CREDIT AGREEMENT



                                                             among



                                            PEPCO HOLDINGS, INC.,


                                                   BANK ONE, NA,
                                             as Administrative Agent,


                                                             and


                                            MERRILL LYNCH & CO.,

                                                as Syndication Agent







                              BANC ONE CAPITAL MARKETS, INC.,
                                           MERRILL LYNCH & CO.,
                               Co-Lead Arrangers and Co-Book Runners


                                           Dated as of August 1, 2002

                                                         CREDIT AGREEMENT


            This CREDIT AGREEMENT, dated as of August 1, 2002, is among Pepco Holdings,
Inc. (the "Borrower"), various financial institutions (together with their respective successors and
assigns, each a "Lender" and collectively the "Lenders") and Bank One, NA, a national banking
association having its principal office in Chicago, Illinois, as administrative agent.

            The parties hereto agree as follows:

                                                                   ARTICLE I

                                                                 DEFINITIONS

            1.1        Definitions. As used in this Agreement:

             "ACE" means Atlantic City Electric Company.

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

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

             "Affected Lender" is defined in Section 3.7.

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

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

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

            "Agreement" means this Credit Agreement.

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

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

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

             "Arrangers" means BOCM, Merrill Lynch, Pierce, Fenner & Smith, Incorporated and
Merrill Lynch & Co. and their respective successors, in their capacity as Co-Lead Arrangers and
Co-Book Runners.

             "Asset Sale" means the sale, lease, assignment or other transfer for value by the
Borrower or any Subsidiary to any Person (other than the Borrower or any Subsidiary) of any
asset or right of the Borrower or such Subsidiary (including any sale or other transfer of stock of
any Subsidiary, whether by merger, consolidation or otherwise), excluding (a) any sale, lease,
assignment or other transfer in the ordinary course of business and (b) any Permitted ACE Asset
Sale, Permitted DPL Asset Sale, Permitted PEPCO Distribution or Permitted PHI Asset Sale
(each as defined in the Other Credit Agreement as in effect on the date hereof).

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

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

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

             "BOCM" means Bank One Capital Markets, Inc.

             "Borrower" is defined in the preamble.

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

             "Borrowing Notice" is defined in Section 2.9.

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

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

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

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

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

             "Code" means the Internal Revenue Code of 1986.

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

             "Conectiv" means Conectiv, a Delaware corporation.

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

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

             "Conversion/Continuation Notice" is defined in Section 2.10.

             "Debt Issuance" means any issuance of Indebtedness by the Borrower or any Subsidiary
other than (a) Indebtedness secured by Liens described in Section 6.12(xvi), (b) commercial
paper, (c) Nonrecourse Transition Bond Debt, (d) Nonrecourse Indebtedness and (e)
Indebtedness arising under the Other Credit Agreement.

             "Default" means an event described in Article VII.

             "DPL" means Delmarva Power & Light Company, a Delaware and Virginia corporation.

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

             "Equity Issuance" means the issuance of equity securities or interests by the Borrower or
any Subsidiary (other than issuances of equity securities or interests by any Subsidiary to the
Borrower or any other Subsidiary).

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

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

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

             "Eurodollar Loan" means a Loan which, except as otherwise provided in Section 2.12,
bears interest at the applicable Eurodollar Rate.

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

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

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

             "Facility Termination Date" means July 30, 2003 or any earlier date on which the
Aggregate Commitment is reduced to zero or the obligation of the Lenders to make Loans to the
Borrower is terminated pursuant to Section 8.1.

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

             "Floating Rate Advance" means an Advance which, except as otherwise provided in
Section 2.12, bears interest at the Alternate Base Rate.

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

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

             "Granting Lender" is defined in Section 12.5.

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

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

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

             "Lender" is defined in the preamble.

             "Lending Installation" means, with respect to a Lender, the office, branch, subsidiary or
affiliate of such Lender specified as such in its Administrative Questionnaire or otherwise
selected by such Lender pursuant to Section 2.18.

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

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

             "Loan Documents" means this Agreement and any Notes issued pursuant to Section
2.14.

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

             "Material Indebtedness" is defined in Section 7.5.

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

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

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

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

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

             "Net Cash Proceeds" means:

             (a)      with respect to any Asset Sale, the aggregate cash proceeds (including cash
proceeds received by way of deferred payment of principal pursuant to a note, installment
receivable or otherwise, but only as and when received) received by the Borrower or any
Subsidiary pursuant to such Asset Sale, net of (i) the direct costs relating to such Asset Sale
(including sales commissions and legal, accounting and investment banking fees), (ii) taxes paid
or payable as a result thereof (after taking into account any available tax credit or deduction and
any tax sharing arrangement), (iii) amounts required to be applied to the repayment of any
Indebtedness secured by a Lien on the asset subject to such Asset Sale, (iv) in the case of the sale
of the stock of any Subsidiary, any Indebtedness of such Subsidiary which is required to be
repaid as a result of or in connection with such sale (other than obligations hereunder) and (v)
any reserve for adjustment in respect of the sale price of such asset (until such amount is
available to the Borrower or the applicable Subsidiary); and

             (b)      with respect to any Debt Issuance or Equity Issuance, the aggregate cash proceeds
received by the Borrower or any Subsidiary pursuant to such issuance, net of the direct costs
relating to such issuance (including filing costs, sales and underwriter's commissions and legal,
accounting and investment banking fees).

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

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

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

             "Nonrecourse Transition Bond Debt" means obligations evidenced by Transition Bonds
rated investment grade or better by S&P or Moody's, representing a securitization of Intangible
Transition Property as to which obligations neither the Borrower nor any Subsidiary of the
Borrower (other than a Special Purpose Subsidiary) has any direct or indirect liability (whether
as primary obligor, guarantor, surety, provider of collateral security, through a put option, asset
repurchase agreement, capital maintenance agreement or debt subordination agreement, or
through any other right or arrangement of any nature providing direct or indirect assurance of
payment or performance of any such obligation in whole or in part), except for liability to
repurchase Intangible Transition Property conveyed to the securitization vehicle, on terms and
conditions customary in receivables securitizations, in the event such Intangible Transition
Property violates representations and warranties of scope customary in receivables
securitizations.

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

             "Note" means any promissory note substantially in the form of Exhibit C issued at the
request of a Lender pursuant to Section 2.14.

             "Obligations" means all unpaid principal of and accrued and unpaid interest on the
Loans, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other
obligations of the Borrower to the Agent or to any Lender or any other Indemnified Party arising
under the Loan Documents.
             "Other Credit Agreement" means the Credit Agreement dated as of the date hereof
among the Borrower, PEPCO, DPL, ACE, various lenders and Bank One, as administrative
agent.

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

             "Participants" is defined in Section 12.2.1.

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

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

             "PCI" means Potomac Capital Investment Corporation.

             "PEPCO" means Potomac Electric Power Company.

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

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

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

             "Pricing Schedule" means Schedule 1 hereto.

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

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

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

             "Public Reports" means (i) the annual reports on Form 10-K of each of PEPCO, DPL
and ACE for the year ended December 31, 2001; (ii) the quarterly reports on Form 10-Q filed
with the SEC by PEPCO on May 10, 2002, by DPL on May 15, 2002 and by ACE on May 15,
2002; and (iii) the Borrower's Form 8-K filed with the SEC on June 7, 2002.

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

             "Purchasers" is defined in Section 12.3.1.

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

             "Required Lenders" means Lenders in the aggregate having at least 51% of the
Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the
aggregate holding at least 51% of the aggregate unpaid principal amount of the outstanding
Advances.

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

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

             "SEC" means the Securities and Exchange Commission.

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

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

             "Single Employer Plan" means a Plan maintained by the Borrower or any member of the
Controlled Group for employees of the Borrower or any member of the Controlled Group.

             "SPC" is defined in Section 12.5.

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

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

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

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

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

             "Total Capitalization" means at any time the sum of Total Indebtedness and Net Worth,
each calculated at such time.

             "Total Indebtedness" means at any time all Indebtedness of the Borrower and its
Subsidiaries at such time determined on a consolidated basis in accordance with Agreement
Accounting Principles, excluding to the extent otherwise included in Indebtedness of the
Borrower or any Subsidiary, (a) debentures issued in connection with Trust Preferred Securities;
(b) any Nonrecourse Transition Bond Debt; (c) any Nonrecourse Indebtedness listed on Schedule

 

End of Preview