8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):                         March 7, 2016                      

State or Other Jurisdiction of Incorporation	Exact Name of Registrant as specified in its Charter, Address of Principal Executive Offices, Zip Code and Telephone Number (Including Area Code)	Commission File Number	IRS Employer Identification No.
Delaware	PEPCO HOLDINGS, INC. 701 Ninth Street, N.W. Washington, D.C. 20068 Telephone: (202) 872-2000	001-31403	52-2297449
New Jersey	ATLANTIC CITY ELECTRIC COMPANY 500 North Wakefield Drive Newark, DE 19702 Telephone: (202) 872-2000	001-03559	21-0398280
District of Columbia and Virginia	POTOMAC ELECTRIC POWER COMPANY 701 Ninth Street, N.W. Washington, D.C. 20068 Telephone: (202) 872-2000	001-01072	53-0127880
Delaware and Virginia	DELMARVA POWER & LIGHT COMPANY 500 North Wakefield Drive Newark, DE 19702 Telephone: (202) 872-2000	001-01405	51-008428

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

THIS COMBINED FORM 8-K IS BEING SEPARATELY FILED BY EACH OF PEPCO HOLDINGS, INC., ATLANTIC CITY ELECTRIC COMPANY, POTOMAC ELECTRIC POWER COMPANY AND DELMARVA POWER & LIGHT COMPANY.  INFORMATION CONTAINED HEREIN RELATING TO ANY INDIVIDUAL REGISTRANT IS FILED BY SUCH REGISTRANT ON ITS OWN BEHALF.  NO REGISTRANT MAKES ANY REPRESENTATION AS TO INFORMATION RELATING TO ANY OTHER REGISTRANT.

Item 1.01.                      Entry into a Material Definitive Agreement.

As previously disclosed, on April 29, 2014, Pepco Holdings, Inc., a Delaware corporation (Pepco Holdings), entered into an Agreement and Plan of Merger with Exelon Corporation, a Pennsylvania corporation (Exelon), and Purple Acquisition Corp., a Delaware corporation and an indirect, wholly owned subsidiary of Exelon (Merger Sub), which was amended and restated on July 18, 2014 (the Merger Agreement), providing for the merger of Merger Sub with and into Pepco Holdings (the Merger), with Pepco Holdings surviving the Merger as a wholly owned subsidiary of Exelon.

On March 7, 2016, Pepco Holdings, Exelon and Merger Sub entered into a Letter Agreement (the Letter Agreement), pursuant to which Pepco Holdings and Exelon acknowledged that either party may terminate the Merger Agreement at any time and Pepco Holdings agreed that it would not declare or pay any dividend on its common stock covering the period after December 10, 2015 and prior to the termination of the Merger Agreement in consideration for Exelon’s agreement to (i) file with the District of Columbia Public Service Commission (DCPSC) a request for other relief (as described in Item 8.01 below), and (ii) pursue closing of the Merger if  the DCPSC grants the request for other relief and approves the Merger on the terms provided in such filing, without modification.  Pursuant to the Letter Agreement, if Pepco Holdings violates the terms of the Letter Agreement, Exelon shall have the right to terminate the Merger Agreement, and Pepco Holdings would not be entitled to (a) retain the $180 million reverse termination fee prepaid by Exelon through the purchase of an aggregate of 18,000 shares of Pepco Holdings preferred stock and (b) reimbursement otherwise required under the Merger Agreement for up to $40 million for out-of-pocket expenses incurred by Pepco Holdings.

The foregoing summary of the Letter Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Letter Agreement attached as Exhibit 2 and incorporated herein by reference.

Item 8.01.                      Other Events.

As previously disclosed, on February 26, 2016, the DCPSC issued an order rejecting the Nonunanimous Full Settlement Agreement and Stipulation (the DC Settlement Agreement) among Pepco Holdings, Potomac Electric Power Company, Exelon, and certain of their respective affiliates (the Joint Applicants) and the District of Columbia Government, the Office of the People’s Counsel and other parties filed with the DCPSC on October 6, 2015, and directing the parties to the DC Settlement (the Settling Parties) to review a revised DC Settlement Agreement (the DCPSC Revised Settlement Agreement) included in the DCPSC’s order and to notify the DCPSC of their acceptance of the DCPSC Revised Settlement Agreement by March 11, 2016.  The terms of  such order also provided that if the Settling Parties choose, they may request relief from the DCPSC other than as provided in the DCPSC order and the non-Settling Parties to the DCPSC proceeding will have seven (7) business days to file comments in response to the Settling Parties’ filing.

On March 7, 2016, the Joint Applicants filed a Joint Applicants’ Request for Other Relief with the DCPSC requesting approval of the Merger through either (i) the adoption of the DCPSC Revised Settlement Agreement as a resolution on the merits, (ii) the adoption of the DC Settlement Agreement as originally executed by the Settling Parties, or (iii) the adoption of modifications to the DCPSC Revised Settlement Agreement as set forth therein and in Attachment A to the Letter Agreement.

Pursuant to the DCPSC’s February 26, 2016 order, the other parties to the DCPSC proceeding regarding the Merger will have seven (7) business days from the date of the Joint Applicants’ filing to file comments or request other relief from the DCPSC.  In such filing, the Joint Applicants requested

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expedited review and consideration of the Joint Applicants’ Request for Other Relief by April 7, 2016, without reopening the record in the proceeding or holding additional hearings.

A copy of the Joint Applicants’ Request for Other Relief has been made available on Pepco Holdings’ Web site (http://www.pepcoholdings.com).  Investors may access copies of this information (among other documents and information) through the “Regulatory Filings” hyperlink on the Investor Relations page of this Web site.

Pursuant to the Merger Agreement, Pepco Holdings’ utility subsidiaries were prohibited from filing any new rate cases without Exelon’s consent.  As a result, none of Pepco Holdings’ utility subsidiaries have filed any new distribution base rate cases since entering into the Merger Agreement in April 2014.  On March 7, 2016, Exelon agreed to waive this prohibition on rate case filings and consented to Pepco Holdings’ utility subsidiaries filing new rate cases with the Delaware Public Service Commission, the Maryland Public Service Commission and the New Jersey Board of Public Utilities.

Item 9.01.	Financial Statements and Exhibits.
	(d)	Exhibits
		Exhibit No.	Description of Exhibit
		2	Letter Agreement, dated March 7, 2016, among Pepco Holdings, Inc., Exelon Corporation and Purple Acquisition Corp.

Cautionary Statements Regarding Forward-Looking Information

Certain of the matters discussed in this Current Report on Form 8-K constitute “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, both as amended by the Private Securities Litigation Reform Act of 1995. Words such as “may,” “might,” “will,” “should,” “could,” “anticipate,” “estimate,” “expect,” “predict,” “project,” “future”, “potential,” “intend,” “seek to,” “plan,” “assume,” “believe,” “target,” “forecast,” “goal,” “objective,” “continue” or the negative of such terms or other variations thereof and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements.  These forward-looking statements include, but are not limited to, statements regarding benefits of the proposed Merger, the expected timing of completion of the Merger, anticipated future financial and operating performance and results of Pepco Holdings if the Merger is not completed, including estimates for growth.  These statements are based on the current expectations of management of Pepco Holdings and its utility subsidiaries.  There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this Current Report on Form 8-K.  For example, (1) conditions to the closing of the Merger may not be satisfied; (2) the Merger may involve unexpected costs, unexpected liabilities or unexpected delays, or the effects of purchase accounting may be different from the companies’ expectations; (3) the credit ratings of the combined company or its subsidiaries may be different from what the companies expect; (4) Pepco Holdings and its utility subsidiaries may not realize the values expected to be obtained for properties expected or required to be sold; (5) the industry may be subject to future regulatory or legislative actions that could adversely affect Pepco Holdings and its utility subsidiaries; and (6) Pepco Holdings and its utility subsidiaries may be adversely affected by other economic, business, and/or competitive factors. Other unknown or unpredictable factors could also have material adverse effects on

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future results, performance or achievements of the combined company.  Therefore, forward-looking statements are not guarantees or assurances of future performance, and actual results could differ materially from those indicated by the forward-looking statements.  Discussions of some of these other important factors and assumptions are contained in Pepco Holdings’ and its utility subsidiaries’ filings with the Securities and Exchange Commission (SEC), and available at the SEC’s website at www.sec.gov, including: (1) the definitive proxy statement that Pepco Holdings filed with the SEC on August 12, 2014 and mailed to its stockholders in connection with the proposed Merger; (2) Pepco Holdings’ Current Report on Form 8-K filed with the SEC on September 12, 2014, which provides supplemental disclosures to the definitive proxy statement; and (3) Pepco Holdings’ and its utility subsidiaries’ Annual Report on Form 10-K for the year ended December 31, 2015 in (a) Part I, Item 1A. “Risk Factors,” (b) Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (c) Note (16), “Commitments and Contingencies” to the consolidated financial statements of Pepco Holdings included in Part II, Item 8. “Financial Statements and Supplementary Data.  In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication. Pepco Holdings and its utility subsidiaries do not undertake any obligation to publicly release any revision to these forward-looking statements to reflect events or circumstances after the date of this communication.  New factors emerge from time to time, and it is not possible for Pepco Holdings or its utility subsidiaries to predict all such factors.  Furthermore, it may not be possible to assess the impact of any such factor on Pepco Holdings’ or its utility subsidiaries’ businesses or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.  Any specific factors that may be provided should not be construed as exhaustive.

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SIGNATURES

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

		PEPCO HOLDINGS, INC.
		DELMARVA POWER & LIGHT COMPANY
		POTOMAC ELECTRIC POWER COMPANY
		ATLANTIC CITY ELECTRIC COMPANY
Date:	March 7, 2016	/s/ FRED BOYLE
		Name:	Frederick J. Boyle
		Title:	Senior Vice President and Chief Financial Officer of Pepco Holdings, Inc., Delmarva Power & Light Company and Potomac Electric Power Company and Chief Financial Officer of Atlantic City Electric Company

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INDEX TO EXHIBIT FILED HEREWITH

Exhibit No.	Description of Exhibit
2	Letter Agreement, dated March 7, 2016, among Pepco Holdings, Inc., Exelon Corporation and Purple Acquisition Corp.

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EX-2

Exhibit 2

March 7, 2016

Pepco Holdings, Inc.

701 Ninth Street, N.W.

Washington, D.C. 20068

Attention: General Counsel

Ladies and Gentlemen:

Reference is made to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of April 29, 2014, as amended and restated on July 18, 2014, among Pepco Holdings, Inc. (“PHI”), Exelon Corporation (“Exelon”) and Purple Acquisition Corp.  Capitalized terms used and not otherwise defined in this letter (this “Letter Agreement”) shall have the same meanings ascribed to them in the Merger Agreement.

Following the decision of the District of Columbia Public Service Commission (“DCPSC”) in Formal Case No. 1119 by Order No. 17947, PHI and Exelon filed a petition for reconsideration of Order No. 17947 on September 28, 2015.   On or around October 6, 2015, PHI, Exelon, the District of Columbia Government, the Office of People’s Counsel, the District of Columbia Water and Sewer Authority, the National Consumer Law Center, and other parties (collectively, the “Settling Parties”) executed the Nonunanimous Full Settlement Agreement and Stipulation (the “Settlement Agreement”) setting forth the terms and conditions on which PHI and Exelon and their respective Subsidiaries seek approval of the Merger by DCPSC.  PHI and Exelon and their respective Subsidiaries filed with the DCPSC a Motion of Joint Applicants to Reopen the Record in Formal Case No. 1119 to Allow for Consideration of Nonunanimous Full Settlement Agreement and Stipulation and Granting Additional Requested Relief.  On February 26, 2016, the DCPSC, by Order No. 18109, presented a revised version of the Settlement Agreement (the “DCPSC Revised Settlement Agreement”) and ordered that the Merger and the DCPSC Revised Settlement Agreement will be deemed approved by the DCPSC, without any further action by the DCPSC, if all of the Settling Parties accept the terms of the DCPSC Revised Settlement Agreement and file a notice of that acceptance with the DCPSC on or before March 11, 2016.  Exelon and PHI have agreed to a modification to the terms and conditions set forth in the DCPSC Revised Settlement Agreement, which modified terms and conditions  are included in Appendix A hereto (the “Modified DCPSC Filing Terms”). This Letter Agreement sets forth the terms and conditions under which Exelon and PHI and their respective Subsidiaries will file a request for other relief, including the Modified DCPSC Filing Terms with the DCPSC and seek DCPSC approval of the Merger on terms set forth in the Settlement Agreement, the DCPSC Revised Settlement Agreement, or the Modified DCPSC Filing Terms without execution of the DCPSC Revised Settlement Agreement or the Modified DCPSC Filing Terms by all other Settling Parties (the “Other Relief Request”).

PHI and Exelon each acknowledges and agrees that (a) neither PHI nor Exelon is required to agree to the additional and different conditions to approval of the Merger set forth in Order No. 18109, the DCPSC Revised Settlement Agreement, or the Modified DCPSC Filing Terms, and (b) each of PHI

and Exelon has the right to terminate the Merger Agreement at any time pursuant to Section 8.2(a) of the Merger Agreement.  In consideration for Exelon’s agreement to (a) concurrently with the execution and delivery of this Letter Agreement  file the Other Relief Request with the DCPSC, and (b) close the Merger if (i) the DCPSC approves the Merger and the  Other Relief Request (including either  the Settlement Agreement, the DCPSC Revised Settlement Agreement, or the Modified DCPSC Filing Terms) as filed, without conditions or modifications, (ii) all conditions to Closing of the Merger in Article VII of the Merger Agreement have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing), and (iii) PHI has fulfilled its obligations under this Letter Agreement.  PHI represents, warrants and agrees that it has not and shall not declare or pay any dividend or distribution in respect of its common stock subsequent to the dividend paid to shareholders of record on December 10, 2015, and prior to the termination of the Merger Agreement, notwithstanding permission to do so under Section 6.1(a)(vi) of the Merger Agreement.  PHI represents and warrants to Exelon that this Letter Agreement, including PHI’s obligations regarding dividends and distributions, has been duly authorized by PHI’s board of directors.  If PHI declares or pays a dividend or distribution in respect of its common stock at any time subsequent to the dividend paid to shareholders of record on December 10, 2015, and prior to termination of the Merger Agreement, Exelon shall have the right to terminate the Merger Agreement, and PHI, without any further action by PHI, shall then be deemed to have irrevocably and unconditionally waived all rights to receive  (a) the Parent Termination Fee otherwise payable under Section 8.5(c) of the Merger Agreement and (b)  reimbursement otherwise required under the Merger Agreement for up to $40 million for the documented out-of-pocket expenses incurred by PHI in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement.

Nothing contained herein shall operate as an amendment to, or a waiver of, any other provision of the Merger Agreement or the Letter Agreement dated October 6, 2015, or otherwise waive or impair any party’s rights under the Merger Agreement, which shall continue in full force and effect, except as expressly modified by this Letter Agreement.

The provisions of Sections 9.2, 9.3, 9.4, 9.5, 9.6, 9.8 9.12 and 9.14 of the Merger Agreement shall apply to this Letter Agreement as if the same were set out herein in full.

[Signature page follows]

Please acknowledge your agreement and acceptance of the foregoing by countersigning this letter in the space provided below.

Yours sincerely,
EXELON CORPORATION
/s/ DARRYL BRADFORD
Name:	Darryl Bradford
Title:	Executive Vice President and General Counsel

PURPLE ACQUISITION CORP.
/s/ DARRYL BRADFORD
Name:	Darryl Bradford
Title:	President

ACKNOWLEDGED AS OF THE DATE HEREOF:
PEPCO HOLDINGS, INC.
/s/ KEVIN C. FITZGERALD
Name:	Kevin C. Fitzgerald
Title:	Executive Vice President and General Counsel
Date:	March 7, 2016

Appendix A to Letter Agreement

REVISED NONUNANIMOUS FULL SETTLEMENTAGREEMENT AND STIPULATION

Customer Base Rate Credit

4.           Exelon will provide a Customer Base Rate Credit in the amount of $45.6 million, in two parts as set forth below.  No portion of the Customer Base Rate Credit shall be recovered in utility rates:

(a)  $25.6 million of the $45.6 million will be a Residential Customer Base Credit which will be a credit used to offset any residential distribution rate increases approved by the Commission in any Pepco base rate case filed after close of the Merger until the Residential Customer Base Rate Credit is fully utilized.  Pepco will apply the Residential Customer Base Rate Credit solely to offset any increase in the distribution customer charge and the volumetric or variable distribution charge approved by the Commission, in rate cases filed after close of the Merger until the Residential Customer Base Rate Credit is fully utilized, and the amount of the credit will appear as a separate line item on the residential customer’s bill.  Residential customers shall include customers who participate in Pepco’s Residential Aid Discount (“RAD”) Program.  For purposes of this paragraph, residential customers shall include all Master Metered Apartment units, and $4.3 million of the $25.6 million shall be allocated for application as a credit for the Master Metered Apartments.  Pepco will defer recovery of any residential rate increase before March 31, 2019 not offset by the $25.6 million Residential Customer Base Rate Credit, and not offset by any additional allocations to residential customers of the $20 million part of the Customer Base Rate Credit, through the creation of a regulatory asset equaling the incremental amount of the deferred residential rate increase until March 31, 2019 (the “Incremental Offset”).  Pepco will recover the balance of the Incremental Offset regulatory asset, along with a 5% return, automatically in residential rates, without the need for any further Commission approval, over a two-year period commencing April 1, 2019; provided however, that the recovery period will be extended beyond the two-year period if and as necessary to ensure that the recovery of the balance does not exceed $1 million per year.  Only the Incremental Offset amount, and return thereon, if any, will be recovered in rates, and no portion of the Residential Customer Base Rate Credit shall be recovered in utility rates.

(b)  $20 million of the $45.6 million will be a credit to offset rate increases for Pepco customers approved by the Commission in any Pepco base rate case filed after the close of the Merger until the $20 million is fully utilized.  The Commission will determine in the base rate cases how the $20 million will be allocated among Pepco customers (which may include commercial customers, and which may be used to address negative class rates of return) and over what period of time, and Pepco and the parties in the Pepco base rate cases will be provided an opportunity to propose to the Commission how the $20 million will be allocated among Pepco customers and over what period of time.  The Commission may decide not to allocate all of the $20 million to credits to offset rate increases or address negative class rates of return.  Instead, it may allocate any unused portion of the $20 million for either or both of (a) assistance to low and limited income customers in the District of Columbia, including under the Low Income Home Energy Assistance Program (“LIHEAP”) and (b) projects funded through the MEDSIS Pilot Project Subaccount described in Paragraph 7.  Exelon shall deposit any unused portion of the $20 million into the MEDSIS Pilot Project Subaccount within 30 days of such direction from the Commission.

Support for Formal Case No. 1130

7.           Within sixty (60) days after Merger close, Exelon shall provide funding in the amount of $1.55 million to the Formal Case No. 1130 MEDSIS Pilot Project Fund Subaccount within the Formal Case No. 1119 Escrow Fund.  The fund shall be held in escrow until the Commission approves a pilot project and directs that the funds be released.