duties as
Agent hereunder and under any other Loan Document by or through employees,
agents and
attorneys in fact and shall not be answerable to the Lenders, except as to money
or securities
received by it or its authorized agents, for the default or misconduct of any
such agents or
attorneys in fact selected by it with reasonable care. The Agent shall be
entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all
matters pertaining to the Agent's duties hereunder and under any other Loan
Document.

            10.7      Reliance on Documents; Counsel. The Agent shall be
entitled to rely upon any
Note, notice, consent, certificate, affidavit, letter, telegram, statement,
paper or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or
persons, and, in respect to legal matters, upon the opinion of counsel selected
by the Agent,
which counsel may be employees of the Agent.

            10.8      Agent's Reimbursement and Indemnification. The Lenders
agree to reimburse
and indemnify the Agent ratably in proportion to their respective Commitments
(or, if the
Commitments have been terminated, in proportion to their Commitments immediately
prior to
such termination) (i) for any amounts not reimbursed by any Borrower for which
the Agent is
entitled to reimbursement by such Borrower under the Loan Documents, (ii) for
any other
expenses incurred by the Agent on behalf of the Lenders, in connection with the
preparation,
execution, delivery, administration and enforcement of the Loan Documents
(including for any
expenses incurred by the Agent in connection with any dispute between the Agent
and any
Lender or between two or more of the Lenders) and (iii) for any liabilities,
obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent in any
way relating to or arising out of the Loan Documents or any document delivered
in connection
therewith or the transactions contemplated thereby (including for any such
amounts incurred by
or asserted against the Agent in connection with any dispute between the Agent
and any Lender
or between two or more of the Lenders), or the enforcement of any of the terms
of the Loan
Documents or of any such other documents, provided that (i) no Lender shall be
liable for any of
the foregoing to the extent any of the foregoing is found in a final
non-appealable judgment by a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct
of the Agent and (ii) any indemnification required pursuant to Section 3.5(vii)
shall,
notwithstanding the provisions of this Section 10.8, be paid by the relevant
Lender in accordance
with the provisions thereof. The obligations of the Lenders under this Section
10.8 shall survive
payment of the Obligations and termination of this Agreement.

            10.9     Notice of Default. The Agent shall not be deemed to have
knowledge or notice of
the occurrence of any Default or Unmatured Default hereunder (except for failure
of a Borrower
to pay any amount required to be paid to the Agent hereunder for the account of
the Lenders)
unless the Agent has received written notice from a Lender or a Borrower
referring to this
Agreement, describing such Default or Unmatured Default and stating that such
notice is a
"notice of default". In the event that the Agent receives such a notice, the
Agent shall give
prompt notice thereof to all Lenders.

            10.10    Rights as a Lender. In the event the Agent is a Lender, the
Agent shall have the
same rights and powers hereunder and under any other Loan Document with respect
to its
Commitment, its Loans and its interest in the LC Obligations as any Lender and
may exercise the
same as though it were not the Agent, and the term "Lender" or "Lenders" shall,
at any time
when the Agent is a Lender, unless the context otherwise indicates, include the
Agent in its
individual capacity. The Agent and its Affiliates may accept deposits from, lend
money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those
contemplated by this Agreement or any other Loan Document, with any Borrower or
any of its
Subsidiaries in which such Borrower or such Subsidiary is not restricted hereby
from engaging
with any other Person. The Agent in its individual capacity is not obligated to
remain a Lender.

            10.11      Lender Credit Decision. Each Lender acknowledges that it
has, independently
and without reliance upon the Agent, the Arranger or any other Lender and based
on the
financial statements prepared by the Borrowers and such other documents and
information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement
and the other Loan Documents. Each Lender also acknowledges that it will,
independently and
without reliance upon the Agent, the Arranger or any other Lender and based on
such documents
and information as it shall deem appropriate at the time, continue to make its
own credit
decisions in taking or not taking action under this Agreement and the other Loan
Documents.

            10.12    Successor Agent. The Agent may resign at any time by giving
written notice
thereof to the Lenders and PHI, such resignation to be effective upon the
appointment of a
successor Agent or, if no successor Agent has been appointed, forty-five days
after the retiring
Agent gives notice of its intention to resign. The Agent may be removed at any
time with or
without cause by written notice received by the Agent from the Required Lenders,
such removal
to be effective on the date specified by the Required Lenders. Upon any such
resignation or
removal, the Required Lenders shall have the right (with, so long as no Default
or Unmatured
Default exists with respect to any Borrower, the consent of PHI, which shall not
be unreasonably
withheld or delayed) to appoint, on behalf of the Borrowers and the Lenders, a
successor Agent.
If no successor Agent shall have been so appointed by the Required Lenders
within thirty days
after the resigning Agent's giving notice of its intention to resign, then the
resigning Agent may
appoint, on behalf of the Borrowers and the Lenders, a successor Agent.
Notwithstanding the
previous sentence, the Agent may at any time without the consent of any Lender
but with the
consent of PHI, not to be unreasonably withheld or delayed, appoint any of its
Affiliates which is
a commercial bank as a successor Agent hereunder. If the Agent has resigned or
been removed
and no successor Agent has been appointed, the Lenders may perform all the
duties of the Agent
hereunder and the Borrowers shall make all payments in respect of their
respective Obligations
to the applicable Lender and for all other purposes shall deal directly with the
Lenders. No
successor Agent shall be deemed to be appointed hereunder until such successor
Agent has
accepted the appointment. Any such successor Agent shall be a commercial bank
having capital
and retained earnings of at least $100,000,000. Upon the acceptance of any
appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and
become vested with all the rights, powers, privileges and duties of the
resigning or removed
Agent. Upon the effectiveness of the resignation or removal of the Agent, the
resigning or
removed Agent shall be discharged from its duties and obligations hereunder and
under the Loan
Documents. After the effectiveness of the resignation or removal of an Agent,
the provisions of
this Article X shall continue in effect for the benefit of such Agent in respect
of any actions taken
or omitted to be taken by it while it was acting as the Agent hereunder and
under the other Loan
Documents. In the event that there is a successor to the Agent (by merger or
resignation or
removal), or the Agent assigns its duties and obligations to an Affiliate
pursuant to this Section
10.12, then the term "Prime Rate" as used in this Agreement shall mean the prime
rate, base rate
or other analogous rate of the new Agent. Notwithstanding the foregoing
provisions of this
Section 10.12, the Agent may not be removed by the Required Lenders unless the
Agent (in its
individual capacity) is concurrently removed from its duties and
responsibilities as the Issuer.

            10.13    Agent's Fee. The Borrowers agree to pay to the Agent and
the Arranger, for their
own respective accounts, the fees agreed to by the Borrowers, the Agent and the
Arranger
pursuant to the letter agreement dated March 19, 2002, among such parties or as
otherwise
agreed to from time to time.

            10.14    Delegation to Affiliates. The Borrowers and the Lenders
agree that the Agent
may delegate any of its duties under this Agreement to any of its Affiliates.
Any such Affiliate
(and such Affiliate's directors, officers, agents and employees) which performs
duties in
connection with this Agreement shall be entitled to the same benefits of the
indemnification,
waiver and other protective provisions to which the Agent is entitled under
Articles IX and X.

            10.15     Other Agents. None of the Lenders identified on the cover
page of this
Agreement or otherwise herein as being the "Syndication Agent" or a
"Co-Documentation
Agent" (collectively, the "Other Agents") shall have any right, power,
obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Lenders. Each
Lender acknowledges that it has not relied, and will not rely, on any of the
Other Agents in
deciding to enter into this Agreement or in taking or refraining from taking any
action hereunder
or pursuant hereto.

                                                                ARTICLE XI

                                              SETOFF; RATABLE PAYMENTS

            11.1    Setoff. In addition to, and without limitation of, any
rights of the Lenders under
applicable law, if any Borrower becomes insolvent, however evidenced, or any
Default occurs
with respect to such Borrower, any and all deposits (including all account
balances, whether
provisional or final and whether or not collected or available) and any other
Indebtedness at any
time held or owing by any Lender or any Affiliate of any Lender to or for the
credit or account of
such Borrower may be offset and applied toward the payment of the Obligations of
such
Borrower owing to such Lender, whether or not the Obligations, or any part
thereof, shall then be
due.

            11.2    Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment
made to it upon the Outstanding Credit Extensions owed to it by any Borrower
(other than
payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5 and payments made to
the Issuer in
respect of Reimbursement Obligations so long as the Lenders have not funded
their
participations therein) in a greater proportion than that received by any other
Lender, such
Lender agrees, promptly upon demand, to purchase a portion of the Outstanding
Credit
Extensions owed by such Borrower to the other Lenders so that after such
purchase each Lender
will hold its ratable proportion of all of such Borrower's Outstanding Credit
Extensions. If any
Lender, whether in connection with setoff or amounts which might be subject to
setoff or
otherwise, receives collateral or other protection for the Outstanding Credit
Extensions owed by
it to any Borrower or such amounts which may be subject to setoff, such Lender
agrees,
promptly upon demand, to take such action necessary such that all Lenders share
in the benefits
of such collateral ratably in proportion to the Outstanding Credit Extensions
owed to each of
them by such Borrower. In case any such payment is disturbed by legal process,
or otherwise,
appropriate further adjustments shall be made.

                                                                   ARTICLE XII

                    BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

            12.1    Successors and Assigns. The terms and provisions of the Loan
Documents shall
be binding upon and inure to the benefit of the Borrowers and the Lenders and
their respective
successors and assigns, except that (i) no Borrower shall have the right to
assign its rights or
obligations under the Loan Documents and (ii) any assignment by any Lender must
be made in
compliance with Section 12.3. The parties to this Agreement acknowledge that
clause (ii) of the
preceding sentence relates only to absolute assignments and does not prohibit
assignments
creating security interests, including any pledge or assignment by any Lender of
all or any
portion of its rights under this Agreement and any Note to a Federal Reserve
Bank; provided that
no such pledge or assignment creating a security interest shall release the
transferor Lender from
its obligations hereunder unless and until the parties thereto have complied
with the provisions of
Section 12.3. The Agent may treat the Person which made any Loan or which holds
any Note as
the owner thereof for all purposes hereof unless and until such Person complies
with Section
12.3; provided that the Agent may in its discretion (but shall not be required
to) follow
instructions from the Person which made any Loan or which holds any Note to
direct payments
relating to such Loan or Note to another Person. Any assignee of the rights to
any Loan or any
Note agrees by acceptance of such assignment to be bound by all the terms and
provisions of the
Loan Documents. Any request, authority or consent of any Person, who at the time
of making
such request or giving such authority or consent is the owner of the rights to
any Loan (whether
or not a Note has been issued in evidence thereof), shall be conclusive and
binding on any
subsequent holder or assignee of the rights to such Loan.

            12.2      Participations.

            12.2.1        Permitted Participants; Effect. Upon giving notice to
but without obtaining
the consent of any Borrower, any Lender may, in the ordinary course of its
business and in
accordance with applicable law, at any time sell to one or more banks or other
entities
("Participants") participating interests in any Obligations owing to such
Lender, any Note held
by such Lender, any Commitment of such Lender or any other interest of such
Lender under the
Loan Documents. In the event of any such sale by a Lender of participating
interests to a
Participant, such Lender's obligations under the Loan Documents shall remain
unchanged, such
Lender shall remain solely responsible to the other parties hereto for the
performance of such
obligations, such Lender shall remain the owner of the Obligations owing to such
Lender and the
holder of any Note issued to it for all purposes under the Loan Documents, all
amounts payable
by each Borrower under this Agreement shall be determined as if such Lender had
not sold such
participating interests, and the Borrowers, the Issuer and the Agent shall
continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under the
Loan Documents.

            12.2.2        Voting Rights. Each Lender shall retain the sole right
to approve, without the
consent of any Participant, any amendment, modification or waiver of any
provision of the Loan
Documents other than any amendment, modification or waiver which extends the
Facility
Termination Date for any Borrower or the final maturity of any Loan or
Reimbursement
Obligation in which such Participant has an interest or forgives all or any
portion of the principal
amount thereof, or reduces the rate or extends the time of payment of interest
thereon or on any
facility fees, utilization fees or letter of credit fees.

            12.2.3        Benefit of Setoff. The Borrowers agree that each
Participant shall be deemed
to have the right of setoff provided in Section 11.1 in respect of its
participating interest in
amounts owing under the Loan Documents to the same extent as if the amount of
its participating
interest were owing directly to it as a Lender under the Loan Documents,
provided that each
Lender shall retain the right of setoff provided in Section 11.1 with respect to
the amount of
participating interests sold to each Participant. The Lenders agree to share
with each Participant,
and each Participant, by exercising the right of setoff provided in Section
11.1, agrees to share
with each Lender, any amount received pursuant to the exercise of its right of
setoff, such
amounts to be shared in accordance with Section 11.2 as if each Participant were
a Lender.

            12.3   Assignments.

            12.3.1        Permitted Assignments. Any Lender may, in the ordinary
course of its
business and in accordance with applicable law, at any time assign to one or
more banks or other
entities ("Purchasers") all or any part of its rights and obligations under the
Loan Documents.
Such assignment shall be substantially in the form of Exhibit B or in such other
form as may be
agreed to by the parties thereto. The consent of PHI and the Agent shall be
required prior to an
assignment becoming effective with respect to a Purchaser which is not a Lender
or an Affiliate
thereof; provided that if a Default exists with respect to any Borrower, the
consent of PHI shall
not be required. Such consent shall not be unreasonably withheld or delayed.
Each such
assignment with respect to a Purchaser which is not a Lender or an Affiliate
thereof shall (unless
each of PHI and the Agent otherwise consent) be in an amount not less than the
lesser of (i)
$5,000,000 or (ii) the remaining amount of the assigning Lender's Commitment
(calculated as at
the date of such assignment) or outstanding Loans and participations in LC
Obligations (to the
extent such Commitment has been terminated). Each assignment shall be of a
constant, and not a
varying, percentage of all of the assigning Lender's interests in the
Obligations of, and
Commitment to, all Borrowers.

            12.3.2        Effect; Effective Date. Upon (i) delivery to the Agent
of an Assignment
Agreement, together with any consents required by Section 12.3.1, and (ii)
payment of a $3,500
fee to the Agent for processing such assignment (unless such fee is waived by
the Agent), such
Assignment Agreement shall become effective on the effective date specified in
such
Assignment Agreement. On and after the effective date of such Assignment
Agreement, such
Purchaser shall for all purposes be a Lender party to this Agreement and any
other Loan
Document executed by or on behalf of the Lenders and shall have all the rights
and obligations
of a Lender under the Loan Documents, to the same extent as if it were an
original party hereto,
and no further consent or action by the Borrowers, the Lenders or the Agent
shall be required to
release the transferor Lender with respect to the percentage of the Aggregate
Commitment and
Obligations assigned to such Purchaser. Upon the consummation of any assignment
to a
Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Agent and
the Borrowers
shall, if the transferor Lender or the Purchaser desires that its Loans be
evidenced by Notes,
make appropriate arrangements so that new Notes or, as appropriate, replacement
Notes are
issued to such transferor Lender and new Notes or, as appropriate, replacement
Notes, are issued
to such Purchaser.

            12.4    Dissemination of Information. The Borrowers authorize each
Lender to disclose
to any Participant or Purchaser or any other Person acquiring an interest in the
Loan Documents
by operation of law (each a "Transferee") and any prospective Transferee any and
all information
in such Lender's possession concerning the creditworthiness of the Borrowers and
their
respective Subsidiaries, including any information contained in any Public
Reports; provided that
each Transferee and prospective Transferee agrees to be bound by Section 9.11 of
this
Agreement.

            12.5    Grant of Funding Option to SPC. Notwithstanding anything to
the contrary
contained herein, any Lender (a "Granting Lender") may grant to a special
purpose funding
vehicle (an "SPC"), identified as such in writing from time to time by the
Granting Lender to the
Agent and PHI, the option to provide to any Borrower all or any part of any Loan
that such
Granting Lender would otherwise be obligated to make to such Borrower pursuant
to this
Agreement; provided that (i) nothing herein shall constitute a commitment by any
SPC to make
any Loan and (ii) if an SPC elects not to exercise such option or otherwise
fails to provide all or
any part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the
terms hereof. The making of a Loan by an SPC hereunder shall utilize the
Commitment of the
Granting Lender to the same extent, and as if, such Loan were made by such
Granting Lender.
Each party hereto agrees that no SPC shall be liable for any indemnity or
similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Lender).
In furtherance of the foregoing, each party hereto agrees (which agreement shall
survive the
termination of this Agreement) that, prior to the date that is one year and one
day after the
payment in full of all outstanding commercial paper or other senior indebtedness
of any SPC, it
will not institute against, or join any other Person in instituting against,
such SPC any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding
under the laws of
the United States or any State thereof. In addition, notwithstanding anything to
the contrary
contained in this Section 12.5, any SPC may (a) with notice to, but without the
prior written
consent of, PHI and the Agent and without paying any processing fee therefor,
assign all or a
portion of its interests in any Loan to the Granting Lender or to any financial
institution
(consented to by PHI and the Agent) providing liquidity and/or credit support to
or for the
account of such SPC to support the funding or maintenance of Loans and (b)
disclose on a
confidential basis any non-public information relating to its Loans to any
rating agency,
commercial paper dealer or provider of any surety, guarantee or credit or
liquidity enhancement
to such SPC.

            12.6    Tax Treatment. If any interest in any Loan Document is
transferred to any
Transferee which is organized under the laws of any jurisdiction other than the
United States or
any State thereof, the transferor Lender shall cause such Transferee,
concurrently with the
effectiveness of such transfer, to comply with the provisions of Section
3.5(iv).

                                                               ARTICLE XIII

                                                                   NOTICES

            13.1    Notices. Except as otherwise permitted by Section 2.14, all
notices, requests and
other communications to any party hereunder shall be in writing (including
facsimile
transmission or, subject to Section 13.3, electronic mail or posting on a
website) and shall,
subject to the last paragraph of Section 6.1, be given to such party at (i) in
the case of any
Borrower or the Agent, its address, facsimile number or electronic mail address
set forth on the
signature pages hereof or such other address, facsimile number or electronic
mail address as it
may hereafter specify for such purpose by notice to the other parties hereto;
and (ii) in the case of
any Lender, at the address, facsimile number or electronic mail address set
forth in its
Administrative Questionnaire or such other address, facsimile number or
electronic mail address
as such Lender may hereafter specify for such purpose by notice to the Borrowers
and the Agent.
Subject to the last paragraph of Section 6.1, each such notice, request or other
communication
shall be effective (i) if given by facsimile transmission, when transmitted to
the facsimile number
specified pursuant to this Section and confirmation of receipt is received, (ii)
if given by mail,
three Business Days after such communication is deposited in the mails with
first class postage
prepaid, addressed as aforesaid, or (iii) if given by any other means, when
delivered (or, in the
case of electronic mail, received) at the address specified pursuant to this
Section; provided that
notices to the Agent under Article II shall not be effective until received.

            13.2    Notices to and by Subsidiary Borrowers. Each Subsidiary
Borrower (a) authorizes
PHI to send and receive notices on behalf of such Subsidiary Borrower hereunder
and
(b) irrevocably agrees that any notice to PHI which is effective pursuant to
Section 13.1 shall
be conclusively deemed to have been received by such Subsidiary Borrower.

             13.3    Limited Use of Electronic Mail. Electronic mail and
internet and intranet
websites may be used to distribute routine communications, such as financial
statements and
other information as provided in Section 6.1, and to distribute Loan Documents
for execution by
the parties thereto, but not for purposes of other notices hereunder.

                                                                 ARTICLE XIV

                                                              COUNTERPARTS

            This Agreement may be executed in any number of counterparts, all of
which taken
together shall constitute one agreement, and any of the parties hereto may
execute this
Agreement by signing any such counterpart. This Agreement shall be effective
when it has been
executed by the Borrowers, the Agent and the Lenders and each party has notified
the Agent by
facsimile transmission or telephone that it has taken such action.

       CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

            15.1    CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING SECTION 5.1401.7 OF THE
GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO THE
CONFLICT OF LAWS PROVISIONS THEREOF) OF THE STATE OF NEW YORK, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

            15.2    CONSENT TO JURISDICTION. EACH BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW
YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENT, AND EACH BORROWER HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER
TO BRING PROCEEDINGS AGAINST A BORROWER IN THE COURTS OF ANY
OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY A BORROWER
AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR
ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW
YORK.

            15.3    WAIVER OF JURY TRIAL. THE BORROWERS, THE AGENT AND
THE LENDERS HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT
OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

            IN WITNESS WHEREOF, the Borrowers, the Lenders and the Agent have
executed this
Agreement as of the date first above written.

                                           

PEPCO HOLDINGS, INC.

By:              A. J. KAMERICK          
Title:  Vice President and Treasurer

701 Ninth Street NW
Fifth Floor
Washington, DC 20068
Attention:     Anthony J. Kamerick
Telephone:   (202) 872-2056
Fax:              (202) 872-3015
E-mail:          tjkamerick@pepco.com

   

POTOMAC ELECTRIC POWER COMPANY

By:            KAREN G. ALMQUIST              
Title:  Assistant Treasurer

701 Ninth Street NW
Fifth Floor
Washington, DC 20068
Attention:     Anthony J. Kamerick
Telephone:    (202) 872-2056
Fax:               (202) 872-3015
E-mail:           kgalmquist@pepco.com

 

 

 

 

DELMARVA POWER & LIGHT COMPANY

By:             DONNA J. KINZEL                    
Title:  Assistant Treasurer

c/o Conectiv
800 King Street
Wilmington, DE 19899-0231
Attention:  Donna Kinzel
Telephone:(302) 429-3004
Fax:(302) 429-3188
E-mail:  donna.kinzel@conectiv.com

ATLANTIC CITY ELECTRIC COMPANY

By:             DONNA J. KINZEL                    
Title:  Assistant Treasurer

c/o Conectiv
800 King Street
Wilmington, DE 19899-0231
Attention:  Donna Kinzel
Telephone:(302) 429-3004
Fax:(302) 429-3188
E-mail:  donna.kinzel@conectiv.com

 

 

 

 

BANK ONE, NA,
Individually as Administrative Agent and as Issuer

By:               DAWN M. LAWLER           
Title:  Director

1 Bank One Plaza
Chicago, Illinois 60670
Attention: Utilities Group
Telephone:     (312) 732-3857
Fax:                (312) 732-3055
E-mail:  dawn_m_lawler@bankone.com

 

 

 

 

WACHOVIA BANK, NATIONAL
ASSOCIATION, Individually and as Syndication
Agent

By:                  D. MITCH WILSON              
Title:  Vice President

 

 

 

 

THE BANK OF NOVA SCOTIA, Individually and
as Co-Documentation Agent

By:       JAMES R. TRIMBLE                
Title:  Managing Director

 

 

 

 

CREDIT SUISSE FIRST BOSTON, CAYMAN
ISLANDS BRANCH, Individually and as Co-
Documentation Agent

By:                  PAUL L. COLON         
Title:  Vice President

By:                  VANESSA GOMEZ      
Title:  Associate

 

 

 

 

BANK OF AMERICA, N.A., Individually and as
Senior Managing Agent

By:            GRETCHEN P. BURUD      
Title:  Managing Director

 

 

 

 

FLEET NATIONAL BANK, Individually and as
Senior Managing Agent

By:        CHERYL A. HULT              
Title:  Vice President

 

 

 

 

BAYERISCHE LANDESBANK
GIROZENTRALE, Individually and as Managing
Agent

By:    PETER OBERMANN                
Title:  Senior Vice President

By:     JAMES H. BOYLE                   
Title:  Vice President

 

 

 

 

MELLON BANK, N.A., Individually and as Co-
Agent

By:             SCOTT HENNESSEE      
Title:  Vice President

 

 

 

 

THE BANK OF NEW YORK, Individually and as
Co-Agent

By:                  JOHN N. WATT               
Title:  Vice President

 

 

 

 

SUNTRUST BANK, Individually and as Co-Agent

By:              DAVID H. EIDSON             
Title:  Vice President

 

 

 

 

ALLFIRST BANK, Individually and as Co-Agent

By:     SHIRLEY M. TRIMBLE             
Title:  Vice President

 

 

 

 

MERRILL LYNCH BANK USA

By:        D. KEVIN IMLAY                     
Title:  Senior Credit Officer

 

 

 

 

CITIBANK, N.A.

By:             JOHN S. KING                      
Title:  Managing Director

 

 

 

 

THE NORTHERN TRUST COMPANY

By:            BRIAN STRIKLAND          
Title:  Vice President

 

 

 

 

MIZUHO CORPORATE BANK, LTD.

By:                    JOHN DIPPO                    
Title:  Senior Vice President

 

 

 

 

WILMINGTON TRUST COMPANY

By:             JOSEPH L. YACYSHYN       
Title:  Vice President

 

 

 

 

RIGGS BANK N.A.

By:           DOUGLAS H. KLAMFOTH
Title:  Vice President

 

 

 

 

UNION BANK OF CALIFORNIA, N.A.

By:           CHAD CANFIELD                     
Title:  Assistant Vice President

 

 

 

 

BANK HAPOALIM B.M.

By:               MARC BOSC                      
Title:  Vice President

 

 

 

 

E.SUN COMMERCIAL BANK, LTD., LOS
ANGELES BRANCH

By:                BENJAMIN LIN                    
Title:  EVP and General Manager

 

 

                                                                SCHEDULE 1

                                                         PRICING SCHEDULE

 

Level I
Status

Level II
Status

Level III
Status

Level IV
Status

Level V
Status

Level VI
Status

Applicable Margin/LC Fee Rate

0.565%

0.675%

0.750%

0.850%

1.200%

1.800%

Facility Fee Rate

0.085%

0.100%

0.125%

0.150%

0.175%

0.200%

Utilization Fee Rate

0.100%

0.100%

0.125%

0.125%

0.125%

0.250%

            For the purposes of this Schedule, the following terms have the
following meanings,
subject to the other provisions of this Schedule:

             "Level I Status" exists with respect to any Borrower on any date
if, on such date, such
Borrower's Moody's Rating is A2 or better or such Borrower's S&P Rating is A or
better.

             "Level II Status" exists with respect to any Borrower on any date
if, on such date, (i)
such Borrower has not qualified for Level I Status and (ii) such Borrower's
Moody's Rating is A3
or better or such Borrower's S&P Rating is A- or better.

             "Level III Status" exists with respect to any Borrower on any date
if, on such date,
(i) such Borrower has not qualified for Level I Status or Level II Status and
(ii) such Borrower's
Moody's Rating is Baa1 or better or such Borrower's S&P Rating is BBB+ or
better.

             "Level IV Status" exists with respect to any Borrower on any date
if, on such date,
(i) such Borrower has not qualified for Level I Status, Level II Status or Level
III Status and (ii)
such Borrower's Moody's Rating is Baa2 or better or such Borrower's S&P Rating
is BBB or
better.

             "Level V Status" exists with respect to any Borrower on any date
if, on such date, (i)
such Borrower has not qualified for Level I Status, Level II Status, Level III
Status or Level IV
Status and (ii) such Borrower's Moody's Rating is Baa3 or better or such
Borrower's S&P Rating
is BBB- or better.

             "Level VI Status" exists with respect to any Borrower on any date
if, on such date, such
Borrower has not qualified for Level I Status, Level II Status, Level III
Status, Level IV Status or
Level V Status.

             "Moody's Rating" means, at any time for any Borrower, the rating
issued by Moody's
and then in effect with respect to such Borrower's senior unsecured long-term
debt securities
without third-party credit enhancement.

             "S&P Rating" means, at any time for any Borrower, the rating issued
by S&P and then in
effect with respect to such Borrower's senior unsecured long-term debt
securities without third-
party credit enhancement.

             "Status" means Level I Status, Level II Status, Level III Status,
Level IV Status, Level V
Status or Level VI Status.

            For purposes of this Schedule, the Moody's Rating and the S&P Rating
in effect for any
Borrower on any date are that in effect at the close of business on such date.

            The Applicable Margin, the Facility Fee Rate, the LC Fee Rate and
the Utilization Fee
Rate for each Borrower shall be determined in accordance with the above based on
such
Borrower's Status as determined from its then-current Moody's Rating and S&P
Rating. If the
applicable Borrower is split-rated and the ratings differential is one level,
the higher rating will
apply. If the applicable Borrower is split-rated and the ratings differential is
two levels or more,
the intermediate rating at the midpoint will apply (or, if there is no midpoint,
the higher of the
two intermediate ratings will apply). If at any time the applicable Borrower has
no Moody's
Rating or no S&P Rating, Level VI Status shall exist.

                                                                   SCHEDULE 2

                                      COMMITMENTS AND PRO RATA SHARES

Lender

Amount of Commitment

Pro Rata Share

Bank One, NA

$145,000,000

9.67%

Wachovia Bank, National Association

$140,000,000

9.33%

The Bank of Nova Scotia

$140,000,000

9.33%

Credit Suisse First Boston, Cayman Islands Branch

$140,000,000

9.33%

Bank of America, N.A.

$125,000,000

8.33%

Fleet National Bank

$125,000,000

8.33%

Bayerische Landesbank Girozentrale

$ 85,000,000

5.67%

Mellon Bank, N.A.

$ 75,000,000

5.00%

The Bank of New York

$ 75,000,000

5.00%

SunTrust Bank

$ 75,000,000

5.00%

Allfirst Bank

$ 70,000,000

4.67%

Merrill Lynch Bank USA

$ 50,000,000

3.33%

Citibank, N.A.

$ 50,000,000

3.33%

The Northern Trust Company

$ 50,000,000

3.33%

Mizuho Corporate Bank, Ltd.

$ 50,000,000

3.33%

Wilmington Trust Company

$ 25,000,000

1.67%

Riggs Bank N.A.

$ 25,000,000

1.67%

Union Bank of California, N.A.

$ 25,000,000

1.67%

Bank Hapoalim B.M.

$ 20,000,000

1.33%

E.Sun Commercial Bank, Ltd.,
Los Angeles Branch

$ 10,000,000

0.67%

                                                                    SCHEDULE 3

                                                TRUST PREFERRED SECURITIES

$125,000,000 of 7-3/8% Trust Originated Preferred Securities (TOPRs) issued by
Potomac
Electric Power Company Trust I, a statutory Delaware business trust established
by Potomac
Electric Power Company.

$70,000,000 of 8-1/4% Cumulative Quarterly Income Preferred Securities issued by
Atlantic
Capital I, a special purpose statutory Delaware business trust established by
Atlantic City
Electric Company.

$25,000,000 of 7-3/8% Cumulative Quarterly Income Preferred Securities issued by
Atlantic
Capital II, a special purpose statutory Delaware business trust established by
Atlantic City
Electric Company.

$70,000,000 of 8-1/8% Cumulative Trust Preferred Capital Securities issued by
Delmarva Power
Financing I, a special purpose statutory Delaware business trust established by
Delmarva Power
& Light Company.

                                                                   SCHEDULE 4

                                                     SIGNIFICANT SUBSIDIARIES

Name of Company Controlled

Owned By

Percent
Ownership

Amount of
Investment
(as of 3/31/02)

Potomac Electric Power Company

(a D.C. and Virginia corporation)

Pepco Holdings, Inc

100%

$1,332.8 Million

Conectiv

(a Delaware corporation)

Pepco Holdings, Inc

100%

$1,309.4 Million

Delmarva Power & Light Company

(a Delaware and Virginia corporation)

Conectiv

100%

$588.2 Million

Atlantic City Electric Company

(a New Jersey corporation)

Conectiv

100%

$615.6 Million

Conectiv Energy Holding Company
(A Delaware corporation)

Conectiv

100%

$572.0 Million

Conectiv Delmarva Generation, Inc
(A Delaware corporation)

Conectiv Energy Holding Company

100%

$447.8 Million

Potomac Capital Investment Corp
(a Delaware corporation)

Pepco Holdings, Inc

100%

$373.4 Million

*After giving effect to the Merger and the Permitted Pepco Distributions

 

                                                                  SCHEDULE 5

                                                                        LIENS

Incurred By

Owed To

Property
Encumbered

Maturity

Amount of
Indebtedness

Potomac Electric Power Co.

CitiCapital (BLC)

Vehicles, Office
Equip., Computers

Master Agreement

$ 17,210,807*

Potomac Electric Power Co.
(Pepco Energy Services)

Hannon Armstrong
Pepco Funding Corp.

Contract Payments Receivable

Master Agreement

$ 59,717,761*

Potomac Electric Power Co.
(Pepco Energy Services)

ABB Energy Capital L.L.C.

Contract Payments Receivable

Master Agreement

$ 10,539,803*

POM Holdings, Inc.
(Potomac Capital Investment Corp.)

ABB Energy Capital L.L.C.

Contract Payments Receivable

August 30, 2017

$ 9,189,292*

Pepco Energy Services, Inc. & Viron/Pepco Services Partnership

John Hancock

Contract Payments Receivable

August 30, 2017

$ 20,761,223*

POM Holdings, Inc., Pepco Energy Services, Inc., & Trigen/Pepco Services, LLC

Allfirst Bank

Contract Payments Receivable

December, 31, 2023

$ 6,527,500*

Delmarva Power & Light Company

Town of St. Michaels, Maryland

Distribution Equipment

October 15, 2006

$ 872,000 

Atlantic City Electric Co.

Guo Mao International Hotels B.V.

Scrubber @ B.L. England Generation Station

January 21, 2007

$ 4,634,809 

*The amount of this lien fluctuates with the amount of accounts receivable
created by this program. The amount listed is as of
May 31, 2002.

                                                             SCHEDULE 6

                                           NONRECOURSE INDEBTEDNESS

Name of Company

Aggregate
Principal
Amount

Type of
Indebtedness

Potomac Capital Investment Corporation
(Potomac Equipment Leasing Corporation)

$19,140,000

Promissory Note with
First Security Bank

Potomac Capital Investment Corporation
(Harmans Building Associates)

$ 6,280,000

Loan Agreement with
Massachusetts Mutual

Conectiv Bethlehem, Inc.

Up to $365 million

Senior Secured Credit
Facilities 4-Year
Construction and Term
Loan Facility *

         * Closed on June 26, 2002

   

                                                                    SCHEDULE 7

                                                  EXISTING LETTERS OF CREDIT

                                                 

CONECTIV LETTERS OF CREDIT

Expiration Date

Company

Beneficiary

Bank

Date Issued

L/C #

Amount

             

1/31/03

PHI

Liberty Mutual

Bank One

1/31/98

320373

$400,000

2/28/03

PHI

Penn Manufacturers Assoc.

Bank One

04/05/00

322173

1,175,000

07/09/02

PHI

PJM Interconnection LLC & PPL Utilities

Bank One

07/10/01

325290

32,582,825

09/18/02

PHI

Nebraska Public Power

Bank One

09/18/00

322748

250,000

10/24/02

PHI

City of Bethlehem

Bank One

10/25/01

325792

3,650,000

11/01/02

PHI

NY ISO

Bank One

09/05/01

325594

3,852,800

01/09/03

PHI

BCLP

Bank One

01/09/97

320349

6,000,000

01/31/03

ACE/DPL

Indemnity Insurance Co. of NA

Bank One

02/21/02

750148

1,600,000

01/28/03

PHI

PJM Interconnection LLC or Peco or DP&L

Bank One

01/30/02

326110

23,440,700

02/03/03

PHI

PJM Interconnection LLC or PA Elec. Co.

Bank One

03/15/02

750163

1,627,150

01/24/03

PHI

Liberty Mutual

Bank One

04/30/02

750199

365,000

02/03/03

PHI

IMO

Bank One

04/23/02

750183

3,663,554

             

                                                                   SCHEDULE 8

                                                 PERMITTED ACE ASSET SALES

Keystone Electric Generating Station*                         Shelocta, PA
Conemaugh Electric Generating Station*                     New Florence, PA
B L England Electric Generating Station                      Beesley's Pt., NJ
Deepwater Electric Generating Station                         Pennsville, PA

* Joint owned plants. ACE owns 2.47% of Keystone and 3.83% of Conemaugh

                                                                  TABLE OF
CONTENTS

ARTICLE I

DEFINITIONS

Page

     

1.1

Definitions

1

     

1.2

Interpretation

14

     1.3

Accounting

15

ARTICLE II

     THE CREDITS

       

     2.1

Commitment

15

     2.2

Required Payments; Termination

15

     2.3

Ratable Loans

15

     2.4

Types of Advances

16

     2.5

Facility Fee; Utilization Fee; Reductions in Aggregate Commitment

 

     2.6

Minimum Amount of Each Advance

16

     2.7

Prepayments

17

     2.8

Method of Selecting Types and Interest Periods for New Advances

17

     2.9

Conversion and Continuation of Outstanding Advances

17

     2.10

Changes in Interest Rate, etc.

18

     2.11

Rates Applicable After Default

18

     2.12

Method of Payment

18

     2.13

Noteless Agreement: Evidence of Indebtedness

19

     2.14

Telephonic Notices

19

     2.15

Interest Payment Dates; Interest and Fee Basis

20

     2.16

Notification of Advances, Interest Rates, Prepayments and Commitment Reductions

20

     2.17

Lending Installations

20

     2.18

Non-Receipt of Funds by the Agent

20

     2.19

Letters of Credit

21

     2.20

Extension of Facility Termination Date

24

ARTICLE III

     YIELD PROTECTION; TAXES

 

     3.1

Yield Protection

26

     3.2

Changes in Capital Adequacy Regulations

26

     3.3

Availability of Types of Advances

27

     3.4

Funding Indemnification

27

     3.5

Taxes

27

     3.6

Mitigation of Circumstances; Lender Statements; Survival of Indemnity

29

     3.7

Replacement of Lender

30

ARTICLE IV

     CONDITIONS PRECEDENT

 

     4.1

Initial Credit Extension

30

     4.2     

Each Credit Extension

31

     4.3

Certain Credit Extensions

32

ARTICLE V

     REPRESENTATIONS AND WARRANTIES

 

     5.1

Existence and Standing

32

     5.2

Authorization and Validity

32

     5.3

No Conflict; Government Consent

33

     5.4

Financial Statement

33

     5.5

No Material Adverse Change

33

     5.6

Taxes

34

     5.7

Litigation and Contingent Obligations

34

     5.8

Significant Subsidiaries

34

     5.9

ERISA

34

     5.10

Accuracy of Information

34

     5.11

Regulation U

34

     5.12

Material Agreements

34

     5.13

Compliance With Laws

35

     5.14

Plan Assets; Prohibited Transactions

35

     5.15

Environmental Matters

35

     5.16

Investment Company Act

35

     5.17

Public Utility Holding Company Act

35

     5.18

Insurance

35

     5.19

No Default

35

     5.20

Ownership of Properties

35

ARTICLE VI

     COVENANTS

 

     6.1

Financial Reporting

36

     6.2

Use of Proceeds

38

     6.3

Notice of Default

38

     6.4

Conduct of Business

38

     6.5

Taxes

38

     6.6

Insurance

38

     6.7

Compliance with Laws

38

     6.8

Maintenance of Properties

39

     6.9

Inspection

39

     6.10

Merger

39

     6.11

Sales of Assets

39

     6.12

Liens

40

     6.13

Leverage Ratio

42

ARTICLE VII

DEFAULTS

 

     7.1

Representation or Warranty

43

     7.2

Nonpayment

43

     7.3

Certain Covenant Breaches

43

     7.4

Other Breaches

43

     7.5

Cross Default

43

     7.6

Voluntary Bankruptcy, etc.

43

     7.7

Involuntary Bankruptcy, etc.

44

     7.8

Seizure of Property, etc.

44

     7.9

Judgments

44

     7.10

ERISA

44

     7.11

Unenforceability of Loan Documents

45

     7.12

Change in Control

45

ARTICLE VIII

     ACCELERATION, WAIVERS, AMENDMENTS AND      REMEDIES

 

     8.1

Acceleration

45

     8.2

Amendments

45

     8.3

Preservation of Rights

46

ARTICLE IX

     GENERAL PROVISIONS

 

     9.1

Survival of Representations

46

     9.2

Governmental Regulation

46

     9.3

Headings

46

     9.4

Entire Agreement

46

     9.5

Several Obligations; Benefits of this Agreement

47

     9.6

Expenses; Indemnification

47

     9.7

Numbers of Documents

47

     9.8

Disclosure

47

     9.9

Severability of Provisions

48

     9.10

Nonliability of Lenders

48

     9.11

Confidentiality

48

     9.12

Nonreliance

48

     9.13

Termination of Existing Credit Facilities

49

ARTICLE X

THE AGENT

 

     10.1

Appointment; Nature of Relationship

49

     10.2

Powers

49

     10.3

General Immunity

49

     10.4

No Responsibility for Loans Recitals, etc.

49

     10.5

Action of Instructions of Lenders

50

     10.6

Employment of Agents and Counsel

50

     10.7

Reliance on Documents; Counsel

50

     10.8

Agent's Reimbursement and Indemnification

50

     10.9

Notice of Default

51

     10.10

Rights as a Lender

51

     10.11

Lender Credit Decision

51

     10.12

Successor Agent

51

     10.13

Agent's Fee

52

     10.14

Delegation to Affiliates

52

     10.15

Other Agents

52

ARTICLE XI

     SETOFF; RATABLE PAYMENTS

 

     11.1

Setoff

53

     11.2     

Ratable Payments

53

ARTICLE XII

     BENEFIT OF AGREEMENT; ASSIGNMENTS;      PARTICIPATIONS

 

     12.1

Successors and Assigns

53

     12.2

Participants

54

     12.3

Assignments

54

     12.4

Dissemination of Information

55

     12.5

Grant of Funding Option to SPC

55

     12.6

Tax Treatment

56

ARTICLE XIII

     NOTICES

 

     13.1

Notices

56

     13.2

Notices to and by Subsidiary Borrowers

56

     13.3

Limited Use of Electronic Mail

57

ARTICLE XIV

     COUNTERPARTS

 

ARTICLE XV

     CHOICE OF LAW: CONSENT TO JURISTICTION;      WAIVER OF JURY TRIAL

 

     15.1

CHOICE OF LAW

57

     15.2

CONSENT TO JURISDICTION

57

     15.3

WAIVER OF JURY TRIAL

58

EXHIBITS

EXHIBIT A                COMPLIANCE CERTIFICATE
EXHIBIT B                ASSIGNMENT AGREEMENT
EXHIBIT C                NOTE
EXHIBIT D                FORM OF LEGAL OPINIONS
EXHIBIT E                 FORM OF EXTENSION REQUEST

SCHEDULES

SCHEDULE 1             PRICING SCHEDULE
SCHEDULE 2             COMMITMENTS AND PRO RATA SHARES
SCHEDULE 3             TRUST PREFERRED SECURITIES
SCHEDULE 4             SIGNIFICANT SUBSIDIARIES
SCHEDULE 5             LIENS
SCHEDULE 6            NONRECOURSE INDEBTEDNESS
SCHEDULE 7             EXISTING LETTERS OF CREDIT
SCHEDULE 8             PERMITTED ACE ASSET SALES

CREDIT AGREEMENT

AMONG

PEPCO HOLDINGS, INC.,
POTOMAC ELECTRIC POWER COMPANY,
DELMARVA POWER & LIGHT COMPANY
and
ATLANTIC CITY ELECTRIC COMPANY,
as Borrowers,

BANK ONE, NA,
as Administrative Agent,

WACHOVIA BANK, N.A.,
as Syndication Agent,

and

CREDIT SUISSE FIRST BOSTON
and
THE BANK OF NOVA SCOTIA,
as Co-Documentation Agents

BANC ONE CAPITAL MARKETS, INC.
Lead Arranger and Sole Book Runner

DATED AS OF August 1, 200