<PAGE>
                                                                    EXHIBIT 10.1

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                   BONDABLE TRANSITION PROPERTY SALE AGREEMENT

                                     between

                  ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC

                                     Issuer

                                       and

                         ATLANTIC CITY ELECTRIC COMPANY

                                     Seller

                          Dated as of ___________, 2002



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                                TABLE OF CONTENTS

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TABLE OF CONTENTS..............................................................................................     i
Article I Definitions..........................................................................................     1
                  Section 1.01.     Definitions................................................................     1
                  Section 1.02.     Other Definitional Provisions..............................................     1
Article II Conveyance of Transferred Bondable Transition Property..............................................     2
                  Section 2.01.     Conveyance of Initial Transferred Bondable
                                    Transition Property and Subsequent Transferred
                                    Bondable Transition Property...............................................     2
                  Section 2.02.     Conditions to Conveyance of Bondable Transition Property...................     4
Article III Representations and Warranties of Seller...........................................................     5
                  Section 3.01.     Organization and Good Standing.............................................     5
                  Section 3.02.     Due Qualification..........................................................     5
                  Section 3.03.     Power and Authority........................................................     5
                  Section 3.04.     Binding Obligation.........................................................     5
                  Section 3.05.     No Violation...............................................................     6
                  Section 3.06.     No Proceedings.............................................................     6
                  Section 3.07.     Approvals..................................................................     7
                  Section 3.08.     The Transferred Bondable Transition Property...............................     7
                  Section 3.09.     Solvency...................................................................    10
                  Section 3.10.     Limitation on Representations and Warranties...............................    10
Article IV Covenants of the Seller.............................................................................    10
                  Section 4.01.     Seller's Existence.........................................................    10
                  Section 4.02.     No Liens or Conveyances....................................................    11
                  Section 4.03.     Use of Proceeds............................................................    11
                  Section 4.04.     Delivery of Collections....................................................    11
                  Section 4.05.     Notice of Liens............................................................    11
                  Section 4.06.     Compliance with Law........................................................    11
                  Section 4.07.     Covenants Related to Transferred Bondable Transition Property..............    11
                  Section 4.08.     Notice of Indemnification Events...........................................    12
                  Section 4.09.     Protection of Title........................................................    12
                  Section 4.10.     Taxes......................................................................    13
                  Section 4.11.     Further Assurances.........................................................    13
Article V Additional Undertakings of the Seller................................................................    13
                  Section 5.01.     Liability of the Seller; Indemnities.......................................    14
                  Section 5.02.     Merger or Consolidation of, or Assumption of the Obligations of, the Seller    15
                  Section 5.03.     Limitation on Liability of the Seller and Others...........................    16
Article VI Miscellaneous Provisions............................................................................    17
                  Section 6.01.     Amendment..................................................................    17
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                  Section 6.02.     Notices....................................................................    17
                  Section 6.03.     Assignment By Seller.......................................................    18
                  Section 6.04.     Assignment to Trustee......................................................    18
                  Section 6.05.     Limitations on Rights of Others............................................    18
                  Section 6.06.     Severability...............................................................    18
                  Section 6.07.     Separate Counterparts......................................................    18
                  Section 6.08.     Headings...................................................................    18
                  Section 6.09.     Governing Law..............................................................    18
                  Section 6.10.     Nonpetition Covenant.......................................................    19
EXHIBIT A  BILL OF SALE........................................................................................     1
EXHIBIT B OPINION OF COUNSEL...................................................................................     1
EXHIBIT C OPINION OF COUNSEL...................................................................................     1
APPENDIX A MASTER DEFINITIONS..................................................................................     1
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                  BONDABLE TRANSITION PROPERTY SALE AGREEMENT, dated as of
_________________, 2002, by and between ATLANTIC CITY ELECTRIC TRANSITION
FUNDING LLC, a Delaware limited liability company, as issuer (the "Issuer"), and
ATLANTIC CITY ELECTRIC COMPANY, a New Jersey corporation, as seller (in such
capacity, the "Seller").

                              W I T N E S S E T H:

                  WHEREAS, on the date hereof and subsequently from time to
time, the Issuer desires to purchase from the Seller and the Seller desires to
sell to the Issuer Bondable Transition Property created pursuant to the
Competition Act and the BPU Financing Orders upon the terms and subject to the
conditions hereof;

                  WHEREAS the Issuer, in order to finance the purchase of the
Transferred Bondable Transition Property, will on the date hereof and on each
such subsequent occasion issue Transition Bonds under the Indenture; and

                  WHEREAS the Issuer, in order to secure its obligations under
the Transition Bonds and the Indenture, will pledge its right, title and
interest in, to and under the Transferred Bondable Transition Property to the
Trustee for the benefit of the Transition Bondholders.

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

                  Section 1.01. Definitions.

Capitalized terms used herein and not otherwise defined herein have the meanings
assigned to them in Appendix A.

                  Section 1.02. Other Definitional Provisions.

                  (a)      "Agreement" means this Bondable Transition Property
         Sale Agreement, as the same may be amended, supplemented or otherwise
         modified from time to time.

                  (b)      The words "hereof", "herein", "hereunder" and words
         of similar import when used in this Agreement refer to this Agreement
         as a whole and not to any particular portion of this Agreement.

                  (c)      Uncapitalized terms used herein that are defined in
         the Competition Act, have as the context requires, the meanings
         assigned to such terms in the Competition Act,


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         but without giving effect to amendments to the Competition Act after
         the date hereof affecting such meanings that, if applied hereto, would
         have a material adverse effect on the Issuer or the Transition
         Bondholders.

                  (d)      All terms defined in this Agreement have the meanings
         herein assigned to them when used in any certificate or other document
         made or delivered pursuant hereto except where otherwise expressly
         provided therein.

                  (e)      References in this Agreement to sections, appendices,
         annexes, schedules and exhibits are to the sections, appendices,
         annexes, schedules and exhibits of, in or to this Agreement unless
         otherwise specified.

                  (f)      The term "including" means "including without
         limitation" and "or" is used in the inclusive sense.

                  (g)      The definitions contained in this Agreement are
         applicable to the singular as well as the plural forms of the defined
         terms, and personal pronouns refer to all persons regardless of gender.

                                   ARTICLE II
             CONVEYANCE OF TRANSFERRED BONDABLE TRANSITION PROPERTY

                  Section 2.01. Conveyance of Initial Transferred Bondable
Transition Property and Subsequent Transferred Bondable Transition Property.

                  (a)      In consideration of the Issuer's payment to or upon
         the order of the Seller of $_________________, net of the underwriting
         discount, original issue discount and financial advisory fees for the
         Transition Bonds in the aggregate amount of $___________, or
         $___________ (the "Initial Purchase Price") by wire transfer of funds
         immediately available on the date hereof to Seller's account no.
         ___________ for further credit to account no. _____________ at
         _____________________________, routing transit _________________,
         subject to the conditions specified in Section 2.02, the Seller does
         hereby irrevocably sell, transfer, assign and otherwise convey to the
         Issuer, without recourse (subject to the obligations of the Seller
         herein), all right, title and interest of the Seller in, to and under
         the Initial Transferred Bondable Transition Property identified in the
         Bill of Sale delivered pursuant to Section 2.02(a) on or prior to the
         Initial Transfer Date (such sale, transfer, assignment and conveyance
         of the Initial Transferred Bondable Transition Property to include, to
         the fullest extent permitted by the Competition Act and the New Jersey
         UCC, the assignment of all revenues, collections, claims, rights,
         payments, money or proceeds of or arising from the Transition Bond
         Charges related to the Initial Transferred Bondable Transition
         Property, as the same may be adjusted from time to time). Such sale,
         transfer, assignment and conveyance of the Initial Transferred Bondable
         Transition Property is hereby expressly stated to be a sale or other
         absolute transfer and, pursuant to Section 23.a. of the Competition
         Act, shall constitute a sale or


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         other absolute transfer of all of the Seller's right, title and
         interest, in, to and under and not a borrowing secured by, the Initial
         Transferred Bondable Transition Property. The preceding sentence is the
         statement referred to in Section 23.a. of the Competition Act. The
         Seller agrees and confirms that, upon payment of the Initial Purchase
         Price and the execution and delivery of this Agreement and the related
         Bill of Sale, the Seller shall have no right, title or interest in, to
         or under the Initial Transferred Bondable Transition Property.

                  (b)      Subject to the conditions specified in Section 2.02,
         the Issuer does hereby purchase the Initial Transferred Bondable
         Transition Property from the Seller for the consideration set forth in
         paragraph (a) above.

                  (c)      The Seller and the Issuer each acknowledge and agree
         that the purchase price for the Initial Transferred Bondable Transition
         Property sold pursuant to this Agreement is equal to its fair market
         value at the time of sale.

                  (d)      The Seller and the Issuer further agree that from
         time to time the Seller may offer to sell, and the Issuer may purchase,
         Subsequent Transferred Bondable Transition Property as of Subsequent
         Transfer Dates, subject to the conditions specified in Section 2.02, in
         exchange for consideration to be agreed upon and set forth in the
         related Bill of Sale (the "Subsequent Purchase Price"). The Seller and
         the Issuer hereby agree that each such sale, transfer, assignment and
         conveyance of any Subsequent Transferred Bondable Transition Property
         shall include, to the fullest extent permitted by the Competition Act
         and the New Jersey UCC, the assignment of all revenues, collections,
         claims, rights, payments, money or proceeds of or arising from the
         Transition Bond Charges related to the Subsequent Transferred Bondable
         Transition Property, as the same may be adjusted from time to time.
         Such sale, transfer, assignment and conveyance of the Subsequent
         Transferred Bondable Transition Property is hereby expressly stated to
         be a sale or other absolute transfer and, pursuant to Section 23.a. of
         the Competition Act, shall constitute a sale or other absolute transfer
         of all of the Seller's right, title and interest, in, to and under and
         not a borrowing secured by, the Subsequent Transferred Bondable
         Transition Property. The preceding sentence is the statement referred
         to in Section 23.a. of the Competition Act. The Seller agrees and
         confirms that, after giving effect to any sale contemplated by this
         paragraph (d) and the execution and delivery of the related Bill of
         Sale, it shall have no right, title or interest in, to or under the
         Subsequent Transferred Bondable Transition Property.

                  (e)      Notwithstanding the foregoing, in the event that any
         sale, transfer, assignment and conveyance of any Transferred Bondable
         Transition Property is determined by a court of competent jurisdiction
         not to be a true and absolute sale as contemplated by the parties
         hereto and by the Competition Act, then such sale, transfer, assignment
         and conveyance shall be treated as a pledge of such Transferred
         Bondable Transition Property and the Seller shall be deemed to have
         granted, and does hereby grant, as of the date hereof a security
         interest to the Issuer in such Transferred Bondable Transition Property
         to secure a payment obligation incurred by the Seller in the amount
         paid by the Issuer for the Transferred Bondable Transition Property.


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                  Section 2.02. Conditions to Conveyance of Bondable Transition
Property.

The obligation of the Seller to sell, and the obligation of the Issuer to
purchase, Bondable Transition Property upon any Transfer Date shall be subject
to and conditioned upon the satisfaction or waiver of each of the following
conditions:

                  (a)      on or prior to such Transfer Date, the Seller shall
         deliver to the Issuer a duly executed Bill of Sale identifying the
         Bondable Transition Property to be conveyed as of that date,
         substantially in the form of Exhibit A;

                  (b)      as of such Transfer Date, no breach by the Seller of
         its representations, warranties or covenants in this Agreement shall
         exist and the Seller shall have delivered to the Issuer and the Trustee
         an Officers' Certificate to such effect, and no Servicer Default shall
         have occurred and be continuing;

                  (c)      as of such Transfer Date:

                           (i)      the Issuer shall have sufficient funds
                  available to pay the purchase price for the Transferred
                  Bondable Transition Property to be conveyed on such date, and

                           (ii)     all conditions set forth in the Indenture to
                  the issuance of one or more Series of Transition Bonds
                  intended to provide such funds shall have been satisfied or
                  waived;

                  (d)      on or prior to such Transfer Date, the Seller shall
         have taken all actions required under the Competition Act, the BPU
         Financing Orders and the New Jersey UCC, including without limitation
         filings under the New Jersey UCC, to transfer to the Issuer ownership
         of the Transferred Bondable Transition Property to be conveyed on such
         date free and clear of all Liens other than Liens created by the Issuer
         pursuant to the Indenture, and the Issuer shall have taken all actions
         required for the Issuer to grant to the Trustee a first priority
         perfected security interest in the Collateral and maintain such
         security interest as of such date, including without limitation filings
         under the New Jersey UCC;

                  (e)      in the case of any sale of Subsequent Transferred
         Bondable Transition Property only, the Seller shall have provided the
         Issuer and each Rating Agency with a written notice specifying the
         Subsequent Transfer Date for such Subsequent Transferred Bondable
         Transition Property not later than 10 days prior to such Subsequent
         Transfer Date and shall have taken any other action necessary in order
         for the Rating Agency Condition to have been satisfied with respect to
         such sale;

                  (f)      the Seller shall have delivered to each Rating Agency
         and to the Issuer:

                           (i)      an Opinion of Counsel to the Seller with
                  respect to the transfer of the Transferred Bondable Transition
                  Property then being conveyed to the Issuer, substantially in
                  the form of Exhibit B, and


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                           (ii)     an Opinion of Counsel to the Seller,
                  substantially in the form of Exhibit C;

                  (g)      the Seller shall have delivered to the Trustee and
         the Issuer an Officers' Certificate confirming the satisfaction of each
         condition precedent specified in this Section 2.02; and

                  (h)      the Seller shall have received the Initial Purchase
         Price or the Subsequent Purchase Price, as applicable, in funds
         immediately available on such Transfer Date.

                                   ARTICLE III
                    REPRESENTATIONS AND WARRANTIES OF SELLER

                  As of each Transfer Date, the Seller makes the following
representations and warranties on which the Issuer is relying in acquiring the
Bondable Transition Property purchased and sold on such Transfer Date. The
representations and warranties made as of any Transfer Date shall survive the
sale of Transferred Bondable Transition Property to the Issuer on such date and
the pledge thereof to the Trustee pursuant to the Indenture.

                  Section 3.01. Organization and Good Standing.

                  The Seller is a corporation duly organized and in good
standing under the laws of its state of incorporation, with the corporate power
and authority to own its properties and conduct its business as currently owned
and conducted.

                  Section 3.02. Due Qualification.

                  The Seller is duly qualified to do business as a foreign
corporation in all jurisdictions in which it is required to be so qualified, and
has obtained all necessary licenses and approvals in all jurisdictions in which
the ownership or lease of its property or the conduct of its business requires
such qualification, licenses or approvals (except where the failure to so
qualify and to obtain such licenses and approvals would not be reasonably likely
to have a material adverse effect on the Seller's business, operations, assets,
revenues or properties).

                  Section 3.03. Power and Authority.

                  The Seller has the corporate power and authority to execute,
deliver and perform this Agreement and to own, sell, assign, transfer and convey
to the Issuer the Bondable Transition Property purchased and sold on such
Transfer Date, and the Seller has duly authorized such execution, delivery,
performance, sale, assignment, transfer and conveyance by all necessary
corporate action.

                  Section 3.04. Binding Obligation.

                  This Agreement constitutes a legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with its
terms subject to any applicable bankruptcy, receivership, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
from


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time to time in effect and to general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).

                  Section 3.05. No Violation.

The consummation of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof do not: (i) conflict with, result in any breach
of any of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under, the articles of incorporation or by-laws of the
Seller, or any indenture or other material agreement or instrument to which the
Seller is a party or by which it is bound; (ii) result in the creation or
imposition of any Lien upon any of the Seller's properties pursuant to the terms
of any such indenture or other material agreement or instrument (except as
contemplated by the Basic Documents and as set forth in Section 2.01(e)); or
(iii) violate any law applicable to the Seller or any order, rule or regulation
applicable to the Seller of any court or federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or its properties. The Bondable Transition Property is not
subject to any Lien thereon created by the indenture, dated January 15, 1937 (as
amended and supplemented), between Atlantic City Electric Company and the Bank
of New York, as successor trustee to Irving Trust Company.

                  Section 3.06. No Proceedings.

Except as disclosed in the prospectus and the related prospectus supplement each
dated ___________, 2002, of Atlantic City Electric Transition Funding LLC
relating to the offer and sale of Transition Bonds, and in any subsequent
prospectus supplements relating to a subsequent offer and sale of Transition
Bonds (collectively, the "Prospectus"), there are no proceedings or
investigations pending or, to the Seller's best knowledge, threatened, before
any court, federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties:

                  (a)      asserting the invalidity of any of the Basic
         Documents, the Transition Bonds, the Competition Act, the Restructuring
         Order (insofar as it relates to the transactions contemplated hereby)
         or the BPU Financing Orders;

                  (b)      seeking to prevent the issuance of the Transition
         Bonds or the consummation of any of the transactions contemplated by
         the Basic Documents;

                  (c)      challenging the Seller's treatment of the Transition
         Bonds as debt for federal and state income or franchise tax purposes;
         or

                  (d)      seeking any determination or ruling that could
         reasonably be expected to materially and adversely affect the
         performance by the Seller or the Issuer of its obligations under, or
         the validity or enforceability of, the Basic Documents or the
         Transition Bonds.

                  Section 3.07. Approvals.

Except for the filing of financing statements and continuation statements under
the New Jersey


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UCC, no approval, authorization, consent, order or other action of, or filing
with, any court, federal or state regulatory body, administrative agency or
other governmental instrumentality is required in connection with the execution
and delivery by the Seller of this Agreement, the performance by the Seller of
the transactions contemplated hereby or the fulfillment by the Seller of the
terms hereof, except those that have been obtained, made or taken.

                  Section 3.08. The Transferred Bondable Transition Property.

                  (a)      Information. All information provided by the Seller
         to the Issuer in writing on or prior to such Transfer Date with respect
         to the Transferred Bondable Transition Property purchased and sold on
         such Transfer Date is, in light of the circumstances under which it was
         provided, correct in all material respects.

                  (b)      Effect of Transfer. Each sale, transfer, assignment
         and conveyance herein contemplated constitutes a sale or other absolute
         transfer, of all right, title and interest of the Seller in, to and
         under the Transferred Bondable Transition Property from the Seller to
         the Issuer; upon execution and delivery of this Agreement and the
         related Bill of Sale, the Seller will have no right, title or interest
         in, to or under the Transferred Bondable Transition Property purchased
         and sold on such Transfer Date; such Transferred Bondable Transition
         Property would not be part of the estate of the Seller as debtor in the
         event of the filing of a bankruptcy petition by or against the Seller
         under any bankruptcy law; and, to the fullest extent permitted by law,
         including the Competition Act and applicable BPU Regulations, the
         Issuer shall have all of the rights originally held by the Seller with
         respect to the Transferred Bondable Transition Property set forth in
         the Competition Act, other than the rights of a public utility,
         including the right to collect any amounts payable by any Customer or
         Third Party in respect of such Transferred Bondable Transition
         Property.

                  (c)      Transfer Filings. The Seller is the sole owner of the
         Transferred Bondable Transition Property purchased and sold to the
         Issuer on such Transfer Date; and such Transferred Bondable Transition
         Property will be validly sold, assigned, transferred and conveyed to
         the Issuer free and clear of all Liens other than Liens created by the
         Issuer pursuant to the Indenture. All actions or filings, including
         filings with the New Jersey Division of Revenue/Office of Commercial
         Recording under the New Jersey UCC and filings with the BPU under the
         Competition Act, necessary in any jurisdiction to give the Issuer a
         valid first priority perfected ownership interest in such Transferred
         Bondable Transition Property and to grant to the Trustee a first
         priority perfected security interest in such Transferred Bondable
         Transition Property, free and clear of all Liens of the Seller or
         anyone else have been taken or made, other than filings that would not
         have an adverse effect on the Servicer to collect the Transition Bond
         Charges or on the rights of the Issuer or the Trustee with respect to
         such Transferred Bondable Transition Property.

                  (d)      BPU Financing Orders Irrevocable; Process Valid; No
         Litigation; Etc.


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                           (i)      Each BPU Financing Order issued by the BPU
                  on or prior to such Transfer Date has been in accordance with
                  the Competition Act, and such order and the process by which
                  it was issued comply with all applicable laws, rules and
                  regulations and is in full force and effect and final and
                  non-appealable under state law, and the designee certification
                  delivered pursuant to such order is final and incontestable as
                  of its date.

                           (ii)     Each Series of Transition Bonds, as of its
                  Series Issuance Date, is entitled to the protections provided
                  by the Competition Act and, in accordance with the Competition
                  Act, the BPU Financing Orders authorizing the issuance of such
                  Series and the Transition Bond Charge order have become
                  irrevocable, and the Advice Letter with respect to such Series
                  is final and incontestable.

                           (iii)    (A)      Under the Competition Act, none of
                  the State of New Jersey, the BPU or any other governmental
                  agency of the State of New Jersey may limit, alter or in any
                  way impair or reduce the value of Bondable Transition Property
                  or Transition Bond Charges approved by the BPU Financing
                  Orders issued by the BPU on or prior to such Transfer Dates or
                  any rights thereunder until the Transition Bonds are fully
                  paid and discharged, or in any way limit, alter, impair or
                  reduce the value or amount of the Transferred Bondable
                  Transition Property; and

                                    (A)

                                    (B)      under the Contract Clauses of the
                           United States Constitution and the New Jersey
                           Constitution, the State of New Jersey, the BPU or any
                           other governmental agency of the State of New Jersey,
                           may take no action that substantially impairs the
                           rights of Bondable Transition Bondholders unless such
                           action is justified as necessary and reasonable and
                           of a character appropriate to advance an important
                           public purpose, such as to remedy an important
                           general, social or economic problem or to cope with a
                           great public calamity, and, under the Takings Clauses
                           of the United States and New Jersey Constitutions,
                           the State of New Jersey could not repeal or amend the
                           Competition Act by way of legislative process or take
                           any other action in contravention of its pledge and
                           agreement under the Competition Act referred to in
                           this clause (B) without paying just compensation to
                           the Transition Bondholders, as determined by a court
                           of competent jurisdiction, if doing so would
                           constitute a permanent appropriation of the property
                           interest of the Transition Bondholders and deprive
                           the Transition Bondholders of their reasonable
                           investment-backed expectations arising from their
                           investments in the Transition Bonds.

                           (iv)     There is no order by any court (a) providing
                  for the revocation, alteration, limitation or other impairment
                  of the Competition Act, any BPU Financing Order, the
                  Restructuring Order (insofar as it relates to the sale of the
                  Transferred Bondable Transition Property), any Advice Letter,
                  the Transferred


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                  Bondable Transition Property arising thereunder, or the
                  Transition Bond Charge approved thereunder, or any rights
                  arising under any of them or (b) that seeks to enjoin the
                  performance of any obligations under the BPU Financing Orders.

                           (v)      No other approval, authorization, consent,
                  order or other action of, or filing with, any court, federal
                  or state regulatory body, administrative agency or other
                  governmental instrumentality is required in connection with
                  the creation or transfer of the Transferred Bondable
                  Transition Property, except those that have been obtained or
                  made.

                  (e)      Assumptions. The assumptions used in calculating the
         Transition Bond Charge in the Advice Letter delivered by the Issuer to
         the BPU in connection with the Transition Bonds issued and sold on such
         Transfer Date pursuant to the BPU Financing Orders are reasonable and
         made in good faith.

                  (f)      Creation of Transferred Bondable Transition Property.

                           (i)      For purposes of the Competition Act and the
                  New Jersey UCC, the Transferred Bondable Transition Property,
                  upon the transfer thereof to an assignee and receipt of
                  consideration therefor in connection with its sale to the
                  Issuer, constitutes a vested, presently existing property
                  right;

                           (ii)     the Transferred Bondable Transition Property
                  includes without limitation (A) the irrevocable right of the
                  Seller and its permitted assigns to charge, collect and
                  receive, and be paid from collections of, the Transition Bond
                  Charge, subject to the limitations on electricity rates
                  specified in the Restructuring Order, in the amount necessary
                  to provide for the full recovery of the Bondable Stranded
                  Costs which have been determined to be recoverable in the BPU
                  Financing Orders and (B) all rights of the Seller under the
                  BPU Financing Orders, including all rights to obtain periodic
                  adjustments of the Transition Bond Charge pursuant to the
                  Competition Act, and all revenues, collections, payments,
                  money and proceeds arising under, or with respect to, any of
                  the foregoing; and

                           (iii)    the provisions of the BPU Financing Orders
                  creating the Transferred Bondable Transition Property and
                  authorizing the issuance of the Transition Bonds, have been
                  declared to be irrevocable by the BPU and any supplemental
                  order of the BPU of similar effect authorizing the issuance of
                  the Transition Bonds will be given such status to the extent
                  necessary to provide the protections provided in clause (ii)
                  above; and

                           (iv)     no failure on any Transfer Date to satisfy
                  any condition imposed by the Competition Act with respect to
                  the recovery of Bondable Stranded Costs will adversely affect
                  the creation of the Bondable Transition Property sold on such
                  Transfer Date, the sale, transfer and assignment of such
                  Bondable Transition Property or the right to collect the
                  related Transition Bond Charges.


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                  Section 3.09. Solvency.

After giving effect to the sale, transfer and conveyance of Transferred Bondable
Transition Property purchased and sold on such Transfer Date, the Seller:

                  (a)      is solvent and expects to remain solvent;

                  (b)      is adequately capitalized to conduct its business and
         affairs considering its size and the nature of its business and
         intended purposes;

                  (c)      is not engaged in nor does it expect to engage in a
         business for which its remaining property represents an unreasonably
         small portion of its capital;

                  (d)      reasonably believes that it will be able to pay its
         debts as they come due; and

                  (e)      does not intend to incur, or believe that it will
         incur, indebtedness that it will not be able to repay at its maturity.

                  Section 3.10. Limitation on Representations and Warranties.

None of the representations and warranties of the Seller herein contained shall
be construed as a representation or warranty that amounts actually collected
from the Transition Bond Charge will be sufficient to meet payment obligations
on the Transition Bonds or that assumptions made in calculating the Transition
Bond Charge will be realized. None of the representations and warranties of the
Seller herein contained shall be construed as a representation or warranty that
there will be no change in law by legislative enactment, constitutional
amendment or judicial reinterpretation of constitutional provisions or that no
attempt will be made by the State of New Jersey, the BPU or any other
governmental agency of the State of New Jersey to limit, alter or in any way
impair or reduce the value of Bondable Transition Property or Transition Bond
Charges approved by the BPU Financing Orders in breach of the pledge and
agreement of the State of New Jersey under the Competition Act.

                                   ARTICLE IV
                             COVENANTS OF THE SELLER

                  Section 4.01. Seller's Existence.

So long as any of the Transition Bonds are outstanding, the Seller shall keep in
full force and effect its existence as a corporation and remain in good standing
under the laws of the State of New Jersey, and shall obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
necessary to protect the validity and enforceability of this Agreement and each
other instrument or agreement to which the Seller is a party necessary to the
proper administration of this Agreement and the transactions contemplated
hereby.

                  Section 4.02. No Liens or Conveyances.


                                       13
<PAGE>
Except for the conveyances hereunder, the Seller shall not sell, pledge, assign
or transfer to any other Person, or grant, create, incur, assume or suffer to
exist any Lien on, any of the Transferred Bondable Transition Property, whether
now existing or hereafter created, or any interest therein. The Seller shall not
at any time assert any Lien against or with respect to any Transferred Bondable
Transition Property, and shall defend the right, title and interest of the
Issuer and the Trustee, as assignee of the Issuer, in, to and under the
Transferred Bondable Transition Property, whether now existing or hereafter
created, against all claims of third parties claiming through or under the
Seller.

                  Section 4.03. Use of Proceeds.

The Seller shall use proceeds from the sale of the Transferred Bondable
Transition Property in accordance with the BPU Financing Orders and the
Competition Act.

                  Section 4.04. Delivery of Collections.

If the Seller receives collections of the Transition Bond Charge with respect to
the Transferred Bondable Transition Property or the proceeds thereof and if the
Seller is not the Servicer, the Seller shall pay the Servicer on behalf of the
Issuer all payments received by the Seller in respect thereof as soon as
practicable after receipt thereof by the Seller, but in no event later than two
Business Days after such receipt.

                  Section 4.05. Notice of Liens.

The Seller shall notify the Issuer and the Trustee promptly after becoming aware
of any Lien on any Transferred Bondable Transition Property other than the
conveyances hereunder and under the Indenture.

                  Section 4.06. Compliance with Law.

The Seller shall comply with its organizational or governing documents and all
laws, treaties, rules, regulations and determinations of any governmental
instrumentality applicable to the Seller, except to the extent that failure to
so comply would not adversely affect the Issuer's or the Trustee's interests in
the Transferred Bondable Transition Property or under any of the Basic Documents
or the Seller's performance of its obligations hereunder.

                  Section 4.07. Covenants Related to Transferred Bondable
Transition Property.

                  (a)      So long as any of the Transition Bonds are
         outstanding, the Seller shall:

                           (i)      treat the Transition Bonds as debt of the
                  Seller for federal income tax purposes;

                           (ii)     disclose in its financial statements that it
                  is not the owner of the Transferred Bondable Transition
                  Property and that the assets of the Issuer are not


                                       14
<PAGE>
                  available to pay creditors of the Seller or any of its
                  Affiliates (other than the Issuer); and

                           (iii)    disclose the effects of all transactions
                  between the Seller and the Issuer in accordance with generally
                  accepted accounting principles; and

                  (b)      So long as any of the Transition Bonds are
         Outstanding,

                           (i)      in all proceedings relating directly or
                  indirectly to the Transferred Bondable Transition Property,
                  the Seller shall not make any statement or reference in
                  respect of the Transferred Bondable Transition Property that
                  is inconsistent with the ownership thereof by the Issuer
                  (other than for financial accounting or tax reporting
                  purposes); and

                           (ii)     the Seller shall not take any action in
                  respect of the Transferred Bondable Transition Property except
                  solely in its capacity as the Servicer pursuant to the
                  Servicing Agreement or as otherwise contemplated by or
                  consistent with the Basic Documents or as required by
                  applicable law.

                  Section 4.08. Notice of Indemnification Events.

The Seller shall deliver to the Issuer and the Trustee, promptly after having
obtained knowledge thereof, written notice in an Officers' Certificate of any
Indemnification Event or any event that, with the giving of notice or the
passage of time or both, would become an Indemnification Event.

                  Section 4.09. Protection of Title.

The Seller shall execute and file such filings, and cause to be executed and
filed such filings, including filings with the BPU pursuant to the Competition
Act, and take all such actions, all in such manner and in such places as may be
required under applicable law fully to preserve, maintain and protect the
interests of the Issuer and the Trustee in the Transferred Bondable Transition
Property, including all filings under the Competition Act relating to the
transfer of the ownership of the Transferred Bondable Transition Property by the
Seller to the Issuer and the pledge of the Transferred Bondable Transition
Property by the Issuer to the Trustee. The Seller shall deliver (or cause to be
delivered) to the Issuer and the Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing. The Seller shall institute any action or proceeding
necessary to compel the performance by the BPU or the State of New Jersey of any
of their obligations or duties under the Competition Act or the BPU Financing
Orders, and the Seller agrees to take such legal or administrative actions,
including defending against or instituting and pursuing legal actions and
appearing or testifying at hearings or similar proceedings, in each case as may
be reasonably necessary:

                  (a)      to protect the Issuer and its permitted assigns and
         the Transition Bondholders from claims, state actions or other actions
         or proceedings of third parties which, if successfully pursued, would
         result in a breach of any representation set forth in Article III; or


                                       15
<PAGE>
                  (b)      to block or overturn any attempts to cause a repeal
         of, modification of or supplement to the Competition Act, the BPU
         Financing Orders, any Advice Letter, the Restructuring Order (to the
         extent it affects the rights of Transition Bondholders or the validity
         or value of the Bondable Transition Property) or the rights of
         Transition Bondholders by legislative enactment or constitutional
         amendment that would be adverse to the Issuer, the Trustee or the
         Transition Bondholders.

The costs of any such actions or proceedings reasonably allocated by the Seller
to the Transferred Bondable Transition Property shall be reimbursed by the
Issuer to the Seller from amounts on deposit in the Collection Account as an
Operating Expense. The Seller's obligations pursuant to this Section 4.09 shall
survive and continue notwithstanding that the payment of Operating Expenses
pursuant to the Indenture may be delayed (it being understood that the Seller
may be required to advance its own funds to satisfy its obligation hereunder).
The Seller designates the Issuer as its agent and attorney-in-fact to execute
any filings of financing statements, continuation statements or other
instruments required of the Issuer pursuant to this Section, it being understood
that the Issuer shall have no obligation to execute any such instruments.

                  Section 4.10. Taxes.

So long as any of the Transition Bonds are outstanding, the Seller shall, and
shall cause each of its subsidiaries to, pay all material taxes, including gross
receipts taxes, assessments and governmental charges imposed upon it or any of
its properties or assets or with respect to any of its franchises, business,
income or property before any penalty accrues thereon if the failure to pay any
such taxes, assessments and governmental charges would, after any applicable
grace periods, notices or other similar requirements, result in a Lien on the
Transferred Bondable Transition Property; provided that no such tax need be paid
if the Seller or one of its subsidiaries is contesting the same in good faith by
appropriate proceedings promptly instituted and diligently conducted and if the
Seller or such subsidiary has established appropriate reserves as shall be
required in conformity with generally accepted accounting principles.

                  Section 4.11. Further Assurances.

In connection with the issuance of any Transition Bonds, upon request from the
Issuer, the Seller shall execute and deliver such further instruments and do
such further acts as may be necessary to carry out more effectively the
provisions and purposes of this Agreement and the related Bill of Sale.

                                    ARTICLE V
                      ADDITIONAL UNDERTAKINGS OF THE SELLER

                  The Seller hereby undertakes the obligations contained in this
Article V and hereby consents to the assignment by the Issuer of its right with
respect to such obligations to the Trustee for the benefit of the Transition
Bondholders.

                  Section 5.01. Liability of the Seller; Indemnities.


                                       16
<PAGE>
                  (a)      The Seller shall be liable in accordance herewith
         only to the extent of the obligations specifically undertaken by the
         Seller under this Agreement.

                  (b)      The Seller shall indemnify the Issuer and the
         Trustee, for itself and on behalf of the Transition Bondholders, and
         each of their respective officers, directors, managers, employees and
         agents for, and defend and hold harmless each such Person from and
         against, any and all taxes (other than any taxes imposed on Transition
         Bondholders solely as a result of their ownership of Transition Bonds)
         that may at any time be imposed on or asserted against the Issuer and
         the Trustee under existing law as of any Transfer Date as a result of
         the sale and assignment of the Transferred Bondable Transition Property
         by the Seller to the Issuer, the acquisition or holding of the
         Transferred Bondable Transition Property by the Issuer or the issuance
         and sale by the Issuer of the Transition Bonds, including any sales,
         general corporation, personal property, privilege or license taxes, but
         excluding any taxes imposed as a result of a failure of such person to
         properly withhold or remit taxes imposed with respect to payments on
         any Transition Bond, it being understood that the Transition
         Bondholders shall be entitled to enforce their rights against the
         Seller under this Section 5.01(b) subject to Section 5.06 of the
         Indenture.

                  (c)      The Seller shall indemnify the Issuer and the
         Trustee, for itself and on behalf of the Transition Bondholders, and
         each of their respective officers, directors, managers, employees and
         agents for, and defend and hold harmless each such Person from and
         against, (i) any and all amounts of principal of and interest on the
         Transition Bonds (including amounts owed to Holders of any floating
         rate Transition Bonds at the gross fixed rate, if any, specified in the
         related Series Supplement) not paid when due or when scheduled to be
         paid in accordance with their terms and the amount of any deposits to
         the Issuer required to have been made in accordance with the terms of
         the Basic Documents which are not made when so required, in each case
         as a result of the Seller's breach of any of its representations,
         warranties or covenants contained in this Agreement, and (ii) any and
         all liabilities, obligations, claims, actions, suits or payments of any
         kind whatsoever that may be imposed on or asserted against the Issuer
         or the Trustee, other than any liabilities, obligations or claims for
         or payments of principal of or interest on the Transition Bonds,
         together with any reasonable costs and expenses incurred by such
         person, as a result of the Seller's breach of any of its
         representations, warranties or covenants contained in this Agreement,
         it being understood that the Transition Bondholders shall be entitled
         to enforce their rights against the Seller under this Section 5.01(c)
         subject to Section 5.06 of the Indenture.

                  (d)      The Seller shall indemnify the Issuer and the
         Trustee, for itself and on behalf of the Transition Bondholders, for
         any and all liabilities, obligations, losses, damages, payments or
         expenses that result from (i) the Seller's willful misconduct, bad
         faith or gross negligence in the performance of its duties under this
         Agreement, or (ii) the Seller's reckless disregard of its obligations
         and duties under this Agreement, it being understood that the
         Transition Bondholders shall be entitled to enforce their rights
         against the Seller under this Section 5.01(d) subject to Section 5.06
         of the Indenture.


                                       17
<PAGE>
                  (e)      Indemnification under this Section 5.01 shall survive
         the termination of this Agreement and shall include reasonable fees and
         expenses of investigation and litigation (including reasonable
         attorneys' fees and expenses). The Seller shall not indemnify any party
         under this Section 5.01 with respect to any sale of Transferred
         Bondable Transition Property for any changes in law after the related
         Transfer Date.

                  (f)      The indemnification obligation of the Seller under
         this Section 5.01 shall be pari passu with all other general unsecured
         obligations of the Seller.

                  Section 5.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Seller.

Any Person or Persons:

                  (a)      into which the Seller may be merged or consolidated
         and which succeeds to all or a significant part of the electric
         distribution business of the Seller,

                  (b)      which results from the division of the Seller into
         two or more Persons and which succeeds to all or a significant part of
         the electric distribution business of the Seller,

                  (c)      which may result from any merger or consolidation to
         which the Seller shall be a party and which succeeds to all or a
         significant part of the electric distribution business of the Seller,

                  (d)      which may succeed to all or a significant part of the
         electric distribution business of the Seller, or

                  (e)      which may otherwise succeed to all or a significant
         part of the electric distribution business of the Seller,

which Person or Persons in any of the foregoing cases executes an agreement of
assumption to perform every obligation of the Seller under this Agreement, shall
be the successor or successors to the Seller hereunder without the execution or
filing of any document or any further act by any of the parties to this
Agreement; provided, however, that

                           (i)      immediately after giving effect to such
                  consolidation, merger or succession, no breach of any
                  representation or warranty made pursuant to Article III shall
                  have occurred and be continuing unremedied and no Servicer
                  Default, and no event that, after notice or lapse of time or
                  both, would become a Servicer Default, shall have occurred and
                  be continuing,

                           (ii)     the Seller shall have delivered to the
                  Issuer and the Trustee an Officers' Certificate and an Opinion
                  of Counsel each stating that such consolidation, merger or
                  succession and such agreement of assumption comply with this
                  Section 5.02 and that all conditions precedent, if any,
                  provided for in this Agreement relating to such consolidation,
                  merger or succession have been


                                       18
<PAGE>
                  complied with,

                           (iii)    the Seller shall have delivered to the
                  Issuer and the Trustee an Opinion of Counsel either

                                    (A)      stating that, in the opinion of
                           such counsel, all filings to be made by the Seller,
                           including New Jersey UCC filings, that are necessary
                           fully to preserve and protect fully the respective
                           interests of the Issuer and the Trustee in the
                           Transferred Bondable Transition Property have been
                           executed and filed, and reciting the details of such
                           filings, or

                                    (B)      stating that, in the opinion of
                           such counsel, no such action is necessary to preserve
                           and protect such interests;

                           (iv)     the Rating Agencies shall have received
                  prior written notice of such transaction and the Rating Agency
                  Condition shall have been satisfied with respect to such
                  consolidation, merger or succession; and

                           (v)      the Seller shall have delivered to the
                  Issuer and the Trustee an opinion of independent tax counsel
                  (as selected by, and in form and substance reasonably
                  satisfactory to, the Seller, and which may be based on a
                  ruling from the Internal Revenue Service) to the effect that,
                  for federal income tax purposes, such consolidation, merger or
                  succession will not result in a material adverse federal
                  income tax consequence to the Seller, the Issuer, the Trustee
                  or the holders of the Outstanding Transition Bonds.

The Seller shall not consummate any transaction referred to in clauses (a), (b),
(c), (d) or (e) above except upon execution of the above-described agreement of
assumption and compliance with clauses (i), (ii), (iii), (iv) and (v) above.
When one or more Persons acquire the properties and assets of the Seller
substantially as a whole and become the successor or successors to the Seller in
accordance with the terms of this Section 5.02, then upon the satisfaction of
all of the other conditions of this Section 5.02, the Seller shall automatically
and without further notice be released from its obligations hereunder.

                  Section 5.03. Limitation on Liability of the Seller and
Others.

The Seller and any director, officer, employee or agent of the Seller may rely
in good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person, respecting any matters
arising hereunder. Subject to Section 4.09, the Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its obligations under this Agreement and that in its opinion may
involve it in any expense or liability.

                                   ARTICLE VI
                            MISCELLANEOUS PROVISIONS

                  Section 6.01. Amendment.


                                       19

<PAGE>
      (a) This Agreement may be amended or supplemented by the Seller and the
Issuer with the consent of the Trustee and the satisfaction of the Rating Agency
Condition. Promptly after the execution of any such amendment or consent, the
Issuer shall furnish written notification of the substance of such amendment or
consent to each of the Rating Agencies.

                  (a)

                  (b)   Prior to the execution of any amendment or supplement to
            this Agreement, the Issuer and the Trustee shall be entitled to
            receive and rely upon an Opinion of Counsel stating that the
            execution of such amendment or supplement is authorized or permitted
            by this Agreement. The Issuer and the Trustee may, but shall not be
            obligated to, enter into any such amendment or supplement which
            affects their own rights, duties or immunities under this Agreement
            or otherwise.

                  Section 6.02. Notices.

      Unless otherwise specifically provided herein, all notices, directions,
consents and waivers required under the terms and provisions of this Agreement
shall be in English and in writing, and any such notice, direction, consent or
waiver may be given by United States first-class mail, reputable overnight
courier service, facsimile transmission or electronic mail (confirmed by
telephone, United States first-class mail or reputable overnight courier service
in the case of notice by facsimile transmission or electronic mail) or any other
customary means of communication, and any such notice, direction, consent or
waiver shall be effective when delivered or transmitted, or if mailed, five days
after deposit in the United States first-class mail with proper postage for
first-class mail prepaid:

                  (a)   in the case of the Seller, at Atlantic City Electric
            Company, 800 King Street, P.O. Box 231, Wilmington, Delaware 19899,
            Attention: General Counsel,

                  (b)   in the case of the Issuer, at Atlantic City Electric
            Transition Funding LLC, 800 King Street, Wilmington, Delaware 19899,
            Attention: Managers,

                  (c)   in the case of Moody's, at Moody's Investors Service,
            Inc., ABS Monitoring Department, 99 Church Street, New York, New
            York 10007,

                  (d)   in the case of Standard & Poor's, at Standard & Poor's
            Ratings Group, 55 Water Street, New York, New York 10041, Attention:
            Asset Backed Surveillance Department,

                  (e)   in the case of Fitch, Inc., 1 State Street Plaza, New
            York, NY 10004, Attention: ABS Surveillance, and

                  (f)   in the case the Trustee, at the address provided for
            notices or communications to the Trustee in the Indenture; or, as to
            each of the foregoing, at such other address as shall be designated
            by written notice to the other parties.

                  Section 6.03. Assignment By Seller.


                                       20
<PAGE>
      Subject to Section 5.02, this Agreement may not be assigned by the Seller.

                  Section 6.04. Assignment to Trustee.

      The Seller hereby acknowledges and consents to any pledge, assignment and
grant of a security interest by the Issuer to the Trustee pursuant to the
Indenture for the benefit of the Transition Bondholders of all right, title and
interest of the Issuer in, to and under the Transferred Bondable Transition
Property and the proceeds thereof and the assignment of any or all of the
Issuer's rights hereunder to the Trustee.

                  Section 6.05. Limitations on Rights of Others.

      The provisions of this Agreement are solely for the benefit of the Seller,
the Issuer and the Trustee, on behalf of itself and the Transition Bondholders,
and nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Collateral or under or in respect of this Agreement or any covenants, conditions
or provisions contained herein.

                  Section 6.06. Severability.

      Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and no such prohibition or unenforceability in any
jurisdiction shall invalidate or render unenforceable such provision in any
other jurisdiction.

                  Section 6.07. Separate Counterparts.

      This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.

                  Section 6.08. Headings.

      The headings of the various Articles and Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.

                  Section 6.09. Governing Law.

      THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW JERSEY, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

                  Section 6.10. Nonpetition Covenant.

      Notwithstanding any prior termination of this Agreement or the Indenture,
the Seller hereby covenants and agrees that it shall not, prior to the date
which is one year and one day after the


                                       21
<PAGE>
termination of the Indenture and the payment in full of the Transition Bonds,
any other amounts owed under the Indenture, including without limitation any
amounts owed to third-party credit enhancers, and any amounts owed under the
Hedge Agreement or the Interest Rate Swap Agreement, acquiesce, petition or
otherwise invoke or cause the Issuer to invoke the process of any court or
governmental authority for the purpose of commencing or sustaining a case
against the Issuer under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
the property of the Issuer, or ordering the winding up or liquidation of the
affairs of the Issuer.

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the date and year first above written.

                                        ATLANTIC CITY ELECTRIC TRANSITION
                                        FUNDING LLC,
                                          as Issuer


                                        By: ____________________________________
                                            Name:
                                            Title:


                                        ATLANTIC CITY ELECTRIC COMPANY,
                                          as Seller


                                        By: ____________________________________
                                            Name:
                                            Title:


                                       22
<PAGE>
                                   EXHIBIT A
                                  BILL OF SALE

            Capitalized terms used herein and not defined shall have the
meanings set forth in the Bondable Transition Property Sale Agreement dated as
of ______________, 2002 (the "Sale Agreement") between the Issuer and the
Seller.

            In consideration of the Issuer's payment to or upon the order of the
Seller of $_________________, net of the underwriting discount, original issue
discount and financial advisory fees for the Transition Bonds in the aggregate
amount of $___________, or $___________ (the "Initial Purchase Price") by wire
transfer of funds immediately available on the date hereof to Seller's account
no. ___________ for further credit to account no. _____________ at
_____________________________, routing transit _________________, subject to the
conditions specified in Section 2.02 of the Sale Agreement, ATLANTIC CITY
ELECTRIC COMPANY, a New Jersey corporation (the "Seller"), does hereby sell,
assign, transfer and convey to ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC, a
Delaware limited liability company (the "Issuer"), without recourse except as
provided in the Sale Agreement referred to below, all of the Seller's right,
title and interest in, to and under all of its Bondable Transition Property,
which sale, assignment, transfer and conveyance of such Bondable Transition
Property shall include, as provided in the Competition Act, the sale,
assignment, transfer and conveyance of all of the Seller's right, title and
interest in, to and under all revenues, collections, payments, money or proceeds
arising under or with respect to the Transition Bond Charge related to such
Bondable Transition Property, as the same may be adjusted from time to time in
accordance with the Competition Act and the BPU Financing Orders, to have and to
hold the same unto the Issuer and to the successors and assigns of the Issuer,
forever.

            This Bill of Sale is governed by the laws of the State of New
Jersey.

            IN WITNESS WHEREOF, the Seller has duly executed and delivered this
Bill of Sale this ____ day of _________, ____.

                                       ATLANTIC CITY ELECTRIC COMPANY, as Seller


                                       By:
                                          Name:
                                          Title:


Accepted this ____ day of ___________, ____.

ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC


By:
   Name:


                                      A-1


<PAGE>
   Title:


                                      A-2

<PAGE>
                                    EXHIBIT B
                               OPINION OF COUNSEL


                                      B-1
<PAGE>
                                    EXHIBIT C
                               OPINION OF COUNSEL


                                      C-1
<PAGE>
                                   APPENDIX A
                               MASTER DEFINITIONS

The definitions contained in this Appendix A are applicable to the singular as
well as the plural forms of such terms.

      "ACE" means Atlantic City Electric Company, a New Jersey corporation, and
its permitted successors and assigns.

      "Act" has the meaning specified in Section 11.03(a) of the Indenture.

      "Adjustment Date" means (a) [January 1] of each year, (b) quarterly if
determined by the Servicer, and (c) any other date which is thirty days after a
Calculation Date.

      "Adjustment Request" means an application filed by the Servicer with the
BPU for a Transition Bond Charge Adjustment pursuant to Section 4(b) of the
Issuer Annex.

      "Administration Agreement" means the Administration Agreement dated as of
_________, 2002, between the Issuer and Conectiv Resource Partners, Inc., as
administrator, as the same may be amended or supplemented from time to time.

      "Administrator" means Conectiv Resource Partners, Inc., as administrator
under the Administration Agreement, and each successor to Conectiv Resource
Partners, Inc., in the same capacity, pursuant to Section 5.08 of the
Administration Agreement.

      "Advice Letter" means, with respect to any Series of Transition Bonds, the
Issuance Advice Letter, in the form specified in the BPU Financing Order
authorizing the issuance of Transition Bonds of such Series, filed with the BPU
at the time of the issuance of such Series.

      "Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, control when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms controlling and controlled
have meanings correlative to the foregoing.

      "Annual Accountant's Report" has the meaning assigned to that term in
Section 3.07 of the Servicing Agreement.

      "Authorized Denominations" means, with respect to any Series or Class of
Transition Bonds, $1,000 and integral multiples of $1.00 above that amount,
provided, however, that one bond of each Class may have a denomination of less
than $1,000, or such other denominations as may be specified in the Series
Supplement therefor.

      "Authorized Newspaper" means the Luxemburger Wort or any other newspaper
published in Luxembourg on a daily basis.


                                      A-1
<PAGE>
      "Authorized Officer" means, with respect to the Issuer, (a) any Manager
and, (b) any person designated as an "Officer" under the Issuer LLC Agreement
and authorized thereby to act on behalf of the Issuer.

      "Basic Documents" means the Formation Documents, the Sale Agreement, any
Bills of Sale, the Servicing Agreement, the Administration Agreement, the
Indenture, as each may be amended or supplemented from time to time.

      "Billing Month" means a calendar month during which the Transition Bond
Charge is billed to Customers.

      "Bill of Sale" means any bill of sale issued by the Seller to the Issuer
pursuant to the Sale Agreement evidencing the sale of Bondable Transition
Property by the Seller to the Issuer.

      "Bondable Stranded Costs" has the meaning assigned to that term in the
Competition Act and the BPU Financing Orders.

      "Bondable Transition Property" has the meaning assigned to that term in
the Competition Act and the BPU Financing Orders.

      "Bondable Transition Property Documentation" means all documents relating
to the Transferred Bondable Transition Property, including copies of the
Petition and the BPU Financing Orders and all documents filed with the BPU in
connection with any Transition Bond Charge Adjustment.

      "Book-Entry Transition Bonds" means beneficial interests in the Transition
Bonds, ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.11 of the Indenture.

      "BPU" means the State of New Jersey Board of Public Utilities or its
successor.

      "BPU Financing Orders" means the bondable stranded costs rate order issued
by the BPU in favor of ACE on ___________, 2002 pursuant to the Competition Act,
any subsequent bondable stranded costs rate orders issued by the BPU in favor of
ACE pursuant to the Competition Act, and any order supplemental to any of the
foregoing.

      "BPU Regulations" means any regulations, orders, guidelines or directives
promulgated, issued or adopted by the BPU.

      "Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the City of New York, New York or with respect to
any Transition Bonds listed on the Luxembourg Stock Exchange, in Luxembourg, are
required or authorized by law or executive order to remain closed.

      "Calculation Date" means (a) [December 1] of each year, (b) if applicable,
[quarterly dates] of each year and for so long as the Transition Bonds are
outstanding, and (c) any other day on which the Servicer files an Adjustment
Request.


                                      A-2
<PAGE>
      "Capital Subaccount" with respect to any Series has the meaning specified
in Section 8.02(a) of the Indenture.

      "Class" means, with respect to any Series, any one of the classes of
Transition Bonds of that Series, as specified in the Series Supplement for that
Series.

      "Class Final Maturity Date" means the Final Maturity Date of a Class, as
specified in the Series Supplement for the related Series.

      "Class Subaccount," with respect to a Class within a Series, has the
meaning specified in Section 8.02(a) of the Indenture and, if established for
such Series and Class, in the Series Supplement for such Series.

      "Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.

      "Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.

      "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.

      "Collateral" has the meaning specified in the Granting Clause of the
Indenture.

      "Collection Account" has the meaning specified in Section 8.02(a) of the
Indenture.

      "Collection Period" means the period from and including the first day of a
calendar month to but excluding the first day of the next calendar month.

      "Collections Curve" means an annually prepared forecast, with respect to
each Billing Month, of the percentages of amounts billed in such Billing Month
that are expected to be received during such Billing Month and each of the
following six months.

      "Collections Curve Payment" means, with respect to any Billing Month, the
sum of the amounts paid to the Trustee during such Billing Month and each of the
following six months based on the Collections Curve then in effect.

      "Commission" means the U.S. Securities and Exchange Commission, and any
successor thereof.

      "Competition Act" means the Electric Discount and Energy Competition Act,
New Jersey Statutes Annotated, title 48, chapter 3, article 7, as in effect from
time to time.

      "Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at date of the execution of this Indenture is located at [       ],
or at such other


                                      A-3
<PAGE>
address as the Trustee may designate from time to time by notice to the
Transition Bondholders and the Issuer, or the principal corporate trust office
of any successor Trustee (the address of which the successor Trustee will notify
the Transition Bondholders and the Issuer in writing).

      "Covenant Defeasance Option" has the meaning specified in Section 4.01(b)
of the Indenture.

      "Curve Payment Shortfall" means, for a particular Billing Month, the
amount, if any, by which the actual TBC Collections in respect of a Billing
Month exceed the Collections Curve Payments made to the Trustee in respect of
that Billing Month, as determined on the Reconciliation Date for that Billing
Month.

      "Customer" means each person who is a retail consumer of electricity and
who accesses ACE's transmission and distribution system, regardless of whether
such consumer elects to purchase electricity from a Third Party.

      "Daily Remittance Date" means, if the Servicer has not satisfied the
conditions of Section 5.10(b) of the Servicing Agreement, each Business Day
commencing on the second Business Day following the date on which the Servicer
begins remittance procedures under Section 3.03(a)(ii)(y) of the Servicing
Agreement.

      "Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.

      "Defeasance Subaccount" has the meaning specified in Section 8.02(a) of
the Indenture.

      "Definitive Transition Bonds" has the meaning specified in Section 2.11 of
the Indenture.

      "DTC Agreement" means the agreement between the Issuer, the Trustee and
The Depository Trust Company, as the initial Clearing Agency, dated on or about
___________, 2002, relating to the Transition Bonds, as the same may be amended
or supplemented from time to time.

      "Eligible Guarantor Institution" means a firm or other entity identified
in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein):

            (a)   a bank;

            (b)   a broker, dealer, municipal securities broker or dealer or
                  government securities broker or dealer;

            (c)   a credit union;

            (d)   a national securities exchange, registered securities
                  association or clearing agency; or


                                      A-30
<PAGE>
            (e)   a savings association that is a participant in a securities
                  transfer association.

      "Eligible Institution" means:

            (f)   the corporate trust department of the Trustee, so long as any
                  of the securities of the Trustee have a credit rating from
                  each Rating Agency in one of its generic rating categories
                  which signifies investment grade, or

            (g)   a depositary institution organized under the laws of the
                  United States of America or any state (or any domestic branch
                  of a foreign bank), which

                  (i)   has either

                        (A)   with respect to any Eligible Investment having a
                              maturity of greater than one month, a long-term
                              unsecured debt rating of "AA-" by Standard &
                              Poor's and Fitch and "Aa3" by Moody's, or

                        (B)   with respect to any Eligible Investment having a
                              maturity one month or less, a certificate of
                              deposit rating of "A-1+" by Standard & Poor's,
                              "F1+" by Fitch and "P-1" by Moody's, or any other
                              long-term, short-term or certificate of deposit
                              rating acceptable to the Rating Agencies, and

                  (ii)  whose deposits are insured by the FDIC.

      "Eligible Investments" mean book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:

            (a)   direct obligations of, and obligations fully and
                  unconditionally guaranteed as to timely payment by, the United
                  States of America;

            (b)   demand deposits, time deposits or certificates of deposit of
                  any depository institution or trust company (any depositary
                  institution or trust company being referred to in this
                  definition as a "financial institution") incorporated under
                  the laws of the United States of America or any state thereof
                  (or any domestic branch of a foreign bank) and subject to
                  supervision and examination by federal or state banking or
                  depositary institution authorities; provided, however, that at
                  the time of the investment or contractual commitment to invest
                  therein, the commercial paper or other short-term unsecured
                  debt obligations of such financial institution (other than
                  such obligations the rating of which is based on the credit of
                  a Person other than such financial institution) shall have a
                  credit rating from each of the Rating Agencies in the highest
                  investment category granted thereby;

            (c)   commercial paper or other short-term unsecured debt
                  obligations of any


                                      A-31
<PAGE>
                  corporation organized under the laws of the United States of
                  America (other than ACE) whose ratings, at the time of the
                  investment or contractual commitment to invest therein, from
                  each of the Rating Agencies are in the highest rating category
                  granted thereby;

            (d)   investments in money market funds having a rating from each of
                  the Rating Agencies in the highest rating category granted
                  thereby (including funds for which the Trustee or any of its
                  Affiliates act as investment manager or advisor);

            (e)   bankers' acceptances issued by any depositary institution or
                  trust company referred to in clause (b) above;

            (f)   repurchase obligations with respect to any security that is a
                  direct obligation of, or fully guaranteed by, the United
                  States of America or any agency or instrumentality thereof the
                  obligations of which are backed by the full faith and credit
                  of the United States of America, in either case entered into
                  with a financial institution (acting as principal)
                  incorporated under the laws of the United States of America or
                  any state thereof (or any domestic branch of a foreign bank)
                  and subject to supervision and examination by federal or state
                  banking or depositary institution authorities; provided,
                  however, that at the time of the investment or contractual
                  commitment to invest therein, the commercial paper or other
                  short-term unsecured debt obligations of such financial
                  institution (other than such obligations the rating of which
                  is based on the credit of a Person other than such financial
                  institution) shall have a credit rating from each of the
                  Rating Agencies in the highest investment category granted
                  thereby;

            (g)   repurchase obligations with respect to any security or whole
                  loan entered into with

                  (i)   a financial institution (acting as principal) described
                        in clause (b) above,

                  (ii)  a broker/dealer (acting as principal) registered as a
                        broker or dealer under Section 15 of the Exchange Act
                        (any broker/dealer being referred to in this definition
                        as a "broker/dealer"), the unsecured short-term debt
                        obligations of which are rated P-1 by Moody's and A-1+
                        by Standard & Poor's at the time of entering into the
                        repurchase obligation, or

                  (iii) an unrated broker/dealer, acting as principal, that is a
                        wholly-owned subsidiary of a non-bank or bank holding
                        company the unsecured short-term debt obligations of
                        which are rated P-1 by Moody's and A-1+ by Standard &
                        Poor's and F1+ by Fitch at the time of purchase; or


                                      A-32
<PAGE>
            (h)   any other investment permitted by each Rating Agency;

                  (i)   provided, however, that, with respect to Moody's only,
                        the obligor related to clauses (b), (c), (d), (f), (g)
                        and (h) above must have both a long term rating of at
                        least A1 and a short-term rating of at least P-1, and
                        provided, further, that, unless otherwise permitted by
                        each Rating Agency, upon the failure of any Eligible
                        Institution to maintain any applicable rating set forth
                        in this definition or the definition of Eligible
                        Institution, the related investments at such institution
                        shall be reinvested in Eligible Investments at a
                        successor Eligible Institution within 10 days, and
                        provided, further, that, any Eligible Investment must
                        not:

                  (ii)  be sold, liquidated or otherwise disposed of at a loss,
                        prior to the maturity thereof, or

                  (iii) mature later than (i) the date on which the proceeds of
                        such Eligible Investment will be required to be on
                        deposit in the Collection Account in order for the
                        Trustee to make all required and scheduled payments and
                        deposits into Subaccounts under the Indenture, if such
                        Eligible Investment is held by an Affiliate of the
                        Trustee, or (ii) the Business Day prior to the date on
                        which the proceeds of such Eligible Investment will be
                        required to be on deposit in the Collection Account in
                        order for the Trustee to make all required and scheduled
                        payments and deposits into Subaccounts under the
                        Indenture, if such Eligible Investment is not held by an
                        Affiliate of the Trustee.

      "Eligible Securities Account" means either:

            (a)   a segregated trust account with an Eligible Institution or

            (b)   a segregated trust account with the corporate trust department
                  of a depositary institution organized under the laws of the
                  United States of America or any state (or any domestic branch
                  of a foreign bank), having corporate trust powers and acting
                  as trustee for funds deposited in such account, so long as any
                  of the securities of such depositary institution shall have a
                  credit rating from each Rating Agency in one of its generic
                  rating categories which signifies investment grade.

      "Event of Default" has the meaning specified in Section 5.01 of the
Indenture.

      "Excess Curve Payment" means, for a particular Billing Month, the amount,
if any, by which the Collections Curve Payments made to the Trustee in respect
of that Billing Month exceed the actual TBC Collections in respect of that
Billing Month, as determined on the Reconciliation Date for that Billing Month.


                                      A-33
<PAGE>
      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

      "Executive Officer" means, with respect to any corporation, the chief
executive officer, chief operating officer, chief financial officer, chief
information officer, president, executive vice president, any vice president,
the secretary or the treasurer of such corporation; and with respect to any
limited liability company, any manager thereof.

      "Expected Amortization Schedule" means, with respect to each Series or, if
applicable, each Class of Transition Bonds, the expected amortization schedule
for principal thereof, as specified in the Series Supplement therefor.

      "Expected Final Payment Date" means, with respect to each Series or, if
applicable, each Class of Transition Bonds, the Payment Date related to the date
when all interest and principal is scheduled to be paid with respect to that
Series or Class in accordance with the Expected Amortization Schedule, as
specified in the Series Supplement therefor.

      "FDIC" means the Federal Deposit Insurance Corporation or its successor.

      "Final Maturity Date" means, for each Series or, if applicable, each Class
of Transition Bonds, the Payment Date related to the date by which all principal
of and interest on such Series or Class of Transition Bonds is required to be
paid, as specified in the Series Supplement therefor.

      "Financing Issuance" means an issuance of a new Series of Transition Bonds
under the Indenture to provide funds to finance the purchase by the Issuer of
Bondable Transition Property.

      "Fitch" means Fitch, Inc. or its successor.

      "Formation Document" means the Issuer LLC Agreement, the Issuer
Certificate of Formation and any other document pursuant to which the Issuer is
formed or governed, as each may be amended or supplemented from time to time.

      "General Subaccount" has the meaning specified in Section 8.02(a) of the
Indenture.

      "Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm. A Grant
of the Collateral or of any other agreement or instrument shall include all
rights, powers and options (but none of the obligations) of the Granting party
thereunder, including the immediate and continuing right to claim for, collect,
receive and give receipt for principal, interest and other payments in respect
of the Collateral and all other moneys payable thereunder, to give and receive
notices and other communications, to make waivers or other agreements, to
exercise all rights and options, to bring Proceedings in the name of the
Granting party or otherwise and generally to do and receive anything that the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.

      "Hedge Agreement" means, with respect to any Series, the document or
documents, if any, identified as a "Hedge Agreement" in the Series Supplement
for such Series.


                                      A-34
<PAGE>
      "Holder" or "Transition Bondholder" means the Person in whose name a
Transition Bond of any Series or Class is registered in the Transition Bond
Register.

      "Indemnification Event" means an event which triggers ACE's obligation to
indemnify the Issuer and the Trustee, for itself and on behalf of the Transition
Bondholders, and each of their respective managers, officers, directors and
agents, pursuant to Section 5.01 of the Sale Agreement.

      "Indemnity Amount" means the amount of any indemnification obligation
payable under the Basic Documents.

      "Indenture" means the Indenture dated as of ___________, 2002, between the
Issuer and the Trustee, as the same may be amended and supplemented from time to
time, by one or more Supplemental Indentures, and shall include each Series
Supplement and the forms and terms of the Transition Bonds established
thereunder.

      "Independent" means, when used with respect to any specified Person, that
the Person

            (a)   is in fact independent of the Issuer, any other obligor upon
                  the Transition Bonds, ACE and any Affiliate of any of the
                  foregoing Persons,

            (b)   does not have any direct financial interest or any material
                  indirect financial interest in the Issuer, any such other
                  obligor, ACE or any Affiliate of any of the foregoing Persons,
                  and

            (c)   is not connected with the Issuer, any such other obligor, ACE
                  or any Affiliate of any of the foregoing Persons as an
                  officer, employee, promoter, underwriter, trustee, partner,
                  director or other Person performing similar functions.

      "Independent Certificate" means a certificate or opinion to be delivered
to the Trustee under the circumstances described in, and otherwise complying
with, the applicable requirements of Section 11.01 of the Indenture, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Appendix A and that the signer is Independent within the meaning
thereof.

      "Independent Manager" has the meaning set forth in the Issuer LLC
Agreement.

      "Initial Purchase Price" has the meaning set forth in Section 2.01 of the
Sale Agreement.

      "Initial Transfer Date" means the Series Issuance Date for the first
Series of Transition Bonds, i.e., ______ __, 2002.

      "Initial Transferred Bondable Transition Property" means the Bondable
Transition Property sold by the Seller to the Issuer as of the Initial Transfer
Date pursuant to the Sale Agreement and the Bill of Sale delivered on or prior
to the Initial Transfer Date as identified in


                                      A-35
<PAGE>
such Bill of Sale.

      "Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 90 consecutive days or (b)
the commencement by such Person of a voluntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.

      "Interest" means, for any Payment Date for any Series or Class of
Transition Bonds, the sum, without duplication, of

            (a)   an amount equal to the amount of interest accrued at the
                  applicable Interest Rate from the prior Payment Date with
                  respect to that Series or Class;

            (b)   any unpaid interest, to the extent permitted by applicable
                  law, plus any interest accrued on this unpaid interest at the
                  applicable Interest Rate, to the extent permitted by
                  applicable law;

            (c)   if the Transition Bonds have been declared due and payable,
                  all accrued and unpaid interest thereon; and

            (d)   with respect to a Series or Class to be redeemed prior to the
                  next Payment Date, the amount of interest that will be payable
                  as interest on such Series or Class upon such redemption.

      "Interest Rate" means, with respect to each Series or Class of Transition
Bonds, the rate at which interest accrues on the principal balance of Transition
Bonds of such Series or Class, as specified in the Series Supplement therefor.

      "Interest Rate Swap Agreement" means any ISDA Master Agreement, together
with the related Schedule and Confirmation, between the Issuer and the
counterparty thereunder, as same may be amended or supplemented from time to
time, with respect to any Series or Class of Transition Bonds as provided in the
Series Supplement for such Series or Class, as the case may be.

      "Issuer" means Atlantic City Electric Transition Funding LLC, a Delaware
limited liability company, or its successor under the Indenture or the party
named as such in the


                                      A-36
<PAGE>
Indenture until a successor replaces it and, thereafter, means the successor.

      "Issuer Annex" means Annex 1 of the Servicing Agreement.

      "Issuer Certificate of Formation" means the Certificate of Formation of
the Issuer, which was filed with the Delaware Secretary of State's Office on
March 28, 2001, as the same may be amended or supplemented from time to time.

      "Issuer LLC Agreement" means the Amended and Restated Limited Liability
Company Agreement between the Issuer and ACE, as sole Member, dated as of
_______, 2002, as the same may be amended or supplemented from time to time.

      "Issuer Officer's Certificate" means a certificate signed by any
Authorized Officer of the Issuer, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01 of the
Indenture, and delivered to the Trustee. Unless otherwise specified, any
reference in the Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer.

      "Issuer Opinion of Counsel" means one or more written opinions of counsel
who may, except as otherwise expressly provided in the Indenture, be employees
of or counsel to the Issuer or the Seller and who shall be reasonably
satisfactory to the Trustee, and which opinion or opinions shall be addressed to
the Trustee, and shall be in a form reasonably satisfactory to the Trustee.

      "Issuer Order" or "Issuer Request" means a written order or request,
respectively, signed in the name of the Issuer by any one of its Authorized
Officers and delivered to the Trustee.

      "Legal Defeasance Option" has the meaning specified in Section 4.01(b) of
the Indenture.

      "Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.

      "Losses" means collectively, any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever.

      "Manager" has the meaning set forth in the Issuer LLC Agreement.

      "Market Transition Charge" means the market transition charge that ACE may
impose on Customers pursuant to the Competition Act and the Restructuring Order.

      "Member" means ACE, as the sole member of the Issuer, in its capacity as
such member under the Issuer LLC Agreement.

      "Monthly Remittance Date" means the [15th] day of each calendar month (or
if such day is not a Business Day, the next Business Day) beginning in _____
2002.

      "Monthly Servicing Fee" means the fee payable to the Servicer on a monthly
basis for services rendered, in accordance with Section 5.07 of the Servicing
Agreement.


                                      A-37
<PAGE>
      "Moody's" means Moody's Investors Service Inc., or its successor.

      "MTC-Tax" means the tax which ACE is entitled to impose under the
Restructuring Order.

      "New Jersey UCC" means the Uniform Commercial Code, as in effect in the
State of New Jersey, as amended from time to time.

      "Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, any executive vice
president or any vice president and (b) a treasurer, assistant treasurer,
secretary or assistant secretary, in each case of the Servicer.

      "Operating Expenses" means, with respect to the Issuer, all fees, costs,
expenses and indemnity payments owed by the Issuer, including , without
limitation, all amounts owed by the Issuer to the Trustee, the Monthly Servicing
Fee, the fees and expenses payable by the Issuer to the Administrator under the
Administration Agreement, the fees and expenses payable by the Issuer to the
Independent Managers and Special Members of the Issuer, fees of the Rating
Agencies, legal fees and expenses of the Servicer pursuant to Section 3.10 of
the Servicing Agreement, legal and accounting fees, costs and expenses of the
Issuer, and legal, accounting or other fees, costs and expenses of the Seller
(including, without limitation, any costs and expenses incurred by the Seller
pursuant to Section 4.08 of the Sale Agreement) under or in connection with the
Basic Documents or the BPU Financing Orders.

      "Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to ACE or the Issuer, which counsel shall be
reasonably acceptable to the Trustee, the Issuer or the Rating Agencies, as
applicable, and which shall be in form reasonably satisfactory to the Trustee,
if applicable.

      "Outstanding" with respect to Transition Bonds means, as of the date of
determination, all Transition Bonds theretofore authenticated and delivered
under the Indenture except:

            (a)   Transition Bonds theretofore canceled by the Transition Bond
                  Registrar or delivered to the Transition Bond Registrar for
                  cancellation;

            (b)   Transition Bonds or portions thereof the payment for which
                  money in the necessary amount has been theretofore deposited
                  with the Trustee or any Paying Agent in trust for the Holders
                  of such Transition Bonds; provided, however, that if such
                  Transition Bonds are to be redeemed, notice of such redemption
                  has been duly given pursuant to the Indenture or provision
                  therefor, satisfactory to the Trustee, made; and

            (c)   Transition Bonds in exchange for or in lieu of other
                  Transition Bonds which have been authenticated and delivered
                  pursuant to the Indenture unless proof satisfactory to the
                  Trustee is presented that any such Transition Bonds are held
                  by a protected purchaser;

provided that in determining whether the Holders of the requisite Outstanding
Amount of the


                                      A-38
<PAGE>
Transition Bonds or any Series or Class thereof have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any Basic
Document, Transition Bonds owned by the Issuer, any other obligor upon the
Transition Bonds, ACE or any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Transition Bonds that
the Trustee knows to be so owned shall be so disregarded. Transition Bonds so
owned that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Transition Bonds and that the pledgee is not the
Issuer, any other obligor upon the Transition Bonds, ACE or any Affiliate of any
of the foregoing Persons.

      "Outstanding Amount" means, with respect to one or more Classes or Series,
the aggregate principal amount of, as the context requires, all Outstanding
Transition Bonds of such Class or Classes or of such Series or group of Series.

      "Overcollateralization" means, with respect to any Payment Date and any
Series, the amount, if any, that, if deposited to the Overcollateralization
Subaccount for such Series on such Payment Date, would cause the balance in such
subaccount on such Payment Date to equal the Scheduled Overcollateralization
Level for such Series on such Payment Date.

      "Overcollateralization Amount" means, with respect to any Series, the
amount specified as such in the Series Supplement therefor.

      "Overcollateralization Subaccount" with has the meaning specified in
Section 8.02(a) of the Indenture.

      "Paying Agent" means the Trustee or any other Person, including any Person
appointed pursuant to Section 3.02(b) of the Indenture, that meets the
eligibility standards for the Trustee specified in Section 6.11 of the Indenture
and is authorized by the Issuer to make the payments of principal of or premium,
if any, or interest on the Transition Bonds on behalf of the Issuer.

      "Payment Date" means _____________, _____________, _____________ and
_____________.

      "Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), business trust, limited liability company, unincorporated organization
or government or any agency or political subdivision thereof.

      "Petition" means the petition filed by ACE with the BPU, dated June 25,
2001.

      "Predecessor Transition Bond" means, with respect to any particular
Transition Bond, every previous Transition Bond evidencing all or a portion of
the same debt as that evidenced by such particular Transition Bond; and, for the
purpose of this definition, any Transition Bond authenticated and delivered
under Section 2.06 of the Indenture in lieu of a mutilated,


                                      A-39
<PAGE>
lost, destroyed or stolen Transition Bond shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Transition Bond.

      "Principal" means, with respect to any Payment Date and each Series or
Class of Transition Bonds:

            (a)   the amount of principal scheduled to be paid on such Payment
                  Date in accordance with the Expected Amortization Schedule;

            (b)   the amount of principal due on the Final Maturity Date of any
                  Series or Class on such Payment Date;

            (c)   the amount of principal due as a result of the occurrence and
                  continuance of an Event of Default and acceleration of the
                  Transition Bonds;

            (d)   the amount of principal and premium, if any, due as a result
                  of a redemption of Transition Bonds on such Payment Date; and

            (e)   any overdue payments of principal.

      "Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.

      "Rating Agency" means, as of any date, any rating agency rating the
Transition Bonds of any Class or Series at the time of issuance thereof at the
request of the Issuer. If no such organization or successor is any longer in
existence, "Rating Agency" shall be a nationally recognized statistical rating
organization or other comparable Person designated by the Issuer, notice of
which designation shall be given to the Trustee, the Member and the Servicer.

      "Rating Agency Condition" means, with respect to any action, the
notification in writing by the Trustee to each Rating Agency of such action and
the notification by each Rating Agency to the Trustee and the Issuer that such
action will not result in a reduction or withdrawal of the then current rating
by such Rating Agency of any Outstanding Series or Class of Transition Bonds.

      "Reconciliation Date" for a particular Billing Month means the fifteenth
day (or if that day is not a Business Day, the next succeeding Business Day) of
the calendar month that is seven months after such Billing Month.

      "Record Date" has, with respect to any Series, the meaning set forth in
the related Series Supplement.

      "Redemption Date" means, with respect to each Series or Class of
Transition Bonds, the date for the redemption of the Transition Bonds of such
Series or Class pursuant to Sections 10.01 or 10.02 of the Indenture or the
Series Supplement for such Series or Class, which in each case shall be a
Payment Date.

      "Redemption Price" has the meaning set forth in Section 10.01 of the
Indenture.


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<PAGE>
      "Refunding Issuance" means an issuance of a new Series of Transition Bonds
under the Indenture to pay the cost of refunding, through redemption or payment
on the Expected Final Payment Date for a Series or Class of Transition Bonds,
all or part of the Transition Bonds of such Series or Class to the extent
permitted by the terms thereof.

      "Registered Holder" means, as of any date, the Person in whose name a
Transition Bond is registered in the Transition Bond Register on such date.

      "Released Parties" has the meaning specified in Section 5.02(f) of the
Servicing Agreement.

      "Remittance Date" means a Daily Remittance Date or a Monthly Remittance
Date, as applicable.

      "Required Capital Amount" means with respect to any Series, the amount
required to be deposited in the Capital Subaccount on the Series Issuance Date
of such Series, as specified in the related Series Supplement.

      "Responsible Officer" means, with respect to the Trustee, any officer
within the Corporate Trust Office of the Trustee, including any vice president,
assistant vice president, secretary, assistant secretary, or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.

         "Restructuring Order" means the decision and order of the BPU issued on
March 30, 2001 pursuant to Section 13 of the Competition Act.

      "Retiring Trustee" means a Trustee that resigns or vacates the office of
Trustee for any reason.

      "Revenue Requirements" means with respect to any Series as of any date of
determination, the amounts estimated in good faith by the Servicer to be payable
in respect of such Series pursuant to Section 8.02(d) and clauses (i) through
(xiii) of Section 8.02(e) during the period commencing on the preceding
Adjustment Date (or on such date of determination if it is an Adjustment Date)
and ending on the day immediately preceding the first Adjustment Date scheduled
to follow such determination date.

      "Sale Agreement" means the Bondable Transition Property Sale Agreement
dated as of ___________, 2002, between the Seller and the Issuer, as the same
may be amended or supplemented from time to time.

      "Scheduled Overcollateralization Level" means, with respect to each Series
and any Payment Date, the amount with respect to such Series set forth as such
in Schedule 1 to the Series Supplement for such Series, as such Schedule 1 shall
have been adjusted in accordance with Section 3.19 of the Indenture to reflect
redemptions or defeasances of Transition Bonds and issuances of additional
Series of Transition Bonds.


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<PAGE>
      "Scheduled Transition Bond Balance" means, as of any date, the sum of the
amounts provided for in the Expected Amortization Schedules for each outstanding
Series of Transition Bonds as of such date.

      "Securities Account Control Agreement" means the securities account
control agreement by and between Atlantic City Electric Transition Funding LLC,
as debtor, the Trustee as the Secured Party and ______________, in its capacity
as securities intermediary thereunder.

      "Seller" means ACE, in its capacity as seller of the Bondable Transition
Property to the Issuer pursuant to the Sale Agreement.

      "Series" means the Series 2002-1 Transition Bonds and any subsequent
series of Transition Bonds issued by the Issuer and authenticated by the Trustee
pursuant to the Indenture, as specified in the Series Supplement therefor.

      "Series Capital Subaccount" with respect to each Series has the meaning
specified in Section 8.02(a) of the Indenture and in the related Series
Supplement.

      "Series Final Maturity Date" means the Final Maturity Date for a Series.

      "Series Issuance Date" means, with respect to any Series, the date on
which the Transition Bonds of such Series are to be originally issued in
accordance with Section 2.10 of the Indenture and the Series Supplement for such
Series.

      "Series Overcollateralization Subaccount" with respect to each Series has
the meaning specified in Section 8.02(a) of the Indenture and in the related
Series Supplement.

      "Series Reserve Subaccount" with respect to each Series has the meaning
specified in Section 8.02(a) of the Indenture and in the related Series
Supplement.

      "Series Subaccount" with respect to each Series has the meaning specified
in Section 8.02(a) of the Indenture and in the related Series Supplement.

      "Series Supplement" means any Supplemental Indenture that authorizes a
particular Series of Transition Bonds, as the same may be amended or
supplemented from time to time.

      "Servicer" means ACE, as the servicer of the Bondable Transition Property,
and each successor to ACE (in the same capacity) pursuant to Section 5.03 or
6.04 of the Servicing Agreement.

      "Servicer Default" means an event specified in Section 6.01 of the
Servicing Agreement.

      "Servicing Agreement" means the Servicing Agreement dated as of ________,
2002, between the Issuer and the Servicer, as the same may be amended and
supplemented from time to time.

      "Special Member" has the meaning set forth in the Issuer LLC Agreement.


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<PAGE>
      "Standard & Poor's" or "S&P" means Standard & Poor's Rating Group, a
division of The McGraw-Hill Companies, or its successor.

      "state" in the jurisdictional sense means any one of the 50 states of the
United States of America or the District of Columbia.

      "Subaccount" means any of the subaccounts of the Collection Account
specified in Section 8.02 of the Indenture.

      "Subsequent Purchase Price" means, in relation to a Subsequent Sale, the
price specified in the related Bill of Sale, to be paid by the Issuer for the
Subsequent Transferred Bondable Transition Property purchased and sold in such
Subsequent Sale.

      "Subsequent Sale" means any sale of Bondable Transition Property by the
Seller to the Issuer after the Initial Transfer Date.

      "Subsequent Transfer Date" means a date on which a sale of Subsequent
Transferred Bondable Transition Property is effective, as specified in the
written notice relating to such sale contemplated in Section 2.02(e) of the Sale
Agreement.

      "Subsequent Transferred Bondable Transition Property" means Bondable
Transition Property sold by the Seller to the Issuer as of a Subsequent Transfer
Date pursuant to the Sale Agreement and a Bill of Sale delivered on or prior to
the related Subsequent Transfer Date as identified in such Bill of Sale.

      "Successor Servicer" means a successor Servicer appointed by the Trustee
pursuant to Section 6.04 of the Servicing Agreement which succeeds to all the
rights and duties of the Servicer under the Servicing Agreement.

      "Supplemental Indenture" means a supplemental indenture entered into by
the Issuer and the Trustee pursuant to Article IX of the Indenture.

      "Target Payment Date" has the meaning specified in Section 5(a) of Annex 1
to the Servicing Agreement.

      "TBC Collections" means amounts received by the Servicer in respect of the
Transition Bond Charge.

      "Termination Notice" has the meaning specified in Section 6.01 of the
Servicing Agreement.

      "Third Party" means any third party, including any electric generation
supplier, providing billing or metering services, licensed by the BPU pursuant
to relevant provisions of the Competition Act, the BPU Regulations and the BPU
Financing Orders.

      "Total Revenue Requirement" means, as of any date of determination, the
sum of the Revenue Requirements for all Series outstanding as of such date.


                                      A-43
<PAGE>
      "Transfer Date" means the Initial Transfer Date or any Subsequent Transfer
Date, as applicable.

      "Transferred Bondable Transition Property" means, collectively, all
Bondable Transition Property that has been sold, assigned and transferred to the
Issuer pursuant to the Sale Agreement.

      "Transition Bond" means any of the transition bonds (as defined in the
Competition Act) issued by the Issuer pursuant to the Indenture.

      "Transition Bond Balance" means, as of any date, the aggregate Outstanding
Amount of all Series of Transition Bonds on such date.

      "Transition Bond Charge" means the Transition Bond Charge authorized by
the BPU to be imposed on all Customers by ACE or its successor to recover
Bondable Stranded Costs pursuant to the Competition Act and the BPU Financing
Orders.

      "Transition Bond Charge Adjustment" means each adjustment to Transition
Bond Charge related to the Transferred Bondable Transition Property made in
accordance with Section 4.01 and Annex 1 of the Servicing Agreement and the
Issuer Annex.

      "Transition Bond Charge Adjustment Process" means the process by which
adjustments are made to the Transition Bond Charge or to the formula governing
such adjustments, in either case pursuant to Section 4.01 and Annex 1 of the
Servicing Agreement, the Competition Act, the Petition and the BPU Financing
Orders.

      "Transition Bond Owner" means, with respect to a Book-Entry Transition
Bond, the Person who is the beneficial owner of such Book-Entry Transition Bond,
as reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).

      "Transition Bond Register" has the meaning specified in Section 2.05(a) of
the Indenture.

      "Transition Bond Registrar" has the meaning specified in Section 2.05(a)
of the Indenture.

      "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
in force on the date hereof, unless otherwise specifically provided.

      "Trustee" means _________________________, a ___________, or its
successor, as trustee under the Indenture and in the capacity specified in the
first paragraph of the Indenture, or any successor Trustee under the Indenture.

      "Underwriting Agreement" means the Underwriting Agreement dated as of
________, 2002, among the Seller, the Issuer and Morgan Stanley & Co.,
Incorporated, on behalf of itself and as the representative of the several
underwriters named therein.


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<PAGE>
      "U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.


                                      A-45