-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, f81vUz/904FE3SPwkkZOKoHDvWh7nVgwuBGFN9nIA4rQdJpZlQFDrge44FZQMafD mjwFx3SWYfgJWPUAXqZyeA== 0000950154-94-000048.txt : 19940629 0000950154-94-000048.hdr.sgml : 19940629 ACCESSION NUMBER: 0000950154-94-000048 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19940623 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PECO ENERGY CAPITAL LP CENTRAL INDEX KEY: 0000925910 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 51035522 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-53785 FILM NUMBER: 94535472 BUSINESS ADDRESS: STREET 1: 1013 CENTRE RD, STE 350F CITY: WILMINGTON STATE: DE ZIP: 19805 BUSINESS PHONE: 3029980592 MAIL ADDRESS: STREET 1: C/O PECO ENERGY CO STREET 2: 2301 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PECO ENERGY CO CENTRAL INDEX KEY: 0000078100 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 230970240 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-53785-01 FILM NUMBER: 94535473 BUSINESS ADDRESS: STREET 1: 2301 MARKET ST STREET 2: P O BOX 8699 CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2158414000 FORMER COMPANY: FORMER CONFORMED NAME: PHILADELPHIA ELECTRIC CO DATE OF NAME CHANGE: 19920703 S-3/A 1 Registration Nos. 33-53785 33-53785-01 ============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- PECO Energy Company PECO Energy Capital, L.P. (Exact name of registrant (Exact name of registrant as specified as specified in charter) in Limited Partnership Agreement) Pennsylvania Delaware (State or other jurisdiction of incorporation or organization) 23-0970240 51-0355322 (I.R.S. Employer Identification No.) P.O. Box 8699 1013 Centre Road 2301 Market Street Suite 350F Philadelphia, PA 19101 Wilmington, DE 19805 (215) 841-4000 (302) 998-0592 (Address, including zip code, and telephone number, including area code, of registrants' principal executive offices) M. W. Rimerman M. W. Rimerman Vice President-Finance and Treasurer Director P.O. Box 8699 P.O. Box 8699 2301 Market Street 2301 Market Street Philadelphia, PA 19101 Philadelphia, PA 19101 (215) 841-4000 (215) 841-4000 (Name, address, including zip code, and telephone number, including area code, of agents for service) with copies to: James W. Durham, Esq. Senior Vice President and General Counsel P.O. Box 8699 2301 Market Street, Philadelphia, PA 19101 Robert C. Gerlach, Esq. Robert M. Jones, Jr., Esq. Ballard Spahr Andrews & Ingersoll Drinker Biddle & Reath 1735 Market Street 1100 Philadelphia National Bank Bldg. Philadelphia, PA 19103-7599 Philadelphia, PA 19107 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: After the Registration Statement becomes effective, as determined by market conditions and other factors. --------------- If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. / X / --------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ============================================================================== SUBJECT TO COMPLETION, DATED JUNE , 1994 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE , 1994 PREFERRED SECURITIES PECO ENERGY CAPITAL % CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES (MIPS*), SERIES A (LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY) GUARANTEED TO THE EXTENT SET FORTH HEREIN BY PECO ENERGY COMPANY --------------- The % Cumulative Monthly Income Preferred Securities, Series A (the "Series A Preferred Securities"), representing the limited partner interests offered hereby, are being issued by PECO Energy Capital, L.P., a limited partnership formed under the laws of the State of Delaware ("PECO Energy Capital"). The general partner of PECO Energy Capital is PECO Energy Capital Corp. (the "General Partner"), which is a wholly owned subsidiary of PECO Energy Company ("PECO Energy"). PECO Energy Capital exists for the sole purpose of issuing partner interests and lending the proceeds thereof to PECO Energy. The limited partner interests represented by the Series A Preferred Securities will have a preference with respect to cash distributions and amounts payable on liquidation over the General Partner's interest in PECO Energy Capital. Holders of the Series A Preferred Securities will be entitled to receive cumulative preferential cash distributions("Dividends"), at an annual rate of % of the stated liquidation preference of $25 per Series A Preferred Security, accruing from the date of original issuance and payable monthly in arrears on the last day of each calendar month of each year, commencing _______, 1994. The payment of Dividends and payments in liquidation or redemption with respect to the Series A Preferred Securities, in each case out of funds legally available therefor held by PECO Energy Capital, are guaranteed by PECO Energy to the extent described herein and in the accompanying Prospectus. See "Description of the Guarantee" in the accompanying Prospectus. If PECO Energy fails to make interest payments on its __% Deferrable Interest Subordinated Debentures, Series A purchased by PECO Energy Capital with the proceeds of the Series A Preferred Securities, PECO Energy Capital will not have sufficient funds to pay Dividends on the Series A Preferred Securities. The Guarantee does not cover payment of Dividends when PECO Energy Capital does not have sufficient funds to pay such Dividends. In such event, the remedy of a holder of Series A Preferred Securities is to enforce the rights of PECO Energy Capital under the Series A Subordinated Debentures. See "Certain Terms of the Series A Subordinated Debentures" herein and "Description of the Subordinated Debentures" in the accompanying Prospectus. The obligations of PECO Energy under the Guarantee are subordinate and junior in right of payment to all general liabilities of PECO Energy and its obligations under the Series A Subordinated Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness of PECO Energy, which aggregated approximately $5.4 billion at March 31, 1994. The Series A Preferred Securities are subject to optional redemption in whole or in part, from time to time, on or after June 30, 1999, at $25 per Series A Preferred Security plus accumulated and unpaid Dividends to the date fixed for redemption (the "Redemption Price"), and will be redeemed at such price from the proceeds of any redemption or payment at maturity of the Series A Subordinated Debentures. See "Certain Terms of the Series A Preferred Securities_Optional Redemption" and "_Mandatory Redemption." In addition, the Series A Preferred Securities will be subject to redemption upon the occurrence of certain events described under "Certain Terms of the Series A Preferred Securities_Optional Redemption" and "_Special Event Redemptions" herein. In the event of the liquidation of PECO Energy Capital, holders of Series A Preferred Securities will be entitled to receive for each Series A Preferred Security, a liquidation preference of $25 plus accumulated and unpaid Dividends to the date of payment. See "Description of the Preferred Securities -- Liquidation Distribution" in the accompanying Prospectus. See "Certain Investment Considerations" for certain information relevant to an investment in the Series A Preferred Securities, including the period during which and circumstances under which payment of Dividends on the Series A Preferred Securities may be deferred and the related federal income tax consequences. Application has been made to list the Series A Preferred Securities on the New York Stock Exchange. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INITIAL PUBLIC UNDERWRITING PROCEEDS TO PECO OFFERING PRICE COMMISSION(1) ENERGY CAPITAL(2)(3) -------------- ------------- -------------------- Per Series A Preferred Security ....$ (2) $ Total ...................$ (2) $ - ---------- (1) PECO Energy Capital and PECO Energy have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) As the proceeds of the sale of the Series A Preferred Securities will be loaned to PECO Energy, under the Underwriting Agreement PECO Energy has agreed to pay to the Underwriters $ per Series A Preferred Security (or $ in the aggregate); provided that such compensation will be $ per Series A Preferred Security sold to certain institutions. Therefore, to the extent that Series A Preferred Securities are sold to such institutions, the actual amount of Underwriters' compensation will be less than the amount specified above. See "Underwriting." (3) Expenses of the offering, excluding underwriting commissions which are payable by PECO Energy, are estimated to be $ . -------------------- The Series A Preferred Securities offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of the Series A Preferred Securities will be made only in book-entry form through the facilities of The Depository Trust Company on or about , 1994. - --------------- *An application has been filed by Goldman, Sachs & Co. with the United States Patent and Trademark Office for the registration of the MIPS servicemark. GOLDMAN, SACHS & CO. SMITH BARNEY INC. DEAN WITTER REYNOLDS INC. A. G. EDWARDS & SONS, INC. KIDDER, PEABODY & CO. INCORPORATED PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED --------------- The date of this Prospectus Supplement is , 1994. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus supplement shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A PREFERRED SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 The following information supplements and should be read in conjunction with the information contained in the accompanying Prospectus. Each of the capitalized terms used in this Prospectus Supplement has the meaning set forth in this Prospectus Supplement or in the accompanying Prospectus. CERTAIN INVESTMENT CONSIDERATIONS Prospective purchasers of the Series A Preferred Securities should carefully review the information contained elsewhere in this Prospectus Supplement and in the accompanying Prospectus and should particularly consider the following matters: SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND THE SERIES A SUBORDINATED DEBENTURES PECO Energy's obligations under the Guarantee are subordinate and junior in right of payment to all general liabilities of PECO Energy and its obligations under the _% Deferrable Interest Subordinated Debentures, Series A (the "Series A Subordinated Debentures") are subordinate and junior in right of payment to all Senior Indebtedness (as defined in the accompanying Prospectus) of PECO Energy. At March 31, 1994, the Senior Indebtedness of PECO Energy aggregated $5,402,096,000. There are no terms in the Series A Preferred Securities, the Series A Subordinated Debentures or the Guarantee that limit PECO Energy's ability to incur additional indebtedness, including indebtedness that ranks senior to the Series A Subordinated Debentures and the Guarantee. The Guarantee guarantees payment to the holders of the Series A Preferred Securities of accumulated and unpaid monthly Dividends, amounts payable on redemption, and amounts payable on liquidation of PECO Energy Capital, in each case, however, only to the extent that PECO Energy Capital has funds on hand legally available therefor and payment thereof does not otherwise violate applicable law. If PECO Energy were to default in its obligation to pay interest or amounts payable on redemption or maturity of the Series A Subordinated Debentures, PECO Energy Capital would lack legally available funds for the payment of Dividends or amounts payable on redemption of the Series A Preferred Securities, and in such event holders of the Series A Preferred Securities would not be able to rely upon the Guarantee for payment of such amounts. Instead, holders of the Series A Preferred Securities would be required to seek enforcement of PECO Energy Capital's rights against PECO Energy pursuant to the terms of the Indenture. See "Description of the Guarantee - -- Status of the Guarantee" and "Description of the Subordinated Debentures - -- Subordination" in the accompanying Prospectus. OPTION TO EXTEND INTEREST PAYMENT PERIOD PECO Energy has the right under the Indenture to extend interest payment periods on the Series A Subordinated Debentures to up to 60 consecutive months, and, as a consequence, monthly Dividends on the Series A Preferred Securities can be deferred by PECO Energy Capital during any such extended interest payment period. Dividends in arrears after the monthly payment date therefor will accumulate additional distributions thereon at the rate per annum of % thereof. The term "Dividends" as used herein includes, as applicable, monthly distributions, distributions on monthly distributions in arrears and Additional Amounts (as defined below). In the event PECO Energy exercises its right to extend the interest payment periods on the Series A Subordinated Debentures, PECO Energy may not declare dividends on any shares of its capital stock during such extension period. PECO Energy Capital and PECO Energy currently believe that the extension of an interest payment period is unlikely. See "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period" in the accompanying Prospectus. Should an extended interest payment period occur, PECO Energy Capital will continue to accrue income for United States federal income tax purposes which will be allocated, but not distributed, to owners of the Series A Preferred Securities. As a result, the owner will include such interest in gross income for United States federal income tax purposes in advance of the receipt of cash, and will not receive the cash related to such income if the owner disposes of the Series A Preferred Securities prior to the record date for payment of Dividends. See "United States Taxation -- Potential Extension of Interest Payment Period." PECO ENERGY CAPITAL PECO Energy Capital is a limited partnership formed under the laws of the State of Delaware. All of its general partner interests are owned by the General Partner, which is a wholly owned special purpose subsidiary of PECO Energy. As a limited partnership, all of the business and affairs of PECO Energy Capital will be managed by the General Partner. PECO Energy Capital has been created solely for the purpose of issuing partner interests, including the Preferred Securities, and lending the proceeds thereof to PECO Energy. Such S-3 loans will be evidenced by the Subordinated Debentures issued by PECO Energy under an Indenture dated as of , 1994 (the "Indenture") between PECO Energy and Meridian Trust Company, as trustee (the "Trustee"), including the Series A Subordinated Debentures to be issued concurrently with the issuance of the Series A Preferred Securities. The Subordinated Debentures will be the only assets of PECO Energy Capital and the only revenues of PECO Energy Capital will be the interest on the Subordinated Debentures. PECO ENERGY PECO Energy, incorporated in Pennsylvania in 1929, is an operating utility which provides electric and gas service to the public in southeastern Pennsylvania. The total area served by PECO Energy and its subsidiaries covers 2,475 square miles. Electric service is supplied in an area of 2,340 square miles with a population of about 3,700,000, including 1,600,000 in the City of Philadelphia. Approximately 95% of the electric service area and 64% of retail kilowatthour sales are in the suburbs around Philadelphia and in northeastern Maryland, and 5% of the service area and 36% of such sales are in the City of Philadelphia. In 1993, approximately 60% of PECO Energy's electric output was generated from nuclear sources. PECO Energy estimates for 1994 that 59% of its electric output will come from nuclear sources. Natural gas service is supplied in a 1,475-square-mile area of southeastern Pennsylvania adjacent to Philadelphia with a population of 1,900,000. PECO Energy and its subsidiaries hold franchises to the extent necessary to operate in the areas served. CERTAIN TERMS OF THE SERIES A PREFERRED SECURITIES DIVIDENDS The Series A Preferred Securities will be entitled to Dividends out of funds on hand legally available therefor held by PECO Energy Capital at the annual rate of % of the stated liquidation preference of $25, payable monthly in arrears on the last day of each calendar month. The General Partner may make distributions on the general partner interests of PECO Energy Capital only after payment in full of all Dividends accrued on the Series A Preferred Securities and any other outstanding Preferred Securities of PECO Energy Capital. The first Dividend payment date for the Series A Preferred Securities will be , 1994, and such Dividends will be cumulative from the date of original issue. The Series A Preferred Securities will rank pari passu with all other series of Preferred Securities which may be issued by PECO Energy Capital. No other series of Preferred Securities have been issued by PECO Energy Capital. PECO Energy has the right under the Indenture to extend the interest payment period from time to time on the Series A Subordinated Debentures to a period not exceeding 60 consecutive months; provided that such extended interest period shall not extend beyond the stated maturity date or redemption date of the Series A Subordinated Debentures. As a consequence, monthly Dividends on the Series A Preferred Securities would be deferred (but would continue to accumulate with Dividends thereon) by PECO Energy Capital during any such extended interest payment period. In the event that PECO Energy exercises its right to extend the interest payment period on the Series A Subordinated Debentures, PECO Energy may not declare or pay dividends on, or redeem, purchase or acquire, any of its capital stock during the extension period. PECO Energy Capital and PECO Energy currently believe that the extension of an interest payment period is unlikely. Prior to the termination of any such extension period, PECO Energy may further extend the interest payment period, provided that such extension period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any extension period and the payment of all amounts then due on the Series A Subordinated Debentures, PECO Energy may elect to extend the interest payment period again, subject to the above requirements. See "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period" in the accompanying Prospectus. Payments received by PECO Energy Capital with respect to the Series A Subordinated Debentures and other series of PECO Energy's Subordinated Debentures will not be segregated by PECO Energy Capital for the benefit of the holders of the Series A Preferred Securities or holders of any other particular series of Preferred Securities. S-4 OPTIONAL REDEMPTION The Series A Preferred Securities are subject to redemption, at the option of the General Partner, in whole or in part, from time to time, on or after , 1999, at $25 per Series A Preferred Security, plus accumulated and unpaid Dividends, if any, to the date fixed for redemption (the "Redemption Price"). If at any time after the issuance of the Series A Preferred Securities, PECO Energy Capital is or would be required to pay Additional Amounts as described below or PECO Energy is or would be required to pay Additional Interest on the Series A Subordinated Debentures, as described under "Description of the Subordinated Debentures -- Additional Interest" in the accompanying Prospectus, then the Series A Preferred Securities will be subject to redemption, at the option of the General Partner, in whole or, if such requirement relates only to certain of the Series A Preferred Securities, in part as to that portion of the Series A Preferred Securities subject to such requirement, in each case at any time thereafter at the Redemption Price. MANDATORY REDEMPTION If at any time PECO Energy redeems the Series A Subordinated Debentures or pays the Series A Subordinated Debentures at maturity as described under "Description of the Subordinated Debentures" in the accompanying Prospectus, the Series A Preferred Securities will be subject to mandatory redemption at the Redemption Price. The Series A Preferred Securities will not be entitled to any sinking fund. SPECIAL EVENT REDEMPTIONS If a Tax Event (as defined below) shall occur and be continuing, the Series A Preferred Securities will be subject to redemption, at the option of the General Partner, in whole or in part at the Redemption Price within 90 days following the occurrence of such Tax Event. "Tax Event" means that PECO Energy Capital shall have received an opinion of counsel (which may be regular counsel to PECO Energy or an affiliate but not an employee thereof) experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such interpretation or pronouncement is announced on or after the date of issuance of the Series A Preferred Securities, there is more than an insubstantial risk that (i) PECO Energy Capital is subject to United States federal income tax with respect to interest received on the Series A Subordinated Debentures, (ii) interest payable by PECO Energy on the Series A Subordinated Debentures will not be deductible for United States federal income tax purposes or the Partnership will otherwise not be taxed as a partnership or (iii) PECO Energy Capital is subject to more than a de minimis amount of other taxes, duties or other governmental charges. If an Investment Company Act Event (as defined below) shall occur and be continuing, the Series A Preferred Securities will be subject to mandatory redemption in whole at the Redemption Price within 90 days following the occurrence of such Investment Company Act Event. "Investment Company Act Event" means the occurrence of a change in law or regulation or a change in official interpretation of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law") to the effect that PECO Energy Capital is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in 1940 Act Law becomes effective on or after the date of issuance of the Series A Preferred Securities; provided, that no Investment Company Act Event shall be deemed to have occurred if PECO Energy Capital has received an opinion of counsel (which may be regular counsel to PECO Energy or any affiliate but not an employee thereof) experienced in such matters, to the effect that PECO Energy Capital and/or PECO Energy has taken reasonable measures, in its discretion, to avoid such Change in 1940 Act Law so that notwithstanding such Change in 1940 Act Law, PECO Energy Capital is not required to be registered as an "investment company" within the meaning of the 1940 Act. ADDITIONAL AMOUNTS If, as a result of (i) the Series A Subordinated Debentures not being treated as indebtedness for United S-5 States federal income tax purposes or (ii) PECO Energy Capital not being treated as a partnership for United States federal income tax purposes, PECO Energy Capital is required to withhold or deduct from payments on the Series A Preferred Securities for or on account of any present or future taxes imposed by the United States which would not otherwise be required to be withheld or deducted, PECO Energy Capital will pay such additional amounts as may be necessary in order that the net amounts received by the holders of the Series A Preferred Securities after such withholding or deduction will equal the amounts which would have been received in respect of such Series A Preferred Securities in the absence of such withholding or deduction ("Additional Amounts"), except that no such Additional Amounts will be payable to a holder of Series A Preferred Securities (or a third party on such holder's behalf) with respect to Series A Preferred Securities if: (a) such holder is liable for such taxes by reason of such holder having a connection with the United States, other than being a holder of Series A Preferred Securities; or (b) PECO Energy Capital has notified such holder of the obligation to withhold or deduct taxes and requested but not received from such holder a valid declaration of non-residence, a valid taxpayer identification number or other claim for exemption in such form or content as may be required by the United States Internal Revenue Service (the "IRS") and such withholding or deduction would not have been required had such declaration, taxpayer identification number or claim been received. LIQUIDATION VALUE The amount per share payable on the Series A Preferred Securities in the event of any voluntary or involuntary liquidation of PECO Energy Capital is $25 plus accumulated and unpaid Dividends. CERTAIN TERMS OF THE SERIES A SUBORDINATED DEBENTURES In exchange for, and to evidence the loan of, the proceeds of the sale of the Series A Preferred Securities and the General Partner's related investment in PECO Energy Capital, PECO Energy will issue the Series A Subordinated Debentures to PECO Energy Capital in the principal amount of $ and with interest payment and redemption and maturity provisions which correspond to the distribution and redemption provisions of the Series A Preferred Securities. In addition, the Series A Subordinated Debentures will be subject to mandatory redemption upon the dissolution of PECO Energy Capital. The Series A Subordinated Debentures will mature on , 2043. The Series A Subordinated Debentures will rank junior and be subordinate in right of payment to all Senior Indebtedness of PECO Energy. See "Description of the Subordinated Debentures -- Subordination" in the accompanying Prospectus. UNITED STATES TAXATION GENERAL This section is a summary of certain United States federal income tax considerations that may be relevant to prospective purchasers of Series A Preferred Securities and represents the opinion of Ballard Spahr Andrews & Ingersoll, counsel to PECO Energy and PECO Energy Capital, insofar as it relates to matters of law and legal conclusions. This section is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed regulations thereunder and current administrative rulings and court decisions, all of which are subject to change. Subsequent changes may cause tax consequences to vary substantially from the consequences described below. No attempt has been made in the following discussion to comment on all United States federal income tax matters affecting purchasers of Series A Preferred Securities. Moreover, the discussion focuses on holders of Series A Preferred Securities who are individual citizens or residents of the United States who are owners of Series A Preferred Securities for United States federal tax purposes and has only limited application to corporations, estates, trusts or non-resident aliens. Accordingly, each prospective purchaser of Series A Preferred Securities should consult, and should depend on, his or her own tax adviser in analyzing the federal, state, local and foreign tax consequences of the purchase, ownership or disposition of Series A Preferred Securities. In April 1994, the IRS issued certain notices generally addressing the characteristics which distinguish debt from equity for various purposes under United States federal income tax laws. In these notices, the IRS S-6 indicated that transactions involving securities that, like the Series A Preferred Securities, have both debt and equity characteristics would be reviewed with scrutiny to determine how they would be treated for tax purposes. Based upon the advice of its tax counsel, PECO Energy believes that interest on the Series A Subordinated Debentures will be deductible under the tests referred to in these notices. If, however, the IRS should subsequently issue a further official pronouncement, or should there be a judicial decision, pursuant to which interest on the Series A Subordinated Debentures would not be deductible, the Series A Preferred Securities would be subject to redemption at the option of PECO Energy Capital, as described herein. INCOME FROM SERIES A PREFERRED SECURITIES In the opinion of Ballard Spahr Andrews & Ingersoll, PECO Energy Capital will be treated as a partnership for United States federal income tax purposes. Accordingly, each owner of Series A Preferred Securities will be required to include in gross income such owner's distributive share of the net income of PECO Energy Capital. Such income should not exceed distributions received on such Series A Preferred Securities, except in limited circumstances as described below under "Potential Extension of Interest Payment Period." No portion of such income will be eligible for the dividends received deduction. DISPOSITION OF SERIES A PREFERRED SECURITIES Gain or loss will be recognized on a sale, including a redemption for cash, of Series A Preferred Securities in an amount equal to the difference between the amount realized and the tax basis of the owner of the Series A Preferred Security for the Series A Preferred Securities sold. Gain or loss recognized by an owner of the Series A Preferred Security on the sale or exchange of a Series A Preferred Security held for more than one year will generally be taxable as long-term capital gain or loss except that ordinary income may be recognized to the extent of such owner's pro rata share of accrued but unallocated income of PECO Energy Capital. PECO ENERGY CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES The General Partner will furnish each owner of a Series A Preferred Security with a schedule K-1 each year setting forth such owner's allocable share of income for the prior calendar year. The General Partner is required to furnish such schedules as soon as practicable following the end of the year, but in any event prior to March 31. Any person who holds Series A Preferred Securities as a nominee for another person is required to furnish to PECO Energy Capital (a) the name, address and taxpayer identification number of the beneficial owner and the nominee; (b) information as to whether the beneficial owner is (i) a person that is not a United States person, (ii) a foreign government, an international organization or any wholly owned agency or instrumentality of either of the foregoing, or (iii) a tax-exempt entity; (c) the amount and description of Series A Preferred Securities held, acquired or transferred for the beneficial owner; and (d) certain information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales. Brokers and financial institutions are required to furnish additional information, including whether they are United States persons, and certain information on Series A Preferred Securities they acquire, hold or transfer for their own accounts. A penalty of $50 per failure (up to a maximum of $100,000 per calendar year) is imposed by the Code for failure to report such information to PECO Energy Capital. The nominee is required to supply the beneficial owners of the Series A Preferred Securities with the information furnished to PECO Energy Capital. POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD Under the terms of the Indenture, PECO Energy will be permitted to extend the interest payment period on the Series A Subordinated Debentures up to 60 consecutive months. In the event that PECO Energy exercises this right, PECO Energy may not declare dividends on any of its capital stock during such extended interest period. PECO Energy Capital and PECO Energy currently believe that the extension of an interest payment period is unlikely. In the event that the interest payment period is extended, PECO Energy Capital will continue to accrue income, generally equal to the amount of the interest payment due at the end of the extended interest payment period, over the length of the extended interest payment period. Accrued income will be allocated, but not distributed, to holders of record on the Business Day preceding S-7 the last day of each calendar month. As a result, owners of Series A Preferred Securities during an extended interest payment period will be required to include interest in gross income in advance of the receipt of cash, and any such persons who dispose of Series A Preferred Securities prior to the record date for the payment of Dividends following such extended interest payment period will include interest in gross income but will not receive any cash related thereto. The tax basis of a Series A Preferred Security will be increased by the amount of any interest that is included in income without a receipt of cash, and will be decreased again when and if such cash is subsequently received from PECO Energy Capital. The subsequent receipt of such cash will not be included in gross income. UNITED STATES ALIEN HOLDERS For purposes of this discussion, a "United States Alien Holder" is any holder or beneficial owner who or which is (i) a nonresident alien individual or (ii) a foreign corporation, partnership or estate or trust, in either case not subject to United States federal income tax on a net income basis in respect of a Series A Preferred Security. Under present United States federal income tax law, subject to the discussion below with respect to backup withholding, and assuming satisfaction by PECO Energy Capital of its withholding tax obligations, if any: (i) Payments by PECO Energy Capital or any of its paying agents to any United States Alien Holder will not be subject to United States federal withholding tax provided that (a) the beneficial owner of the Series A Preferred Security does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of PECO Energy, (b) the beneficial owner of the Series A Preferred Security is not a controlled foreign corporation that is related to PECO Energy through stock ownership, and (c) either (A) the beneficial owner of the Series A Preferred Security certifies to PECO Energy Capital or its agent, under penalties of perjury, that it is a United States Alien Holder and provides its name and address or (B) the holder of the Series A Preferred Security is a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution"), and such holder certifies to PECO Energy Capital or its agent under penalties of perjury that such statement has been received from the beneficial owner by it or by a financial institution between it and the beneficial owner and furnishes the payor with a copy thereof; and (ii) a United States Alien Holder of a Series A Preferred Security will generally not be subject to United States federal income or withholding tax on any gain realized on the sale or exchange of a Series A Preferred Security unless such person is present in the United States for 183 days or more in the taxable year of sale and such person has a "tax home" in the United States or certain other requirements are met. BACKUP WITHHOLDING AND INFORMATION REPORTING In general, information reporting requirements will apply to payments to noncorporate United States holders of the proceeds of the sale of Series A Preferred Securities within the United States and "backup withholding" at a rate of 31% will apply to such payments if the seller fails to provide a correct taxpayer identification number. Payments of the proceeds from the sale by a United States Alien Holder of Series A Preferred Securities made to or through a foreign office of a broker will not be subject to information reporting or backup withholding, except that, if the broker is a United States person, a controlled foreign corporation for United States tax purposes or a foreign person 50% or more of whose gross income is effectively connected with a United States trade or business for a specified three-year period, information reporting may apply to such payments. Payments of the proceeds from the sale of Series A Preferred Securities to or through the United States office of a broker is subject to information reporting and backup withholding unless the holder or beneficial owner certifies as to its non-United States status or otherwise establishes an exemption from information reporting and backup withholding. S-8 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement among PECO Energy Capital, PECO Energy and the underwriters named below (the "Underwriters"), for whom Goldman, Sachs & Co., Smith Barney Inc., Dean Witter Reynolds Inc., A. G. Edwards & Sons, Inc., Kidder, Peabody & Co. Incorporated, PaineWebber Incorporated and Prudential Securities Incorporated are acting as Representatives, PECO Energy Capital has agreed to sell to each of the Underwriters and each of the Underwriters has severally agreed to purchase from PECO Energy Capital the respective number of Series A Preferred Securities set forth opposite its name below: NUMBER OF SERIES A UNDERWRITER PREFERRED SECURITIES --------------- ------------------------ Goldman, Sachs & Co. Smith Barney Inc. Dean Witter Reynolds Inc. A. G. Edwards & Sons, Inc. Kidder, Peabody & Co. Incorporated PaineWebber Incorporated Prudential Securities Incorporated ---------- Total ========== Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all such Series A Preferred Securities offered hereby, if any are taken. The Underwriters propose to offer the Series A Preferred Securities in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus Supplement, and in part to certain securities dealers at such price less a concession of $ per Series A Preferred Security. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per Series A Preferred Security to certain brokers and dealers. After the Series A Preferred Securities are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Representatives. In view of the fact that the proceeds from the sale of the Series A Preferred Securities will be loaned to PECO Energy, under the Underwriting Agreement, PECO Energy has agreed to pay to the Underwriters $ per Series A Preferred Security ($ per Series A Preferred Security sold to certain institutions) for the accounts of the several Underwriters. Prior to this offering, there has been no public market for the Series A Preferred Securities. In order to meet one of the requirements for listing the Series A Preferred Securities on the New York Stock Exchange, the Underwriters have undertaken to sell the Series A Preferred Securities to a minimum of 400 beneficial holders. PECO Energy and PECO Energy Capital have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. PECO Energy and PECO Energy Capital have agreed, during the period beginning on the date of the Underwriting Agreement and continuing to and including the earlier of (i) the date, after the closing date, on which the distribution of the Series A Preferred Securities ceases, as determined by Goldman, Sachs & Co., or (ii) 30 days after the closing date, not to offer, sell, contract to sell, or otherwise dispose of any Series A Preferred Securities, any limited partner interests of PECO Energy Capital, or any preferred stock or any other securities of PECO Energy Capital or PECO Energy which are substantially similar to the Series A Preferred Securities, including the related Guarantee, or any securities convertible into or exchangeable for Series A Preferred Securities, limited partner interests, preferred stock or other substantially similar securities of either PECO Energy Capital or PECO Energy, without the prior written consent of Goldman, Sachs & Co. S-9 SUBJECT TO COMPLETION, DATED JUNE , 1994 PROSPECTUS PECO ENERGY CAPITAL CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES (MIPS*) GUARANTEED TO THE EXTENT SET FORTH HEREIN BY PECO ENERGY COMPANY --------------- PECO Energy Capital, L.P. ("PECO Energy Capital"), a Delaware special purpose limited partnership in which a subsidiary of PECO Energy Company ("PECO Energy") is the general partner, may offer from time to time, in one or more series, its monthly income preferred securities representing limited partner interests ("Preferred Securities"). The payment of periodic cash distributions ("Dividends") with respect to the Preferred Securities of each series and payments on liquidation or redemption with respect to such Preferred Securities, in each case out of funds on hand legally available therefor held by PECO Energy Capital, are guaranteed by PECO Energy to the extent described herein (the "Guarantee"). The obligations of PECO Energy under the Guarantee will be subordinate and junior in right of payment to all general liabilities of PECO Energy. Concurrently with the issuance of each series of Preferred Securities, PECO Energy Capital will loan the proceeds thereof to PECO Energy and to evidence such loan PECO Energy will issue and deliver to PECO Energy Capital a series of PECO Energy's deferrable interest subordinated debentures (the "Subordinated Debentures") with terms corresponding to that series of Preferred Securities. The Subordinated Debentures will be unsecured and subordinate and junior in right of payment to Senior Indebtedness (as defined herein) of PECO Energy. The Subordinated Debentures will be the sole asset of PECO Energy Capital and the interest on the Subordinated Debentures will be the only revenue of PECO Energy Capital. The Preferred Securities may be offered in amounts, at prices and on terms to be determined at the time of offering, provided, however, that the aggregate initial public offering price of all Preferred Securities issued under the Registration Statement of which this Prospectus forms a part shall not exceed $350,000,000. Certain specific terms of the particular series of Preferred Securities in respect of which this Prospectus is being delivered will be set forth in an accompanying Prospectus Supplement (the "Prospectus Supplement"), including where applicable and to the extent not set forth herein, the specific title, the aggregate amount, Dividend rate (or the method for determining the rate), the stated liquidation preference, redemption provisions, other rights, the initial public offering price, and any other special terms, as well as any planned listing of the Preferred Securities on a securities exchange. The Preferred Securities may be sold for public offering to or through underwriters or dealers designated from time to time. See "Plan of Distribution." The names of any such underwriters or dealers involved in the sale of the Preferred Securities of the particular series in respect of which this Prospectus is being delivered, the number of Preferred Securities to be purchased by any such underwriters or dealers and any applicable commissions or discounts will be set forth in the Prospectus Supplement. The net proceeds to PECO Energy Capital will also be set forth in the Prospectus Supplement. The Prospectus Supplement will contain information concerning United States federal income tax considerations, if applicable, and the Preferred Securities offered. - --------------- *An application has been filed by Goldman, Sachs & Co. with the United States Patent and Trademark Office for the registration of the MIPS servicemark. --------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------- The date of this Prospectus is , 1994. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus supplement shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. STATEMENT OF AVAILABLE INFORMATION PECO Energy is subject to the information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy and information statements and other information with the Securities and Exchange Commission (the "SEC"). Such reports, proxy and other information filed by PECO Energy may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at certain of its regional offices at Suite 1400, 500 West Madison Street, Chicago, IL 60661-2511 and Suite 1300, 7 World Trade Center, New York, NY 10048. Copies of such material may also be obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Securities of PECO Energy are listed on the New York and Philadelphia Stock Exchanges, where reports, proxy material and other information concerning PECO Energy may be inspected. No separate financial statements of PECO Energy Capital have been included herein. PECO Energy and PECO Energy Capital do not consider that such financial statements would be material to holders of Preferred Securities offered hereby because PECO Energy Capital is a newly formed special purpose entity, has no operating history and no independent operations and is not engaged in, and does not propose to engage in, any activity other than as set forth below. See "PECO Energy Capital." --------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the SEC pursuant to Section 13 of the Exchange Act by PECO Energy (File No. 1-1401) are incorporated herein by reference: 1. PECO Energy's Annual Report on Form 10-K for the year ended December 31, 1993; 2. PECO Energy's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994; and 3. PECO Energy's Current Reports on Form 8-K dated March 18, 1994, April 14, 1994, May 25, 1994 and June 16, 1994. Each document filed subsequent to the date of this Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the termination of the offering shall be deemed to be incorporated by reference in this Prospectus and shall be a part hereof from the date of filing of such document. Any statement contained herein or in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein or in a Prospectus Supplement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. PECO ENERGY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL DOCUMENTS DESCRIBED ABOVE UNDER "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," OTHER THAN EXHIBITS TO SUCH DOCUMENTS. SUCH REQUESTS SHOULD BE DIRECTED TO PECO ENERGY COMPANY, FINANCIAL DIVISION, S21-1, P.O. BOX 8699, PHILADELPHIA, PA 19101, (215) 841-5741. PECO ENERGY CAPITAL PECO Energy Capital is a limited partnership formed under the laws of the State of Delaware. All of its general partner interests are owned by PECO Energy Capital Corp., a Delaware corporation (the "General Partner"), which is a wholly owned subsidiary of PECO Energy. As a limited partnership, all of the business and affairs of PECO Energy Capital will be managed by the General Partner. PECO Energy Capital has been created solely for the purpose of issuing partner interests, including the Preferred Securities, and lending the proceeds thereof to PECO Energy. Such loans will be evidenced by the Subordinated Debentures issued by PECO Energy under an Indenture dated as of , 1994 (the "Indenture") between PECO Energy and Meridian Trust Company, as trustee (the "Trustee"). The Subordinated Debentures will be the only assets of PECO Energy Capital and the only revenues of PECO Energy Capital will be the interest on the Subordinated 2 Debentures. The General Partner will pay all of PECO Energy Capital's operating expenses and will have general liability for all of PECO Energy Capital's obligations. PECO Energy Capital has been advised by its special Delaware counsel that, assuming a holder of Preferred Securities acts in conformity with the Amended and Restated Limited Partnership Agreement of PECO Energy Capital (the "Limited Partnership Agreement"), such holder (other than the General Partner) will not be liable for the debts, obligations and liabilities of PECO Energy Capital, whether arising in contract, tort or otherwise, solely by reason of being a limited partner of PECO Energy Capital, subject to the obligation of a limited partner to repay any funds wrongfully distributed to it. The place of business of PECO Energy Capital is the principal executive offices of the General Partner at 1013 Centre Road, Suite 350F, Wilmington, DE 19805 and its telephone number is (302) 998-0592. PECO ENERGY PECO Energy, incorporated in Pennsylvania in 1929, is an operating utility which provides electric and gas service to the public in southeastern Pennsylvania. The total area served by PECO Energy and its subsidiaries covers 2,475 square miles. Electric service is supplied in an area of 2,340 square miles with a population of about 3,700,000, including 1,600,000 in the City of Philadelphia. Approximately 95% of the electric service area and 64% of retail kilowatthour sales are in the suburbs around Philadelphia and in northeastern Maryland, and 5% of the service area and 36% of such sales are in the City of Philadelphia. In 1993, approximately 60% of PECO Energy's electric output was generated from nuclear sources. PECO Energy estimates for 1994 that 59% of its electric output will come from nuclear sources. Natural gas service is supplied in a 1,475-square-mile area of southeastern Pennsylvania adjacent to Philadelphia with a population of 1,900,000. PECO Energy and its subsidiaries hold franchises to the extent necessary to operate in the areas served. The principal executive offices of PECO Energy are located at 2301 Market Street, Philadelphia, PA 19103. Its mailing address is P.O. Box 8699, Philadelphia, PA 19101 and its telephone number is (215) 841-4000. COVERAGE RATIOS PECO Energy's Ratio of Earnings to Fixed Charges for each of the periods indicated was as follows: YEARS ENDED DECEMBER 31, 3 MONTHS ENDED MARCH 31, ------------------------------------ ------------------------ 1989 1990 1991 1992 1993 1993 1994 ---- ---- ---- ---- ---- ---- ---- 2.08 1.31* 2.55 2.43 3.15 3.16 3.58 The Ratio of Earnings to Fixed Charges represents, on a pre-tax basis, the number of times earnings cover fixed charges. Earnings consist of net income to which has been added fixed charges and taxes based on income of PECO Energy. Fixed charges consist of interest on funded indebtedness, other interest, amortization of net gain on reacquired debt and net discount on debt and the interest portion of all rentals charged to income. PECO Energy's Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends for each of the periods indicated was as follows: YEARS ENDED DECEMBER 31, 3 MONTHS ENDED MARCH 31, ------------------------------------ ------------------------ 1989 1990 1991 1992 1993 1993 1994 ---- ---- ---- ---- ---- ---- ---- 1.77 1.04* 2.14 2.06 2.67 2.75 3.05 - --------------- *Reflects the one-time, after-tax charge against income of approximately $250 million associated with various disallowances made by the Pennsylvania Public Utility Commission in the Limerick Unit No. 2 rate order and the one-time, after-tax charge against income of approximately $150 million associated with PECO Energy's 1990 early retirement plan. 3 The Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends represents, on a pre-tax basis, the number of times earnings cover fixed charges and preferred stock dividends. Earnings consist of net income to which has been added fixed charges and taxes based on income of PECO Energy. Combined fixed charges and preferred stock dividends consist of interest on funded indebtedness, other interest, amortization of net gain on reacquired debt and net discount on debt, preferred stock dividends (increased to reflect the pre-tax earnings required to cover such dividend requirements) and the interest portion of all rentals charged to income. USE OF PROCEEDS The proceeds to be received by PECO Energy Capital from the sale of the Preferred Securities offered hereby will be loaned to PECO Energy and will be applied by PECO Energy to the redemption or payment at maturity of outstanding securities. DESCRIPTION OF THE PREFERRED SECURITIES The following is a summary of certain terms and provisions of the Preferred Securities and the Limited Partnership Agreement. The summary is subject to, and qualified in its entirety by reference to, the Limited Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act. The Limited Partnership Agreement is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. GENERAL Under the Limited Partnership Agreement, PECO Energy Capital is authorized to issue two classes of partner interests, the Preferred Securities representing limited partner interests, including the Preferred Securities offered hereby, and general partner interests. All of the general partner interests of PECO Energy Capital are owned by the General Partner, which is a wholly owned subsidiary of PECO Energy. All of the Preferred Securities will be of equal rank in participation in the profits and assets and income of PECO Energy Capital. The Limited Partnership Agreement authorizes the General Partner to establish series of Preferred Securities having such designations, rights, privileges, restrictions and other terms and provisions as the General Partner may determine. Dividends on all series of Preferred Securities must be paid in full before the General Partner may participate in the profits or assets of PECO Energy Capital. DIVIDENDS Dividends on each series of Preferred Securities will be cumulative, will accrue from the date of issuance and will be payable monthly in arrears on the last day of each calendar month of each year, except as otherwise described below. The Dividends payable on a series of Preferred Securities offered hereby will be specified in a Prospectus Supplement related thereto. The amount of Dividends payable for any period will be computed on the basis of twelve 30-day months and a 360-day year and, for any period shorter than a full monthly distribution period, will be computed on the basis of the actual number of days elapsed in such period. PECO Energy has the right under the Indenture to extend the interest payment period from time to time on the Subordinated Debentures to a period not exceeding 60 consecutive months; provided that such extended interest period shall not extend beyond the stated maturity date or redemption date of any series of Subordinated Debentures (an "Extension Period"). As a consequence, monthly Dividends on the Preferred Securities would be deferred by PECO Energy Capital during any Extension Period. Dividends in arrears after the monthly payment date therefor will accumulate additional distributions thereon at the Dividend rate thereof. The term "Dividends" as used herein includes, as applicable, monthly distributions, distributions on monthly distributions in arrears and Additional Amounts (as defined below). In the event that PECO Energy exercises this right, neither PECO Energy nor any majority-owned subsidiary of PECO Energy may declare or pay dividends on or redeem, purchase or acquire, any of its capital stock (other than dividends by a wholly owned subsidiary) during any Extension Period. Prior to the termination of any such Extension Period, PECO Energy may further extend the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any Extension Period and the payment of all amounts then due, PECO Energy may elect to extend the interest payment period again, subject to the above requirements. See "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period." 4 Dividends on the Preferred Securities must be paid by PECO Energy Capital in any calendar year or portion thereof to the extent PECO Energy Capital has funds on hand legally available therefor. It is anticipated that PECO Energy Capital's earnings will be limited to interest payments on the Subordinated Debentures issued by PECO Energy to PECO Energy Capital. See "Description of the Subordinated Debentures." Dividends on the Preferred Securities will be payable to the holders thereof as they appear on the books and records of PECO Energy Capital on the relevant record dates, which will be one Business Day prior to the relevant payment dates. Subject to any applicable laws and regulations and the provisions of the Limited Partnership Agreement, each such payment will be made as described under "Book-Entry-Only Issuance -- The Depository Trust Company" below. In the event that any date on which Dividends are payable on the Preferred Securities is not a Business Day, then payment of the Dividend payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. A "Business Day" shall mean any day other than a day on which banking institutions in The City of New York or Delaware are authorized or required by law to close. CERTAIN RESTRICTIONS ON PECO ENERGY CAPITAL If dividends have not been paid in full on any series of Preferred Securities, PECO Energy Capital shall not: (i) pay any Dividends on any other series of Preferred Securities, unless the amount of any Dividends paid on any Preferred Securities is paid on all Preferred Securities then outstanding on a pro rata basis in proportion to the full Dividends to which each series of Preferred Securities would be entitled if paid in full; (ii) pay any distribution on the general partner interests; or (iii) redeem, purchase or otherwise acquire any Preferred Securities or the general partner interests; until, in each case, such time as all accumulated and unpaid Dividends on all series of Preferred Securities shall have been paid in full for all prior distribution periods. As of the date of this Prospectus, there are no Preferred Securities outstanding. REDEMPTION PROVISIONS The redemption provisions with respect to each series of the Preferred Securities offered hereby will be set forth in the Prospectus Supplement related thereto. PECO Energy Capital may not redeem any Preferred Securities unless all accumulated and unpaid Dividends have been paid on all Preferred Securities for all monthly distribution periods terminating on or prior to the date of redemption. If a partial redemption would result in a delisting of such series of Preferred Securities from any national securities exchange on which such series of Preferred Securities is then listed, PECO Energy Capital may only redeem such series of Preferred Securities in whole. Notice of any redemption of the Preferred Securities will be given not less than 30 days nor more than 60 days prior to the redemption date to the record owners thereof. So long as The Depository Trust Company ("DTC") or its nominee is the sole record holder of the Preferred Securities of any series, any failure on the part of DTC or a participant in the book entry system to notify a beneficial owner of such Preferred Securities of such redemption shall not affect the validity of the redemption. See "Book-Entry-Only Issuance -- The Depository Trust Company" below. If notice of redemption shall have been given and payment shall have been made by PECO Energy Capital to DTC, then, upon the date of such payment all rights of beneficial owners of the Preferred Securities so called for redemption will cease. In the event that any date fixed for redemption of Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that if such Business Day falls in the next succeeding calendar year, such payment will be made on the immediately preceding Business Day (in each case with the same force and effect as if made on such day). 5 Subject to applicable law and except as provided under "Description of the Subordinated Debentures-Certain Covenants of PECO Energy," PECO Energy or its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. LIQUIDATION DISTRIBUTION In the event of any voluntary or involuntary dissolution and winding up of PECO Energy Capital, the holders of the Preferred Securities at the time outstanding will be entitled to receive out of the assets of PECO Energy Capital after satisfaction of liabilities to creditors as required by Delaware law and before any distribution of assets is made to holders of its general partner interests, the aggregate of the stated liquidation preference and all accumulated and unpaid Dividends to the date of payment (the "Liquidation Distribution"). All assets of PECO Energy Capital remaining after payment of the Liquidation Distribution will be distributed to the General Partner. If, upon such liquidation, the Liquidation Distribution can be paid only in part because PECO Energy Capital has insufficient assets available to pay in full the aggregate Liquidation Distribution on all Preferred Securities, then the amounts payable on each series of Preferred Securities shall be paid on a pro rata basis, in proportion to the full Liquidation Distribution to which each series of Preferred Securities would be entitled. Pursuant to the Limited Partnership Agreement, PECO Energy Capital shall be dissolved and its affairs shall be wound up upon the occurrence of any of the following events: (i) upon the expiration of the term of PECO Energy Capital, which is 99 years, (ii) upon the retirement, resignation, expulsion, bankruptcy or dissolution of the General Partner or the occurrence of any other event that under applicable law causes PECO Energy Capital Corp. to cease to be the General Partner, except for a transfer to a permitted successor of the General Partner as set forth in the Limited Partnership Agreement, (iii) the entry of a decree of judicial dissolution, or (iv) the written consent of the General Partner and all of the holders of the Preferred Securities. Upon such dissolution, PECO Energy is required to redeem the Subordinated Debentures to fund the Liquidation Distribution. MERGER, CONSOLIDATION, ETC. OF PECO ENERGY CAPITAL PECO Energy Capital may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other entity, except with the approval of the General Partner and the holders of 66-2/3% in aggregate stated liquidation preference of the outstanding Preferred Securities or as otherwise described below. The General Partner may, without the consent of the holders of the Preferred Securities, cause PECO Energy Capital to consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, a corporation, a limited liability company or a limited partnership, a trust or other entity organized as such under the laws of any state of the United States of America or the District of Columbia, provided that (i) such successor entity either (x) expressly assumes all of the obligations of PECO Energy Capital under the Preferred Securities or (y) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank, as regards participation in the profits and assets of the successor entity, at least as high as the Preferred Securities rank, as regards participation in the profits and assets of PECO Energy Capital, (ii) PECO Energy confirms its obligations under the Guarantee with regard to the Successors Securities, if any, (iii) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease does not cause any series of Preferred Securities or Successor Securities to be delisted by any national securities exchange on which such series of Preferred Securities is then listed, (iv) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease does not cause the Preferred Securities or Successor Securities to be downgraded by any "nationally recognized statistical rating organization," as that term is defined by the SEC for purposes of Rule 436(g)(2) under the Securities Act of 1933, (v) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease does not adversely affect the powers, preferences and other special rights of holders of Preferred Securities or Successor Securities in any material respect, (vi) such successor entity has a purpose substantially identical to that of PECO Energy Capital, (vii) prior to such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease, PECO Energy has received an opinion of counsel (which may be regular tax or other counsel to PECO Energy or an affiliate, but not an employee thereof) to the 6 effect that (w) holders of outstanding Preferred Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the consolidation, amalgamation, merger, replacement, conveyance, transfer or lease, (x) such successor entity will be treated as a partnership for United States federal income tax purposes, (y) following such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease, PECO Energy and such successor entity will be in compliance with the Investment Company Act of 1940 (the "1940 Act") without registering thereunder as an investment company, and (z) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease will not adversely affect the limited liability of holders of Preferred Securities or Successor Securities. VOTING RIGHTS Except as provided below and under "Description of the Guarantee -- Amendments" and "Merger, Consolidation, etc. of PECO Energy Capital", and as otherwise required by law and the Limited Partnership Agreement, the holders of the Preferred Securities will have no voting rights. If (i) PECO Energy Capital fails to pay Dividends in full on the Preferred Securities for 18 consecutive monthly distribution periods, (ii) an Event of Default (as defined in the Indenture) occurs and is continuing, or (iii) PECO Energy is in default on any of its payment obligations under the Guarantee, then the holders of the Preferred Securities, acting as a single class, will be entitled by a vote of the majority of the aggregate stated liquidation preference of the outstanding Preferred Securities to appoint a special representative (the "Special Representative") to enforce PECO Energy Capital's rights against PECO Energy under the Subordinated Debentures and the Indenture and the obligations undertaken by PECO Energy under the Guarantee, including, after failure to pay Dividends for 60 consecutive monthly distribution periods on the Preferred Securities, the payment of Dividends on the Preferred Securities. The Special Representative shall not be admitted as a partner of PECO Energy Capital or otherwise be deemed a partner of PECO Energy Capital and shall have no liability for the debts, obligations or liabilities of PECO Energy Capital. For purposes of determining whether PECO Energy Capital has failed to pay Dividends in full for 18 consecutive monthly distribution periods, Dividends shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Dividends on all Preferred Securities have been or contemporaneously are paid with respect to all monthly distribution periods terminating on or prior to the date of payment of such full cumulative Dividends. Subject to the requirements of applicable law, not later than 30 days after such right to appoint the Special Representative, the General Partner will convene a general meeting for the above purpose. If the General Partner fails to convene such meeting within such 30-day period, the holders of 10% of the aggregate stated liquidation preference of the Preferred Securities will be entitled to convene such meeting. The provisions of the Partnership Agreement relating to the convening and conduct of the general meetings of security holders will apply with respect to any such meeting. Any Special Representative so appointed shall vacate office immediately if PECO Energy Capital (or PECO Energy pursuant to the Guarantee) shall have paid in full all accumulated and unpaid Dividends on the Preferred Securities or such default or breach, as the case may be, shall have been cured. Notwithstanding the appointment of any such Special Representative, PECO Energy retains all rights under the Indenture, including the right to extend the interest payment period as provided under "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period." If any proposed amendment to the Limited Partnership Agreement provides for, or the General Partner otherwise proposes to effect, any action which would materially adversely affect the powers, preferences or special rights attached to any series of Preferred Securities, whether by way of amendment to the Limited Partnership Agreement or otherwise, then the holders of such series of Preferred Securities will be entitled to vote on such amendment or action of the General Partner (but not on any other amendment or action) and, in the case of an amendment or action which would equally adversely affect the rights or preferences of any other Preferred Securities, such Preferred Securities shall vote together as a class on such amendment or action of the General Partner (but not on any other amendment or action), and such amendment or action shall not be effective except with the approval of the holders of not less than 66-2/3% of the aggregate stated liquidation preference of such series of Preferred Securities. Except in certain circumstances described under "Liquidation Distribution," PECO Energy Capital will be dissolved and wound up only with the consent of the holders of all Preferred Securities then outstanding. 7 The powers, preferences or special rights attached to any Preferred Securities will be deemed not to be adversely affected by the creation or issue of, and no vote will be required for the creation or issue of, any additional series of Preferred Securities or additional general partner interests. Holders of Preferred Securities have no preemptive rights. So long as any Subordinated Debentures are held by PECO Energy Capital, the General Partner, unless so directed by the Special Representative, shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the holders of the Subordinated Debentures or the Trustee under the Indenture, or executing any trust or power conferred on the Trustee, (ii) waive any past default which is available under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Subordinated Debentures shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture, where such consent shall be required, without, in each case, obtaining the prior approval of the holders of at least 66-2/3% in aggregate stated liquidation preference of all series of Preferred Securities affected thereby, acting as a single class; provided, however, that where a consent under the Indenture would require the consent of each holder affected thereby, no such consent shall be given by the General Partner without the prior consent of each holder of all series of Preferred Securities affected thereby. The General Partner shall not revoke any action previously authorized or approved by a vote of any series of Preferred Securities. The General Partner shall notify all holders of the Preferred Securities of any notice of default received from the Trustee with respect to the Subordinated Debentures. Any required approval of holders of Preferred Securities may be given at a separate meeting of such holders convened for such purposes, at a meeting of all partners of PECO Energy Capital or pursuant to written consent. PECO Energy Capital will cause a notice of any meeting at which holders of any series of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of such series of Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought, and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of the Preferred Securities will be required for PECO Energy Capital to redeem and cancel Preferred Securities in accordance with the Limited Partnership Agreement. Notwithstanding that holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by PECO Energy or any entity owned more than 50% by PECO Energy, either directly or indirectly, shall not be entitled to vote or consent and shall, for the purposes of such vote or consent, be treated as if they were not outstanding. The holders of the Preferred Securities will have no rights to remove or replace the General Partner. BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY The Depository Trust Company will act as securities depository for the Preferred Securities offered hereby. Each series of Preferred Securities offered hereby will be issued only as fully registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully registered global Preferred Security certificates will be issued, representing in the aggregate the total number of Preferred Securities of each series, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the 8 New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the SEC. Purchases of Preferred Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Preferred Securities on DTC's records. The ownership interest of each actual purchaser of each Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements, of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Preferred Securities. Transfers of ownership interests in the Preferred Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Preferred Securities, except in the event that use of the book-entry system for the Preferred Securities is discontinued. DTC has no knowledge of the actual Beneficial Owners of the Preferred Securities. DTC's records reflect only the identity of the Direct Participants to whose accounts such Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of a series of Preferred Securities are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such series to be redeemed. Although voting with respect to the Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will consent or vote with respect to Preferred Securities. Under its usual procedure, DTC would mail an Omnibus Proxy to PECO Energy Capital as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments on the Preferred Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customer practices and will be the responsibility of such Participant and not of DTC, PECO Energy Capital, the General Partner or PECO Energy, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of distributions to DTC is the responsibility of PECO Energy Capital, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that PECO Energy and PECO Energy Capital believe to be reliable, but neither PECO Energy nor PECO Energy Capital takes responsibility for the accuracy thereof. DTC may discontinue providing its services as securities depository with respect to any series of the Preferred Securities at any time by giving reasonable notice to PECO Energy Capital. Under such circumstances, in the event that a successor securities depository is not obtained, Preferred Security certificates are required to be printed and delivered. Additionally, the General Partner may decide to discontinue use of the system of book-entry transfers through DTC (or a successor depository), including for the purpose of effectuating a partial redemption of a series of Preferred Securities in which only the Preferred Securities of certain holders will be redeemed. 9 In the event that the book entry only system is discontinued, the General Partner will appoint a registrar, transfer agent and paying agent for the Preferred Securities. Registration of transfers of Preferred Securities will be effected without charge by or on behalf of PECO Energy Capital, but upon payment of any tax or other governmental charges which may be imposed in relation to it. PECO Energy Capital will not be required to register or cause to be registered the transfer of Preferred Securities after such Preferred Securities have been called for redemption. MISCELLANEOUS The General Partner is authorized and directed to use its best efforts to manage the affairs of PECO Energy Capital in such a way that PECO Energy Capital would not be deemed to be an "investment company" required to be registered under the 1940 Act or taxed as a corporation for United States federal income tax purposes and so that the Subordinated Debentures will be treated as indebtedness of PECO Energy for federal income tax purposes. In this connection, the General Partner is authorized to take any action not inconsistent with applicable law, the Certificate of Limited Partnership of PECO Energy Capital or the Limited Partnership Agreement, and that does not materially adversely affect the interests of holders of Preferred Securities, that the General Partner determines in its discretion to be necessary or desirable for such purposes. PECO Energy Capital may not borrow money or issue debt or mortgage or pledge any of its assets. DESCRIPTION OF THE GUARANTEE The following is a summary of certain provisions of the Guarantee which will be executed and delivered by PECO Energy concurrently with the issuance of each series of Preferred Securities offered hereby for the benefit of the holders from time to time of that series of the Preferred Securities. The summary is subject to, and qualified by reference to the Payment and Guarantee Agreement, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. Reference in the summary to Preferred Securities means the series of the Preferred Securities to which a Guarantee relates. GENERAL PECO Energy will agree, to the extent set forth herein, to pay in full, to the holders of the Preferred Securities, the Guarantee Payments (as defined below) (except to the extent paid by PECO Energy Capital), as and when due, regardless of any defense, right of set-off or counterclaim which PECO Energy Capital may have or assert. The following payments, to the extent not paid by PECO Energy Capital (the "Guarantee Payments"), will be subject to the Guarantee (without duplication): (i) any accumulated and unpaid Dividends on the Preferred Securities to the extent that PECO Energy Capital has funds on hand legally available therefor, (ii) the redemption price with respect to any Preferred Securities called for redemption to the extent that PECO Energy Capital has funds on hand legally available therefor, (iii) upon a liquidation of PECO Energy Capital, the lesser of (a) the Liquidation Distribution and (b) the amount of assets of PECO Energy Capital legally available for distribution to holders of Preferred Securities and (iv) any additional amounts payable with respect to a particular series of Preferred Securities. PECO Energy's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by PECO Energy to the holders of Preferred Securities or by causing PECO Energy Capital to pay such amounts to such holders. STATUS OF THE GUARANTEE The Guarantee will constitute an unsecured obligation of PECO Energy and will rank subordinate and junior in right of payment to all general liabilities of PECO Energy. The Limited Partnership Agreement provides that each holder of Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the Guarantee. The Guarantee will constitute a guarantee of payment and not of collection. The Guarantee will be held for the benefit of the holders of the Preferred Securities. In the event of the appointment of a Special Representative, the Special Representative may enforce the Guarantee. If no Special Representative has been appointed to enforce the Guarantee, the General Partner has the right to enforce the Guarantee on behalf of the holders of the Preferred Securities. The holders of not less than 10% in aggregate stated liquidation preference of the Preferred Securities have the right to direct the time, method and place of conducting any 10 proceeding to enforce the Guarantee, including the giving of directions to the General Partner or the Special Representative, as the case may be. If the General Partner or the Special Representative fails to enforce the Guarantee as above provided, any holder of Preferred Securities may institute a legal proceeding directly against PECO Energy to enforce its rights under the Guarantee without first instituting a legal proceeding against PECO Energy Capital or any other person or entity. The Guarantee will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by PECO Energy Capital. CERTAIN COVENANTS OF PECO ENERGY Under the Guarantee, PECO Energy will covenant that, so long as any Preferred Securities remain outstanding, neither PECO Energy nor any majority-owned subsidiary of PECO Energy shall declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than dividends by a wholly owned subsidiary) if at such time PECO Energy shall be in default with respect to its payment obligations under the Guarantee or there shall have occurred any event that, with giving of notice or the lapse of time or both, would constitute an Event of Default under the Indenture. AMENDMENTS Except with respect to any changes which do not materially adversely affect the rights of holders of Preferred Securities (in which case no vote will be required), the Guarantee may be changed only with the prior approval of the holders of not less than 66-2/3% of the aggregate stated liquidation preference of the outstanding Preferred Securities. The manner of obtaining any such approval of holders of the Preferred Securities will be as set forth under "Description of the Preferred Securities -- Voting Rights." MERGER OF PECO ENERGY So long as any Preferred Securities remain outstanding, PECO Energy will maintain its corporate existence; provided that PECO Energy may consolidate with or merge with or into any other person or sell, convey, transfer or lease its properties and assets substantially as an entirety to any person if the successor person shall be organized and existing under the laws of the United States or any state thereof or the District of Columbia and shall expressly assume the obligations of PECO Energy under the Guarantee. TERMINATION OF THE GUARANTEE The Guarantee will terminate and be of no further force and effect upon full payment of the redemption price of the Preferred Securities or upon full payment of the amounts payable upon liquidation of PECO Energy Capital. The Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Preferred Securities must restore payment of any sums paid under the Preferred Securities or the Guarantee. DESCRIPTION OF THE SUBORDINATED DEBENTURES The following is a summary of certain terms and provisions of the Subordinated Debentures and the Indenture. The summary is subject to, and is qualified by reference to the Indenture, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. GENERAL Concurrently with the issuance of each series of the Preferred Securities, PECO Energy Capital will loan the proceeds thereof and the General Partner's concurrent investment in PECO Energy Capital to PECO Energy. The loan will be evidenced by a separate series of Subordinated Debentures issued by PECO Energy to PECO Energy Capital. The Subordinated Debentures will be unsecured subordinated obligations of PECO Energy issued under the Indenture. Each series of Subordinated Debentures will be in the principal amount equal to the aggregate stated liquidation preference of the related series of Preferred Securities plus the General Partner's concurrent investment in PECO Energy Capital, will bear interest at a rate equal to the Dividend rate on such series of Preferred Securities payable on the Dividend dates, will have maturity and redemption provisions corresponding to the redemption provisions of such series of Preferred Securities and will be subject to mandatory redemption upon the dissolution and winding up of PECO Energy Capital. 11 OPTION TO EXTEND INTEREST PAYMENT PERIOD Under the Indenture, PECO Energy shall have the right at any time so long as PECO Energy is not in default in the payment of interest on any series of Subordinated Debentures, to extend the interest payment period for all Subordinated Debentures for up to 60 consecutive months; provided that no Extension Period shall extend beyond the stated maturity date or date of mandatory redemption of any series of Subordinated Debentures. At the end of the Extension Period, PECO Energy shall pay all interest then accrued and unpaid (together with interest thereon compounded daily to the extent permitted by applicable law). During any such Extension Period, neither PECO Energy nor any majority-owned subsidiary of PECO Energy shall declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than dividends by wholly owned subsidiaries). Prior to the termination of any such Extension Period, PECO Energy may further extend the interest payment period, provided that such Extension Period together with all such further extensions thereof may not exceed 60 consecutive months. Upon the termination of any Extension Period and the payment of all amounts then due, PECO Energy may select a new Extension Period subject to the above requirements. PECO Energy shall give PECO Energy Capital notice of its selection of such extended interest payment period one Business Day prior to the earlier of (i) the date the Dividends on the Preferred Securities are payable or (ii) the date PECO Energy Capital is required to give notice to any national securities exchange on which any series of the Preferred Securities is listed or other applicable self-regulatory organization or to holders of the Preferred Securities of the record date or the date such Dividend is payable, but in any event not less than two Business Days prior to such record date. PECO Energy shall cause PECO Energy Capital to give such notice of PECO Energy's selection of such extended interest payment period to the holders of the Preferred Securities. ADDITIONAL INTEREST If any time PECO Energy Capital shall be required to pay any Additional Amounts in respect of the Preferred Securities pursuant to the terms thereof, then PECO Energy will pay as interest ("Additional Interest") an amount equal to such Additional Amounts on the Subordinated Debentures. In addition, if PECO Energy Capital would be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, PECO Energy also will pay as Additional Interest such amounts as shall be required so that the net amounts received and retained by PECO Energy Capital after paying any such taxes, duties, assessments or governmental charges will not be less than the amounts PECO Energy Capital would have received had no such taxes, duties, assessments or governmental charges been imposed. SUBORDINATION The Indenture provides that all payments by PECO Energy in respect of the Subordinated Debentures shall be subordinated to the prior payment in full of all amounts payable on Senior Indebtedness. The term "Senior Indebtedness" means (i) the principal of and premium in respect of (A) indebtedness of PECO Energy for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by PECO Energy; (ii) all capital lease obligations of PECO Energy; (iii) all obligations of PECO Energy issued or assumed as the deferred purchase price of property, all conditional sale obligations of PECO Energy and all obligations of PECO Energy under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) certain obligations of PECO Energy for the reimbursement of any obligor on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction entered into in the ordinary course of business of PECO Energy; (v) all obligations of the type referred to in clauses (i) through (iv) of other persons and all dividends of other persons (other than Preferred Securities) for the payment of which, in either case, PECO Energy is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) of other persons secured by any lien on any property or asset of PECO Energy (whether or not such obligation is assumed by PECO Energy), except for any such indebtedness that is by its terms subordinated to or pari passu with the Subordinated Debentures. 12 Upon any payment or distribution of assets or securities of PECO Energy, upon any dissolution or winding up or total or partial liquidation or reorganization of PECO Energy, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts payable on Senior Indebtedness (including any interest accruing on such Senior Indebtedness subsequent to the commencement of a bankruptcy, insolvency or similar proceeding) shall first be paid in full before PECO Energy Capital or any Special Representative appointed by the holders of the Preferred Securities shall be entitled to receive from PECO Energy any payment of principal of or interest on or any other amounts in respect of the Subordinated Debentures. No direct or indirect payment by or on behalf of PECO Energy of principal of or interest on the Subordinated Debentures, whether pursuant to the terms of the Subordinated Debentures or upon acceleration or otherwise, shall be made if, at the time of such payment, there exists (i) a default in the payment of all or any portion of any Senior Indebtedness or (ii) any other default pursuant to which the maturity of Senior Indebtedness has been accelerated and, in either case, requisite notice has been given to PECO Energy and the Trustee and such default shall not have been cured or waived by or on behalf of the holders of such Senior Indebtedness. If the Trustee, PECO Energy Capital, as holder of the Subordinated Debentures or any Special Representative appointed by the holders of the Preferred Securities, shall have received any payment on account of the principal of or interest on the Subordinated Debentures when such payment is prohibited and before all amounts payable on Senior Indebtedness are paid in full, then such payment shall be received and held in trust for the holders of Senior Indebtedness and shall be paid over or delivered first to the holders of the Senior Indebtedness remaining unpaid to the extent necessary to pay such Senior Indebtedness in full. Nothing in the Indenture shall limit the right of PECO Energy Capital or the Special Representative to take any action to accelerate the maturity of the Subordinated Debentures or to pursue any rights or remedies against PECO Energy; provided that all Senior Indebtedness shall first be paid before PECO Energy Capital is entitled to receive any payment from PECO Energy of principal of or interest on the Subordinated Debentures. Upon the payment in full of all Senior Indebtedness, PECO Energy Capital (and any Special Representative appointed by such holders) shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or dividends of assets of PECO Energy made on such Senior Indebtedness until all accrued interest on and principal of the Subordinated Debentures shall be paid in full. The Indenture does not limit the aggregate amount of Senior Indebtedness which PECO Energy may issue. CERTAIN COVENANTS OF PECO ENERGY PECO Energy will covenant that it and any majority-owned subsidiary will not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than dividends by wholly owned subsidiaries) (i) during an Extension Period, (ii) if there shall have occurred any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default under the Indenture or (iii) if PECO Energy shall be in default with respect to its payment obligations under the Guarantee. PECO Energy will also covenant (i) to maintain direct or indirect 100% ownership of the General Partner and will cause the General Partner to maintain 100% ownership of the general partner interests of PECO Energy Capital, (ii) to cause at least 10% of the total value of PECO Energy Capital and at least 3% of all interests in the capital, income, gain, loss, deduction and credit of PECO Energy Capital to be represented by general partner interests, (iii) to timely cause the General Partner to perform all of its duties as general partner of PECO Energy Capital (including the duty to pay Dividends on the Preferred Securities), and (iv) to use its reasonable efforts to cause PECO Energy Capital to remain a limited partnership and otherwise continue to be treated as a partnership for United States federal income tax purposes. PECO Energy Capital may not waive compliance or waive any default in compliance by PECO Energy with any covenant or other term in the Indenture without the approval of the Special Representative or without the direction of the holders of 66-2/3% of the aggregate stated liquidation preference of the Preferred Securities. 13 MODIFICATION OF THE INDENTURE The Indenture contains provisions permitting PECO Energy and the Trustee, with the consent of the Special Representative or PECO Energy Capital at the direction of the holders of not less than 66-2/3% of the aggregated stated liquidation preference of the Preferred Securities related to the Subordinated Debentures which are affected by the modification, to modify the Indenture or any supplemental indenture or the rights of the holders of the Subordinated Debentures issued under the Indenture; provided that no such modification may, (a) change the stated maturity date of the principal of, or any installment of principal of or interest, if any, on, any Subordinated Debenture, (b) reduce the principal amount of, or premium or rate of interest, if any, on, any Subordinated Debenture, (c) reduce the amount of principal of an original issue discount Subordinated Debenture payable upon acceleration of the maturity thereof, (d) change the place or currency of payment of principal of, or premium or interest, if any, on, any Subordinated Debenture or (e) impair the right to institute suit for the enforcement of any payment on or with respect to any Subordinated Debenture, or change the amendment provisions of the Indenture. EVENTS OF DEFAULT The following are Events of Default under the Indenture: (i) default for 10 days in payment of any interest (including Additional Interest) on the Subordinated Debentures (other than the payment of interest during an Extension Period); (ii) default in payment of principal of (or premium, if any, on) the Subordinated Debentures; (iii) default for 60 days after notice in the performance of any other covenant in the Indenture or (iv) certain events of bankruptcy, insolvency or reorganization of PECO Energy. In case an Event of Default under the Indenture shall occur and be continuing other than an Event of Default relating to bankruptcy of PECO Energy, in which case principal and interest on all of the Subordinated Debentures shall become immediately due and payable, the Trustee or the Special Representative may declare the principal of all the Subordinated Debentures to be due and payable. Under certain circumstances, any declaration of acceleration with respect to Subordinated Debentures may be rescinded and past defaults (except, unless theretofore cured, a default in the payment of principal of or interest on the Subordinated Debentures) may be waived only by the Special Representative or by PECO Energy Capital at the direction of the holders of 66-2/3% in aggregate stated liquidation preference of Preferred Securities. PECO Energy is required to furnish to the Trustee annually a statement as to the performance by PECO Energy of its obligations under the Indenture and as to any default in such performance. ENFORCEMENT OF CERTAIN RIGHTS OF HOLDERS OF PREFERRED SECURITIES The holders of the Preferred Securities will have the rights referred to under "Description of Preferred Securities--Voting Rights," including the right to appoint a Special Representative authorized to exercise the rights of PECO Energy Capital, as the holder of the Subordinated Debentures, to declare the principal and interest on the Subordinated Debentures due and payable and to enforce the obligations of PECO Energy under the Subordinated Debentures and the Indenture directly against the Company, without first proceeding against PECO Energy Capital or any other person or entity. CONSOLIDATION, MERGER, SALE OR CONVEYANCE The Indenture provides that PECO Energy may not consolidate with or merge with or into any other person or sell, convey, transfer or lease its properties and assets substantially as an entirety to any person, unless (i) the successor person shall be organized and existing under the laws of the United States or any state thereof or the District of Columbia, and shall expressly assume by a supplemental indenture all of the obligations of PECO Energy under the Subordinated Debentures and the Indenture and (ii) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing. DEFEASANCE AND DISCHARGE Under the terms of the Indenture, PECO Energy will be discharged from any and all obligations in respect of the Subordinated Debentures of any series if PECO Energy deposits with the Trustee, in trust, (i) money and/or (ii) United States Government Securities (as defined in the Indenture), which through the payment of interest thereon and principal thereof in accordance with their terms will provide money in an amount sufficient to pay all the principal of, and interest on, the Subordinated Debentures of such series on the dates such payments are due in accordance with the terms of such Subordinated Debentures. 14 INFORMATION CONCERNING THE TRUSTEE Subject to the provisions of the Indenture relating to its duties, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the holders thereunder, unless such holders shall have offered to the Trustee reasonable indemnity. Subject to such provision for indemnification, the holders of a majority in principal amount of the Subordinated Debentures then outstanding thereunder or the Special Representative will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee thereunder, or exercising any trust or power conferred on the Trustee. The Indenture contains limitations on the right of the Trustee, as a creditor of PECO Energy, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. In addition, the Trustee may be deemed to have a conflicting interest and may be required to resign as Trustee if at the time of default under the Indenture it is a creditor of PECO Energy. An affiliate of Meridian Trust Company, the Trustee under the Indenture, has from time to time engaged in transactions with, or performed services for, PECO Energy and its affiliates in the ordinary course of business. Mr. Joseph F. Paquette, Jr. is Chairman of the Board and a Director of PECO Energy and a Director of Meridian Bancorp, Inc., the parent corporation of the Trustee. PLAN OF DISTRIBUTION PECO Energy Capital may offer or sell Preferred Securities offered hereby to one or more underwriters for public offering and sale by them. PECO Energy Capital may sell Preferred Securities as soon as practicable after effectiveness of the Registration Statement. Any such underwriter involved in the offer and sale of the Preferred Securities will be named in an applicable Prospectus Supplement. Underwriters may offer and sell the Preferred Securities at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. In connection with the sale of Preferred Securities, underwriters may be deemed to have received compensation from PECO Energy and/or PECO Energy Capital in the form of underwriting discounts or commissions and may also receive commissions. Underwriters may sell Preferred Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters. Any underwriting compensation paid by PECO Energy and/or PECO Energy Capital to underwriters in connection with the offering of Preferred Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in an applicable Prospectus Supplement. Underwriters and dealers participating in the distribution of the Preferred Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Preferred Securities may be deemed to be underwriting discounts and commissions, under the Securities Act. Underwriters and dealers may be entitled, under agreement with PECO Energy and PECO Energy Capital, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to reimbursement by PECO Energy for certain expenses. Underwriters and dealers may engage in transactions with, or perform services for, PECO Energy and/or PECO Energy Capital and/or any of their affiliates in the ordinary course of business. Each series of Preferred Securities will be a new issue of securities and will have no established trading market. Any underwriters to whom Preferred Securities are sold by PECO Energy Capital for public offering and sale may make a market in such Preferred Securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. The Preferred Securities may or may not be listed on a national securities exchange. No assurance can be given as to the liquidity of or the trading markets for any Preferred Securities. 15 LEGAL MATTERS Certain matters of Delaware law relating to the validity of the Preferred Securities, the validity of the Limited Partnership Agreement and the formation of PECO Energy Capital are being passed upon by Richards, Layton & Finger, P.A., special Delaware counsel to PECO Energy Capital. The validity of the Guarantee and the Subordinated Debentures will be passed upon on behalf of PECO Energy by Ballard Spahr Andrews & Ingersoll. Certain legal matters will be passed upon on behalf of the Underwriters by Drinker Biddle & Reath, counsel to the Underwriters. Ballard Spahr Andrews & Ingersoll and Drinker Biddle & Reath will rely on Richards, Layton & Finger, P.A. as to certain matters of Delaware law. EXPERTS The consolidated financial statements and schedules of PECO Energy incorporated by reference in this Prospectus have been audited by Coopers & Lybrand, independent accountants, for the periods indicated in their report thereon which is included in the Annual Report on Form 10-K for the year ended December 31, 1993. The consolidated financial statements and schedules audited by Coopers & Lybrand have been incorporated herein by reference in reliance on their report given on their authority as experts in accounting and auditing. 16 ====================================== ======================================= No person has been authorized to give any information or to make any PREFERRED SECURITIES representations other than those contained in this Prospectus PECO ENERGY CAPITAL Supplement or the Prospectus and, if given or made, such information or representations must not be % CUMULATIVE relied upon as having been MONTHLY INCOME PREFERRED authorized. This Prospectus SECURITIES, SERIES A Supplement and the Prospectus do not constitute an offer to sell or the solicitation of any offer to GUARANTEED TO THE EXTENT buy any securities other than the SET FORTH HEREIN BY securities described in this Prospectus Supplement and the Prospectus or an offer to sell or PECO ENERGY COMPANY the solicitation of an offer to buy such securities in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this Prospectus Supplement or the Prospectus nor any sale made hereunder or thereunder shall, under any circumstances, create any implication that the information contained herein or therein is correct as of any time subsequent to the date of such information. ---------- ---------- TABLE OF CONTENTS PROSPECTUS SUPPLEMENT PROSPECTUS SUPPLEMENT ---------- PAGE ---- Certain Investment Considerations ............. S-3 PECO Energy Capital .......... S-3 PECO Energy .................. S-4 Certain Terms of the Series A Preferred Securities ................. S-4 Certain Terms of the Series A Subordinated Debentures ................. S-6 United States Taxation ....... S-6 GOLDMAN, SACHS & CO. Underwriting ................. S-9 SMITH BARNEY INC. PROSPECTUS DEAN WITTER REYNOLDS INC. Statement of Available Information ................ 2 A.G. EDWARDS & SONS, INC. Incorporation of Certain Documents by Reference ..... 2 KIDDER, PEABODY & CO. PECO Energy Capital .......... 2 INCORPORATED PECO Energy .................. 3 Coverage Ratios .............. 3 PAINEWEBBER INCORPORATED Use of Proceeds ............. 4 Description of the Preferred PRUDENTIAL SECURITIES Securities ................. 4 INCORPORATED Description of the Guarantee .................. 10 Description of the REPRESENTATIVES OF THE UNDERWRITERS Subordinated Debentures .... 11 Plan of Distribution ......... 15 Legal Matters ................ 16 Experts ...................... 16 ====================================== ======================================= PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 16. EXHIBITS EXHIBIT NUMBERS - ------- 1-1 Form of Underwriting Agreement. 4-5 Form of Deferrable Interest Subordinated Debenture Indenture. 4-6 Form of Deferrable Interest Subordinated Debenture (included in Exhibit 4-5 above). II-1 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant, PECO Energy Company, certifies that it has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Philadelphia, Commonwealth of Pennsylvania, on the 23rd day of June, 1994. PECO Energy Company /s/ J. F. Paquette, Jr. By ----------------------- J. F. PAQUETTE, JR. Chairman of the Board Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ J. F. Paquette, Jr. Chairman of the Board and Director June 23, 1994 - ------------------------ (Principal Executive Officer) J. F. PAQUETTE, JR. /s/ C. A. McNeill, Jr. President and Director June 23, 1994 - ------------------------ (Principal Operating Officer) C. A. MCNEILL, JR. /s/ K. G. Lawrence Senior Vice President--Finance June 23, 1994 - ------------------------ (Principal Financial and K. G. LAWRENCE Accounting Officer) This registration statement has also been signed by K.G. Lawrence, Attorney-in-Fact, on behalf of the following Directors on the date indicated: Susan W. Catherwood Joseph C. Ladd M. Walter D'Alessio Edithe J. Levit Richard G. Gilmore Kinnaird R. McKee Richard H. Glanton Joseph J. McLaughlin James A. Hagen John M. Palms Nelson G. Harris Ronald Rubin /s/ K. G. Lawrence By ---------------------------- June 23, 1994 K. G. LAWRENCE II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant, PECO Energy Capital, L.P., certifies that it has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Philadelphia, Pennsylvania, on the 23rd day of June, 1994. PECO Energy Capital, L.P. By: PECO Energy Capital Corp., its general partner /s/ J. B. Mitchell By -------------------------------- J. B. MITCHELL President Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ J. B. Mitchell President and Director June 23, 1994 - ------------------------ (Principal Executive Officer and J. B. MITCHELL Principal Financial and Accounting Officer) /s/ M. W. Rimerman Director June 23, 1994 - ------------------------ M. W. RIMERMAN /s/ K. G. Lawrence Director June 23, 1994 - ------------------------ K. G. LAWRENCE II-3 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION PAGE ------- ----------- ---- 1-1 Form of Underwriting Agreement. 4-5 Form of Deferrable Interest Subordinated Debenture Indenture. 4-6 Form of Deferrable Interest Subordinated Debenture (included in Exhibit 4-5 above). EX-1.1 2 EXHIBIT 1-1 PECO ENERGY CAPITAL, L.P. PECO ENERGY COMPANY UNDERWRITING AGREEMENT June , 1994 Goldman, Sachs & Co. Smith Barney Inc. Dean Witter Reynolds Inc. A.G. Edwards & Sons, Inc. Kidder, Peabody & Co. Incorporated PaineWebber Incorporated Prudential Securities Incorporated As Representatives of the Several Underwriters Named in Schedule I c/o Goldman, Sachs & Co. 85 Broad Street, 22nd Floor New York, NY 10004 Dear Sirs: PECO Energy Capital, L.P., a limited partnership organized under the laws of Delaware (the "Company"), and PECO Energy Company, a Pennsylvania corporation, as guarantor and provider of certain undertakings (the "Guarantor"), propose, subject to the terms and conditions stated herein, that the Company issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of _______ of the Company's ___% Cumulative Monthly Income Preferred Securities, Series A (liquidation preference $25 per share) (the "Series A Preferred Securities"), guaranteed by the Guarantor on a limited basis as to the payment of accumulated and unpaid monthly distributions and as to payments on liquidation or redemption and benefiting from certain additional undertakings of the Guarantor pursuant to a certain Payment and Guaranty Agreement entered into by the Guarantor dated ___ 1994. Such guarantee and undertakings are herein referred to collectively as the "Guarantee"; the Guarantee and Series A Preferred Securities are herein referred to collectively as the "Securities". Concurrently with the issuance of the Series A Preferred Securities, the Company will loan the proceeds thereof to the Guarantor and to evidence such loan the Guarantor will issue and deliver to the Company the Guarantor's ___% Deferrable Interest Subordinated Debentures, Series A due 2043 (the "Subordinated Debentures"). 1. Each of the Company and the Guarantor jointly and severally represents and warrants to, and agrees with, each of the Underwriters that: (a) A registration statement on Form S-3 (File Nos. 33-53785 and 33-53785-01) in respect of the Securities has been filed with the Securities and Exchange Commission (the "Commission"); such registration statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto but including all documents incorporated by reference in the prospectus included therein, to you for each of the other Underwriters, have been declared effective by the Commission in such form; no other document with respect to such registration statement or document incorporated by reference therein has heretofore been filed with the Commission; and no stop order suspending the effectiveness of such registration statement has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in such registration statement or filed with the Commission pursuant to Rule 424(b) of the rules and regulations of the Commission under the Securities Act of 1933, as amended (the "Act"), being hereinafter called a "Preliminary Prospectus"; the various parts of such registration statement, including all exhibits thereto and the documents incorporated by reference in the prospectus contained in the registration statement at the time such part of the registration statement became effective, each as amended at the time such part of the registration statement became effective, being hereinafter called the "Registration Statement"; such final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, being hereinafter called the "Prospectus"; any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of such Preliminary Prospectus or Prospectus, as the case may be; and any reference to any amendment or supplement to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after the effective date of the Registration Statement or the date of such Preliminary Prospectus or Prospectus, as the case may be, under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by reference in such Registration Statement, Preliminary Prospectus or Prospectus, as the case may be); (b) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided, however, that this representation and warranty shall not apply to any statement or omission made in reliance upon and in conformity with information 2 regarding any Underwriter or the arrangements with respect to the underwriting of the offering of the Securities contemplated hereby furnished in writing to the Company or the Guarantor by an Underwriter through you expressly for use therein; (c) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder; the Registration Statement does not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus does not and will not, as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information regarding any Underwriter or the arrangements with respect to the underwriting of the offering of the Securities contemplated hereby furnished in writing to the Company or the Guarantor by an Underwriter through you expressly for use therein; (d) The documents incorporated by reference in the Registration Statement and the Prospectus, when they became effective or were filed (or, if an amendment with respect to any such document was filed or became effective, when such amendment was filed or became effective) with the Commission, as the case may be, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations thereunder, and any further documents so filed and incorporated by reference will, when they become effective or are filed with the Commission, as the case may be, conform in all material respects to the requirements of the Exchange Act and the rules and regulations thereunder; none of such documents, when it became effective or was filed (or, if an amendment with respect to any such documents was filed or became effective, when such amendment was filed or became effective) contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and no such further document, when it becomes effective or is filed, will contain an untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; 3 (e) Coopers & Lybrand are independent certified public accountants as required by the Act and the rules and regulations of the Commission thereunder; (f) The Company is a validly existing limited partnership in good standing under the laws of the State of Delaware. The Company has all requisite power and authority to issue the Series A Preferred Securities and lend the proceeds thereof to the Guarantor as described in the Prospectus; (g) The Company has no subsidiaries; (h) The Guarantor is a validly existing corporation in good standing under the laws of the Commonwealth of Pennsylvania. Each of the Guarantor's subsidiaries ("Subsidiaries") which constitutes a "gas utility company" or an "electric utility company," as defined in the Public Utility Holding Company Act of 1935, as amended (a "Utility Subsidiary"), is a validly existing corporation under the laws of its jurisdiction of incorporation. The Guarantor and each Utility Subsidiary have all requisite power and authority to own and occupy their respective properties and carry on their respective businesses as presently conducted and as described in the Prospectus and are duly qualified as foreign corporations to do business and in good standing in every jurisdiction in which the nature of the business conducted or property owned by them makes such qualification necessary and in which the failure to so qualify would have a materially adverse effect on the Guarantor; (i) The Guarantee has been duly authorized and executed by the Guarantor, and when issued and delivered will constitute a legal, valid and binding obligation of the Guarantor, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditor's rights and to general equity principles; (j) The Subordinated Debentures have been duly authorized and when issued and delivered to the Company will constitute the legal, valid and binding obligations of the Guarantor, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditor's rights and to general equity principles; (k) The Series A Preferred Securities have been duly authorized by the Company and will conform to the description thereof in the Prospectus; and when the Series A Preferred Securities are executed and delivered to the Underwriters and are paid for by the Underwriters in accordance with the terms of this 4 Agreement, the Series A Preferred Securities will be duly issued, fully paid and non-assessable, and free of preemptive rights; (l) The issue and sale of the Securities by the Company, the issue of the Subordinated Debentures by the Guarantor, the compliance by the Company and the Guarantor with all of the provisions of this Agreement, the execution, delivery and performance by the Guarantor of the Guarantee, and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Guarantor, the Company or any other Subsidiary is a party or by which the Guarantor, the Company or any other Subsidiary is bound or to which any of the property or assets of the Guarantor, the Company or any other Subsidiary is subject, which breach, violation or default would be material to the issue and sale of the Securities or would have a material adverse effect on the general affairs, management, prospectus, financial position, stockholders' equity (or partnership net worth, as applicable) or results of operations of the Company or the Guarantor and its Subsidiaries taken as a whole, nor will such action result in any violation of the provisions of the Articles of Incorporation or Bylaws of the Guarantor or the Certificate of Limited Partnership or Limited Partnership Agreement of the Company or any statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Guarantor, the Company or any other Subsidiary or any of their properties; (m) Except (i) for the orders of the Commission making the Registration Statement effective, (ii) for the Notice of Registration of a Securities Certificate issued by the Guarantor in respect of the issuance of its Subordinated Debentures and Guarantee in connection with the issuance of an aggregate principal amount of up to $350,000,000 (liquidation value) of preferred interests by a special purpose subsidiary of the Guarantor permitting the Company to issue the Series A Preferred Securities as contemplated by this Agreement, (iii) for permits and similar authorizations required under the securities or "Blue Sky" laws of any jurisdiction, (iv) for an application filed with the Pennsylvania Public Utilities Commission under Section 1102(a)(4) (the "Section 1102 Application") of the Pennsylvania Public Utility Code, as amended, for authorization to acquire an interest in PECO Energy Capital Corp., the general partner of the Company, and/or the Company, (v) for an application for the qualification of an indenture (the "Indenture") between the Guarantor and Meridian Trust Company, as trustee, under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and (vi) to the extent, if any, required pursuant to the undertakings set forth under Item 17 of Part II of the Registration Statement, no consent, approval, authorization or other order of any governmental authority is 5 legally required for the execution, delivery and performance of this Agreement by the Company and Guarantor and the consummation of the transactions contemplated hereby; (n) This Agreement has been duly authorized, executed and delivered by the Company and by the Guarantor; and (o) All of the issued general partner interests of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and are owned by the Guarantor or a wholly-owned subsidiary of the Guarantor and free of preemptive rights. 2. (a) Subject to the terms and conditions herein set forth, the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price per Series A Preferred Security of $25.00, the number of Series A Preferred Securities set forth opposite the name of such Underwriter in Schedule I hereto. The Guarantor hereby guarantees the timely performance by the Company of its obligation to issue and sell the Series A Preferred Securities as aforesaid. (b) The Guarantor agrees to execute and deliver to the Company the Guarantee concurrently with the issue and sale of the Series A Preferred Securities as contemplated herein. (c) As compensation to the Underwriters for their commitments hereunder, and in light of the fact that the proceeds of the sale of the Series A Preferred Securities will be loaned by the Company to the Guarantor, the Guarantor, agrees to pay at the Time of Delivery (as defined in Section 4 hereof) to Goldman, Sachs & Co., for the accounts of the several Underwriters, an amount equal to $___ per Series A Preferred Security; provided, however, that such compensation will be an amount equal to $.__ per Series A Preferred Security for Series A Preferred Securities sold to certain institutions. The Underwriters shall inform the Guarantor in writing at the Time of Delivery of the number of Series A Preferred Securities sold to such institutions. 3. Upon the authorization by you of the release of the Series A Preferred Securities, the several Underwriters propose to offer the Series A Preferred Securities for sale upon the terms and conditions set forth in the Prospectus. 4. (a) Certificates, on original issuance, will be issued in the form of one or more global certificates registered in the name of Depository Trust Company or its nominee for the accounts of the Underwriters representing the Series A Preferred Securities. Such certificates shall be delivered by or on behalf of the 6 Company to Depository Trust Company for the account of each Underwriter, against payment by such Underwriter or on its behalf of the purchase price therefor by certified or official bank check or checks, payable to the order of the Company in Philadelphia Clearing House (next day) funds, all at the office of the Guarantor or, in the case of delivery of the said certificates at such other place or places as shall be agreed upon by the Guarantor and Goldman, Sachs & Co. The time and date of such delivery and payment shall be 9:30 a.m., Philadelphia time, on ________, 1994, or at such other time and date as you and the Company may agree upon in writing. Such time and date for delivery of the Series A Preferred Securities is herein called (the "Time of Delivery") and the date thereof is herein called (the "Closing Date"). Such certificates will be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery at the office of The Depository Trust Company, 55 Water Street, New York, New York 10004. (b) At the Time of Delivery, the Guarantor will pay, or cause to be paid, the commission payable to the Underwriters under Section 2 hereof by certified or official bank check or checks, payable to the order of Goldman, Sachs & Co. in New York Clearing House (next day) funds. 5. Each of the Company and the Guarantor jointly and severally agrees with each of the Underwriters: (a) To complete the Prospectus in a form approved by you and to file the Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement; to furnish you, without charge, three signed copies of the Registration Statement (or copies thereof), including exhibits, and, during the period mentioned in paragraph (d) below, as many copies of the Prospectus and any supplements and amendments thereto as you may reasonably request. (b) Other than pursuant to filings under the Exchange Act incorporated in the Registration Statement and the Prospectus by reference, before amending or supplementing the Registration Statement or the Prospectus, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object in writing. (c) As soon as the Company and the Guarantor are advised thereof, to promptly advise you orally, and (if requested by you) to confirm such advice in writing, (i) when any amendment to the Registration Statement has become effective or any amendment or supplement to the Prospectus has been filed, (ii) when any stop order has been issued under the Act with respect to the Registration Statement or any proceedings therefor have been 7 instituted or are threatened; and to make every reasonable effort to secure the prompt removal of any stop order, if issued, (iii) of the suspension of the Securities for offering or sale in any jurisdiction, and (iv) of the happening of any event during the period mentioned in subparagraph (d) below which in the judgment of the Company and the Guarantor makes any statement made in the Registration Statement or the Prospectus untrue and which requires the making of any changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. (d) If, during such period after the first date of the public offering of the Securities (not exceeding nine months) as in the opinion of your counsel the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Prospectus to comply with law, forthwith to prepare and duly file with the Commission an appropriate supplement or amendment thereto, and furnish, at its own expense, to you such reasonable number of copies thereof as you shall reasonably request. If any Underwriter is required to deliver a Prospectus after the expiration of the aforesaid period, the Company and Guarantor will, if requested by such Underwriter and in each case at the expense of such Underwriter, furnish Prospectuses and supplements and amendments thereto, as aforesaid, or furnish a reasonable quantity of a supplemented prospectus or of supplements to the Prospectus complying with Section 10(a)(3) of the Act. (e) To cooperate with you and Counsel for the Underwriters to qualify the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request, provided that neither the Company nor the Guarantor shall be required to qualify as a foreign corporation in any jurisdiction where it is not now so qualified or to take any action which would subject it to general service of process in any jurisdiction where it is not now so subject, and to pay all expenses (including fees and disbursements of counsel) in connection therewith as well as all fees payable in connection with the review (if any) of the offering of the Securities by the National Association of Securities Dealers, Inc. (f) In the case of the Guarantor, to make generally available to the Guarantor's security holders a consolidated earnings statement (which need not be audited) for the first full twelve consecutive months ended after the date deemed to be the effective date of the Registration Statement pursuant to Rule 158 promulgated under the Securities Act, or successor provision of law, rule or regulation, as soon as is reasonably practicable after 8 the end of such period, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act. (g) During the period beginning from the date hereof and continuing to and including the earlier of (i) the date, after the Time of Delivery, on which the distribution of the Securities ceases, as determined by Goldman, Sachs & Co. or (ii) the date which is 30 days after the Time of Delivery, not to offer, sell, contract to sell or otherwise dispose of any Securities, any preferred stock or any other securities (including any undertakings relating to any securities substantially similar to the Series A Preferred Securities) of the Company or the Guarantor which are substantially similar to the Series A Preferred Securities or the Guarantee, any securities convertible into or exchangeable for Series A Preferred Securities, the Guarantee, preferred stock or such substantially similar securities of either the Company or the Guarantor (other than pursuant to employee stock option plans of the Guarantor existing, or on the conversion of convertible securities outstanding, on the date of this Agreement), without the prior written consent of Goldman, Sachs & Co. (h) To furnish to the holders of the Series A Preferred Securities as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Guarantor and its consolidated Subsidiaries certified by independent public accounts) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), consolidated summary financial information of the Guarantor and its Subsidiaries for such quarter in reasonable detail. (i) During a period of five years from the effective date of the Registration Statement, to furnish to the representatives of the Underwriters copies of all reports or other communications (financial or other) furnished to all stockholders of the Company or the Guarantor, and deliver to you (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Guarantor or the Company is listed; and (ii) such additional information concerning the business and financial condition of the Guarantor and the Company as you may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Guarantor and its Subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission). 9 (j) To use its best efforts to list, subject to notice of issuance, the Series A Preferred Securities on the New York Stock Exchange, subject to the Underwriters making the required distribution of Series A Preferred Securities. 6. The Company and the Guarantor jointly and severally covenant and agree with the several Underwriters that the Company and the Guarantor will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's and the Guarantor's counsel and accountants in connection with the registration of the Securities under the Act and other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any Agreement among the Underwriters, this Agreement, the Blue Sky and Legal Investment Memoranda, if any, and any other documents in connection with the offering, purchase, sale and delivery of the Securities; (iii) all expenses in connection with the qualification of the Securities for offering and sale under state securities and insurance securities laws as provided in Section 5(e) hereof, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky and Legal Investment Memoranda; (iv) any fees charged by securities rating services for rating the Securities; (v) the cost of preparing definitive certificates for the Series A Preferred Securities; (vi) the cost and charges of any transfer agent or registrar; (vii) the cost of qualifying the Securities with The Depository Trust Company; (viii) listing fees; and (ix) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that, except as provided in this Section, Section 8 and Section 11 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, transfer taxes on resale of any of the Series A Preferred Securities by them, and any advertising expenses in connection with offers they may make. 7. (a) The several obligations of the Underwriters hereunder are subject to the following conditions: (i) At the Time of Delivery, there shall be in full force and effect a Notice of Registration of a Securities Certificate of the Guarantor in respect to the issuance of its Subordinated Debentures and Guarantee(s) in connection with the issuance of an aggregate principal amount of up to $350,000,000 (liquidation value) of preferred interests by a special purpose subsidiary of the Guarantor permitting the issuance of the Series A Preferred Securities and the transactions relating thereto substantially in accordance with the terms and conditions herein set forth and containing no provision unacceptable to you, it being 10 understood that the Notice in effect as of the date of this Agreement (a copy of which has been delivered to you) does not contain any such unacceptable provision, and that no subsequent Notice shall be deemed to contain any such unacceptable provision, unless you, within 24 hours after receiving a copy thereof from the Guarantor, shall give notice to the Guarantor to the effect that such Notice contains an unacceptable provision. (ii) At the Time of Delivery, approval shall have been given by the Pennsylvania Public Utilities Commission of the Section 1102 Application, and such approval shall be in full force and effect. (iii) At the Time of Delivery: (A) no stop order suspending the effectiveness of the Registration Statement shall be in effect, and no proceedings for that purpose shall be pending before, or threatened by, the Commission; (B) the Indenture shall have become and be qualified under the Trust Indenture Act. (C) subsequent to the date of the most recent financial statements incorporated by reference in the Prospectus as of the date of this Agreement, there shall have been no material adverse change or development which it is reasonable to believe will result in a prospective material adverse change in the financial condition, business or results of operations of the Company or the Guarantor and its Subsidiaries, considered as a whole, except as set forth in the Registration Statement and the Prospectus, including the documents incorporated by reference therein, as of the effective date of this Agreement; (D) the Company and the Guarantor shall have performed all agreements contained herein to be performed by them at or prior to such date, including delivery of the Securities; and (E) the representations and warranties of the Company and the Guarantor contained herein shall be true and correct in all material respects. (iv) At the Time of Delivery and simultaneously with the issuance and sale of the Series A Preferred Securities, you shall be furnished with each of the following opinions or letters: (A) a favorable opinion, dated the Closing Date, of Ballard Spahr Andrews & Ingersoll (Counsel for the Company and the Guarantor) in form and substance reasonably satisfactory to you; 11 (B) a favorable opinion, dated the Closing Date, of Richards, Layton & Finger (Delaware Counsel for the Company and the Guarantor) in form and substance reasonably satisfactory to you; (C) a favorable opinion, dated the Closing Date, of corporate counsel for the Guarantor in form and substance reasonably satisfactory to you; and (D) a favorable opinion, dated the Closing Date, of Drinker Biddle & Reath (Counsel for the Underwriters), in form and substance reasonably satisfactory to you. (v) At the time that this Agreement is signed and at the Closing Date, Coopers & Lybrand shall have furnished to you a letter or letters, dated the respective date of delivery thereof, in form and substance reasonably satisfactory to you. (vi) At the Time of Delivery, the Series A Preferred Securities shall have been duly approved for listing, subject to notice of issuance, on the New York Stock Exchange; (vii) The Guarantor shall have furnished or caused to be furnished to you at the Time of Delivery certificates of officers of the Guarantor satisfactory to you as to the accuracy of the representations and warranties of the Company and the Guarantor herein at and as of the Time of Delivery, as to the performance by the Company and the Guarantor of all of their obligations hereunder to be performed at or prior to the Time of Delivery, as to the matters set forth in this subsection (a) of this Section 7 and as to such other matters as you may reasonably request; and (viii) after the execution and delivery of this Agreement and prior to the Time of Delivery (A) trading generally shall not have been suspended or materially limited on or by, as the case may be, the New York Stock Exchange or the National Association of Securities Dealers, Inc., (B) trading of any security issued by the Company or the Guarantor shall not have been suspended on any exchange or in any other over-the-counter market, (C) there shall not have occurred any downgrading and no notice shall have been given of "Credit Watch with Negative Implications" in the rating accorded the Series A Preferred Securities by Moody's Investors Services, Inc. or Standard & Poor's Corporation, (D) a general moratorium on commercial banking activities in New York or Pennsylvania shall not have been declared by either Federal or New York State or Pennsylvania authorities, and (E) there shall not have occurred any outbreak or escalation of hostilities or any calamity or crisis of comparable magnitude that, in your judgment, is material and adverse and, in the case of any of the events specified in clauses (A) through (E), singly or together with any other such event makes it, in your reasonable judgment, impracticable or inadvisable to market the Series A Preferred 12 Securities on the terms and in the manner contemplated in the Prospectus. (b) The obligations of the Company and Guarantor to deliver the Securities are subject to the following conditions: (i) At the Time of Delivery, no stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for that purpose shall be pending before, or threatened by, the Commission. (ii) At the Time of Delivery, there shall be in full force and effect a Notice of Registration of a Securities Certificate of the Guarantor in respect of the issuance of its Subordinated Debentures and Guarantee(s) in connection with the issuance of an aggregate principal amount of up to $350,000,000 (liquidation value) of preferred interests by a special purpose subsidiary of the Guarantor permitting the issuance of the Series A Preferred Securities and the transactions relating thereto substantially in accordance with the terms and conditions herein set forth and containing no provision unacceptable to the Guarantor, it being understood that the Notice in effect as of the date of this Agreement does not contain any such unacceptable provision, and that no subsequent Notice shall be deemed to contain any such unacceptable provision, unless the Guarantor, within 24 hours after receiving a copy thereof, shall have given notice to you to the effect that such Notice contains an unacceptable provision; (iii) At the Time of Delivery, approval shall have been given by the Pennsylvania Public Utilities Commission of the Section 1102 Application, and such approval shall be in full force and effect; and (iv) At the Time of Delivery, the Company shall receive payment for the Series A Preferred Securities. 8. (a) The Company and the Guarantor agree jointly and severally to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses based upon (x) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (including the Prospectus contained therein and including any amendment or supplement to any thereof) or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not 13 misleading or, (y) to the extent not covered by clause (x), any untrue statement of a material fact contained in any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading all in light of the circumstances under which they were made, except in either case insofar as such losses, claims, damages, liabilities or expenses are caused by (i) any such untrue statement or omission or alleged untrue statement or omission based upon information furnished in writing to the Company or Guarantor by any Underwriter expressly for use therein, or (ii) the failure of any Underwriter to send to any purchaser to whom it had sent a Preliminary Prospectus an amended prospectus as shall have been furnished by the Company or the Guarantor for such purpose (excluding documents incorporated therein by reference), if required by the Act, to the extent that the amended prospectus would have cured the defect in the Preliminary Prospectus giving rise to such losses, claims, damages or liabilities, or (iii) any use of the Prospectus by any Underwriter after the expiration of that period, if any, during which the Underwriter is required by law to deliver a prospectus, unless the Company and Guarantor shall have been advised in writing of such intended use. (b) Each Underwriter agrees to indemnify and hold harmless the Company and its controlling persons and partners and the Guarantor and its controlling persons, directors, and officers to the same extent as the foregoing indemnity from the Company and Guarantor to each Underwriter, but only with respect to any untrue statement or omission or alleged untrue statement or omission based upon information furnished in writing to the Company or the Guarantor by such Underwriter expressly for use in such Registration Statement or Preliminary Prospectus or Prospectus. In case any action shall be brought against the Company or Guarantor or any such controlling person, partner, director or officer in respect of which he or it may seek indemnity or reimbursement from any Underwriter on account of the agreement of such Underwriter contained in this subsection (b), the Underwriter shall have the rights and duties given to the Company and Guarantor, and the Company and Guarantor and any such controlling person, partner, director, or officer shall have the rights and duties given to the Underwriter, by subsection (c) below. (c) Each Underwriter agrees that, promptly upon the receipt of notice of the commencement of any action or proceeding (including any governmental action) against such Underwriter or against any person so controlling such Underwriter in respect of which indemnity or reimbursement may be sought from the Company or Guarantor on account of its agreement in the next preceding subsection (a), timely notice will be given to the Company and the Guarantor of the commencement thereof. Thereupon the Company and the Guarantor shall be entitled to participate in (and, to the 14 extent that it shall desire, including the selection of counsel reasonably satisfactory to such Underwriter or controlling person, to direct) the defense thereof and shall in any event be liable to pay all fees and expenses thereof. Any Underwriter or any such controlling person shall have the right to employ separate counsel, but if the Company or Guarantor has selected counsel in any such case, such employment by an Underwriter or controlling person shall be at its expense unless (i) the employment of such separate counsel has been authorized in writing by the Company and Guarantor and the Company and Guarantor shall have agreed to pay such expense or (ii) the Underwriter or controlling person shall have been advised by its counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the Company or the Guarantor and in the reasonable judgment of such counsel it is advisable for such indemnified party to employ separate counsel. It is understood that the Company and Guarantor shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Underwriters and controlling persons, and that all such fees and expenses shall be reimbursed as they are incurred. Such counsel shall be designated in writing by Goldman, Sachs & Co. and consented to by the Company and Guarantor, which consent shall not be unreasonably withheld. The Company and Guarantor shall not be liable for any settlement of any such action or proceeding effected without its written consent, but if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding, the Company and Guarantor agree jointly and severally to indemnify and hold harmless each Underwriter and each such controlling person, if any, from and against any loss or liability by reason of such settlement or judgment. The Company and Guarantor shall not, without the prior written consent of any such Underwriter or controlling person, effect any settlement of any pending or threatened proceeding in respect of which any such Underwriter or controlling person is or could have been a party and indemnity could have been sought hereunder by any such Underwriter or controlling person, unless such settlement includes an unconditional release of any such Underwriter or controlling person from all liability on claims that are the subject matter of such proceeding. (d) In order to provide for just and equitable contribution in circumstances in which any indemnity provision provided for in this Section 8 is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms (including the requirements of subsection (c) of this Section 8), each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of the losses, liabilities, claims, damages and expenses of the nature contemplated in said indemnity provision in such proportion as is 15 equitable and as shall reflect both the relative benefit received by the Company and the Guarantor on the one hand and the Underwriter or Underwriters, as the case may be, on the other hand from the offering of the Securities, and the relative fault, if any, of the Company and Guarantor on the one hand and of the Underwriter or Underwriters, as the case may be, on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefit received by the Company and Guarantor on the one hand and the Underwriter or Underwriters, as the case may be, on the other hand in connection with the offering of the Securities shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities (before deducting expenses) received by the Company and the Guarantor bear to the total commissions, concessions and discounts received by the Underwriter or Underwriters, as the case may be. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantor on the one hand or the Underwriter or Underwriters, as the case may be, on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantor and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to hereinabove. The amount paid or payable by an indemnified party as a result of the losses, liabilities, claims, damages and expenses referred to hereinabove shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. No Underwriter or person controlling such Underwriter shall be obligated to make contribution hereunder which in the aggregate exceeds the total public offering price of the Securities purchased by such Underwriter under this Agreement, less the aggregate amount of any damages which such Underwriter and its controlling persons have otherwise been required to pay in respect of the same claim or any substantially similar claim. The Underwriters' obligations to contribute are several in proportion to their respective purchasing obligations and not joint. 9. If any one or more of the Underwriters shall default in its obligation to purchase the amount of Series A Preferred Securities set forth opposite its name in Schedule I, in accordance 16 with the terms hereof, and the aggregate number of Series A Preferred Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-eleventh of the aggregate number of Series A Preferred Securities to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Series A Preferred Securities set forth opposite their respective names in Schedule I bears to the aggregate number of Series A Preferred Securities set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the Series A Preferred Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Series A Preferred Securities that any Underwriter has agreed to purchase as set forth in Schedule I be increased pursuant to this Section 9 by an amount in excess of one-tenth of such number of Series A Preferred Securities without the written consent of such Underwriter. If any Underwriter or Underwriters shall fail or refuse to purchase any Series A Preferred Securities and the aggregate number of Series A Preferred Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase exceeds one-eleventh of the aggregate number of Series A Preferred Securities to be purchased by all Underwriters hereunder and arrangements satisfactory to you, the Company and Guarantor for the purchase of such Series A Preferred Securities are not made within 48 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company and Guarantor for the purchase or sale of any Series A Preferred Securities under this Agreement. Any action taken under this Section 9 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company, the Guarantor and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company, the Guarantor or any officer or director or controlling person of the Company or the Guarantor, and shall survive delivery of and payment for the Series A Preferred Securities. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, the Company and the Guarantor shall not then be under any liability to any Underwriter except as provided in Section 6 and Section 8 hereof; but if, for any other reason, any Securities are not delivered by or on behalf of the Company or the Guarantor as provided herein, the Company and the Guarantor jointly and 17 severally will reimburse the Underwriters through you for all out- of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Securities not so delivered, but the Company and the Guarantor shall then be under no further liability to any Underwriter except as provided in Section 6 and Section 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the Underwriters. All statements requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to the Underwriters in care of Goldman, Sachs & Co., at 85 Broad Street, New York, New York 10004, Attention: Registration Department: and if to the Company or the Guarantor shall be delivered or sent by mail, telex or facsimile transmission to the address of the Guarantor set forth in the Registration Statement, Attention: Secretary; provided, however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company or the Guarantor by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Company, the Guarantor and, to the extent provided in Section 8 and Section 10 hereof, the officers and directors of the Company and the Guarantor and each person who controls the Company, the Guarantor or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Series A Preferred Securities from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 15. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 18 If the foregoing is in accordance with your understanding, please sign and return to us five counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement between each of the Underwriters, on the one hand, and the Company and the Guarantor on the other. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters, the form of which shall be submitted to the Company and the Guarantor for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, PECO Energy Capital, L.P., By: PECO Energy Capital Corp., General Partner By: ------------------------------ PECO Energy Company By: ------------------------------ Accepted, June __, 1994 Goldman, Sachs & Co. Smith Barney Inc. Dean Witter Reynolds Inc. A.G. Edwards & Sons, Inc. Kidder, Peabody & Co. Incorporated PaineWebber Incorporated Prudential Securities Incorporated Acting severally on behalf of themselves. By Goldman, Sachs & Co. By: -------------------------------------- 19 SCHEDULE I Number of Series A Preferred Securities Underwriters To Be Purchased ------------ --------------- Goldman, Sachs & Co. . . . . . . . . . . ________ Smith Barney Inc. . . . . . . . . . . . ________ Dean Witter Reynolds Inc.. . . . . . . . ________ A.G. Edwards & Sons, Inc.. . . . . . . . ________ Kidder, Peabody & Co. Incorporated . . . ________ PaineWebber Incorporated.. . . . . . . . ________ Prudential Securities Incorporated.. . . ________ Total. . . . . . . . . . . . . . . . 20 EX-4.5 3 EXHIBIT 4-5 PECO ENERGY COMPANY AND MERIDIAN TRUST COMPANY, AS TRUSTEE INDENTURE DATED AS OF _________________ BY AND BETWEEN PROVIDING FOR THE ISSUANCE OF DEFERRABLE INTEREST SUBORDINATED DEBENTURES IN SERIES AND FOR _% DEFERRABLE INTEREST SUBORDINATED DEBENTURES, SERIES A TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 Definitions.. . . . . . . . . . . . . . . . . . 2 SECTION 1.02 Other Definitions.. . . . . . . . . . . . . . . 7 SECTION 1.03 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . 7 SECTION 1.04 Rules of Construction.. . . . . . . . . . . . . 8 SECTION 1.05 Acts of Holders.. . . . . . . . . . . . . . . . 8 ARTICLE 2 THE DEBENTURES; THE SERIES A DEBENTURES SECTION 2.01 Issue of Debentures Generally.. . . . . . . . . 9 SECTION 2.02 Form of the Series A Securities; Denominations.. . . . . . . . . . . . . . . . 11 SECTION 2.03 Payment of Principal and Interest.. . . . . . . 11 SECTION 2.04 Execution and Authentication. . . . . . . . . . 12 SECTION 2.05 Registrar and Paying Agent. . . . . . . . . . . 12 SECTION 2.06 Paying Agent to Hold Money in Trust.. . . . . . 13 SECTION 2.07 Debentureholder Lists.. . . . . . . . . . . . . 14 SECTION 2.08 Transfer and Exchange.. . . . . . . . . . . . . 14 SECTION 2.09 Replacement Debentures. . . . . . . . . . . . . 15 SECTION 2.10 Outstanding Debentures; Determinations of Holders' Action.. . . . . . . . . . . . . . . 16 SECTION 2.11 Temporary Debentures. . . . . . . . . . . . . . 16 SECTION 2.12 Cancellation. . . . . . . . . . . . . . . . . . 17 SECTION 2.13 Defaulted Interest. . . . . . . . . . . . . . . 17 ARTICLE 3 REDEMPTION SECTION 3.01 Redemption; Notice to Trustee.. . . . . . . . . 18 SECTION 3.02 Selection of Debentures to be Redeemed. . . . . 18 SECTION 3.03 Notice of Redemption. . . . . . . . . . . . . . 18 SECTION 3.04 Effect of Notice of Redemption. . . . . . . . . 19 SECTION 3.05 Deposit of Redemption Price.. . . . . . . . . . 19 SECTION 3.06 Debentures Redeemed in Part . . . . . . . . . . 20 ARTICLE 4 COVENANTS SECTION 4.01 Payment of Debentures . . . . . . . . . . . . . 20 SECTION 4.02 Prohibition Against Dividends, etc. During an Event of Default or an Extension Period . . . 21 SECTION 4.03 SEC Reports . . . . . . . . . . . . . . . . . . 21 SECTION 4.04 Compliance Certificates . . . . . . . . . . . . 21 SECTION 4.05 Relationship with PECO Energy Capital . . . . . 22 SECTION 4.06 Further Instruments and Acts. . . . . . . . . . 22 i SECTION 4.07 Payments for Consents . . . . . . . . . . . . . 22 ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.01 When the Company May Merge, Etc . . . . . . . . 23 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01 Events of Default . . . . . . . . . . . . . . . 24 SECTION 6.02 Acceleration. . . . . . . . . . . . . . . . . . 25 SECTION 6.03 Other Remedies . . . . . . . . . . . . . . . . 26 SECTION 6.04 Waiver of Past Defaults . . . . . . . . . . . . 26 SECTION 6.05 Control by Majority or the Special Representatives . . . . . . . . . . . . . . . 26 SECTION 6.06 Limitation on Suits . . . . . . . . . . . . . . 27 SECTION 6.07 Rights of Holders to Receive Payment. . . . . . 27 SECTION 6.08 Collection Suit by the Trustee. . . . . . . . . 27 SECTION 6.09 The Trustee May File Proofs of Claim. . . . . . 28 SECTION 6.10 Priorities. . . . . . . . . . . . . . . . . . . 28 SECTION 6.11 Undertaking for Costs. . . . . . . . . . . . . . 29 SECTION 6.12 Waiver of Stay, Extension or Usury Laws . . . . 29 ARTICLE 7 THE TRUSTEE SECTION 7.01 Duties of the Trustee . . . . . . . . . . . . . 30 SECTION 7.02 Rights of the Trustee . . . . . . . . . . . . . 31 SECTION 7.03 Individual Rights of the Trustee. . . . . . . . 31 SECTION 7.04 The Trustee's Disclaimer. . . . . . . . . . . . 32 SECTION 7.05 Notice of Defaults. . . . . . . . . . . . . . . 32 SECTION 7.06 Reports by Trustee to Holders . . . . . . . . . 32 SECTION 7.07 Compensation and Indemnity. . . . . . . . . . . 33 SECTION 7.08 Replacement of Trustee. . . . . . . . . . . . . 33 SECTION 7.09 Successor Trustee by Merger . . . . . . . . . . 34 SECTION 7.10 Eligibility; Disqualification . . . . . . . . . 35 SECTION 7.11 Preferential Collection of Claims Against the Company . . . . . . . . . . . . . . . . . . . 35 ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE OF CERTAIN OBLIGATIONS; UNCLAIMED MONEYS SECTION 8.01 Satisfaction and Discharge of Indenture . . . . 35 SECTION 8.02 Application by Trustee of Funds Deposited for Payment of Debentures . . . . . . . . . . . . 36 SECTION 8.03 Repayment of Moneys Held by Paying Agent. . . . 37 SECTION 8.04 Return of Moneys Held by the Trustee and Paying Agent Unclaimed for Three Years. . . . 37 ARTICLE 9 AMENDMENTS SECTION 9.01 Without Consent of Holders. . . . . . . . . . . 37 SECTION 9.02 With Consent of Holders . . . . . . . . . . . . 38 ii SECTION 9.03 Compliance with Trust Indenture Act . . . . . . 39 SECTION 9.04 Revocation and Effect Of Consents, Waivers and Actions . . . . . . . . . . . . . . . . . 39 SECTION 9.05 Notation on or Exchange of Debentures . . . . . 40 SECTION 9.06 Trustee to Sign Supplemental Indentures . . . . 40 SECTION 9.07 Effect of Supplemental Indentures . . . . . . . 40 ARTICLE 10 SUBORDINATION SECTION 10.01 Debentures Subordinated to Senior Indebtedness. . . . . . . . . . . . . . . . . 40 SECTION 10.02 Priority and Payment of Proceeds in Certain Events; Remedies Standstill . . . . . . . . . 41 SECTION 10.03 Payments which May Be Made Prior to Notice. . . 42 SECTION 10.04 Rights of Holders of Senior Indebtedness Not to Be Impaired. . . . . . . . . . . . . . . . 42 SECTION 10.05 Trustee May Take Action to Effectuate Subordination . . . . . . . . . . . . . . . . 43 SECTION 10.06 Subrogation . . . . . . . . . . . . . . . . . . 43 SECTION 10.07 Obligations of Company Unconditional; Reinstatement . . . . . . . . . . . . . . . . 44 SECTION 10.08 Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice . . . . . . . 44 SECTION 10.09 Right of Trustee to Hold Senior Indebtedness. . 45 ARTICLE 11 MISCELLANEOUS SECTION 11.01 Trust Indenture Act Controls. . . . . . . . . . 45 SECTION 11.02 Notices . . . . . . . . . . . . . . . . . . . . 46 SECTION 11.03 Communication by Holders with Other Holders . . 46 SECTION 11.04 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . 47 SECTION 11.05 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . 47 SECTION 11.06 Severability Clause . . . . . . . . . . . . . . 48 SECTION 11.07 Rules by Trustee, Paying Agent and Registrar. . 48 SECTION 11.08 Legal Holidays. . . . . . . . . . . . . . . . . 48 SECTION 11.09 Governing Law . . . . . . . . . . . . . . . . . 48 SECTION 11.10 No Recourse Against Others. . . . . . . . . . . 48 SECTION 11.11 Successors. . . . . . . . . . . . . . . . . . . 49 SECTION 11.12 Multiple Original Copies of this Indenture. . . 49 SECTION 11.13 No Adverse Interpretation of Other Agreements. . . . . . . . . . . . . . . . . . 49 SECTION 11.14 Table of Contents; Headings, Etc. . . . . . . . 49 SECTION 11.15 Benefits of the Indenture . . . . . . . . . . . 49 EXHIBIT A - Form of Series A Debenture . . . . . . . . . . . .A-1 iii CROSS-REFERENCE TABLE of Provisions of the Indenture Required by the Trust Indenture Act of 1939 TRUST INDENTURE PROVISION OF ACT SECTION INDENTURE - --------------- ------------ Section 310(a)(1) 7.10 (a)(2) 7.10 (a)(3) Not Applicable (a)(4) Not Applicable (a)(5) Not Applicable (b) 7.08; 7.10; 11.01 (c) Not Applicable Section 311(a) 7.11 (b) 7.11 (c) Not Applicable Section 312(a) 2.07 (b) 11.03 (c) 11.03 Section 313(a) 7.06 (b)(1) Not Applicable (b)(2) 7.06 (c) 7.06; 11.02 (d) 7.06 Section 314(a) 4.03; 11.02 (b) Not Applicable (c)(1) 2.02; 11.04 (c)(2) 2.02; 11.04 (c)(3) Not Applicable (d) Not Applicable (e) 11.05 (f) Not Applicable Section 315(a) 7.01(2) (b) 7.05; 11.02 (c) 7.01(1) (d) 7.01(3) (e) 6.11 Section 316(a)(1)(A) 6.05 (a)(1)(B) 6.04 (a)(2) Not Applicable (a)(last sentence) 2.10 (b) 6.07 Section 317(a)(1) 6.08 (a)(2) 6.09 (b) 2.06 Section 318(a) 11.01 ___________________ Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture. iv INDENTURE, dated as of __________________, by and between PECO Energy Company, a Pennsylvania corporation (the "Company"), and Meridian Trust Company, a Pennsylvania trust company, as trustee (the "Trustee). WHEREAS, the Company has formed a wholly owned subsidiary, PECO Energy Capital Corp., which is the general partner of PECO Energy Capital, L.P., a Delaware limited partnership, which intends to issue in series from time to time its limited partner interests and to loan the proceeds thereof, together with the investment by PECO Energy Capital Corp. in PECO Energy Capital, L.P., to the Company. WHEREAS, in order to evidence its intention to make such loans and to accept the Debentures as evidence of such loans, and its approval of the terms of the Series A Debentures (as hereinafter defined), PECO Energy Capital, L.P. has joined in this Indenture. WHEREAS, the Company has authorized the issuance of the Series A Debentures to evidence its obligations with respect to a loan from PECO Energy Capital, L.P. of the proceeds of a series of its preferred limited partner interests designated __% Cumulative Monthly Income Preferred Securities, Series A and the related investment by PECO Energy Capital Corp. in PECO Energy Capital, L.P., and to provide therefor, the Company has duly authorized the execution and delivery of this Indenture, all things necessary to make the Series A Debentures when duly issued and executed by the Company and authenticated and delivered hereunder, the valid obligations of the Company, and to make this Indenture a valid and binding agreement of the Company, in accordance with its terms, have been done. NOW THEREFORE: The Company and the Trustee, intending to be legally bound hereby, agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the securities issued hereunder, including the Company's __% Deferrable Interest Subordinated Debentures, Series A (the "Series A Debentures"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 DEFINITIONS. ------------ "Additional Interest", with respect to the Series A Debentures, means an amount equal to and payable at the same time as, any Additional Amounts payable on the Series A Preferred Securities as defined in the action pursuant to the Limited Partnership Agreement creating the Series A Preferred Securities plus amounts, if any, which PECO Energy Capital would be required to pay as taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, with respect to the Series A Debentures. With respect to any other series of Debentures, "Additional Amounts" shall have the meaning set forth in the supplemental indenture creating such series. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. When used with respect to any Person, "control" 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. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means any day that is not a Saturday, a Sunday or a day on which banking institutions in The City of New York or Delaware are authorized or required to close. "Capital Lease Obligations" of a Person means any obligation which is required to be classified and accounted for as a capital lease on the face of a balance sheet of such Person prepared in accordance with GAAP. "Capital Stock" means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock, including any Preferred Stock. "Debentureholder" or "Holder" means a Person in whose name a Debenture is registered on the Registrar's books. "Debentures" shall mean any of the securities of any series issued, authenticated and delivered under this Indenture. 2 "Default" means any event which is, or after notice or passage of time, or both, would be, an Event of Default pursuant to Section 6.01 hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Extension Period" means a period, up to 60 consecutive months, in which the Company elects to extend the interest payment period on the Debentures pursuant to Section 4.01(b) hereof; provided that no Extension Period shall extend beyond the Stated Maturity date or Redemption Date of any series of Subordinated Debentures. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board. "General Partner" means PECO Energy Capital Corp., a Delaware corporation and a wholly owned subsidiary of PECO Energy Company, as the general partner of PECO Energy Capital, L.P., a Delaware limited partnership, or any successor thereto that becomes a general partner of PECO Energy Capital pursuant to the Limited Partnership Agreement. "Guarantee Agreement" means that certain payment and guarantee agreement issued by PECO Energy Company with respect to a series of Securities, to irrevocably and nonconditionally agree to pay such Guarantee Payments (as defined in the Guarantee Agreement) to the holders of the series of Preferred Securities issued concurrently therewith. "Holder" or "Debentureholder" means any Person in whose name a Debenture is registered on the Registrar's books. "Indebtedness" means without duplication, (i) the principal of and premium (if any) in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by the Company; (ii) all Capital Lease Obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of the Company for the reimbursement of any obligor on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction (other than obligations 3 with respect to letters of credit securing obligations (other than obligations described in (i) through (iii) above) entered into in the ordinary course of business of the Company to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third Business Day following receipt by the Company of a demand for reimbursement following payment on the letter of credit); (v) all obligations of the type referred to in clauses (i) through (iv) of other Persons and all dividends of other Persons (other than the Preferred Securities) for the payment of which, in either case, the Company is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; provided, however, that Indebtedness will not include endorsements of negotiable instruments for collection in the ordinary course of business. "Indenture" means this indenture, as amended or supplemented from time to time in accordance with the terms hereof, including the provisions of the TIA that are deemed to be a part hereof. "Issue Date", with respect to a series of Debentures, means the date on which the Debentures of such series are originally issued. "Limited Partnership Agreement" means the Amended and Restated Limited Partnership Agreement of PECO Energy Capital, L.P. dated __________, 1994, as it may be amended from time to time. "Officer" means, with respect to any corporation, the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer, Assistant Treasurer or the Secretary of such corporation. "Officer's Certificate" means a written certificate containing the applicable information specified in Sections 11.04 and 11.05 hereof, signed in the name of the Company by any one of its Officers, and delivered to the Trustee. "Opinion of Counsel" means a written opinion containing the applicable information specified in Sections 11.04 and 11.05 hereof, by legal counsel who is reasonably acceptable to the Trustee. 4 "PECO Energy Capital" means PECO Energy Capital, L.P., a Delaware limited partnership. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Securities" means the limited partner interests issued form time to time in series by PECO Energy Capital. "Record date", with respect to any series of the Debentures, means the date set to determine the holders of such series entitled to payment of interest or principal or to vote, consent, make a request or exercise any other right associated with such series. "Redemption Date" or "redemption date", with respect to any Debenture to be redeemed, means the date specified for the redemption of such Debenture in accordance with the terms thereof and Article 3 of this Indenture. "Redemption Price" or "redemption price", with respect to any Debenture to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture and such Debenture. "Regular record date", with respect to an interest payment on the Debentures of a series, means the date set forth in paragraph 2 of the Debentures of such series for the determination of Holders entitled to receive payment of interest on the next succeeding interest payment date. "SEC" or "Commission" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Indebtedness" means all Indebtedness, except for Indebtedness that is by its terms subordinated to or pari passu with the Debentures. Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness shall not include any Indebtedness between or among the Company and any Affiliates. "Series A Debentures" means any of the Company's __% Deferrable Interest Subordinated Debentures, Series A issued under this Indenture. 5 "Special Representative" means a special representative appointed by the holders of the Preferred Securities pursuant to Section 13.02(d) of the Limited Partnership Agreement. "Stated Maturity", with respect to any Debenture, means, the date specified for the Debentures as the fixed date on which the principal of the Debentures is due and payable. "Subsidiary" means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) the Company, (ii) the Company and one or more Subsidiaries, or (iii) one or more Subsidiaries. "TIA" means the Trust Indenture Act of 1939, as amended and as in effect on the date of this Indenture; provided, however, that if the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended. "Trust Officer", when used with respect to the Trustee, means the chairman or vice-chairman of the Board of Directors, the chairman or vice-chairman of the executive committee of the Board of Directors, the President, any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any account officer or assistant account officer, the controller and any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Trustee" means the party named as the "Trustee" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. "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. 6 "Voting Stock" means, with respect to a corporation, all classes of Capital Stock then outstanding of such corporation normally entitled to vote in elections of directors. "Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly Owned Subsidiary. SECTION 1.02 OTHER DEFINITIONS. ------------------ TERM DEFINED IN SECTION ---- ------------------ "Act" . . . . . . . . . . . . . . . . . . 1.05 "Bankruptcy Law" . . . . . . . . . . . . 6.01 "Custodian" . . . . . . . . . . . . . . . 6.01 "Event of Default". . . . . . . . . . . . 6.01 "Legal Holiday" . . . . . . . . . . . . . 11.08 "Notice of Default" . . . . . . . . . . . 6.01 "Paying Agent" . . . . . . . . . . . . . 2.05 "Register" . . . . . . . . . . . . . . . 2.05 "Registrar" . . . . . . . . . . . . . . . 2.05 "Successor" . . . . . . . . . . . . . . . 5.01 SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. -------------------------------------------------- Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Debentures. "indenture security holder" means a Debentureholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the Debentures. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. 7 SECTION 1.04 RULES OF CONSTRUCTION. ---------------------- Unless the context otherwise requires: (1) A term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including, without limitation; (5) words in the singular include the plural, and words in the plural include the singular; and (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. SECTION 1.05. ACTS OF HOLDERS. ---------------- (1) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (2) The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient. (3) The ownership of Debentures shall be proved by the Register. (4) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any 8 Debenture shall bind every future Holder of the same Debenture and the holder of every Debenture issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Debenture. (5) If the Company solicits from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a resolution of its Board of Directors, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Debentures shall be computed as of such record date. ARTICLE 2 THE DEBENTURES; THE SERIES A DEBENTURES SECTION 2.01 ISSUE OF DEBENTURES GENERALLY. ------------------------------ The aggregate principal amount of the Debentures which may be authenticated and delivered under this Indenture is limited to the aggregate liquidation preference of the Preferred Securities. The Debentures may be issued in one or more series as from time to time shall be authorized by the Board of Directors. The Debentures of each series and the Trustee's Certificate of Authentication shall be substantially in the forms to be attached as exhibits to the Indenture or supplemental indenture providing for their issuance, but in the case of Debentures other than Series A Debentures, with such inclusions, omissions and variations as are such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto 9 or with any rule or regulation of any securities exchange on which the Debentures may be listed, or to confirm to usage. Each Debenture shall be dated the date of its authentication. The several series of Debentures may differ from the Series A Debentures, and as and between series, in respect of any or all of the following matters: (a) designation; (b) date or dates of maturity, which may be serial; (c) interest rate or method of determination of the interest rate and whether Additional Interest will be payable; (d) interest payment dates and the regular record dates therefor; (e) Issue Date; (f) authorized denominations; (g) the place or places for the payment of principal (and premium, if any) and for the payment of interest; (h) limitation upon the aggregate principal amount of Debentures of the series which may be issued; (i) the optional and mandatory redemption provisions, if any; (j) provisions, if any, for any sinking or analogous fund with respect to the Debentures of such series; and (k) any other provisions expressing or referring to the terms and conditions upon which the Debentures of such series are to be issued under this Indenture which are not in conflict with the provisions of this Indenture; in each case as determined and specified by the Board of Directors. The Trustee shall not authenticate and deliver Debentures of any series (other than the Series A Debentures) upon initial issue unless the terms and conditions of such series shall have been set forth in a supplemental indenture entered into between the Company and the Trustee as provided in Section 9.01. 10 SECTION 2.02 FORM OF THE SERIES A SECURITIES; DENOMINATIONS. ----------------------------------------------- The Series A Debentures and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A attached hereto. The terms and provisions contained in the Series A Debentures, a form of which is annexed hereto as Exhibit A, shall constitute, and are hereby expressly made, a part of this Indenture. The Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. The Trustee shall authenticate and make available for delivery Series A Debentures for original issue in the aggregate principal amount of $ to evidence the Company's obligation with respect to the loan from PECO Energy Capital, upon a Board of Directors resolution and a written order of the Company signed by two Officers of the Company, but without any further action by the Company. Such order shall specify the amount of the Series A Debentures to be authenticated and the date on which the original issue of Debentures is to be authenticated and delivered. The aggregate principal amount of Series A Debentures outstanding at any time may not exceed $ except as provided in Section 2.09 hereof. The Series A Debentures shall be issuable only in registered form without coupons and only in denominations of $25.00 and any integral multiple thereof. SECTION 2.03 PAYMENT OF PRINCIPAL AND INTEREST. ---------------------------------- The principal of and interest on the Debentures of any series, as well as any premium thereon in the case of redemption thereof prior to maturity, shall be payable in the coin or currency of the United States of America which at the time is legal tender for public and private debts at the office of the Paying Agent. Each Debenture shall be dated its Issue Date. Interest on the Debentures shall be computed on the basis of a 360-day year composed of twelve 30-day months. The interest on any Debenture which is payable and is punctually paid or duly provided for, on any interest payment date for Debentures of that series shall be paid to the person in whose name the Debenture is registered at the close of business on the regular record date therefor. In the event that any Debenture of a particular series or portion thereof is called for redemption, and the redemption date is subsequent to the regular record date with respect to any interest payment date and prior to such interest payment date, interest on such Debenture will be paid upon presentation and surrender of such Debenture to the Paying Agent. 11 SECTION 2.04 EXECUTION AND AUTHENTICATION. ----------------------------- The Debentures shall be executed on behalf of the Company by its Chief Executive Officer, its President or one of its Vice Presidents, under its corporate seal imprinted or reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any such Officer on the Debentures may be manual or facsimile. Debentures bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Debentures or did not hold such offices at the date of such Debentures. No Debenture shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Debenture a certificate of authentication duly executed by the Trustee by manual signature of an authorized officer, and such certificate upon any Debenture shall be conclusive evidence, and the only evidence, that such Debenture has been duly authenticated and made available for delivery hereunder. The Trustee shall act as the initial authenticating agent. Thereafter, the Trustee may appoint an authenticating agent. An authenticating agent may authenticate Debentures whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as a Paying Agent to deal with the Company or an Affiliate of the Company. SECTION 2.05 REGISTRAR AND PAYING AGENT. --------------------------- The Company shall maintain or cause to be maintained, within or outside the Commonwealth of Pennsylvania, an office or agency where the Debentures may be presented for registration of transfer or for exchange ("Registrar"), an office or agency where Debentures may be presented or surrendered for purchase or payment ("Paying Agent"), and an office or agency where notices and demands to or upon the Company in respect of the Debentures and this Indenture may be served. The Registrar shall keep a register (the "Register") of the Debentures and of their transfer and exchange. The Company may have one or more co-Registrars and one or more additional Paying Agents. The term Paying Agent includes any additional paying agent. The corporate trust office of the Trustee at Reading, Pennsylvania, Attention: Corporate Trust Department, shall initially be the Registrar and agent for service of notice or demands on the Company, and Delaware Trust 12 Company, Wilmington, Delaware, shall initially be the Paying Agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-Registrar (if not the Trustee or the Company). The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall give prompt written notice to the Trustee of any change of location of such office or agency. If at any time the Company shall fail to maintain or cause to be maintained any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.02 hereof. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent or agent for service of notices or demands, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07 hereof. The Company or any Affiliate of the Company may act as Paying Agent, Registrar or co-Registrar or agent for service of notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Debentures may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in location of any such other office or agency. SECTION 2.06 PAYING AGENT TO HOLD MONEY IN TRUST. ------------------------------------ Except as otherwise provided herein, prior to each due date of the principal and interest on any Debenture, the Company shall deposit with the Paying Agent a sum of money sufficient to pay such principal, premium (if any) and interest so becoming due. The Company shall require each Paying Agent (other than the Trustee or the Company) to agree in writing that such Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal and interest on the Debentures and shall notify the Trustee of any default by the Company in making any such payment. At any time during the continuance of any such default, the Paying Agent shall, upon the request of the Trustee, forthwith pay to the Trustee all money so held in trust and account for any money disbursed by it. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any money disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money so paid over to the Trustee. If the Company, a Subsidiary or an Affiliate of 13 either of them acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. SECTION 2.07 DEBENTUREHOLDER LISTS. ---------------------- The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Debentureholders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee on or before the record date for each interest payment date and at such other times as the Trustee may request in writing, within five Business Days of such request, a list, in such form as the Trustee may reasonably require of the names and addresses of Debentureholders, provided that during any deferral period, such information will be provided every six months or upon request of the Trustee. SECTION 2.08 TRANSFER AND EXCHANGE. ---------------------- When Debentures are presented to the Registrar or a co-Registrar with a request to register the transfer or to exchange them for an equal principal amount of Debentures of the same series of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfer and exchanges, the Company shall execute and the Trustee shall authenticate Debentures, all at the Registrar's request. Every Debenture presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar duly executed by the Holder or his attorney duly authorized in writing. The Company shall not charge a service charge for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of the Debentures from the Debentureholder requesting such transfer or exchange (other than any exchange of a temporary Debenture for a definitive Debenture not involving any change in ownership). The Company shall not be required to make, and the Registrar need not register, transfers or exchanges of (a) any Debenture for a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Debentures 14 and ending at the close of business on the day of such mailing or (b) any Debenture selected, called or being called for redemption, except, in the case of any Debenture to be redeemed in part, the portion thereof not to be redeemed. SECTION 2.09 REPLACEMENT DEBENTURES. ----------------------- If (a) any mutilated Debenture is surrendered to the Company or the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Debenture, and there is delivered to the Company and the Trustee such Debenture or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Debenture has been acquired by a bona fide purchaser, the Company shall execute in exchange for any such mutilated Debenture or in lieu of any such destroyed, lost or stolen Debenture, a new Debenture of like tenor and principal amount, bearing a number not contemporaneously outstanding, and the Trustee shall authenticate and make such new Debenture available for delivery. In case any such mutilated, destroyed, lost or stolen Debenture has become or is about to become due and payable, or is about to be redeemed by the Company pursuant to Article 3 hereof, the Company in its discretion may, instead of issuing a new Debenture, pay or purchase such Debenture, as the case may be. Upon the issuance of any new Debentures under this Section 2.09, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith. Every new Debenture issued pursuant to this Section 2.09 in lieu of any mutilated, destroyed, lost or stolen Debenture shall constitute an original additional contractual obligation of the Company whether or not the mutilated, destroyed, lost or stolen Debenture shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and ratably with any and all other Debentures duly issued hereunder. The provisions of this Section 2.09 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures. 15 SECTION 2.10 OUTSTANDING DEBENTURES; DETERMINATIONS OF HOLDERS' -------------------------------------------------- ACTION. ------- Debentures outstanding at any time are all the Debentures authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those mutilated, destroyed, lost or stolen Debentures referred to in Section 2.09 hereof, those redeemed by the Company pursuant to Article 3 hereof, and those described in this Section 2.10 as not outstanding. A Debenture does not cease to be outstanding because the Company or a Subsidiary or Affiliate thereof holds the Debenture; provided, however, that in determining whether the Holders of the requisite principal amount of Debentures have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Debentures owned by the Company shall be disregarded and deemed not to be outstanding. Subject to the foregoing, only Debentures outstanding at the time of such determination shall be considered in any such determination (including determinations pursuant to Articles 3, 6 and 9). If a Debenture is replaced pursuant to Section 2.09, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Debenture is held by a bona fide purchaser. If the Paying Agent (other than the Company) holds, in accordance with this Indenture, at maturity or on a Redemption Date, money sufficient to pay the Debentures payable on that date, then immediately on the date of maturity or such Redemption Date, as the case may be, such Debentures shall cease to be outstanding, and interest, if any, on such Debentures shall cease to accrue. SECTION 2.11 TEMPORARY DEBENTURES. --------------------- So long as PECO Energy Capital shall hold all of the Debentures, the Company may execute temporary Debentures, and upon the Company's written request, signed by two Officers of the Company, the Trustee shall authenticate and make such temporary Debentures available for delivery. Temporary Debentures shall be printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Debentures in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Officers of the Company executing such Debentures may determine, as conclusively evidenced by their execution of such Debentures. 16 After the preparation of definitive Debentures, the temporary Debentures shall be exchangeable for definitive Debentures of the same series upon surrender of the temporary Debentures at the office or agency of the Company designated for such purpose pursuant to Section 2.05 hereof, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Debentures, the Company shall execute a like principal amount of definitive Debentures of authorized denominations, and the Trustee, upon written request of the Company signed by two Officers of the Company, shall authenticate and make such Debentures available for delivery in exchange therefor. Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures. SECTION 2.12 CANCELLATION. ------------- All Debentures surrendered for payment, redemption by the Company pursuant to Article 3 hereof or registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by the Trustee. The Company may at any time deliver to the Trustee for cancellation any Debentures previously authenticated and made available for delivery hereunder which the Company may have acquired in any manner whatsoever, and all Debentures so delivered shall be promptly canceled by the Trustee. The Company may not reissue, or issue new Debentures to replace Debentures it has paid or delivered to the Trustee for cancellation. No Debentures shall be authenticated in lieu of or in exchange for any Debentures canceled as provided in this Section 2.12, except as expressly permitted by this Indenture. All canceled Debentures held by the Trustee shall be destroyed by the Trustee, and the Trustee shall deliver a certificate of destruction to the Company. SECTION 2.13 DEFAULTED INTEREST. ------------------- If the Company defaults in a payment of interest on the Debentures, it shall pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, and such special record date, as used in this Section 2.13 with respect to the payment of any defaulted interest, shall mean the 15th day next preceding the date fixed by the Company for the payment of defaulted interest, whether or not such day is a Business Day. At least 15 days before the subsequent special record date, the Company shall mail to each Holder and to the Trustee a notice that states the subsequent special record date, the payment date and the amount of defaulted interest to be paid. 17 The Company may also pay defaulted interest in any other lawful manner. ARTICLE 3 REDEMPTION SECTION 3.01 REDEMPTION; NOTICE TO TRUSTEE. ------------------------------ (a) The Series A Debentures are subject to redemption prior to maturity as provided in the form thereof. (b) The redemption terms for any additional series of Debentures shall be as specified in the supplemental indenture creating such series of Debentures; provided that each series of Debentures shall be subject to mandatory redemption upon the dissolution of PECO Energy Capital. (c) If any or all of the Debentures are to be redeemed pursuant to paragraphs (a) or (b) above, the Company shall give notice by first class mail, postage prepaid, to the Trustee within 45 days prior to the date of such redemption. Any such notice of redemption shall state the date and price of redemption. SECTION 3.02 SELECTION OF DEBENTURES TO BE REDEEMED. --------------------------------------- If less than all the outstanding Debentures are to be redeemed at any time, the Trustee shall select the Debentures to be redeemed on a pro rata basis, by lot or any other method the Trustee considers fair and appropriate. The Trustee shall make the selection at least 30 but not more than 60 days before the Redemption Date from outstanding Debentures not previously called for redemption. Provisions of this Indenture that apply to Debentures called for redemption also apply to portions of Debentures called for redemption. The Trustee shall notify the Company promptly of the Debentures or portions of Debentures to be redeemed. SECTION 3.03 NOTICE OF REDEMPTION. --------------------- So long as PECO Energy Capital remains the sole Holder of the Debentures, no notice of any redemption of Debentures will be required. In the event and at such time that PECO Energy Capital ceases to be the sole Holder of the Debentures, at least 30 days but not more than 60 days before a Redemption Date, the Trustee shall mail or cause to be mailed a notice of redemption by first-class mail, postage prepaid, to each Holder of 18 Debentures to be redeemed at the Holder's last address, as it appears on the Register. At the Company's written request, the Trustee shall give the notice of redemption in the Company's name and at its expense. The notice shall identify the Debentures to be redeemed, the provision of the Debentures or this Indenture pursuant to which the Debentures called for redemption are being redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price; (3) the name and address of the Paying Agent; (4) that Debentures called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (5) if fewer than all the outstanding Debentures are to be redeemed, the identification and principal amounts of the particular Debentures to be redeemed and that, on and after the Redemption Date, upon surrender of such Debentures, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued; and (6) that, unless the Company defaults in making such redemption payment, interest will cease to accrue on Debentures called for redemption on and after the Redemption Date. SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION. ------------------------------- If notice of redemption is required as set forth in Section 3.03, and after notice of redemption is given, Debentures called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon the later of the Redemption Date and the date such Debentures are surrendered to the Paying Agent, such Debentures shall be paid at the Redemption Price, plus accrued interest to the Redemption Date. SECTION 3.05 DEPOSIT OF REDEMPTION PRICE. ---------------------------- On or prior to a Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or an Affiliate is the Paying Agent, shall segregate and hold in trust or cause such Affiliate to segregate and hold in trust) money sufficient to pay the Redemption Price of, and accrued interest on, all Debentures to be redeemed on that date. The Paying Agent shall 19 return to the Company any money not required for the purpose stated herein. SECTION 3.06 DEBENTURES REDEEMED IN PART. ---------------------------- Upon surrender of a Debenture that is redeemed in part, the Trustee shall authenticate for the Holder a new Debenture equal in principal amount to the unredeemed portion of such Debenture. ARTICLE 4 COVENANTS SECTION 4.01 PAYMENT OF DEBENTURES. ---------------------- (a) The Company shall pay the principal of and interest (including interest accruing on or after the filing of a petition in bankruptcy or reorganization relating to the Company, whether or not a claim for post-filing interest is allowed in such proceeding) on the Debentures on (or prior to) the dates and in the manner provided in the Debentures or pursuant to this Indenture. An installment of principal or interest shall be considered paid on the applicable date due if on such date the Trustee or the Paying Agent holds, in accordance with this Indenture, money sufficient to pay all of such installment then due. The Company shall pay interest on overdue principal and interest on overdue installments of interest (including interest accruing during an Extension Period and/or on or after the filing of a petition in bankruptcy or reorganization relating to the Company, whether or not a claim for post-filing interest is allowed in such proceeding), to the extent lawful, at the rate per annum borne by the Debentures, which interest on overdue interest shall accrue from the date such amounts became overdue. (b) Notwithstanding paragraph (a) of this Section 4.01 or any other provision herein to the contrary, the Company shall have the right in its sole and absolute discretion at any time and from time to time while the Debentures are outstanding, so long as an Event of Default has not occurred and is continuing, to extend the interest payment period for up to 60 consecutive months, provided that such Extension Period shall not extend beyond the stated maturity date or redemption date of the Series A Subordinated Debentures, and provided further that at the end of each Extension Period the Company shall pay all interest then accrued and unpaid (together with interest thereon compounded daily to the extent permitted by applicable law). Prior to the termination of an Extension Period, the Company may shorten or may further extend the interest payment period, provided that such Extension Period together with all such further extensions may not exceed 60 months. The Company shall give the Trustee notice of its 20 selection of such extended or shortened interest payment period at least one Business Day prior to the earlier of (i) the date selected by the Company to make the interest payment or (ii) the date PECO Energy Capital is required to give notice of the record or payment date of such related distribution to any national securities exchange on which the Preferred Securities are then listed or other applicable self-regulatory organization, but in any event not less than two Business Days prior to such record date fixed by the Company for the payment of such interest. The Company shall give or cause the Trustee to give such notice of the Company's selection of such extended interest payment period to the Holders. SECTION 4.02 PROHIBITION AGAINST DIVIDENDS, ETC. DURING AN EVENT OF DEFAULT OR AN EXTENSION PERIOD. ---------------------------------------- Neither the Company nor any Subsidiary shall declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its Capital Stock (other than dividends by a Wholly Owned Subsidiary) during an Extension Period or if at such time there shall have occurred any Default or Event of Default or if the Company shall be in default with respect to its payment obligations under the Guarantee Agreement. SECTION 4.03 SEC REPORTS. ------------ The Company shall file with the Trustee, within 15 days after it files them with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the Trustee such information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which are specified in Sections 13 or 15(d) of the Exchange Act. The Company shall also comply with the provisions of Section 314(a) of the TIA. SECTION 4.04 COMPLIANCE CERTIFICATES. ------------------------ (a) The Company shall deliver to the Trustee within 90 days after the end of each of the Company's fiscal years an Officer's Certificate, stating whether or not the signer knows of any Default or Event of Default. Such certificate shall contain a certification from the principal executive officer, principal 21 financial officer or principal accounting officer of the Company as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 4.04(a), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. If such Officer does know of such a Default or Event of Default, the certificate shall describe any such Default or Event of Default, and its status. Such Officer's Certificate need not comply with Sections 11.04 and 11.05 hereof. (b) The Company shall deliver to the Trustee any information reasonably requested by the Trustee in connection with the compliance by the Trustee or the Company with the TIA. SECTION 4.05 RELATIONSHIP WITH PECO ENERGY CAPITAL. -------------------------------------- The Company agrees (i) to maintain direct or indirect through a wholly owned subsidiary 100% ownership of the General Partner and will cause the General Partner to maintain 100% ownership of the general partnership interests in PECO Energy Capital ("Common Debentures"); (ii) to cause at least 10% of the total value of PECO Energy Capital and at least 3% of all interests in the capital, income, gain, loss, deduction and credit of PECO Energy Capital to be represented by general partner interests; (iii) to cause the General Partner to timely perform all of its duties as General Partner of PECO Energy Capital (including the duty to pay distributions on the Preferred Securities); and (iv) to use its reasonable efforts to cause PECO Energy Capital to remain a limited partnership and otherwise continue to be treated as a partnership for United States federal income tax purposes. SECTION 4.06 FURTHER INSTRUMENTS AND ACTS. ----------------------------- Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. SECTION 4.07 PAYMENTS FOR CONSENTS. ---------------------- Neither the Company nor any Subsidiary shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Debentures for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Debentures unless such consideration is offered to be paid or agreed to be paid to all Holders of the Debentures who so 22 consent, waive or agree to amend in the time frame set forth in the documents soliciting such consent, waiver or agreement. ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.01 WHEN THE COMPANY MAY MERGE, ETC. -------------------------------- The Company may not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all of its assets (either in one transaction or a series of transactions) to, any Person unless: (1) the Person formed by or surviving such consolidation or merger or to which such sale, conveyance, transfer or lease shall have been made (the "Successor") if other than the Company, (a) is organized and existing under the laws of the United States of America or any State thereof or the District of Columbia, and (b) shall expressly assume by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Debentures and the Indenture; (2) immediately prior to and after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Person or any Subsidiary as a result of such transaction as having been incurred by such Person or such Subsidiary at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; and (3) the Company, delivers to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, conveyance, transfer or lease and such supplemental indenture comply with this Indenture. The Successor will be the successor to the Company, and will be substituted for, and may exercise every right and power and become the obligor on the Debentures with the same effect as if the Successor had been named as, the Company herein but, in the case of a sale, conveyance, transfer or lease of all or substantially all of the assets of the Company, the predecessor Company will not be released from its obligation to pay the principal of, premium, if any, and interest on the Debentures. 23 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01 EVENTS OF DEFAULT. ------------------ An "Event of Default" occurs if one of the following shall have occurred and be continuing: (1) The Company defaults in the payment, when due and payable, of (a) interest, including Additional Interest, on any Debenture and the default continues for a period of 10 days; provided, that during an Extension Period, failure to pay interest on the Debentures shall not constitute a Default or Event of Default hereunder, or (b) the principal of, or premium, if any, on any Debentures when the same becomes due and payable at maturity, acceleration, on any Redemption Date, or otherwise; (2) The Company defaults in the performance of, fails to comply with any of its other covenants or agreements in the Debentures or this Indenture and such failure continues for 60 days after receipt by the Company of a "Notice of Default"; (3) The Company, pursuant to or within the meaning of any Bankruptcy Law: (a) commences a voluntary case or proceeding; (b) consents to the entry of an order for relief against it in an involuntary case or proceeding; (c) consents to the appointment of a Custodian of it or for all or substantially all of its property, and such Custodian is not discharged within 60 days; (d) makes a general assignment for the benefit of its creditors; or (e) admits in writing its inability to pay its debts generally as they become due; or (4) A court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company in an involuntary case or proceeding; 24 (b) appoints a Custodian of the Company for all or substantially all of its properties; (c) orders the liquidation of the Company; (d) and in each case the order or decree remains unstayed and in effect for 60 days. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator, custodian or similar official under any Bankruptcy Law. A Default under clause (2) above is not an Event of Default until the Trustee notifies the Company or the Holders of at least a majority in aggregate principal amount of the Debentures at the time outstanding or the Special Representative notifies the Company and the Trustee, of the Default and the Company does not cure such Default within the time specified in clause (2) above after receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default." SECTION 6.02 ACCELERATION. ------------- If any Event of Default other than an Event of Default under clauses (3) or (4) occurs and is continuing, the Trustee, the Holders of not less than 25% in principal amount of the Debentures then outstanding or the Special Representative may declare the principal of all such Debentures due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in clause (3) or (4) with respect to the Company occurs, the principal of and interest on all the Debentures shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Debentureholders. The Special Representative or holders of a majority in aggregate principal amount of the Debentures at the time outstanding by notice to the Trustee may rescind an acceleration 25 and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03 OTHER REMEDIES. --------------- If an Event of Default occurs and is continuing, the Trustee may, in its own name or as trustee of an express trust, institute, pursue and prosecute any proceeding, including, without limitation, any action at law or suit in equity or other judicial or administrative proceeding to collect the payment of principal of, premium, if any, or interest on the Debentures, to enforce the performance of any provision of the Debentures or this Indenture or to obtain any other available remedy. The Trustee may maintain a proceeding even if it does not possess any of the Debentures or does not produce any of the Debentures in the proceeding. A delay or omission by the Trustee, the Special Representative or any Debentureholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04 WAIVER OF PAST DEFAULTS. ------------------------ The Special Representative or the Holders of 66 2/3% in aggregate principal amount of the Debentures at the time outstanding, by notice to the Trustee, the Company and PECO Energy Capital, may waive an existing Default or Event of Default and its consequences. When a Default is waived, it is deemed cured and shall cease to exist, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05 CONTROL BY MAJORITY OR THE SPECIAL ---------------------------------- REPRESENTATIVES. ---------------- The Holders of a majority in aggregate principal amount of the Debentures then outstanding or the Special Representative may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good 26 faith is unduly prejudicial to the rights of other Debentureholders or would involve the Trustee in personal liability. The Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, including withholding notice to the Holders of the Debentures of any series of continuing default (except in the payment of the principal (other than any mandatory sinking fund payment) of (or premium, if any) or interest on any Debentures of such series) if the Trustee considers it in the interest of the holders of such series of Debentures to do so. SECTION 6.06 LIMITATION ON SUITS. -------------------- Except as provided in Section 6.07 hereof, the Special Representative may not pursue any remedy with respect to this Indenture or the Debentures unless: (1) the Holders or the Special Representative gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders or the Special Representative provides to the Trustee reasonable security and indemnity against any loss, liability or expense satisfactory to the Trustee; (3) the Trustee does not comply with the request within 60 days after receipt of the notice, the request and the offer of security and indemnity; and SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. ------------------------------------- Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of the principal amount of or interest on the Debentures held by such Holder, on or after the respective due dates expressed in the Debentures (in the case of interest, as the same may be extended pursuant to Section 4.01(b)) or any Redemption Date, or to bring suit for the enforcement of any such payment on or after such respective dates shall not be impaired or affected adversely without the consent of each such Holder. SECTION 6.08 COLLECTION SUIT BY THE TRUSTEE. ------------------------------- If an Event of Default described in Section 6.01(1) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any obligor on the Debentures for the whole amount 27 owing with respect to the Debentures and the amounts provided for in Section 6.07 hereof. SECTION 6.09 THE TRUSTEE MAY FILE PROOFS OF CLAIM. ------------------------------------- In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or its properties or assets, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise: (1) to file and prove a claim for the whole amount of the principal amount, premium, if any, and interest on the Debentures and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and (2) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10 PRIORITIES. ----------- If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07 hereof; SECOND: to Debentureholders for amounts due and unpaid on the Debentures for the principal amount, 28 Redemption Price or interest, if any, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Debentures; and THIRD: the balance, if any, to the Company. The Trustee may fix a record date and payment date for any payment to Debentureholders pursuant to this Section 6.10. SECTION 6.11 UNDERTAKING FOR COSTS. ---------------------- In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof or a suit by Holders of more than 10% in aggregate principal amount of the Debentures at the time outstanding or a suit by the Special Representative. SECTION 6.12 WAIVER OF STAY, EXTENSION OR USURY LAWS. ---------------------------------------- The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, that would prohibit or forgive the Company from paying all or any portion of the principal or premium, if any, or interest on the Debentures as contemplated herein or affect the covenants or the performance by the Company of its obligations under this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 29 ARTICLE 7 THE TRUSTEE SECTION 7.01 DUTIES OF THE TRUSTEE. ---------------------- (1) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (2) Except during the continuance of an Event of Default, (a) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and (b) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (3) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (a) this paragraph (3) does not limit the effect of paragraph (2) of this Section 7.01; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (4) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (1), (2), (3) and (5) of this Section 7.01 and Section 7.02. (5) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or 30 otherwise incur any financial liability unless it receives security and indemnity reasonably satisfactory to it against any loss, liability or expense. (6) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall not be liable for interest on any money held by it hereunder. SECTION 7.02 RIGHTS OF THE TRUSTEE. ---------------------- (1) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document; (2) Before the Trustee acts or refrains from acting, it may require an Officer's Certificate and, if appropriate, an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer's Certificate and Opinion of Counsel; (3) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care; (4) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers; (5) The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; and (6) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders or Special Representative pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security and indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. SECTION 7.03 INDIVIDUAL RIGHTS OF THE TRUSTEE. --------------------------------- The Trustee in its individual or any other capacity may become the owner or pledgee of Debentures and may otherwise deal with the Company or its Affiliates with the same rights it would 31 have if it were not Trustee. Any Paying Agent, Registrar or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11 hereof. SECTION 7.04 THE TRUSTEE'S DISCLAIMER. ------------------------- The Trustee makes no representation as to the validity or adequacy of this Indenture or the Debentures, it shall not be accountable for the Company's use of the proceeds from the Debentures, and it shall not be responsible for any statement in this Indenture or the Debentures or any report or certificate issued by the Company hereunder or any registration statement relating to the Debentures (other than the Trustee's certificate of authentication), or the determination as to which beneficial owners are entitled to receive any notices hereunder. SECTION 7.05 NOTICE OF DEFAULTS. ------------------- If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Debentureholder, as their names and addresses appear on the Debenture Register, notice of the Default within 90 days after it becomes known to the Trustee unless such Default shall have been cured or waived. Except in the case of a Default described in Section 6.01(1) hereof, the Trustee may withhold such notice if and so long as a committee of Trust Officers in good faith determines that the withholding of such notice is in the interests of Debentureholders. The second sentence of this Section 7.05 shall be in lieu of the proviso to TIA Section 315(b). Said proviso is hereby expressly excluded from this Indenture, as permitted by the TIA. SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS. ------------------------------ Within 60 days after each May 31, beginning with the May 31 next following the date of this Indenture, the Trustee shall mail to each Debentureholder, and such other holders that have submitted their names to the Trustee for such purpose, a brief report dated as of such May 31 in accordance with and to the extent required under TIA Section 313. A copy of each report at the time of its mailing to Debentureholders shall be filed with the Company, the SEC and each securities exchange on which the Debentures are listed. The Company agrees to promptly notify the Trustee whenever the Debentures become listed on any securities exchange and of any listing thereof. 32 SECTION 7.07 COMPENSATION AND INDEMNITY. --------------------------- The Company agrees: (1) to pay to the Trustee from time to time such compensation as shall be agreed in writing between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses, and advances of its agents and counsel), including all reasonable expenses and advances incurred or made by the Trustee in connection with any Event of Default or any membership on any creditors' committee, except any such expense or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee, its officers, directors and shareholders, for, and to hold it harmless against, any and all loss, liability or expense, incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. Before, after or during an Event of Default, the Trustee shall have a claim and lien prior to the Debentures as to all property and funds held by it hereunder for any amount owing it or any predecessor Trustee pursuant to this Section 7.07, except with respect to funds held in trust for the payment of principal of, premium, if any, or interest on particular Debentures. The Company's payment obligations pursuant to this Section 7.07 are not subject to Article 10 of this Indenture and shall survive the discharge of this Indenture. When the Trustee renders services or incurs expenses after the occurrence of a Default specified in Section 6.01 hereof, the compensation for services and expenses are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.08 REPLACEMENT OF TRUSTEE. ----------------------- The Trustee may resign by so notifying the Company in writing at least 30 days prior to the date of the proposed resignation; provided, however, no such resignation shall be 33 effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Special Representative or the Holders of a majority in aggregate principal amount of the Debentures at the time outstanding, may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee, which shall be subject to the consent of the Company unless an Event of Default has occurred and is continuing. The Trustee shall resign if: (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Debentureholders. Subject to payment of all amounts owing to the Trustee under Section 7.07 hereof and subject further to its lien under Section 7.07, the retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, the Special Representative or the Holders of a majority in aggregate principal amount of the Debentures at the time outstanding, may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof, any Debentureholder may petition any court of competent jurisdiction for its removal and the appointment of a successor Trustee. SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER. ---------------------------- If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets (including this Trusteeship) to another 34 corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. SECTION 7.10 ELIGIBILITY; DISQUALIFICATION. ------------------------------ The Trustee shall at all times satisfy the requirements of TIA Sections 310(a)(1) and 310(a)(2). The Trustee (or any Affiliate thereof which has unconditionally guaranteed the obligations of the Trustee hereunder) shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b). In determining whether the Trustee has conflicting interests as defined in TIA Section 310(b)(1), the provisions contained in the proviso to TIA Section 310(b)(1) shall be deemed incorporated herein. SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE --------------------------------------------- COMPANY. -------- If and when the Trustee shall be or become a creditor of the Company, the Trustee shall be subject to the provisions of the TIA regarding the collection of claims against the Company. ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE OF CERTAIN OBLIGATIONS; UNCLAIMED MONEYS SECTION 8.01 SATISFACTION AND DISCHARGE OF INDENTURE. ---------------------------------------- The Company shall be deemed to have paid and discharged the entire indebtedness on any series of the Debentures outstanding on the date the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee or any Paying Agent as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit the Holders (1) cash in an amount, or (2) U.S. Government Obligations, maturing as to principal and interest at such times and in such amounts as will ensure the availability of cash, or (3) a combination thereof, sufficient to pay the principal of, premium, if any, and interest on, all Debentures then outstanding, and on such date; the provisions of this Indenture with respect to the Debentures shall no longer be in effect (except as to (1) the rights of registration of transfer, substitution and exchange of Debentures, (2) the replacement of apparently mutilated, defaced, destroyed, lost or stolen Debentures, (3) the rights of the Holders to receive payments of principal thereof and interest thereon, (4) the rights of the Holders as beneficiaries hereof 35 with respect to the property so deposited with the Trustee payable to all or any of them, (5) the obligation of the Company to maintain an office or agency for payments on and registration of transfer of the Debentures, and (6) the rights, obligations and immunities of the Trustee hereunder); and the Trustee shall, at the request and expense of the Company, execute proper instruments acknowledging the same; provided that if the Company deposits U.S. Government Obligations with the Trustee: (A) no Default or Event of Default with respect to the Debentures has occurred and is continuing on the date of such deposit or occurs as a result of such deposit; (B) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the defeasance contemplated by this provision have been complied with; and (C) the Company has delivered to the Trustee (i) either a private Internal Revenue Service ruling or an Opinion of Counsel based on a ruling of the Internal Revenue Service or other change in Federal income tax law to the effect that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount and in the manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, and (ii) an Opinion of Counsel to the effect that (A) the deposit shall not result in the Company, the Trustee or the trust being deemed to be an "investment company" under the Investment Company Act of 1940, as amended, and (B) such deposit creates a valid trust in which such Holders of the Debentures have the sole beneficial ownership interest or that such Holders of the Debentures have a nonavoidable first priority security interest in such trust. SECTION 8.02 APPLICATION BY TRUSTEE OF FUNDS DEPOSITED FOR --------------------------------------------- PAYMENT OF DEBENTURES. ---------------------- Subject to Section 8.04, and Article 10 of this Indenture, all moneys deposited with the Trustee pursuant to Section 8.01 hereof shall be held in trust and applied by it to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent), to the Holders for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest; but such money need not 36 be segregated from other funds except to the extent required by law. SECTION 8.03 REPAYMENT OF MONEYS HELD BY PAYING AGENT. ----------------------------------------- In connection with the satisfaction and discharge of this Indenture, all moneys then held by any Paying Agent under this Indenture shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 8.04 RETURN OF MONEYS HELD BY THE TRUSTEE AND PAYING ----------------------------------------------- AGENT UNCLAIMED FOR THREE YEARS. -------------------------------- Any moneys deposited with or paid to the Trustee or any Paying Agent for the payment of the principal, premium, if any, or interest on any Debenture and not applied but remaining unclaimed for three years after the date when such principal, premium, if any, or interest shall have become due and payable shall unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be repaid to the Company by the Trustee or such Paying Agent, and the Holder of such Debenture shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Company for any payment which such Holder may be entitled to collect, and all liability of the Trustee or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE 9 AMENDMENTS SECTION 9.01 WITHOUT CONSENT OF HOLDERS. --------------------------- From time to time, when authorized by a resolution of the Board of Directors, the Company and the Trustee, without notice to or the consent of any holders of the Debentures or their Special Representative issued hereunder, may amend or supplement this Indenture or the Debentures: (1) to cure any ambiguity, defect or inconsistency; (2) to comply with Article 5 hereof; (3) to provide for uncertificated Debentures in addition to or in place of certificated Debentures; 37 (4) to make any other change that does not adversely affect the rights of any Debentureholder; or (5) to comply with any requirement of the SEC in connection with the qualification of this Indenture under the TIA; and (6) to set forth the terms and conditions, which shall not be inconsistent with this Indenture, of the series of Debentures (other than the Series A Debentures) that are to be issued hereunder and the form of Debentures of such series. SECTION 9.02 WITH CONSENT OF HOLDERS. ------------------------ With written consent of the Special Representative or the Holders of at least 66 2/3% in aggregate principal amount of the series of Debentures at the time outstanding, the Company and the Trustee may amend this Indenture or the Debentures or may waive future compliance by the Company with any provisions of this Indenture or the Debentures. However, without the consent of each Debentureholder affected, such an amendment or waiver may not: (1) reduce the principal amount of the Debentures the Holders of which must consent to an amendment of the Indenture or a waiver; (2) change the Stated Maturity of the principal of, or the interest or rate of interest on the Debentures, change adversely to the Holders the redemption provisions of Article 3 hereof, or impair the right to institute suit for the enforcement of any such payment or make any Debenture payable in money or securities other than that stated in the Debenture; (3) make any change in Article 10 hereof that adversely affects the rights of the Holders of the Debentures or any change to any other section hereof that adversely affects their rights under Article 10 hereof; (4) waive a Default in the payment of the principal of, premium, if any, or interest on, any Debenture; or (5) change Section 6.07 hereof. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. If certain Holders agree to defer or waive certain obligations of the Company hereunder with respect to Debentures 38 held by them, such deferral or waiver shall not affect the rights of any other Holder to receive the payment or performance required hereunder in a timely manner. After an amendment or waiver under this Section 9.02 becomes effective, the Company shall mail to the Special Representative and to each Holder a notice briefly describing the amendment or waiver. Any failure of the Company to mail such notices, or any defect therein, shall not, however, in any way impair or affect the validity of such amendment or waiver. SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT. ------------------------------------ Every supplemental indenture executed pursuant to this Article 9 shall comply with the TIA. SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ---------------------------------------------- ACTIONS. -------- Until an amendment, waiver or other action by Holders becomes effective, a consent to it or any other action by a Holder of a Debenture hereunder is a continuing consent by the Holder and every subsequent Holder of that Debenture or portion of the Debenture that evidences the same obligation as the consenting Holder's Debenture, even if notation of the consent, waiver or action is not made on the Debenture. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Debenture or portion of the Debenture if the Trustee receives the notice of revocation before the consent of the requisite aggregate principal amount of the Debentures then outstanding has been obtained and not revoked. After an amendment, waiver or action becomes effective, it shall bind every Debentureholder, except as provided in Section 9.02 hereof. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment or waiver. If a record date is fixed, then, notwithstanding the first two sentences of the immediately preceding paragraph, those Persons who were Holders at such record date or their duly designated proxies, and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. 39 SECTION 9.05 NOTATION ON OR EXCHANGE OF DEBENTURES. -------------------------------------- Debentures authenticated and made available for delivery after the execution of any supplemental indenture pursuant to this Article 9 may, and shall, if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Debentures so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and made available for delivery by the Trustee in exchange for outstanding Debentures. SECTION 9.06 TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. ---------------------------------------- The Trustee shall sign any supplemental indenture authorized pursuant to this Article 9 if the supplemental indenture does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing such amendment the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officer's Certificate and Opinion of Counsel stating that such supplemental indenture is authorized or permitted by this Indenture. SECTION 9.07 EFFECT OF SUPPLEMENTAL INDENTURES. ---------------------------------- Upon the execution of any supplemental indenture under this Article 9, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes and every Holder of Debentures theretofore or thereafter authenticated and made available for delivery hereunder shall be bound thereby. ARTICLE 10 SUBORDINATION SECTION 10.01 DEBENTURES SUBORDINATED TO SENIOR INDEBTEDNESS. ----------------------------------------------- Notwithstanding the provisions of Section 6.01 hereof or any other provision herein or in the Debentures, the Company and the Trustee or Holder by his acceptance thereof (a) covenants and agrees, that all payments by the Company of the principal of, premium, if any, and interest on the Debentures shall be subordinated in accordance with the provisions of this Article 10 to the prior payment in full, in cash or cash equivalents, of all amounts payable on, under or in connection with Senior 40 Indebtedness, and (b) acknowledges that holders of Senior Indebtedness are or shall be relying on this Article 10. SECTION 10.02 PRIORITY AND PAYMENT OF PROCEEDS IN CERTAIN EVENTS; --------------------------------------------------- REMEDIES STANDSTILL. -------------------- (a) Upon any payment or distribution of assets or securities of the Company, as the case may be, of any kind or character, whether in cash, property or securities, upon any dissolution or winding up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts payable on, under or in connection with Senior Indebtedness (including any interest accruing on such Senior Indebtedness subsequent to the commencement of a bankruptcy, insolvency or similar proceeding) shall first be paid in full in cash, or payment provided for in cash or cash equivalents, before the Holders or the Trustee on behalf of the Holders shall be entitled to receive from the Company any payment of principal of or interest on or any other amounts in respect of the Debentures or distribution of any assets or securities. (b) No direct or indirect payment by or on behalf of the Company of principal of or interest on the Debentures whether pursuant to the terms of the Debentures or upon acceleration or otherwise shall be made if, at the time of such payment there exists (i) a default in the payment of all or any portion of any Senior Indebtedness (and the Trustee has received written notice thereof from the Company, one or more holders of Senior Indebtedness or from any trustee, representative or agent therefor), or (ii) any other default affecting Senior Indebtedness permitting its acceleration, as the result of which the maturity of Senior Indebtedness has been accelerated, and the Trustee has received written notice from any trustee, representative or agent for the holders of the Senior Indebtedness or the holders of at least a majority in principal amount of the Senior Indebtedness then outstanding of such default and acceleration, and such default shall not have been cured or waived by or on behalf of the holders of such Senior Indebtedness. (c) If, notwithstanding the foregoing provision prohibiting such payment or distribution, the Trustee or any Holder shall have received any payment on account of the principal of or interest on the Debentures (other than as permitted by subsections (a) and (b) of this Section 10.02) when such payment is prohibited by this Section 10.02 and before all amounts payable on, under or in connection with Senior Indebtedness are paid in full in cash or cash equivalents, then and in such event (subject to the provisions of Section 10.08) such payment or distribution shall be received and held in trust for the holders of Senior Indebtedness and shall 41 be paid over or delivered first to the holders of the Senior Indebtedness remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in cash or cash equivalents. Upon any payment or distribution of assets or securities referred to in this Article 10, the Trustee and the Holders shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, and upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making any such payment or distribution, delivered to the Trustee for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. SECTION 10.03 PAYMENTS WHICH MAY BE MADE PRIOR TO NOTICE. ------------------------------------------- Nothing in this Article 10 or elsewhere in this Indenture shall prevent (i) the Company, except under the conditions described in Section 10.02 hereof, from making payments of principal of and interest on the Debentures or from depositing with the Trustee any monies for such payments, or (ii) the application by the Trustee of any monies deposited with it for the purpose of making such payments of principal of and interest on the Debentures, to the Holders entitled thereto, unless at least one day prior to the date when such payment would otherwise (except for the prohibitions contained in Section 10.02 hereof) become due and payable, the Trustee shall have received the written notice provided for in Section 10.02(b)(ii) hereof. SECTION 10.04 RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS NOT TO BE -------------------------------------------------- IMPAIRED. --------- No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time or in any way be prejudiced or impaired by any act or failure to act in good faith by any such holder, or by any noncompliance by the Company with the terms and provisions and covenants herein regardless of any knowledge thereof any such holder may have or otherwise be charged with. The provisions of this Article 10 are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Indebtedness. 42 Notwithstanding anything to the contrary in this Article 10, to the extent any Holders or the Trustee have paid over or delivered to any holder of Senior Indebtedness any payment or distribution received on account of the principal of, or interest on the Debentures to which any other holder of Senior Indebtedness shall be entitled to share in accordance with Section 10.02 hereof, no holder of Senior Indebtedness shall have a claim or right against any Holders or the Trustee with respect to any such payment or distribution or as a result of the failure to make payments or distributions to such other holder of Senior Indebtedness. SECTION 10.05 TRUSTEE MAY TAKE ACTION TO EFFECTUATE SUBORDINATION. ---------------------------------------------------- Each Holder by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Indebtedness and such Holders, the subordination as provided in this Article 10 and appoints the Trustee his attorney-in-fact for any and all such purposes. SECTION 10.06 SUBROGATION. ------------ Upon the payment in full, in cash or cash equivalents, of all Senior Indebtedness, any Holder shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of assets of the Company made on such Senior Indebtedness until the Debentures shall be paid in full; and for the purposes of such subrogation, no payments or distributions to holders of such Senior Indebtedness of any cash, property or securities to which such Holders of the Debentures would be entitled except for this Article 10, and no payment pursuant to this Article 10 to holders of such Senior Indebtedness by such Holders of the Debentures, shall, as between the Company, its creditors other than holders of such Senior Indebtedness and such Holders of the Debentures, be deemed to be a payment by the Company to or on account of such Senior Indebtedness, it being understood that the provisions of this Article 10 are solely for the purpose of defining the relative rights of the holders of such Senior Indebtedness, on the one hand, and such Holders of the Debentures, on the other hand. If any payment or distribution to which such Holders of the Debentures would otherwise have been entitled but for the provisions of this Article 10 shall have been applied, pursuant to this Article 10, to the payment of all Senior Indebtedness, then and in such case, such Holders of the Debentures shall be entitled to receive from the holders of such Senior Indebtedness at the time outstanding any payments or distributions received by such holders 43 of Senior Indebtedness in excess of the amount sufficient to pay, in cash or cash equivalents, all such Senior Indebtedness in full. SECTION 10.07 OBLIGATIONS OF COMPANY UNCONDITIONAL; ------------------------------------- REINSTATEMENT. -------------- Nothing in this Article 10, or elsewhere in this Indenture or in any Debenture, is intended to or shall impair, as between the Company and Holders of the Debentures, the obligations of the Company, which are absolute and unconditional, to pay to such Holders the principal of, and interest on, the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of such Holders of the Debentures and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Trustee, the Special Representative or any Holder from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture, subject to the rights, if any, under this Article 10 of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. The failure to make a scheduled payment of principal of, or interest on, the Debentures by reason of Section 10.02 shall not be construed as preventing the occurrence of an Event of Default under Section 6.01 hereof; provided, however, that if (i) the conditions preventing the making of such payment no longer exist, and (ii) such Holders of the Debentures are made whole with respect to such omitted payments, the Event of Default relating thereto (including any failure to pay any accelerated amounts) shall be automatically waived, and the provisions of the Indenture shall be reinstated as if no such Event of Default had occurred. SECTION 10.08 TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED -------------------------------------------------- IN ABSENCE OF NOTICE. --------------------- The Trustee or Paying Agent shall not be charged with the knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee or Paying Agent, unless and until the Trustee or Paying Agent shall have received written notice thereof from the Company or one or more holders of Senior Indebtedness or from any trustee or agent therefor or unless the Trustee or Paying Agent otherwise had actual knowledge thereof; and, prior to the receipt of any such written notice or actual knowledge, the Trustee or Paying Agent may conclusively assume that no such facts exist. 44 Unless at least one day prior to the date when by the terms of this Indenture any monies are to be deposited by the Company with the Trustee or any Paying Agent for any purpose (including, without limitation, the payment of the principal or the interest on any Debenture), the Trustee or Paying Agent shall, except where no notice is necessary or where notice is deemed given in Sections 10.02 and 10.03 hereof, have received with respect to such monies the notice provided for in the preceding sentence, the Trustee or Paying Agent shall have full power and authority to receive and apply such monies to the purpose for which they were received. Neither of them shall be affected by any notice to the contrary, which may be received by either on or after such date. The foregoing shall not apply to the Paying Agent if the Company is acting as Paying Agent. Nothing in this Section 10.08 shall limit the right of the holders of Senior Indebtedness to recover payments as contemplated by Section 10.02 hereof. The Trustee or Paying Agent shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of such Senior Indebtedness (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder. The Trustee shall not be deemed to have any duty to the holders of Senior Indebtedness. SECTION 10.09 RIGHT OF TRUSTEE TO HOLD SENIOR INDEBTEDNESS. --------------------------------------------- The Trustee and any Paying Agent shall be entitled to all of the rights set forth in this Article 10 in respect of any Senior Indebtedness at any time held by them to the same extent as any other holder of such Senior Indebtedness, and nothing in this Indenture shall be construed to deprive the Trustee or any Paying Agent of any of its rights as such holder. ARTICLE 11 MISCELLANEOUS SECTION 11.01 TRUST INDENTURE ACT CONTROLS. ----------------------------- If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by operation of subsection (c) of Section 318 of the TIA, the imposed duties shall control. The provisions of Sections 310 to 317, inclusive, of the TIA that impose duties on any Person (including provisions automatically deemed included in an indenture unless the indenture provides that such provisions are excluded) are a part of and govern this Indenture, except as, and to the extent, they are expressly excluded from this Indenture, as permitted by the TIA. 45 SECTION 11.02 NOTICES. -------- Any notice or communication shall be in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows: if to the Company: PECO Energy Company 2301 Market Street P.O. Box 8699 Philadelphia, Pennsylvania 19101 Attention: Todd D. Cutler, Esq. Facsimile No.: (215) 841-5743 if to the Trustee: Meridian Trust Company 35 North 6th Street P.O. Box 15111 Reading, Pennsylvania 19612-5111 Attn: Corporate Trust Administration The Company or the Trustee, by giving notice to the other, may designate additional or different addresses for subsequent notices of communications. The Company shall notify the holder, if any, of Senior Indebtedness of any such additional or different addresses of which the Company receives notice from the Trustee. Any notice or communication given to a Debentureholder other than PECO Energy Capital shall be mailed to the Debentureholder at the Debentureholder's address as it appears on the Register of the Registrar and shall be sufficiently given if mailed within the time prescribed. Failure to mail a notice or communication to a Debentureholder or any defect in it shall not affect its sufficiency with respect to other Debentureholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company mails a notice or communication to the Debentureholders, it shall mail a copy to the Trustee and each Registrar, Paying Agent or co-Registrar. SECTION 11.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. -------------------------------------------- Debentureholders may communicate, pursuant to TIA Section 312(b), with other Debentureholders with respect to their rights 46 under this Indenture or the Debentures. The Company, the Trustee, the Registrar, the Paying Agent and anyone else shall have the protection of TIA Section 312(c). SECTION 11.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. --------------------------------------------------- Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officer's Certificate (complying with Section 11.05 hereof) stating that, in the opinion of such Officer, all conditions precedent to the taking of such action have been complied with; and (2) if appropriate, an Opinion of Counsel (complying with Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent to the taking of such action have been complied with. SECTION 11.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. ---------------------------------------------- Each Officer's Certificate and Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that each Person making such Officer's Certificate or Opinion of Counsel has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officer's Certificate or Opinion of Counsel are based; (3) a statement that, in the opinion of each such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement that, in the opinion of such Person, such covenant or condition has been complied with; provided, however, that with respect to matters of fact not involving any legal conclusion, an Opinion of Counsel may rely on an Officer's Certificate or certificates of public officials. 47 SECTION 11.06 SEVERABILITY CLAUSE. -------------------- If any provision in this Indenture or in the Debentures shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.07 RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. --------------------------------------------- The Trustee may make reasonable rules for action by or a meeting of Debentureholders. The Registrar and Paying Agent may make reasonable rules for their functions. SECTION 11.08 LEGAL HOLIDAYS. --------------- A "Legal Holiday" is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action to be taken on such date shall be taken on the next succeeding day that is not a Legal Holiday, and if such action is a payment in respect of the Debentures, no principal or interest installment shall accrue for the intervening period; except that if any interest payment is due on a Legal Holiday and the next succeeding day is in the next succeeding calendar year, such payment shall be made on the Business Day immediately preceding such Legal Holiday. SECTION 11.09 GOVERNING LAW. -------------- This Indenture and the Debentures shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania as applied to contracts made and performed within the Commonwealth of Pennsylvania, without regard to its principles of conflicts of laws. SECTION 11.10 NO RECOURSE AGAINST OTHERS. --------------------------- No director, officer, employee or stockholder, as such, of the Company shall have any liability for any obligations of the Company under the Debentures or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Debenture, each Debentureholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Debentures. 48 SECTION 11.11 SUCCESSORS. ----------- All agreements of the Company in this Indenture and the Debentures shall bind its successors and assigns. All agreements of the Trustee in this Indenture shall bind its successors and assigns. SECTION 11.12 MULTIPLE ORIGINAL COPIES OF THIS INDENTURE. ------------------------------------------- The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Any signed copy shall be sufficient proof of this Indenture. SECTION 11.13 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. ---------------------------------------------- This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.14 TABLE OF CONTENTS; HEADINGS, ETC. --------------------------------- The Table of Contents, Cross-Reference Table, and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 11.15 BENEFITS OF THE INDENTURE. -------------------------- Except as expressly provided in Article 10 hereof, nothing in this Indenture or in the Debentures, express or implied, shall give to any person, other than the parties hereto and their successors hereunder, the Holders and the Special Representative, any benefit or any legal or equitable right, remedy or claim under this Indenture. 49 SIGNATURES IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written. PECO ENERGY COMPANY By: __________________________ Name: ________________________ Title: _______________________ MERIDIAN TRUST COMPANY, AS TRUSTEE By: __________________________ Name: ________________________ Title: ________________________ PECO Energy Capital, L.P. By its General Partner, PECO Energy Capital Corp. By _____________________ Solely for the purposes stated in the recitals hereto. 50 EXHIBIT A [FORM OF FACE OF DEBENTURE] __% SUBORDINATED DEBENTURES, SERIES A DUE 2043 No. _______________ $___________ PECO Energy Company, a Pennsylvania corporation (the "Company"), which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ___________________________ or registered assigns, the principal sum of __________________ Dollars on _____________, 2043, and to pay interest on said principal sum from _____________, 1994 or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, monthly in arrears on the last day of each calendar month of each year commencing ___________, 1994 at the rate of ______% per annum plus Additional Interest, if any, until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the Series A Debentures is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Debenture is registered at the close of business on the regular record date for such interest installment, which shall be the close of business on the Business Day next preceding such Interest Payment Date. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such regular record date, and may be paid to the person in whose name this Debenture is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of this series of Debentures not less than 10 days prior to such special record date, as more fully provided in the Indenture hereinafter referred to. The principal of (and premium, if any) and the interest on this Debenture shall be payable at the office A-1 or agency of the Company maintained for that purpose in Reading, Pennsylvania, in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the holder of this Debenture is PECO Energy Capital, the payment of the principal of (and premium, if any) and interest (including Additional Interest, if any) in this Debenture will be made at such place and to such account as may be designated by PECO Energy Capital. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such Holder upon said provisions. This Debenture is one of a duly authorized series of Debentures of the Company (herein sometimes referred to as the "Series A Debentures"), specified in the Indenture, limited in aggregate principal amount as specified in the Indenture, issued under and pursuant to an Indenture dated as of ________, 1994 (the "Indenture") executed and delivered between the Company and Meridian Trust Company, as trustee (the "Trustee") to which reference is made to the Indenture for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. By the terms of the Indenture, debentures (the "Debentures") are issuable in series which may vary as to amount, date of maturity, rate of interest and in other respects as in the Indenture provided. The Series A Debentures are subject to mandatory redemption prior to maturity at 100% of the principal amount thereof plus accrued interest to the redemption date as follows: (i) in whole upon the dissolution of PECO Energy Capital; and A-2 (ii) in whole or in part upon a redemption of the Series A Preferred Securities (as defined in the Indenture), but if in part, in an aggregate principal amount equal to the aggregate stated liquidation preference of the Series A Preferred Securities redeemed. The Series A Debentures are subject to redemption prior to maturity at any time on or after __________, 1999 at the option of the Company, in whole or in part, at 100% of the principal amount thereof plus accrued interest to the redemption date. In the event of redemption of this Debenture in part only, a new Debenture or Debentures of this series for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Debenture upon compliance by the Company with certain conditions set forth therein. Subject to certain exceptions in the Indenture which require the consent of every Holder, (i) the Indenture or the Series A Debentures may be amended with the written consent of the Holders of a majority in aggregate principal amount of the Series A Debentures at the time outstanding, and (ii) certain defaults or noncompliance with certain provisions may be waived by the written consent of the Holders of a majority in aggregate principal amount of the Series A Debentures at the time outstanding. Subject to certain exceptions in the Indenture, without the consent of any Debentureholder, the Company and the Trustee may amend the Indenture or the Debentures to cure any ambiguity, defect or inconsistency, to bind a successor to the obligations of the Indenture, to provide for uncertificated Debentures in addition to certificated Debentures, to comply with any requirements of the Debentures and Exchange Commission in connection with the qualification of the Indenture under the TIA, or to make any change that does not adversely affect the rights of any Debentureholder. Amendments bind all Holders and subsequent Holders. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this A-3 Debenture at the time and place and at the rate and in the money herein prescribed. The Company shall have the right at any time during the term of the Series A Debentures, from time to time to extend the interest payment period of such Debentures to up to 60 consecutive months (the "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Series A Debentures to the extent that payment of such interest is enforceable under applicable law); provided that, during such Extended Interest Payment Period the Company shall not declare or pay any dividend on, redeem or purchase any of its capital stock. Prior to the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, provided that such Period together with all such further extensions thereof shall not exceed 60 consecutive months. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any additional amounts then due, the Company may select a new Extended Interest Payment period. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the registered holder hereof on the Debenture Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Trustee accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered holder hereof or his attorney duly authorized in writing, and thereupon one or more new Debentures of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to presentment for registration of transfer of this Debenture, the Company, the Trustee, any paying agent and any Debenture Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any payment agent nor any Debenture Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based A-4 hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. Debentures of this series so issued are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Debentures of this series are exchangeable for a like aggregate principal amount of Debentures of this series of a different authorized denomination, as requested by the Holder surrendering the same. All terms used in this Debenture which are defined in the Indenture shall have the meanings assigned to them in the Indenture. This Debenture shall not be valid until an authorized officer of the Trustee manually signs the Trustee's Certificate of Authentication below. IN WITNESS WHEREOF, the Company has caused this Debenture to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. PECO ENERGY COMPANY By: __________________________ Name: ________________________ Title: _______________________ Dated: _____________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION THIS IS ONE OF THE DEBENTURES REFERRED TO IN THE WITHIN-MENTIONED INDENTURE. MERIDIAN TRUST COMPANY By: __________________________ Name ______________________________ Authorized Signatory A-5 ASSIGNMENT FORM To assign this Debenture, fill in the form below: (I) or (we) assign and transfer this Debenture to: __________________________________________________________________ (Insert assignee's social security or tax I.D. number) ___________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ______________________________ agent to transfer this Debenture on the books of the Company. The agent may substitute another to act for him. Dated: ________________ Signature: ________________________ (Sign exactly as your name appears on the other side of this Debenture) Signature Guaranty: ________________________ A-6 -----END PRIVACY-ENHANCED MESSAGE-----