Document:

<PAGE>

                                  $450,000,000

                            364-DAY CREDIT AGREEMENT

                         dated as of September 15, 1999

                                      among

                               PECO ENERGY COMPANY

                                   as Borrower

                             THE BANKS NAMED HEREIN

                                    as Banks

                       THE FIRST NATIONAL BANK OF CHICAGO

                             as Administrative Agent

                                 CITIBANK, N.A.

                             as Documentation Agent

                                       and

                         BANC ONE CAPITAL MARKETS, INC.

                                as Lead Arranger

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                                TABLE OF CONTENTS

Section                                                                     Page
-------                                                                     ----
                                    ARTICLE I
                        DEFINITIONS AND ACCOUNTING TERMS

1.01     Certain Defined Terms................................................ 1
1.02     Computation of Time Periods.......................................... 9
1.03     Accounting Principles................................................ 9

                                   ARTICLE II
                        AMOUNTS AND TERMS OF THE ADVANCES

2.01     The Advances.........................................................10
2.02     Making the Advances..................................................10
2.03     Fees.................................................................11
2.04     Reduction of the Commitments.........................................11
2.05     Repayment of Advances................................................11
2.06     Interest on Advances.................................................12
2.07     Additional Interest on Advances......................................12
2.08     Interest Rate Determination..........................................12
2.09     Conversion of Advances...............................................13
2.10     Prepayments..........................................................13
2.11     Increased Costs......................................................14
2.12     Illegality...........................................................15
2.13     Payments and Computations............................................15
2.14     Taxes................................................................16
2.15     Sharing of Payments, Etc.............................................18
2.16     Extension of Termination Date........................................18
2.17     Additional Lenders...................................................19

                                   ARTICLE III
                              CONDITIONS OF LENDING

3.01     Conditions Precedent to Initial Advances.............................20
3.02     Conditions Precedent to Certain Borrowings...........................21

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

4.01     Representations and Warranties of the Borrower.......................21

                                    ARTICLE V
                            COVENANTS OF THE BORROWER

5.01     Affirmative Covenants................................................23
5.02     Negative Covenants...................................................25

                                       -i-

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                                   ARTICLE VI
                                EVENTS OF DEFAULT

6.01     Events of Default....................................................27

                                   ARTICLE VII
                                   THE AGENTS

7.01     Authorization and Action.............................................28
7.02     Agents' Reliance, Etc................................................29
7.03     Agents and Affiliates................................................29
7.04     Lender Credit Decision...............................................29
7.05     Indemnification......................................................29
7.06     Successor Administrative Agent.......................................30
7.07     Documentation Agent and Lead Arranger................................30

                                  ARTICLE VIII
                                  MISCELLANEOUS

8.01     Amendments, Etc......................................................30
8.02     Notices, Etc.........................................................30
8.03     No Waiver; Remedies..................................................31
8.04     Costs and Expenses; Indemnification..................................31
8.05     Right of Set-off.....................................................32
8.06     Binding Effect.......................................................32
8.07     Assignments and Participations.......................................32
8.08     Governing Law........................................................35
8.09     Consent to Jurisdiction..............................................35
8.10     Execution in Counterparts; Integration...............................35

Schedule I    List of Applicable Lending Offices

Exhibit A     Form of Note

Exhibit B     Notice of a Borrowing

Exhibit C     Assignment and Acceptance

Exhibit D     Form of Opinion of Special Counsel for the Borrower

Exhibit E     Form of Opinion of Counsel to the Administrative Agent

Exhibit F     Form of Annual and Quarterly Compliance Certificate

Exhibit G     Form of Additional Lender Supplement

                                      -ii-
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                            364-DAY CREDIT AGREEMENT

                         dated as of September 15, 1999

         PECO Energy Company, a Pennsylvania corporation (the "Borrower"), the
banks listed on the signature pages hereof (the "Banks"), The First National
Bank of Chicago ("First Chicago"), as administrative agent for the Lenders
hereunder (in such capacity, the "Administrative Agent"), Citibank, N.A., as
documentation agent for the Lenders hereunder (in such capacity, the
"Documentation Agent"), and Banc One Capital Markets, Inc. ("Banc One Capital
Markets"), as lead arranger hereunder (in such capacity, the "Lead Arranger"),
hereby agree as follows:

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

         SECTION 1.01. Certain Defined Terms. As used in this Agreement, each of
the following terms shall have the meaning set forth next to such term below
(each such meaning to be equally applicable to both the singular and plural
forms of the term defined):

         "Additional Lender" has the meaning specified in Section 2.17.

         "Administrative Agent" means First Chicago in its capacity as
administrative agent for the Lenders pursuant to Article VII, and not in its
individual capacity as a Lender, and any successor Administrative Agent
appointed pursuant to Article VII.

         "Advance" means an advance by a Lender to the Borrower as part of a
Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance, each
of which shall be a "Type" of Advance.

         "Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person.

         "Agents" means the Administrative Agent, the Documentation Agent and
the Lead Arranger, collectively.

         "Applicable Commitment Fee Rate" means (i) during any Level 1 Rating
Period, 0.08% per annum, (ii) during any Level 2 Rating Period, 0.100% per
annum, (iii) during any Level 3 Rating Period, 0.125% per annum, (iv) during any
Level 4 Rating Period, 0.1625% per annum and (v) during any Level 5 Rating
Period, 0.275% per annum. The Applicable Commitment Fee Rate shall change when
and as the Rating Period changes.

         "Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance, and such
Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance.

         "Applicable Margin" means, on any date, for a Base Rate Advance or a
Eurodollar Rate Advance, the interest rate per annum set forth below in the
column entitled "Base Rate" or "Eurodollar Rate", as appropriate, opposite the
applicable Rating Period in effect on such date:

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         Rating Period            Base Rate            Eurodollar Rate
         -------------            ---------            ---------------
            Level 1                   0                     .375%
            Level 2                   0                     .450%
            Level 3                   0                     .600%
            Level 4                   0                     .750%
            Level 5                   0                     1.00%

provided, that the Applicable Margin for Eurodollar Advances shall be increased
by .10% for any day when the unused portion of the Commitments is less than or
equal to 50% of the aggregate Commitments. The Applicable Margin applicable to
an outstanding Advance shall change when and as the Rating Period changes, and
when and as the unused portion of the Commitments changes.

         "Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an Eligible Assignee, and accepted by the Administrative
Agent, in substantially the form of Exhibit C hereto.

         "Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time which rate per annum shall at all
times be equal to the higher of:

             (a) the rate of interest announced by First Chicago, from time to
         time, as its corporate base rate; and

             (b) the sum of 1/2 of 1% per annum plus the Federal Funds Rate in
         effect from time to time.

         "Base Rate Advance" means an Advance that bears interest as provided in
Section 2.06(a).

         "Benchmark Debt" means the Borrower's senior secured long-term debt or,
in the event that the Borrower has no senior secured long-term debt rated by S&P
(or by a generally recognized successor to S&P) or by Moody's (or by a generally
recognized successor to Moody's), the Borrower's senior unsecured long-term
debt.

         "Borrowing" means a borrowing consisting of simultaneous Advances of
the same Type and, if such Borrowing comprises Eurodollar Rate Advances, having
Interest Periods of the same duration, made by each of the Lenders pursuant to
Section 2.01 or Converted pursuant to Section 2.10.

         "Business Day" means a day of the year on which banks are not required
or authorized to close in Philadelphia, Pennsylvania, Chicago, Illinois or New
York, New York, and, if the applicable Business Day relates to any Eurodollar
Rate Advances, on which dealings are carried on in the London interbank market.

         "Closing Date" shall mean the date of the initial Advances hereunder.

         "Code" means the Internal Revenue Code of 1986, and the regulations
promulgated thereunder, in each case as amended, reformed or otherwise modified
from time to time.

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         "Commitment" has the meaning specified in Section 2.01.

         "Consolidated Adjusted Total Capitalization" on any date shall mean the
sum, without duplication, of the following with respect to the Borrower and its
consolidated Subsidiaries (exclusive, in each case, of Nonrecourse Transition
Bond Debt, to the extent Nonrecourse Transition Bond Debt would otherwise be
included in such item): (a) total capitalization as of such date, as determined
in accordance with GAAP, (b) the current portion of liabilities which as of such
date would be classified in whole or part as long-term debt in accordance with
GAAP (it being understood that the noncurrent portion of such liabilities is
included in the total capitalization referred to in clause (a)), (c) all
obligations as lessee which, in accordance with GAAP, are capitalized as
liabilities (including the current portion thereof), and (d) all other
liabilities which would be classified as short-term debt in accordance with GAAP
(including, without limitation, all liabilities of the types classified as
"Notes Payable, Bank" on the Borrower's audited balance sheet for December 31,
1998).

         "Consolidated Adjusted Total Debt" on any date shall mean the sum,
without duplication, of the following with respect to the Borrower and its
consolidated Subsidiaries (exclusive, in each case, of Nonrecourse Transition
Bond Debt, to the extent Nonrecourse Transition Bond Debt would otherwise be
included in such item): (a) all liabilities which as of such date would be
classified in whole or in part as long-term debt in accordance with GAAP
(including the current portion thereof), (b) all obligations as lessee which, in
accordance with GAAP, are capitalized as liabilities (including the current
portion thereof), and (c) all other liabilities which would be classified as
short-term debt in accordance with GAAP (including, without limitation, all
liabilities of the types classified as "Notes Payable, Bank" on the Borrower's
audited balance sheet for December 31, 1998).

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

         "Convert", "Conversion" and "Converted" each refers to a conversion of
Advances of one Type into Advances of another Type or the selection of a new, or
the renewal of the same, Interest Period for Eurodollar Rate Advances pursuant
to Section 2.09.

         "Debt" means (i) indebtedness for borrowed money, (ii) obligations
evidenced by bonds, debentures, notes or other similar instrument, (iii)
obligations to pay the deferred purchase price of property or services (other
than trade payables incurred in the ordinary course of business), (iv)
obligations as lessee under leases that shall have been or are required to be,
in accordance with GAAP, recorded as capital leases, (v) obligations (contingent
or otherwise) under reimbursement or similar agreements with respect to the
issuance of letters of credit (other than obligations in respect of documentary
letters of credit opened to provide for the payment of goods or services
purchased in the ordinary course of business) and (vi) obligations under direct
or indirect guaranties in respect of, and obligations (contingent or otherwise)
to purchase or otherwise acquire, or otherwise to assure a creditor against loss
in respect of, indebtedness or obligations of others of the kinds referred to in
clauses (i) through (v) above.

         "Documentation Agent" means Citibank, N.A., in its capacity as
Documentation Agent.

         "Domestic Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Domestic Lending Office" opposite its name on
Schedule I hereto or in the Assignment and Acceptance pursuant to which it
became a Lender, or such other office of such Lender as such Lender may from
time to time specify to the Borrower and the Administrative Agent.

                                      -3-
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         "Eligible Assignee" means (i) a commercial bank organized under the
laws of the United States, or any State thereof; (ii) a commercial bank
organized under the laws of any other country that is a member of the OECD or
has concluded special lending arrangements with the International Monetary Fund
associated with its General Arrangements to Borrow, or a political subdivision
of any such country, provided that such bank is acting through a branch or
agency located in the United States; (iii) a finance company, insurance company
or other financial institution or fund (whether a corporation, partnership or
other entity) engaged generally in making, purchasing or otherwise investing in
commercial loans in the ordinary course of its business; or (iv) the central
bank of any country that is a member of the OECD; provided, however, that (A)
any such Person described in clause (i), (ii) or (iii) above shall also (x) have
outstanding unsecured long-term debt that is rated BBB- or better by S&P and
Baa3 or better by Moody's (or an equivalent rating by another nationally
recognized credit rating agency of similar standing if either such corporation
is no longer in the business of rating unsecured indebtedness of entities
engaged in such businesses) and (y) have combined capital and surplus (as
established in its most recent report of condition to its primary regulator) of
not less than $100,000,000 (or its equivalent in foreign currency), and (B) any
Person described in clause (ii), (iii) or (iv) above shall, on the date on which
it is to become a Lender hereunder, be entitled to receive payments hereunder
without deduction or withholding of any United States Federal income taxes (as
contemplated by Section 2.14(e)).

         "Eligible Successor" means a Person which (i) is a corporation duly
incorporated, validly existing and in good standing under the laws of one of the
states of the United States or the District of Columbia, (ii) is qualified to do
business in Pennsylvania, (iii) as a result of the contemplated acquisition,
consolidation or merger, will succeed to all or substantially all of the
consolidated business and assets of the Borrower and its Subsidiaries, (iv) upon
giving effect to the contemplated acquisition, consolidation or merger, will
have all or substantially all of its consolidated business and assets conducted
and located in the United States and (v) is acceptable to the Majority Lenders
as a credit matter.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder, each as amended and modified from time to time.

         "Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.

         "Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" opposite its
name on Schedule I hereto or in the Assignment and Acceptance pursuant to which
it became a Lender (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time to
time specify to the Borrower and the Administrative Agent.

         "Eurodollar Rate" means, for the Interest Period for each Eurodollar
Rate Advance made as part of the same Borrowing, an interest rate per annum
equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1%
per annum, if such average is not such a multiple) of the rate per annum at
which deposits in U.S. dollars are offered by the principal office of each of
the Reference Banks in London, England, to prime banks in the London interbank
market at 11:00 A.M. (London time) two Business Days before the first day of
such Interest Period in an amount substantially equal to such Reference Bank's
Eurodollar Rate Advance made as part of such Borrowing and for a period equal to
such Interest Period. The Eurodollar Rate for the Interest Period for each
Eurodollar Rate Advance made as part of the same Borrowing shall be determined
by the Administrative Agent on the basis of applicable rates furnished to and
received by the Administrative Agent from the Reference Banks two Business Days
before the first day of such Interest Period, subject, however, to the
provisions of Section 2.08.

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         "Eurodollar Rate Advance" means an Advance that bears interest as
provided in Section 2.06(b).

         "Eurodollar Rate Reserve Percentage" of any Lender for the Interest
Period for any Eurodollar Rate Advance means the reserve percentage applicable
during such Interest Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so applicable) under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Lender with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities having a term equal
to such Interest Period.

         "Events of Default" has the meaning specified in Section 6.01.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended
and modified from time to time.

         "Existing Credit Agreements" shall mean (i) the $450,000,000 364-Day
Credit Agreement dated as of October 7, 1997, among the Borrower, the banks
named therein, certain banks specified therein as lead managers, certain banks
specified therein as co-agents, First Chicago Capital Markets, Inc., Mellon
Bank, N.A., and Citicorp Securities, Inc, as syndication agents, First Chicago
Capital Markets, Inc. and Mellon Bank, N.A., as arrangers, The First National
Bank of Chicago, as Administrative Agent, and Mellon Bank, N.A., as
Documentation Agent, and (ii) the $450,000,000 Credit Agreement dated as of
October 7, 1997, among the Borrower, the banks named therein, certain specified
banks, as lead arrangers, certain specified banks, as co-agents, First Chicago
Capital Markets, Inc., Mellon Bank, N.A., and Citicorp Securities, Inc., as
syndication agents, First Chicago Capital Markets, Inc. and Mellon Bank, N.A.,
as arrangers, The First National Bank of Chicago, as Administrative Agent, and
Mellon Bank, N.A., as Documentation Agent, in each case as amended, modified or
supplemented from time to time.

         "Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

         "FERC" means the Federal Energy Regulatory Commission.

         "FERC Application" has the meaning assigned to that term in Section
3.01(a)(iii).

         "FERC Authorization" has the meaning assigned to that term in Section
3.01(a)(iii).

         "GAAP" shall have the meaning given that term in Section 1.03.

         "Granting Bank" shall have the meaning given that term in Section
8.07(h).

         "Interest Period" means, for each Advance, the period commencing on the
date of such Advance or the date of the Conversion of any Advance into such an
Advance and ending on the last day of the period selected by the Borrower
pursuant to the provisions below and, thereafter, each subsequent period

                                      -5-
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commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by the Borrower pursuant to the
provisions below. The duration of each such Interest Period shall be 1, 2, 3 or
6 months in the case of a Eurodollar Rate Advance, as the Borrower may select in
accordance with Section 2.02 or 2.09; provided, however, that:

             (i) the Borrower may not select any Interest Period that ends after
         the Termination Date then in effect;

             (ii) Interest Periods commencing on the same date for Advances made
         as part of the same Borrowing shall be of the same duration, and

             (iii) whenever the last day of any Interest Period would otherwise
         occur on a day other than a Business Day, the last day of such Interest
         Period shall be extended to occur on the next succeeding Business Day,
         provided, in the case of any Interest Period for a Eurodollar Rate
         Advance, that if such extension would cause the last day of such
         Interest Period to occur in the next following calendar month, the last
         day of such Interest Period shall occur on the next preceding Business
         Day.

         "Lead Arranger" means Banc One Capital Markets in its capacity as Lead
Arranger.

         "Lenders" means the Banks listed on the signature pages hereof and each
Eligible Assignee that shall become a party hereto pursuant to Section 2.17 or
8.07.

         "Level 1 Rating Period" means any period during which the Benchmark
Debt is rated A- or higher by S&P (or a comparable rating from any generally
recognized successor to S&P) or A3 or higher by Moody's (or a comparable rating
from any generally recognized successor to Moody's) (it being understood that,
for this purpose, such ratings shall be subject to the Split Rating Adjustment).

         "Level 2 Rating Period" means any period which does not qualify as a
Level 1 Rating Period during which the Benchmark Debt is rated BBB+ or higher by
S&P (or a comparable rating from any generally recognized successor to S&P) or
Baa1 or higher by Moody's (or a comparable rating from any generally recognized
successor to Moody's) (it being understood that, for this purpose, such ratings
shall be subject to the Split Rating Adjustment).

         "Level 3 Rating Period" means any period which does not qualify as a
Level 1 or Level 2 Rating Period during which the Benchmark Debt is rated BBB or
higher by S&P (or a comparable rating from any generally recognized successor to
S&P) or Baa2 or higher by Moody's (or a comparable rating from any generally
recognized successor to Moody's) (it being understood that, for this purpose,
such ratings shall be subject to the Split Rating Adjustment).

         "Level 4 Rating Period" means any period which does not qualify as a
Level 1, Level 2 or Level 3 Rating Period during which the Benchmark Debt is
rated BBB- or higher by S&P (or a comparable rating from any generally
recognized successor to S&P) or Baa3 or higher by Moody's (or a comparable
rating from any generally recognized successor to Moody's) (it being understood
that, for this purpose, such ratings shall be subject to the Split Rating
Adjustment).

         "Level 5 Rating Period" means any period which does not qualify as a
Level 1, Level 2, Level 3 or Level 4 Rating Period (it being understood that,
for this purpose, such ratings shall be subject to the Split Rating Adjustment).

         "Lien" means any lien (statutory or other), mortgage, pledge, security
interest or other charge or encumbrance, or any other type of preferential
arrangement (including, without limitation, the interest of a vendor or lessor

                                      -6-
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under any conditional sale, capitalized lease or other title retention
agreement).

         "Majority Lenders" means, at any time prior to the Termination Date,
Lenders having at least 51% of the Commitments, and, at any time on or after the
Termination Date, Lenders having at least 51% of the Advances outstanding
(provided that, for purposes hereof, neither the Borrower, nor any of its
Affiliates, if a Lender, shall be included in (i) the Lenders having such amount
of the Commitments or the Advances or (ii) determining the total amount of the
Commitments or the Advances).

         "Material Adverse Change" and "Material Adverse Effect" each means,
relative to any occurrence, fact or circumstances of whatsoever nature
(including, without limitation, any determination in any litigation, arbitration
or governmental investigation or proceeding), (i) any materially adverse change
in, or materially adverse effect on, the financial condition, operations, assets
or business of the Borrower and its consolidated Subsidiaries, taken as a whole
or (ii) any materially adverse effect on the validity or enforceability of this
Agreement or any of the Notes.

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

         "Mortgage" means the First and Refunding Mortgage, dated as of May 1,
1923, between The Counties Gas & Electric Company (to which the Borrower is
successor) and Fidelity Trust Company, Trustee (to which First Union National
Bank is successor), as amended, supplemented or refinanced from time to time,
provided, that no effect shall be given to any amendment, supplement or
refinancing after the date of this Agreement that would broaden the definition
of "excepted encumbrances" as defined in the Mortgage as constituted on the date
of this Agreement.

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

         "Non-Consenting Lender" has the meaning specified in Section 2.16(a).

         "Nonrecourse Transition Bond Debt" means obligations evidenced by
"transition bonds" (as defined in 66 Pa. Cons. Stat. Ann. ss. 2812(g) (West
Supp. 1997), or any successor provision of similar import), rated AA or higher
by S&P (or a comparable rating from a generally recognized successor to S&P) or
Aa2 or higher by Moody's (or a comparable rating from a generally recognized
successor to Moody's), representing a securitization of "intangible transition
property" (as defined in the foregoing statute), as to which obligations neither
the Borrower nor any Subsidiary of the Borrower (other than a Special Purpose
Subsidiary) has any direct or indirect liability (whether as primary obligor,
guarantor, or surety, provider of collateral security, put option, asset
repurchase agreement or capital maintenance agreement, debt subordination
agreement, or through other right or arrangement of any nature providing direct
or indirect assurance of payment or performance of any such obligations in whole
or in part), except for liability to repurchase "intangible transition property"
conveyed to the securitization vehicle, on terms and conditions customary in
receivables securitizations, in the event such "intangible transition property"
violates representations and warranties of scope customary in receivables
securitizations. "Special Purpose Subsidiary" means a direct or indirect
wholly-owned corporate Subsidiary of the Borrower, substantially all of the
assets of which are "intangible transition property" and proceeds thereof,
formed solely for the purpose of holding such assets and issuing such
"transition bonds," and which complies with the requirements customarily imposed
on bankruptcy-remote corporations in receivables securitizations.

                                      -7-
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         "Note" means a promissory note of the Borrower payable to the order of
any Lender, in substantially the form of Exhibit A hereto, evidencing the
aggregate indebtedness of the Borrower to such Lender resulting from the
Advances made by such Lender, including any Notes delivered pursuant to Section
2.16.

         "Notice of a Borrowing" has the meaning specified in Section 2.02(a).

         "OECD" means the Organization for Economic Cooperation and Development.

         "PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.

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

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

         "Principal Subsidiary" means (i) each Utility Subsidiary and (ii) from
and after the date on which the aggregate book value of the assets of the
Subsidiaries of the Borrower that are not Utility Subsidiaries exceeds
$250,000,000, each such Subsidiary the assets of which exceeded $75,000,000 in
book value at any time during the preceding 24-month period.

         "Rating Period" means a Level 1 Rating Period, a Level 2 Rating Period,
a Level 3 Rating Period, a Level 4 Rating Period or a Level 5 Rating Period, as
the case may be.

         "Reference Banks" means First Chicago and Citibank, N.A.

         "Register" has the meaning specified in Section 8.07(c).

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

         "Revolving Credit Agreement" means that certain Revolving Credit
Agreement, dated as of the date hereof, among the Borrower, the banks named
therein, First Chicago, as administrative agent for the lenders thereunder,
Citibank, N.A., as documentation agent, and Banc One Capital Markets, as lead
arranger, as the same may be amended, modified or supplemented from time to
time.

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

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

         "SPC" shall have the meaning assigned to that term in Section 8.07(h).

                                      -8-
<PAGE>

         "Special Purpose Subsidiary" has the meaning assigned to that term in
the definition of "Nonrecourse Transition Bond Debt."

         "Split Rating Adjustment": For the purpose of determining the
appropriate Rating Period, the rating of the Benchmark Debt shall be subject to
adjustment as follows. In the event that the Benchmark Debt is rated at
equivalent rating levels or not more than one rating level apart by S&P (or any
generally accepted successor to S&P) and Moody's (or any generally accepted
successor to Moody's), then no adjustment shall apply. Otherwise, the higher of
the two ratings shall be deemed to be reduced to the next lower rating level.
For this purpose, (i) determination of the rating level shall take into account
"+" and "-" modifiers to S&P ratings and numerical modifiers to Moody's ratings
(so that, for example, an S&P rating of A- shall be deemed equivalent to a
Moody's rating of A3, an S&P rating of BBB+ shall be deemed equivalent to a
Moody's rating of Baa1, an S&P rating of BBB shall be deemed equivalent to a
Moody's rating of Baa2, an S&P rating of BBB- shall be deemed equivalent to a
Moody's rating of Baa3, and so on), and (ii) by way of clarification, in the
event the Benchmark Debt is rated by only one of the two referenced rating
agencies, such rating shall be deemed to be reduced to the next lower rating
level.

         "Subsidiary" means, with respect to any Person, any corporation or
unincorporated entity of which more than 50% of the outstanding capital stock
(or comparable interest) having ordinary voting power (irrespective of whether
or not at the time capital stock, or comparable interests, of any other class or
classes of such corporation or entity shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
such Person (whether directly or through one or more other Subsidiaries).

         "Termination Date" means the earlier of (i) September 13, 2000 (or, if
such date is not a Business Day, the next preceding Business Day) or such later
date that may be established pursuant to Section 2.16(a) or (ii) the date of
termination in whole of the Commitments pursuant to Section 2.04 or Section
6.01.

         "Unfunded Liabilities" means, (i) in the case of any Single Employer
Plan, the amount (if any) by which the present value of all vested
nonforfeitable benefits under such Plan exceeds the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent evaluation date for such Plan, and (ii) in the case of any Multiemployer
Plan, the withdrawal liability that would be incurred by the Controlled Group if
all members of the Controlled Group completely withdrew from such Multiemployer
Plan.

         "Utility Subsidiary" means each Subsidiary of the Borrower that is
engaged principally in the generation, transmission, or distribution of
electricity or gas and is subject to regulation as a public utility by federal
or state regulatory authorities.

         "Year 2000 Problem" shall mean that the computer hardware, software or
equipment containing embedded microchips of the Borrower or any of its
Subsidiaries which is essential to its business or operation will, as a result
of processing dates or time periods occurring after December 31, 1999,
malfunction, causing a system failure or miscalculations resulting in
disruptions of operations, including, among other things, a temporary inability
to process transactions, send bills, operate generation stations, or engage in
similar normal business activities.

         SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".

                                      -9-
<PAGE>

         SECTION 1.03. Accounting Principles. As used in this Agreement, "GAAP"
shall mean generally accepted accounting principles in the United States,
applied on a basis consistent with the principles used in preparing the
Borrower's audited consolidated financial statements as of December 31, 1998 and
for the fiscal year then ended. In this Agreement, except to the extent, if any,
otherwise provided herein, all accounting and financial terms shall have the
meanings ascribed to such terms by GAAP, and all computations and determinations
as to accounting and financial matters shall be made in accordance with GAAP. In
the event that the financial statements generally prepared by the Borrower apply
accounting principles other than GAAP, the compliance certificate delivered
pursuant to Section 5.01(b)(iv) accompanying such financial statements shall
include information in reasonable detail reconciling such financial statements
to GAAP to the extent relevant to the calculations set forth in such compliance
certificate.

                                   ARTICLE II

                        AMOUNTS AND TERMS OF THE ADVANCES

         SECTION 2.01. The Advances. Each Lender severally agrees, on the terms
and conditions hereinafter set forth, to make Advances to the Borrower from time
to time on any Business Day during the period from the date hereof until (but
excluding) the Termination Date in an aggregate amount not to exceed at any time
outstanding the amount set forth opposite such Lender's name on the signature
pages hereof or, if such Lender has entered into any Assignment and Acceptance
or Additional Lender Supplement, set forth for such Lender in the Register
maintained by the Administrative Agent pursuant to Section 8.07(c), as such
amount may be reduced pursuant to Section 2.04 or 2.16 (such Lender's
"Commitment"). Each Borrowing shall consist of Advances of the same Type made or
Converted on the same day by the Lenders ratably according to their respective
Commitments. Each Borrowing comprising Base Rate Advances shall be in an
aggregate amount not less than $5,000,000, and each Borrowing comprising
Eurodollar Rate Advances shall be in an aggregate amount not less than
$10,000,000. Within the limits of each Lender's Commitment, the Borrower may
from time to time borrow, prepay pursuant to Section 2.10 and reborrow under
this Section 2.01.

         SECTION 2.02. Making the Advances. (a) Each Borrowing (other than
pursuant to a Conversion) shall be made on notice, given not later than 10:00
A.M. (Chicago time) on the third Business Day prior to the date of any proposed
Borrowing comprising Eurodollar Rate Advances, and on the date of any proposed
Borrowing comprising Base Rate Advances, by the Borrower to the Administrative
Agent, which shall give to each Lender prompt notice thereof. Each such notice
of a Borrowing (a "Notice of a Borrowing") shall be sent by telecopier, telex or
cable, confirmed immediately in writing, in substantially the form of Exhibit B
hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type
of Advances to be made in connection with such Borrowing, (iii) aggregate amount
of such Borrowing, and (iv) in the case of a Borrowing comprising Eurodollar
Rate Advances, initial Interest Period for the Advances to be made in connection
with such Borrowing. Each Lender shall, before 12:00 Noon (Chicago time) on the
date of such Borrowing, make available for the account of its Applicable Lending
Office to the Administrative Agent at its address referred to in Section 8.02,
in same day funds, such Lender's ratable portion of such Borrowing. After the
Administrative Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to the Borrower at the Administrative Agent's
aforesaid address.

         (b) Each Notice of a Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing that the related Notice of a Borrowing
specifies is to comprise Eurodollar Rate Advances, the Borrower shall indemnify
each Lender against any loss, cost or expense incurred by such Lender as a
result of any failure to fulfill on or before the date specified in such Notice
of a Borrowing for such Borrowing the applicable conditions set forth in Article
III, including, without limitation, any loss, cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by such

                                      -10-
<PAGE>

Lender to fund the Advance to be made by such Lender as part of such Borrowing
when such Advance, as a result of such failure, is not made on such date.

         (c) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such ratable portion available to the Administrative Agent, such
Lender and the Borrower severally agree to repay to the Administrative Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Administrative Agent, at (i) in the case
of the Borrower, the interest rate applicable at the time to Advances made in
connection with such Borrowing and (ii) in the case of such Lender, the Federal
Funds Rate. If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount so repaid shall constitute such Lender's
Advance as part of such Borrowing for purposes of this Agreement.

         (d) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.

         (e) Notwithstanding anything to the contrary contained herein, no more
than sixteen (16) Borrowings comprising Eurodollar Rate Advances may be
outstanding at any time.

         SECTION 2.03. Fees. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee on the
average daily unused portion of such Lender's Commitment from the date on which
the Administrative Agent determines the conditions set forth in Section 3.01 are
satisfied in the case of each Bank, and from the effective date specified in the
Assignment and Acceptance or the Additional Lender Supplement pursuant to which
it became a Lender in the case of each other Lender, until the Termination Date,
and, in the case of the termination in whole of a Lender's Commitment pursuant
to Section 2.04 or 2.16, the date of such termination, payable on the last day
of each March, June, September and December during such period, and on the
Termination Date, and, in the case of the termination in whole of a Lender's
Commitment pursuant to Section 2.04 or 2.16, the date of such termination, at a
percentage rate per annum equal to the Applicable Commitment Fee Rate in effect
from time to time, changing when and as the Applicable Commitment Fee Rate
changes.

         (b) The Borrower agrees to pay to the Administrative Agent for the
account of each Bank a facility fee in an amount equal to .075% of such Bank's
Commitment as in effect on the Closing Date, payable on the Closing Date.

         (c) The Borrower agrees to pay to the Administrative Agent and the Lead
Arranger for their respective accounts, such additional fees, in such amounts
and payable on such dates as may be agreed to in writing from time to time
between the Borrower and the Administrative Agent or the Lead Arranger, as the
case may be.

         SECTION 2.04. Reduction of the Commitments. The Borrower shall have the
right, upon at least two Business Days' notice to the Administrative Agent, to
terminate in whole or reduce ratably in part the unused portions of the
respective Commitments of the Lenders; provided, that the aggregate amount of
the Commitments of the Lenders shall not be reduced to an amount that is less
than the aggregate principal amount of the Advances then outstanding; and
provided, further, that each partial reduction shall be in the aggregate amount
of $10,000,000 or an integral multiple thereof.

                                      -11-
<PAGE>

         SECTION 2.05. Repayment of Advances. The Borrower shall repay the
principal amount of each Advance made by each Lender in accordance with the Note
to the order of such Lender.

         SECTION 2.06. Interest on Advances. The Borrower shall pay interest on
the unpaid principal amount of each Advance made by each Lender from the date of
such Advance until such principal amount shall be paid in full, at the following
rates per annum:

         (a) Base Rate Advances. If such Advance is a Base Rate Advance, a rate
per annum equal at all times to the Base Rate in effect from time to time,
payable quarterly on the last day of each March, June, September and December
during such periods and on the date such Base Rate Advance shall be Converted or
paid in full.

         (b) Eurodollar Rate Advances. Subject to Section 2.07, if such Advance
is a Eurodollar Rate Advance, a rate per annum equal at all times during the
Interest Period for such Advance to the sum of the Eurodollar Rate for such
Interest Period plus the Applicable Margin for such Eurodollar Rate Advance in
effect from time to time, payable on the last day of the Interest Period for
such Eurodollar Rate Advance (or, if the Interest Period for such Advance is six
months, accrued interest shall be payable on the day that is three months and on
the day that is six months from the date such Advance was made) or, if earlier,
on the date such Eurodollar Rate Advance shall be Converted or paid in full.

         SECTION 2.07. Additional Interest on Advances. The Borrower shall pay
to each Lender, so long as such Lender shall be required under regulations of
the Board of Governors of the Federal Reserve System to maintain reserves with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities, additional interest on the unpaid principal amount of each
Eurodollar Rate Advance of such Lender, from the date of such Advance until such
principal amount is paid in full or Converted, at an interest rate per annum
equal at all times to the remainder obtained by subtracting (i) the Eurodollar
Rate for the Interest Period for such Advance from (ii) the rate obtained by
dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar
Rate Reserve Percentage of such Lender for such Interest Period, payable on each
date on which interest is payable on such Advance; provided, that no Lender
shall be entitled to demand such additional interest more than 90 days following
the last day of the Interest Period in respect of which such demand is made;
provided further, however, that the foregoing proviso shall in no way limit the
right of any Lender to demand or receive such additional interest to the extent
that such additional interest relates to the retroactive application of the
reserve requirements described above if such demand is made within 90 days after
the implementation of such retroactive reserve requirements. Such additional
interest shall be determined by such Lender and notified to the Borrower through
the Administrative Agent, and such determination shall be conclusive and binding
for all purposes, absent manifest error.

         SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank
agrees to furnish to the Administrative Agent timely information for the purpose
of determining each Eurodollar Rate. If any one of the Reference Banks shall not
furnish such timely information to the Administrative Agent for the purpose of
determining any such interest rate, the Administrative Agent shall determine
such interest rate on the basis of timely information furnished by the remaining
Reference Banks.

         (b) The Administrative Agent shall give prompt notice to the Borrower
and the Lenders of the applicable interest rate determined by the Administrative
Agent for purposes of Section 2.06(a) or (b), and the applicable rate, if any,
furnished by each Reference Bank for the purpose of determining the applicable
interest rate under Section 2.06(b).

         (c) If either or both Reference Banks fail to furnish timely
information to the Administrative Agent for determining the Eurodollar Rate for
any Eurodollar Rate Advances,

               (i) the Administrative Agent shall forthwith notify the Borrower
         and the Lenders that the interest rate cannot be determined for such
         Eurodollar Rate Advances,

                                      -12-
<PAGE>

               (ii) each such Advance will automatically, on the last day of the
         then existing Interest Period therefor, Convert into a Base Rate
         Advance (or if such Advance is then a Base Rate Advance, will continue
         as a Base Rate Advance), and

               (iii) the obligation of the Lenders to make, or to Convert
         Advances into, Eurodollar Rate Advances shall be suspended until the
         Administrative Agent shall notify the Borrower and the Lenders that the
         circumstances causing such suspension no longer exist.

         (d) If, with respect to any Eurodollar Rate Advances, the Majority
Lenders notify the Administrative Agent that the Eurodollar Rate for any
Interest Period for such Advances will not adequately reflect the cost to such
Majority Lenders of making, funding or maintaining their respective Eurodollar
Rate Advances for such Interest Period, the Administrative Agent shall forthwith
so notify the Borrower and the Lenders, whereupon

             (i) each Eurodollar Rate Advance will automatically, on the last
         day of the then existing Interest Period therefor (unless prepaid or
         Converted to any Type of Advance other than a Eurodollar Rate Advance
         prior to such date), Convert into a Base Rate Advance, and

             (ii) the obligation of the Lenders to make, or to Convert Advances
         into, Eurodollar Rate Advances shall be suspended until the
         Administrative Agent shall notify the Borrower and the Lenders that the
         circumstances causing such suspension no longer exist.

         SECTION 2.09. Conversion of Advances. (a) Voluntary. The Borrower may
on any Business Day, upon notice given to the Administrative Agent not later
than 10:00 A.M. (Chicago time) on the third Business Day prior to the date of
any proposed Conversion into Eurodollar Rate Advances, and on the date of any
proposed Conversion into Base Rate Advances, and subject to the provisions of
Sections 2.08 and 2.12, Convert all Advances of one Type made in connection with
the same Borrowing into Advances of another Type or Types or Advances of the
same Type having the same or a new Interest Period; provided, however, that any
Conversion of Eurodollar Rate Advances into Base Rate Advances or Eurodollar
Advances having the same or new Interest Periods shall be made on, and only on,
the last day of an Interest Period for such Eurodollar Rate Advances, unless the
Borrower shall also reimburse the Lenders in respect thereof pursuant to Section
8.04(b) on the date of such Conversion. Each such notice of a Conversion shall,
within the restrictions specified above, specify (i) the date of such
Conversion, (ii) the Advances to be Converted, and (iii) if such Conversion is
into, or with respect to, Eurodollar Rate Advances, the duration of the Interest
Period for each such Advance.

         (b) Automatic. If the Borrower shall fail to select the Type of any
Advance or the duration of any Interest Period for any Borrowing comprising
Eurodollar Rate Advances in accordance with the provisions contained in the
definition of "Interest Period" in Section 1.01 and Section 2.09(a), the
Administrative Agent will forthwith so notify the Borrower and the Lenders and
such Advances will automatically, on the last day of the then existing Interest
Period therefor, Convert into Base Rate Advances.

         SECTION 2.10. Prepayments. The Borrower may, upon at least three
Business Days' notice in the case of any prepayment of Eurodollar Advances or
one Business Day's notice in the case of any prepayment of Base Rate Advances,
to the Administrative Agent stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Borrower shall, prepay
the outstanding principal amounts of the Advances made as part of the same
Borrowing in whole or ratably in part, together with accrued interest to the
date of such prepayment on the principal amount prepaid; provided, however, that
(i) each partial prepayment shall be in an aggregate principal amount not less
than $10,000,000 in the case of any prepayment of Eurodollar Advances or
$5,000,000 in the case of any prepayment of Base Rate Advances, or any integral

                                      -13-
<PAGE>

multiple of $1,000,000 in excess thereof, and (ii) in the case of any such
prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to
reimburse the Lenders in respect thereof pursuant to Section 8.04(b) on the date
of such prepayment.

         SECTION 2.11. Increased Costs. (a) If on or after the date of this
Agreement, any Lender determines that (i) the introduction of or any change
(other than any change by way of imposition or increase of reserve requirements,
in the case of Eurodollar Rate Advances, included in the Eurodollar Rate Reserve
Percentage) in or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) shall increase
the cost to such Lender of agreeing to make or making, funding or maintaining
Eurodollar Rate Advances, then the Borrower shall from time to time, upon demand
by such Lender (with a copy of such demand to the Administrative Agent), pay to
the Administrative Agent for the account of such Lender additional amounts
(without duplication of any amount payable pursuant to Section 2.14) sufficient
to compensate such Lender for such increased cost; provided, that no Lender
shall be entitled to demand such compensation more than 90 days following the
last day of the Interest Period in respect of which such demand is made;
provided further, however, that the foregoing proviso shall in no way limit the
right of any Lender to demand or receive such compensation to the extent that
such compensation relates to the retroactive application of any law, regulation,
guideline or request described in clause (i) or (ii) above if such demand is
made within 90 days after the implementation of such retroactive law,
interpretation, guideline or request. A certificate as to the amount of such
increased cost, submitted to the Borrower and the Administrative Agent by such
Lender, shall be conclusive and binding for all purposes, absent manifest error.

         (b) If any Lender determines that, after the date of this Agreement,
compliance with any law or regulation or any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) regarding capital adequacy requirements affects or would affect the amount
of capital required or expected to be maintained by such Lender or any
corporation controlling such Lender (including, in any event, any determination
after the date of this Agreement by any such governmental authority or central
bank that, for purposes of capital adequacy requirements, any Lender's
Commitment hereunder does not constitute a commitment with an original maturity
of one year or less) and that the amount of such capital is increased by or
based upon the existence of such Lender's commitment to lend hereunder and other
commitments of this type or the Advances made by such Lender, then, upon demand
by such Lender (with a copy of such demand to the Administrative Agent), the
Borrower shall immediately pay to the Administrative Agent for the account of
such Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender or such corporation in the light of such
circumstances, to the extent that such Lender determines such increase in
capital to be allocable to the existence of such Lender's commitment to lend
hereunder or the Advances made by such Lender; provided, that no Lender shall be
entitled to demand such compensation more than one year following the payment to
or for the account of such Lender of all other amounts payable hereunder and
under any Note held by such Lender and the termination of such Lender's
Commitment; provided further, however, that the foregoing proviso shall in no
way limit the right of any Lender to demand or receive such compensation to the
extent that such compensation relates to the retroactive application of any law,
regulation, guideline or request described above if such demand is made within
one year after the implementation of such retroactive law, interpretation,
guideline or request. A certificate as to such amounts submitted to the Borrower
and the Administrative Agent by such Lender shall be conclusive and binding, for
all purposes, absent manifest error.

         (c) Any Lender claiming compensation pursuant to this Section 2.11
shall use its best efforts (consistent with its internal policy and legal and
regulatory restrictions) to change the jurisdiction of its Applicable Lending
Office if the making of such a change would avoid the need for, or reduce the
amount of, any such compensation that may thereafter accrue and would not, in
the reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender.

                                      -14-
<PAGE>

         SECTION 2.12. Illegality. Notwithstanding any other provision of this
Agreement, if any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for such Lender or its Eurodollar Lending
Office to perform its obligations hereunder to make Eurodollar Rate Advances or
to fund or maintain Eurodollar Rate Advances hereunder, (i) the obligation of
such Lender to make, or to Convert Advances into, Eurodollar Rate Advances shall
be suspended (subject to the following paragraph of this Section 2.12) until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist and (ii) all Eurodollar
Rate Advances of such Lender then outstanding shall, on the last day of then
applicable Interest Period (or such earlier date as such Lender shall designate
upon not less than five Business Days prior written notice to the Administrative
Agent), be automatically Converted into Base Rate Advances.

         If the obligation of any Lender to make, fund or maintain Eurodollar
Rate Advances has been suspended pursuant to the preceding paragraph, then,
unless and until the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist (i) all
Advances that would otherwise be made by such Lender as Eurodollar Rate Advances
shall instead be made as Base Rate Advances and (ii) to the extent that
Eurodollar Rate Advances of such Lender have been Converted into Base Rate
Advances pursuant to the preceding paragraph or made instead as Base Rate
Advances pursuant to the preceding clause (i), all payments and prepayments of
principal that would have otherwise been applied to such Eurodollar Rate
Advances of such Lender shall be applied instead to such Base Rate Advances of
such Lender.

         SECTION 2.13. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Notes not later than 10:00 A.M. (Chicago
time) on the day when due in U.S. dollars to the Administrative Agent at its
address referred to in Section 8.02 in same day funds without setoff,
counterclaim or other deduction. The Administrative Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest or commitment and facility fees ratably (other than
amounts payable pursuant to Section 2.02(c), 2.07, 2.11, 2.14, 2.16(a) or
8.04(b)) to the Lenders for the account of their respective Applicable Lending
Offices, and like funds relating to the payment of any other amount payable to
any Lender to such Lender for the account of its Applicable Lending Office, in
each case to be applied in accordance with the terms of this Agreement. Upon its
acceptance of an Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 8.07(d), from and after
the effective date specified in such Assignment and Acceptance, the
Administrative Agent shall make all payments hereunder and under the Notes in
respect of the interest assigned thereby to the Lender assignee thereunder, and
the parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves.

         (b) The Borrower hereby authorizes each Lender, if and to the extent
payment owed to such Lender is not made when due hereunder or under any Note
held by such Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.

         (c) All computations of interest based on the Base Rate shall be made
by the Administrative Agent on the basis of a year of 365 or 366 days, as the
case may be, and all computations of interest based on the Eurodollar Rate or
the Federal Funds Rate and of commitment fees shall be made by the
Administrative Agent, and all computations of interest pursuant to Section 2.07
shall be made by a Lender, on the basis of a year of 360 days, in each case for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or commitment fees are payable.
Each determination by the Administrative Agent (or, in the case of Section 2.07,
by a Lender) of an interest rate hereunder shall be conclusive and binding for
all purposes, absent manifest error.

         (d) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be

                                      -15-
<PAGE>

included in the computation of payment of interest or commitment fee, as the
case may be; provided, however, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.

         (e) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent that the Borrower
shall not have so made such payment in full to the Administrative Agent, each
Lender shall repay to the Administrative Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Administrative Agent, at the Federal Funds Rate.

         (f) Notwithstanding anything to the contrary contained herein, any
amount payable by the Borrower hereunder or under any Note that is not paid when
due (whether at stated maturity, by acceleration or otherwise) shall (to the
fullest extent permitted by law) bear interest from the date when due until paid
in full at a rate per annum equal at all times to the Base Rate plus 2%, payable
upon demand.

         SECTION 2.14. Taxes. (a) Any and all payments by the Borrower hereunder
or under the Notes shall be made, in accordance with Section 2.13, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Administrative Agent,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Lender or the Administrative Agent (as
the case may be) is organized or any political subdivision thereof and, in the
case of each Lender, taxes imposed on its income, and franchise taxes imposed on
it, by the jurisdiction of such Lender's Applicable Lending Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under any Note to any Lender or
the Administrative Agent, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14) such Lender or
the Administrative Agent (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.

         (b) In addition, the Borrower agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies to the extent arising from the execution, delivery or registration of
this Agreement or the Notes (hereinafter referred to as "Other Taxes").

         (c) No Lender may claim or demand payment or reimbursement in respect
of any Taxes or Other Taxes pursuant to this Section 2.14 if such Taxes or Other
Taxes, as the case may be, were imposed solely as the result of a voluntary
change in the location of the jurisdiction of such Lender's Applicable Lending
Office.

         (d) The Borrower will indemnify each Lender and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender or the Administrative Agent
(as the case may be) and any liability (including penalties, interest and

                                      -16-
<PAGE>

expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. This indemnification shall be
made within 30 days from the date such Lender or the Administrative Agent (as
the case may be) makes written demand therefor.

         (e) Prior to the date of the initial Borrowing in the case of each
Bank, and on the date of the Assignment and Acceptance or Additional Lender
Supplement pursuant to which it became a Lender in the case of each other
Lender, and from time to time thereafter within 30 days from the date of request
if requested by the Borrower or the Administrative Agent, each Lender organized
under the laws of a jurisdiction outside the United States shall provide the
Administrative Agent and the Borrower with the forms prescribed by the Internal
Revenue Service of the United States certifying that such Lender is exempt from
United States withholding taxes with respect to all payments to be made to such
Lender hereunder and under the Notes. If for any reason during the term of this
Agreement, any Lender becomes unable to submit the forms referred to above or
the information or representations contained therein are no longer accurate in
any material respect, such Lender shall notify the Administrative Agent and the
Borrower in writing to that effect. Unless the Borrower and the Administrative
Agent have received forms or other documents satisfactory to them indicating
that payments hereunder or under any Note are not subject to United States
withholding tax, the Borrower or the Administrative Agent shall withhold taxes
from such payments at the applicable statutory rate in the case of payments to
or for any Lender organized under the laws of a jurisdiction outside the United
States and no Lender may claim or demand payment or reimbursement for such
withheld taxes pursuant to this Section 2.14.

         (f) Any Lender claiming any additional amounts payable pursuant to this
Section 2.14 shall use its best efforts (consistent with its internal policy and
legal and regulatory restrictions) to change the jurisdiction of its Applicable
Lending Office if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.

         (g) If the Borrower makes any additional payment to any Lender pursuant
to this Section 2.14 in respect of any Taxes or Other Taxes, and such Lender
determines that it has received (i) a refund of such Taxes or Other Taxes or
(ii) a credit against or relief or remission for, or a reduction in the amount
of, any tax or other governmental charge attributable solely to any deduction or
credit for any Taxes or Other Taxes with respect to which it has received
payments under this Section 2.14, such Lender shall, to the extent that it can
do so without prejudice to the retention of such refund, credit, relief,
remission or reduction, pay to the Borrower such amount as such Lender shall
have determined to be attributable to the deduction or withholding of such Taxes
or Other Taxes. If, within one year after the payment of any such amount to the
Borrower, such Lender determines that it was not entitled to such refund,
credit, relief, remission or reduction to the full extent of any payment made
pursuant to the first sentence of this Section 2.14(g), the Borrower shall upon
notice and demand of such Lender promptly repay the amount of such overpayment.
Any determination made by such Lender pursuant to this Section 2.14(g) shall in
the absence of bad faith or manifest error be conclusive, and nothing in this
Section 2.14(g) shall be construed as requiring any Lender to conduct its
business or to arrange or alter in any respect its tax or financial affairs
(except as required by Section 2.14(f)) so that it is entitled to receive such a
refund, credit or reduction or as allowing any person to inspect any records,
including tax returns, of any Lender.

         (h) Without prejudice to the survival of any other agreement of the
Borrower or any Lender hereunder, the agreements and obligations of the Borrower
and the Lenders contained in this Section 2.14 shall survive the payment in full
of principal and interest hereunder and under the Notes; provided, that no
Lender shall be entitled to demand any payment under this Section 2.14 more than
one year following the payment to or for the account of such Lender of all other
amounts payable hereunder and under any Note held by such Lender and the
termination of such Lender's Commitment; provided further, however, that the
foregoing proviso shall in no way limit the right of any Lender to demand or
receive any payment under this Section 2.14 to the extent that such payment
relates to the retroactive application of any Taxes or Other Taxes if such
demand is made within one year after the implementation of such Taxes or Other
Taxes.

                                      -17-
<PAGE>

         SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances made by it (other than
pursuant to Section 2.02(c), 2.07, 2.11, 2.14, 2.16(a) or 8.04(b)) in excess of
its ratable share of payments on account of the Advances obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Advances made by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them,
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.15 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.

         SECTION 2.16. Extension of Termination Date. (a) Unless the Termination
Date shall have occurred, the Borrower may request the Lenders, by written
notice to the Administrative Agent not more than 90 days and not less than 60
days prior to the then effective Termination Date, to consent to extension of
the Termination Date to the date which is 364 days after the then effective
Termination Date (or, if such date is not a Business Day, the next preceding
Business Day). Each Lender shall, in its sole discretion, determine whether to
consent to such request and shall notify the Administrative Agent of its
determination not more than 45 days and not less than 30 days prior to the
then-effective Termination Date. Any Lender which fails to give such notice to
the Administrative Agent shall be deemed to have not consented to such request.
If any Lender shall not have consented to such request 30 days prior to the then
effective Termination Date (such Lender being referred to herein as a
"Non-Consenting Lender"), the Administrative Agent shall promptly so notify the
Borrower and the other Lenders, whereupon each other Lender may, not more than
30 days and not less than 25 days prior to the then effective Termination Date,
revoke any consent to such extension previously given by such Lender (in which
case such Lender shall be deemed a Non-Consenting Lender). If such request shall
have been consented to by the Majority Lenders (as determined after giving
effect to the replacement of any Non-Consenting Lender pursuant to Section
8.07(g)), the Administrative Agent shall notify the Borrower and the Lenders in
writing of such consent, and such extension shall become effective (other than
with respect to any Non-Consenting Lender) upon the delivery by the Borrower to
the Administrative Agent and each Lender, on or prior to the then-effective
Termination Date, of (i) a certificate of a duly authorized officer of the
Borrower, dated such date, as to the accuracy, both before and after giving
effect to such proposed extension, of the representations and warranties set
forth in Section 4.01 and as to the absence, both before and after giving effect
to such proposed extension, of any Event of Default or event that with the
giving of notice or the passage of time or both would constitute an Event of
Default, (ii) certified copies of all corporate and governmental approvals, if
any, required to be obtained by the Borrower in connection with such proposed
extension , (iii) new Notes dated such date, substantially in the form of
Exhibit A hereto with the blanks appropriately completed, payable to the order
of each Lender (other than a Non-Consenting Lender) in the principal amount of
such Lender's Commitment and (iv ) an opinion of counsel to the Borrower (who
shall be satisfactory to the Administrative Agent) as to the matters set forth
in Exhibit D, upon giving effect to the extension of the Termination Date and
the new Notes, and such other matters as any Lender, through the Administrative
Agent, may reasonably request, all of the foregoing to be satisfactory in form
and substance to the Administrative Agent. In the event of any such extension of
the Termination Date, the Commitment of each Non-Consenting Lender that has not
been replaced pursuant to Section 8.07(g) shall be terminated in whole as of
such former Termination Date, the aggregate principal amount of all Advances
made by each Non-Consenting Lender, together with accrued and unpaid interest,

                                      -18-
<PAGE>

commitment fees and facility fees, and all other amounts payable hereunder to or
for the account of each Non-Consenting Lender shall be due and payable on such
former Termination Date, and upon such reduction and payment of such amounts
each Non-Consenting Lender shall cease to be a party to this Agreement (although
each Non-Consenting Lender shall continue to be entitled to indemnification
pursuant to Section 8.04(c)).

         (b) Upon the effectiveness of any extension of the Termination Date
pursuant to subsection (a) above, each reference in Section 4.01(e) and Exhibit
D to (i) the year-end financial statements of the Borrower, (ii) December 31 of
any year, (iii) the quarter-end financial statements of the Borrower and (iv)
the last day of any fiscal quarter (other than December 31) of any year, shall
be deemed to be amended to be references to (A) the year-end financial
statements of the Borrower included in the Borrower's Annual Report on Form 10-K
most recently delivered to the Lenders pursuant to Section 5.01(b)(iii), (B)
December 31 of the year of the financial statements described in clause (A)
above, (C) the fiscal quarter-end financial statements of the Borrower included
in the Borrower's Quarterly Report on Form 10-Q most recently delivered to the
Lenders pursuant to Section 5.01(b)(ii) and (D) the last day of the fiscal
quarter of the financial statements described in clause (C) above, respectively.

         SECTION 2.17. Additional Lenders. (a) For a period of 60 days after
extension of a Termination Date pursuant to Section 2.16(a) that has resulted in
a reduction of the aggregate Commitments of the Lenders, the Borrower may
request that one or more additional banks or other Persons (each, an "Additional
Lender") become party to this Agreement as Lenders and that the aggregate amount
of the Commitments of the Lenders be increased to reflect the Commitments
allocated to each such Additional Lender; provided, that the aggregate
Commitments of the Lenders after giving effect to such increase shall not exceed
the aggregate Commitments of the Lenders immediately prior to such former
Termination Date. Addition of an Additional Lender shall be made only with the
written consent of the Administrative Agent (which consent shall not be
unreasonably withheld or delayed) and with the written consent of the Borrower
(which consent may be granted or withheld in its absolute discretion). Each
Additional Lender must be an Eligible Assignee and, without the consent of the
Administrative Agent, the initial Commitment of each Additional Lender shall not
be less than $10,000,000.

         (b) Addition of an Additional Lender shall be effected by the
Additional Lender executing and delivering to the Administrative Agent, for its
acceptance and recording in the Register, a duly completed Additional Lender
Supplement in substantially the form of Exhibit G attached hereto. The Borrower
shall execute and deliver to the Administrative Agent for transmittal to such
Additional Lender a Note in substantially the form of Exhibit A attached hereto
in the amount of the Commitment of such Additional Lender. Acceptance by the
Administrative Agent of an Additional Lender is subject to the conditions that
the Administrative Agent shall have received, with a counterpart for each
Lender, (i) a certificate of a duly authorized officer of the Borrower, dated
the effective date of such Additional Lender Supplement, as to the accuracy,
both before and after giving effect to such proposed addition, of the
representations and warranties set forth in Section 4.01 and as to the absence,
both before and after giving effect to such proposed extension, of any Event of
Default or event that with the giving of notice or the passage of time or both
would constitute an Event of Default, (ii) certified copies of all corporate and
governmental approvals, if any, required to be obtained by the Borrower in
connection with such proposed addition, (iii) an opinion of counsel to the
Borrower (who shall be satisfactory to the Administrative Agent) as to the
matters set forth in Exhibit D (appropriately modified to include, in addition
to the other matters set forth therein, such Additional Lender Supplement and
the new Note), and such other matters as any Lender, through the Administrative
Agent, may reasonably request, and (iv) such other certificates and documents as
the Administrative Agent may reasonably request, all of the foregoing to be
satisfactory in form and substance to the Administrative Agent. Upon execution
and delivery of the Additional Lender Supplement, acceptance by the
Administrative Agent and recording in the Register, from and after the effective
date specified in such Additional Lender Supplement, such Additional Lender

                                      -19-
<PAGE>

shall be a party hereto and shall, to the extent of the Commitment specified in
such Additional Lender Supplement, have the rights and obligations of a Lender
hereunder.

         (c) If, at the time an Additional Lender is to become party to this
Agreement, the continuing Lenders have any outstanding Advances, such Additional
Lender shall offer to purchase from each continuing Lender, effective as of the
date such Additional Lender becomes party to this Agreement, a portion of each
continuing Lender's outstanding Advances, in such amounts as will have the
result that, immediately after giving effect to such Additional Lender becoming
party to this Agreement and to such purchases, each Lender (including the
Additional Lender) shall share in the outstanding Advances in the same
proportion as their respective Commitments. The Additional Lender shall offer in
writing to purchase the requisite portion of each continuing Lender's
outstanding Advances, at a price equal to the outstanding principal amount
thereof together with accrued and unpaid interest thereon to the date of
purchase, and a continuing Lender shall not unreasonably decline to accept such
offer. Each such purchase shall be made in accordance with Section 8.07 (with
the related Assignment and Acceptance modified, mutatis mutandis, to reflect
that such purchase is not a purchase of any portion of the Commitment of the
continuing Lender). Such purchases shall not be subject to the provisions of
clause (ii) of Section 8.07(a), and the Borrower shall be responsible for all
amounts payable to the Administrative Agent pursuant to clause (iv) of Section
8.07(a). The Borrower shall pay to each continuing Lender on demand any amount
that would be payable to such continuing Lender pursuant to Section 8.04(b)
(which for this purpose shall be applied as if such assignment were a prepayment
of the Advances assigned by such continuing Lender), and shall reimburse each
continuing Lender on demand for all reasonable fees and expenses (including
reasonable fees and expenses of counsel) incurred by it in connection with such
assignment.

                                   ARTICLE III

                              CONDITIONS OF LENDING

         SECTION 3.01. Conditions Precedent to Initial Advances. The obligation
of each Lender to make its initial Advance is subject to the satisfaction, prior
to or concurrently with, the making of such initial Advance, of each of the
following conditions precedent:

         (a) Documents and Other Agreements. The Administrative Agent shall have
received on or before the day of the initial Borrowing the following, each dated
the same date, in form and substance satisfactory to the Administrative Agent
and (except for the Notes) with one copy for each Lender:

             (i) The Notes payable to the order of each of the Lenders,
         respectively;

             (ii) Certified copies of the resolutions of the Board of Directors
         of the Borrower approving the transactions contemplated by this
         Agreement and the Notes, and of all documents evidencing other
         necessary corporate action with respect to this Agreement and the
         Notes;

             (iii) A certificate of the Secretary or an Assistant Secretary of
         the Borrower certifying (A) the names and true signatures of the
         officers of the Borrower authorized to sign this Agreement and the
         Notes and the other documents to be delivered hereunder; (B) that
         attached thereto are true and correct copies of the Restated Articles
         of Incorporation and the By-laws of the Borrower, in each case in
         effect on such date; and (C) that attached thereto are true and correct
         copies of all governmental and regulatory authorizations and approvals
         required for the due execution, delivery and performance of this
         Agreement and the Notes, including, without limitation, the Application

                                      -20-
<PAGE>

         for Authorization filed with FERC by the Borrower (the "FERC
         Application") and the Authorization issued by FERC approving the FERC
         Application (the "FERC Authorization");

             (iv) Copies of the financial statements referred to in Section
         4.01(e);

             (v) A certificate signed by either the chief financial officer,
         principal accounting officer or treasurer of the Borrower stating that
         (A) the representations and warranties contained in Section 4.01 are
         correct on and as of the date of such certificate as though made on and
         as of such date, (B) no event has occurred and is continuing on the
         date of such certificate that constitutes an Event of Default or would
         constitute an Event of Default but for the requirement that notice be
         given or time elapse or both and (C) stating the specific provision of
         the FERC Application or the FERC Authorization pursuant to which this
         Agreement is authorized and stating that the Borrower is in compliance
         with such provision;

             (vi) A favorable opinion of Ballard Spahr Andrews & Ingersoll,
         special counsel for the Borrower, substantially in the form of Exhibit
         D hereto; and

             (vii) A favorable opinion of Reed Smith Shaw & McClay LLP, counsel
         for the Administrative Agent, substantially in the form of Exhibit E
         hereto.

         (b) Termination of Prior Credit Facility. The Administrative Agent
shall have received evidence of (i) the payment in full of all obligations of
the Borrower under the Existing Credit Agreements, and (ii) the termination of
the "Commitments" under the Existing Credit Agreements.

         SECTION 3.02. Conditions Precedent to Certain Borrowings. The
obligation of each Lender to make an Advance on the occasion of each Borrowing
(including the initial Borrowing) that would increase the aggregate amount of
Advances outstanding shall be subject to the further conditions precedent that
on the date of such Borrowing the following statements shall be true, and each
of the giving of the applicable Notice of a Borrowing and the acceptance by the
Borrower of the proceeds of such Borrowing shall constitute a representation and
warranty by the Borrower that on the date of such Borrowing such statements are
true:

             (A) The representations and warranties contained in Section 4.01
         are correct on and as of the date of such Borrowing, before and after
         giving effect to such Borrowing and to the application of the proceeds
         therefrom, as though made on and as of such date; and

             (B) No event has occurred and is continuing, or would result from
         such Borrowing or from the application of the proceeds therefrom, that
         constitutes an Event of Default or would constitute an Event of Default
         but for the requirement that notice be given or time elapse or both (it
         being understood for clarification that (i) without limiting the
         foregoing, it is a condition of this clause (B) that the Borrower shall
         be in compliance with Section 5.01(a)(iv), Section 5.02(a) and Section
         5.02(c) upon giving effect to such Borrowing and (ii) the conditions of
         this clause (B) shall apply whether or not the respective Commitments
         of the Lenders have been terminated pursuant to Section 6.01).

                                      -21-
<PAGE>

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

         SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:

         (a) The Borrower is a corporation duly organized. validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania.

         (b) The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not and will not
contravene (i) the Borrower's Restated Articles of Incorporation or By-laws,
(ii) applicable law or (iii) any contractual or legal restriction binding on or
affecting the Borrower or its properties.

         (c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of this Agreement or
the Notes except for the filing of the FERC Application with, and the final
approval of, and the FERC Authorization issued by, FERC, which filing has been
duly made and which final approval and FERC Authorization have been duly
obtained; such FERC Authorization is in full force and effect and is final; and
on and after the date of the initial Borrowing hereunder, the action of FERC
approving the FERC Application shall no longer be subject to appeal.

         (d) This Agreement is, and the Notes when delivered hereunder will be,
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms, except as the enforceability
thereof may be limited by equitable principles or bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally.

         (e) The consolidated balance sheet of the Borrower and its Subsidiaries
as at December 31, 1998, and the related statements of income and retained
earnings and of cash flows of the Borrower and its Subsidiaries for the fiscal
year then ended, certified by Pricewaterhouse Coopers LLP, and the unaudited
consolidated balance sheet of the Borrower and its Subsidiaries as at June 30,
1999, and the related unaudited statements of income for the six-month period
then ended, copies of which have been furnished to each Lender, fairly present
in all material respects (subject, in the case of such balance sheets and
statements of income for the period ended June 30, 1999, to year-end
adjustments) the consolidated financial condition of the Borrower and its
Subsidiaries as at such dates and the consolidated results of the operations of
the Borrower and its Subsidiaries for the periods ended on such dates, all in
accordance with GAAP, and since June 30, 1999, there has been no Material
Adverse Change.

         (f) Except as disclosed in the Borrower's Annual, Quarterly or Current
Reports, each as filed with the Securities and Exchange Commission and delivered
to the Lenders (including reports filed prior to the date of execution and
delivery of this Agreement and reports delivered to the Lenders pursuant to
Section 5.01(b)), there is no pending or threatened action, investigation or
proceeding affecting the Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator that may reasonably be anticipated to have a
Material Adverse Effect. There is no pending or threatened action or proceeding
against the Borrower or its Subsidiaries that purports to affect the legality,
validity, binding effect or enforceability of this Agreement or any Note.

         (g) No proceeds of any Advance have been or will be used directly or
indirectly in connection with the acquisition of in excess of 5% of any class of
equity securities that is registered pursuant to Section 12 of the Exchange Act

                                      -22-
<PAGE>

or any transaction subject to the requirements of Section 13 or 14 of the
Exchange Act.

         (h) The Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System),
and no proceeds of any Advance will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock. Not more than 25% of the value of the assets of the Borrower
and its Principal Subsidiaries is represented by margin stock.

         (i) The Borrower (i) is exempt from the provisions of the Public
Utility Holding Company Act of 1935, as amended, other than Section 9(a)(2)
thereof, pursuant to Section 3(a)(2) thereof, and (ii) is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.

         (j) During the twelve consecutive month period prior to the date of the
execution and delivery of this Agreement and prior to the date of any Borrowing
under this Agreement, no steps have been taken to terminate any Plan, and no
contribution failure by the Borrower or any member of the Controlled Group has
occurred with respect to any Plan. No condition exists or event or transaction
has occurred with respect to any Plan (including any Multiemployer Plan) which
might result in the incurrence by the Borrower or any member of the Controlled
Group of any material liability, fine or penalty.

         (k) The Borrower is reviewing its operations and those of its
Subsidiaries with a view to assessing whether its business, or the business of
any of its Subsidiaries (i) will be vulnerable to a Year 2000 Problem or (ii)
will be vulnerable to the effects of a Year 2000 Problem suffered by the
Borrower's or any of its Subsidiaries' major counterparties, in the case of (ii)
as described in the Borrower's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999. The Borrower represents and warrants that it does not
believe that any Year 2000 Problem will impair the Borrower's ability to pay
principal or interest on the Notes in accordance with their terms.

                                    ARTICLE V

                            COVENANTS OF THE BORROWER

         SECTION 5.01. Affirmative Covenants. So long as any Note or any amount
payable by the Borrower hereunder shall remain unpaid or any Lender shall have
any Commitment hereunder (except with respect to subsection (a)(iv), which shall
be applicable only as of the date hereof and at any time that any Advance is
outstanding hereunder), the Borrower will, and, in the case of Section 5.01(a),
will cause its Principal Subsidiaries to, unless the Majority Lenders shall
otherwise consent in writing:

         (a) Keep Books; Corporate Existence; Maintenance of Properties;
Compliance with Laws; Insurance; Taxes.

             (i) keep proper books of record and account, all in accordance with
         generally accepted accounting principles;

             (ii) subject to Section 5.02(b), preserve and keep in full force
         and effect its existence;

             (iii) maintain and preserve all of its properties (except such
         properties the failure of which to maintain or preserve would not have,
         individually or in the aggregate, a Material Adverse Effect) which are

                                      -23-
<PAGE>

         used or useful in the conduct of its business in good working order and
         condition, ordinary wear and tear excepted;

             (iv) comply in all material respects with the requirements of all
         applicable laws, rules, regulations and orders (including those of any
         governmental authority and including with respect to environmental
         matters) to the extent the failure to so comply, individually or in the
         aggregate, would have either a Material Adverse Effect or a material
         adverse effect on the ability of the Borrower to perform its
         obligations under this Agreement and the Notes;

             (v) maintain insurance with responsible and reputable insurance
         companies or associations, or self-insure, as the case may be, in each
         case in such amounts and covering such contingencies, casualties and
         risks as is customarily carried by or self-insured against by companies
         engaged in similar businesses and owning similar properties in the same
         general areas in which the Borrower and its Principal Subsidiaries
         operate;

             (vi) at any reasonable time and from time to time, pursuant to
         prior notice delivered to the Borrower, permit any Lender, or any
         agents or representatives of any thereof, to examine and, at such
         Lender's expense, make copies of, and abstracts from the records and
         books of account of, and visit the properties of, the Borrower and any
         of its Principal Subsidiaries and to discuss the affairs, finances and
         accounts of the Borrower and any of its Subsidiaries with any of their
         respective officers; provided, that any non-public information (which
         has been identified as such by the Borrower) obtained by any Lender, or
         any of their respective agents or representatives pursuant to this
         subsection (vi) shall be treated confidentially by such Person;
         provided, further, that such Person may disclose such information to
         any other party to this Agreement, its examiners, affiliates, outside
         auditors, counsel or other professional advisors in connection with the
         Agreement or if otherwise required to do so by law or regulatory
         process;

             (vii) use the proceeds of the Advances for general corporate
         purposes (including, without limitation, the refinancing of its
         commercial paper, the repayment of outstanding Advances, and the making
         of acquisitions) but in no event for any purpose which would be
         contrary to clause (g) or clause (h) of Section 4.01;

             (viii) take the actions and commit the resources deemed necessary
         by the National Electric Reliance Council ("NERC"), the Mid-Atlantic
         Area Counsel, the Nuclear Regulatory Commission and the PUC to mitigate
         against the Year 2000 Problem; and

             (ix) at the request of the Administrative Agent, provide the
         Administrative Agent with any reports submitted by the Borrower to NERC
         relating to the Year 2000 Problem, within a reasonable time after such
         request.

         (b) Reporting Requirements. Furnish to the Lenders:

             (i) as soon as possible, and in any event within 5 Business Days
         after the occurrence of each Event of Default or each event which, with
         the giving of notice or lapse of time, or both, would constitute an
         Event of Default, continuing on the date of such statement, a statement
         of an authorized officer of the Borrower setting forth details of such
         Event of Default or event and the action which the Borrower proposes to
         take with respect thereto;

                                      -24-
<PAGE>

             (ii) as soon as available and in any event within 60 days after the
         end of each of the first three quarters of each fiscal year of the
         Borrower, a copy of the Borrower's Quarterly Report on Form 10-Q filed
         with the Securities and Exchange Commission with respect to such
         quarter, together with a certificate of an authorized officer of the
         Borrower stating that no Event of Default, or event which, with notice
         or lapse of time or both, would constitute an Event of Default, has
         occurred and is continuing or, if any Event of Default or such event
         has occurred and is continuing, a statement as to the nature thereof
         and the action which the Borrower proposes to take with respect
         thereto;

             (iii) as soon as available and in any event within 105 days after
         the end of each fiscal year of the Borrower, a copy of the Borrower's
         Annual Report on Form 10-K filed with the Securities and Exchange
         Commission with respect to such fiscal year, together with a
         certificate of an authorized officer of the Borrower stating that no
         Event of Default, or event which, with notice of lapse of time or both,
         would constitute an Event of Default, has occurred and is continuing
         or, if any Event of Default or such event has occurred and is
         continuing, a statement as to the nature thereof and the action which
         the Borrower proposes to take with respect thereto;

             (iv) concurrently with the delivery of the annual and quarterly
         reports referred to in Sections 5.01(b)(ii) and 5.01(b)(iii), a
         compliance certificate in substantially the form set forth in Exhibit
         F, duly completed and signed by the Chief Financial Officer, Treasurer
         or an Assistant Treasurer of the Borrower;

             (v) except as otherwise provided in subsections (ii) and (iii)
         above, promptly after the sending or filing thereof, copies of all
         reports that the Borrower sends to any of its security holders, and
         copies of all Reports on Form 10-K, 10-Q or 8-K, and registration
         statements and prospectuses that the Borrower or any of its
         Subsidiaries files with the Securities and Exchange Commission or any
         national securities exchange (except to the extent that any such
         registration statement or prospectus relates solely to the issuance of
         securities pursuant to employee or dividend reinvestment plans of the
         Borrower or such Subsidiary);

             (vi) promptly upon becoming aware of the institution of any steps
         by the Borrower or any other Person to terminate any Plan, or the
         failure to make a required contribution to any Plan if such failure is
         sufficient to give rise to a lien under section 302(f) of ERISA, or the
         taking of any action with respect to a Plan which could result in the
         requirement that the Borrower furnish a bond or other security to the
         PBGC or such Plan, or the occurrence of any event with respect to any
         Plan, which could result in the incurrence by the Borrower or any
         member of the Controlled Group of any material liability, fine or
         penalty; and

             (vii) such other information respecting the condition, operations,
         business or prospects, financial or otherwise, of the Borrower or any
         of its Subsidiaries as any Lender, through the Administrative Agent,
         may from time to time reasonably request.

         SECTION 5.02. Negative Covenants. So long as any Note or any amount
payable by the Borrower hereunder shall remain unpaid or any Lender shall have
any Commitment hereunder (except with respect to subsection (a), which shall be
applicable only as of the date hereof and at any time any Advance is outstanding
hereunder), the Borrower will not, without the written consent of the Majority
Lenders:

         (a) Limitation on Liens. Create, incur, assume or suffer to exist, or
permit any of its Principal Subsidiaries to create, incur, assume or suffer to
exist, any Lien on its respective property, revenues or assets, whether now

                                      -25-
<PAGE>

owned or hereafter acquired except (i) Liens upon or in any property acquired by
the Borrower or any of its Principal Subsidiaries in the ordinary course of
business to secure the purchase price of such property or to secure any
obligation incurred solely for the purpose of financing the acquisition of such
property, (ii) Liens existing on such property at the time of its acquisition
(other than any such Lien created in contemplation of such acquisition unless
permitted by the preceding clause (i)), (iii) Liens granted under the Mortgage
and "excepted encumbrances" as defined in the Mortgage, (iv) Liens granted in
connection with any financing arrangement for the purchase of nuclear fuel or
the financing of pollution control facilities, limited to the fuel or facilities
so purchased or acquired, (v) Liens arising in connection with sales or
transfers of, or financing secured by, accounts receivable or related contracts,
(vi) Liens securing the Borrower's notes collateralized solely by mortgage bonds
of the Borrower issued under the terms of the Mortgage, (vii) Liens arising in
connection with sale and leaseback transactions, but only to the extent (x) the
proceeds received by the Borrower or such Principal Subsidiary from such sale
shall immediately be applied to retire mortgage bonds of the Borrower issued
under the terms of the Mortgage, or (y) the aggregate purchase price of assets
sold pursuant to such sale and leaseback transactions where such proceeds are
not so applied shall not exceed $1,000,000,000, (viii) Liens granted by a
Special Purpose Subsidiary to secure Nonrecourse Transition Bond Debt of such
Special Purpose Subsidiary, and (ix) Liens, other than those described in
clauses (i) through (viii) of this subsection granted by the Borrower or any of
its Principal Subsidiaries in the ordinary course of business securing Debt of
the Borrower and its Principal Subsidiaries in an amount not to exceed
$50,000,000 in the aggregate at any one time outstanding.

         (b) Mergers and Consolidations; Disposition of Assets. Merge with or
into or consolidate with or into, or sell, assign, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially
all of its assets (whether now owned or hereafter acquired) to any Person or
permit any Principal Subsidiary to do so, except that (i) the Borrower or any
Principal Subsidiary may merge with or into or consolidate with or transfer
assets to any other Principal Subsidiary, (ii) any Principal Subsidiary may
merge with or into or consolidate with or transfer assets to the Borrower and
(iii) the Borrower may merge with or into or consolidate with or transfer assets
to any other Person; provided in each case, immediately thereafter in giving
effect thereto, no Event of Default or event that would, with the giving of
notice or the passage of time or both constitute an Event of Default shall have
occurred and be continuing and (A) in the case of any such merger, consolidation
or transfer of assets to which the Borrower is a party, either (x) the Borrower
shall be the surviving corporation or (y) the surviving corporation shall be an
Eligible Successor and shall have assumed all of the obligations of the Borrower
under this Agreement and the Notes pursuant to a written instrument in form and
substance satisfactory to the Administrative Agent and (B) subject to clause (A)
above, in the case of any such merger to which a Principal Subsidiary is a
party, a Principal Subsidiary shall be the surviving corporation.

         (c) Financial Covenant. Permit Consolidated Adjusted Total Debt to
exceed 65% of Consolidated Adjusted Total Capitalization at any time.

         (d) Continuation of Businesses.

             (i) Generation Business. (A) Cease to own (through the Borrower or
         wholly-owned Subsidiaries) the business of generating electricity, or
         (B) reduce the net installed electric generating capacity (summer
         rating) of the electricity generation business owned by the Borrower
         and its wholly-owned Subsidiaries taken as a whole to less than 7821
         Megawatts.

             (ii) Distribution, Transmission and Gas Businesses. Cease to own
         (directly by the Borrower, and not through Subsidiaries) the business
         of distributing electricity to end-users, the business of transmitting
         electricity, or the businesses of transmitting and distributing natural
         gas, each substantially as conducted by the Borrower as of the date of

                                      -26-
<PAGE>

         this Agreement (and the Borrower warrants that as of the date of this
         Agreement substantially all of such businesses conducted by the
         Borrower on a consolidated basis, and the assets relating thereto, are
         operated and owned by the Borrower directly and not through
         Subsidiaries).

                                   ARTICLE VI

                                EVENTS OF DEFAULT

         SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:

         (a) The Borrower shall fail to pay any principal of any Advance when
the same becomes due and payable, or interest thereon or any other amount
payable under this Agreement or any of the Notes within three Business Days
after the same becomes due and payable; or

         (b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) pursuant to the terms of this Agreement
shall prove to have been incorrect or misleading in any material respect when
made; or

         (c) The Borrower shall fail to perform or observe (i) any term,
covenant or agreement contained in Section 5.02, Section 5.01(a)(vii) or Section
5.01(b)(i), or (ii) any other term, covenant or agreement contained in this
Agreement on its part to be performed or observed if the failure to perform or
observe such other term, covenant or agreement shall remain unremedied for 30
days after written notice thereof shall have been given to the Borrower by the
Administrative Agent (which notice shall be given by the Administrative Agent at
the written request of any Lender); or

         (d) The Borrower or any Principal Subsidiary shall fail to pay any
principal of or premium or interest on any Debt that is outstanding in a
principal amount in excess of $50,000,000 in the aggregate (but excluding Debt
evidenced by the Notes and Nonrecourse Transition Bond Debt) of the Borrower or
such Principal Subsidiary (as the case may be) when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such Debt;
or any other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect
of such event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof, other than any acceleration
of any Debt secured by equipment leases or fuel leases of the Borrower or a
Principal Subsidiary as a result of the occurrence of any event requiring a
prepayment (whether or not characterized as such) thereunder, which prepayment
will not result in a Material Adverse Change; or

         (e) The Borrower or any Principal Subsidiary (other than a Special
Purpose Subsidiary) shall generally not pay its debts as such debts become due,
or shall admit in writing its inability to pay its debts generally, or shall
make a general assignment for the benefit of creditors; or any proceeding shall
be instituted by or against the Borrower or any Principal Subsidiary (other than
a Special Purpose Subsidiary) seeking to adjudicate it a bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 60 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the

                                      -27-
<PAGE>

appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property,) shall occur; or the Borrower or
any Principal Subsidiary (other than a Special Purpose Subsidiary) shall take
any corporate action to authorize or to consent to any of the actions set forth
above in this subsection (e); or

         (f) One or more judgments or orders for the payment of money in an
aggregate amount exceeding $50,000,000 (excluding any such judgments or orders
which are fully covered by insurance, subject to any customary deductible, and
under which the applicable insurance carrier has acknowledged such full coverage
in writing) shall be rendered against the Borrower or any Principal Subsidiary
and either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or

         (g) (i) any Reportable Event that the Majority Lenders determine in
good faith might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer a Plan shall have occurred and be continuing 30 days after written
notice to such effect shall have been given to the Borrower by the
Administrative Agent or (ii) any Plan shall be terminated, or (iii) a Trustee
shall be appointed by an appropriate United States District Court to administer
any Plan or (iv) the PBGC shall institute proceedings to terminate any Plan or
to appoint a trustee to administer any Plan; provided, however that on the date
of any event described in clauses (i) through (iv) above the Unfunded
Liabilities of such Plan exceed $20,000,000; or

         (h) any "Event of Default" shall occur under the Revolving Credit
Agreement;

then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the respective Commitments of the Lenders to be terminated, whereupon
the same shall forthwith terminate, and (ii) shall at the request, or may with
the consent, of the Majority Lenders, by notice to the Borrower, declare the
principal amount outstanding under the Notes, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and payable, whereupon
the principal amount outstanding under the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that in the event of an actual or
deemed entry of an order for relief with respect to the Borrower or any
Principal Subsidiary under the Federal Bankruptcy Code, (A) the obligation of
each Lender to make Advances shall automatically be terminated and (B) the
principal amount outstanding under the Notes, all such interest and all such
amounts shall automatically and immediately become due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.

                                   ARTICLE VII

                                   THE AGENTS

         SECTION 7.01. Authorization and Action. Each Lender hereby appoints and
authorizes the Administrative Agent to take such action as administrative agent
on its behalf and to exercise such powers under this Agreement as are delegated
to the Administrative Agent by the terms hereof, together with such powers as
are reasonably incidental thereto. As to any matters not expressly provided for
by this Agreement (including, without limitation, enforcement or collection of
the Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Lenders, and such instructions shall be
binding upon all Lenders and all holders of Notes; provided, however, that the
Administrative Agent shall not be required to take any action which exposes the

                                      -28-
<PAGE>

Administrative Agent to personal liability or which is contrary to this
Agreement or applicable law. The Administrative Agent agrees to give to each
Lender prompt notice of each notice given to it by the Borrower pursuant to the
terms of this Agreement.

         SECTION 7.02. Agents' Reliance, Etc. Neither the Administrative Agent
nor any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement, except for its or their respective own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing: (i)
the Administrative Agent may treat the payee of any Note as the holder thereof
until the Administrative Agent receives and accepts an Assignment and Acceptance
entered into by the Lender which is the payee of such Note, as assignor, and an
Eligible Assignee, as assignee, as provided in Section 8.07; (ii) the
Administrative Agent may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (iii)
the Administrative Agent makes no warranty or representation to any Lender and
shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iv) the Administrative Agent shall not have any duty to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Borrower or to inspect the
property (including the books and records) of the Borrower; (v) the
Administrative Agent shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other instrument or document furnished pursuant hereto;
and (vi) the Administrative Agent shall not incur any liability under or in
respect of this Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopier, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party or
parties.

         SECTION 7.03. Agents and Affiliates. With respect to its Commitment,
Advances and Notes, each of First Chicago and Citibank, N.A. shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not an Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include each of First Chicago and
Citibank, N.A. in its individual capacity. Each of First Chicago and Citibank,
N.A. and their affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of business with,
the Borrower, any of its subsidiaries and any Person who may do business with or
own securities of the Borrower or any such subsidiary, all as if it were not an
Agent and without any duty to account therefor to the Lenders.

         SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements referred to in Section
4.01(e) and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.

         SECTION 7.05. Indemnification. The Lenders agree to indemnify each
Agent (to the extent not reimbursed by the Borrower), ratably according to the
respective principal amounts of the Notes then held by each of the Lenders (or
if no Notes are at the time outstanding, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against any such Agent in any way relating to or
arising out of this Agreement or any action taken or omitted by any such Agent
under this Agreement, provided that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from such Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse each such Agent promptly upon demand for its ratable

                                      -29-
<PAGE>

share of any out-of-pocket expenses (including reasonable counsel fees) incurred
by such Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, to the extent that such
expenses are reimbursable by the Borrower but for which such Agent is not
reimbursed by the Borrower.

         SECTION 7.06. Successor Administrative Agent. The Administrative Agent
may resign at any time by giving written notice thereof to the Lenders and the
Borrower and may be removed at any time with or without cause by the Majority
Lenders. Upon any such resignation or removal, the Majority Lenders shall have
the right to appoint a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Majority Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Lenders, appoint a successor Administrative Agent,
which shall be a commercial bank described in clause (i) or (ii) of the
definition of "Eligible Assignee" and having a combined capital and surplus of
at least $150,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Article VII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
Notwithstanding the foregoing, if no Event of Default, and no event that with
the giving of notice or the passage of time, or both, would constitute an Event
of Default, shall have occurred and be continuing, then no successor
Administrative Agent shall be appointed under this Section 7.06 without the
prior written consent of the Borrower, which consent shall not be unreasonably
withheld or delayed.

         SECTION 7.07. Documentation Agent and Lead Arranger. The titles
"Documentation Agent" and "Lead Arranger" are purely honorific, and the
"Documentation Agent" and the "Lead Arranger" shall have no duties or
responsibilities in such capacity.

                                  ARTICLE VIII

                                  MISCELLANEOUS

         SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or the Notes, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders (other than any Lender that is the
Borrower or an Affiliate of the Borrower), do any of the following: (a) waive
any of the conditions specified in Section 3.01 or 3.02, (b) increase the
Commitments of the Lenders or subject the Lenders to any additional obligations,
(c) reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (e) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes, or the number of Lenders, that shall be
required for the Lenders or any of them to take any action hereunder, or (f)
amend this Section 8.01; provided, further, that no amendment, waiver or consent
shall, unless in writing and signed by the Administrative Agent, in addition to
the Lenders required above to take such action, affect the rights or duties of
the Administrative Agent under this Agreement or any Note.

                                      -30-
<PAGE>

         SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered, if to the Borrower, at its address at 2301 Market Street,
Philadelphia, Pennsylvania 19101, Attention: Vice President-Finance and
Treasurer, S21-1, Telecopy: (215) 557-9885; if to any Bank, at its Domestic
Lending Office specified opposite its name on Schedule I hereto; if to any other
Lender, at its Domestic Lending Office specified in the Assignment and
Acceptance or Additional Lender Supplement pursuant to which it became a Lender;
and if to the Administrative Agent, at its address at One First National Plaza,
Mail Suite 0634, 1FPN-10, Chicago, Illinois 60670, Attention: Mr. Ron Cromey,
Telecopy: (312) 732-4840 or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and communications shall, when mailed, telecopied, telegraphed, telexed
or cabled, be effective when deposited in the mails, telecopied, delivered to
the telegraph company, confirmed by telex answerback or delivered to the cable
company, respectively, except that notices and communications to the
Administrative Agent pursuant to Article II or VII shall not be effective until
received by the Administrative Agent.

         SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender
or the Administrative Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

         SECTION 8.04. Costs and Expenses; Indemnification. (a) The Borrower
agrees to pay on demand all costs and expenses incurred by the Administrative
Agent and the Lead Arranger in connection with the preparation, execution,
delivery, administration, syndication, modification and amendment of this
Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, the reasonable fees, internal charges and
out-of-pocket expenses of counsel (including, without limitation, in-house
counsel) for such Agents with respect thereto and with respect to advising such
Agents as to their respective rights and responsibilities under this Agreement.
The Borrower further agrees to pay on demand all costs and expenses, if any
(including, without limitation, counsel fees and expenses of outside counsel and
of internal counsel), incurred by the any Agent or any Lender in connection with
the collection and enforcement (whether through negotiations, legal proceedings
or otherwise) of this Agreement, the Notes and the other documents to be
delivered hereunder, including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of rights under this Section
8.04(a).

         (b) If any payment of principal of, or Conversion of any Eurodollar
Rate Advance is made other than on the last day of the Interest Period for such
Advance, as a result of a payment or Conversion pursuant to Section 2.09 or 2.12
or acceleration of the maturity of the Notes pursuant to Section 6.01 or for any
other reason, the Borrower shall, upon demand by any Lender (with a copy of such
demand to the Administrative Agent), pay to the Administrative Agent for the
account of such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses which it may reasonably incur as a result
of such payment or Conversion, including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain such Advance.

         (c) The Borrower hereby agrees to indemnify and hold each Lender, each
Agent and each of their respective Affiliates, officers, directors and employees
(each, an "Indemnified Person") harmless from and against any and all claims,
damages, losses, liabilities, costs or expenses (including reasonable attorney's
fees and expenses, whether or not such Indemnified Person is named as a party to
any proceeding or is otherwise subjected to judicial or legal process arising
from any such proceeding) that any of them may pay or incur arising out of or
relating to this Agreement, the Notes or the transactions contemplated thereby,
or the use by the Borrower or any of its subsidiaries of the proceeds of any
Advance, provided that the Borrower shall not be liable for any portion of such
claims, damages, losses, liabilities, costs or expenses resulting from such

                                      -31-
<PAGE>

Indemnified Person's gross negligence or willful misconduct. The Borrower's
obligations under this Section 8.04(c) shall survive the repayment of all
amounts owing to the Lenders and the Administrative Agent under this Agreement
and the Notes and the termination of the Commitments. If and to the extent that
the obligations of the Borrower under this Section 8.04(c) are unenforceable for
any reason, the Borrower agrees to make the maximum contribution to the payment
and satisfaction thereof which is permissible under applicable law.

         SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
any Note held by such Lender, whether or not such Lender shall have made any
demand under this Agreement or such Note and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Borrower after any such
set-off and application made by such Lender, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of each Lender under this Section 8.05 are in addition to other rights
and remedies (including, without limitation, other rights of set-off) that such
Lender may have.

         SECTION 8.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Agents and when the
Administrative Agent shall have been notified by each Bank that such Bank has
executed it and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Agents and each Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of the
Lenders.

         SECTION 8.07. Assignments and Participations. (a) Each Lender may, with
the prior written consent of the Borrower and the Administrative Agent (neither
of which consents shall be unreasonably withheld or delayed), and if demanded by
the Borrower pursuant to subsection (g) hereof shall to the extent required by
such subsection (g), assign to one or more banks or other entities all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and the
Note or Notes held by it); provided, however, that (i) each such assignment
shall be of a constant, and not a varying, percentage of all of the assigning
Lender's rights and obligations under this Agreement, (ii) the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $10,000,000 or, if
less, the entire amount of such Lender's Commitment, and shall be an integral
multiple of $1,000,000 or such Lender's entire Commitment, (iii) each such
assignment shall be to an Eligible Assignee, (iv) the parties to each such
assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with any Note or Notes subject to such assignment and a processing and
recordation fee of $3,500 (which shall be payable by one or more of the parties
to the Assignment and Acceptance, and not by the Borrower, and shall not be
payable if the assignee is a Bank, any Affiliate of any Bank or the Federal
Reserve Bank), and (v) the consent of the Borrower shall not be required after
the occurrence and during the continuance of any Event of Default. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, (x) the assignee thereunder shall
be a party hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder and (y) the Lender assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to

                                      -32-
<PAGE>

be a party hereto (although an assigning Lender shall continue to be entitled to
indemnification pursuant to Section 8.04(c)). Notwithstanding anything contained
in this Section 8.07(a) to the contrary, (A) the consent of the Borrower and the
Administrative Agent shall not be required with respect to any assignment by any
Lender to an Affiliate of such Lender or to another Lender and (B) any Lender
may at any time, without the consent of the Borrower or the Administrative
Agent, and without any requirement to have an Assignment and Acceptance
executed, assign all or any part of its rights under this Agreement and its
Notes to a Federal Reserve Bank, provided that such assignment does not release
the transferor Lender from any of its obligations hereunder.

         (b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01(e) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, such assigning Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.

         (c) The Administrative Agent shall maintain at its address referred to
in Section 8.02 a copy of each Assignment and Acceptance and each Additional
Lender Supplement delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and the Commitment of, and
principal amount of the Advances owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Administrative Agent and
the Lenders may treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.

         (d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Note or Notes subject to such assignment, the Administrative
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower. Within five Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent in exchange for the surrendered
Note or Notes a new Note to the order of such Eligible Assignee in an amount
equal to the Commitment assumed by it pursuant to such Assignment and Acceptance
and, if the assigning Lender has retained a Commitment hereunder, a new Note to
the order of the assigning Lender in an amount equal to the Commitment retained
by it hereunder. Such new Note or Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Note or
Notes, shall be dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of Exhibit A hereto.

                                      -33-
<PAGE>

         (e) Each Lender may sell participations to one or more banks or other
entities (each, a "Participant") in or to all or a portion of its rights and/or
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and the Note or Notes held
by it); provided, however, that (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, (iv) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
(v) such Lender shall retain the sole right to approve, without the consent of
any Participant, any amendment, modification or waiver of any provision of this
Agreement or the Note or Notes held by such Lender, other than any such
amendment, modification or waiver with respect to any Advance or Commitment in
which such Participant has an interest that forgives principal, interest or fees
or reduces the interest rate or fees payable with respect to any such Advance or
Commitment, postpones any date fixed for any regularly scheduled payment of
principal of, or interest or fees on, any such Advance or Commitment, releases
any guarantor of any such Advance or releases any substantial portion of
collateral, if any, securing any such Advance.

         (f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 8.07, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Lender (subject to customary exceptions regarding
regulatory requirements, compliance with legal process and other requirements of
law).

         (g) If (i) any Lender shall make demand for payment under Section
2.11(a), 2.11(b) or 2.14, or (ii) shall deliver any notice to the Administrative
Agent pursuant to Section 2.12 resulting in the suspension of certain
obligations of the Lenders with respect to Eurodollar Rate Advances or (iii)
shall fail to consent to, or shall revoke its consent to, the extension of any
Termination Date pursuant to Section 2.16 or (iv) shall fail to consent to, or
shall revoke its consent to, any extension of the "Termination Date" (as defined
in the Revolving Credit Agreement) requested by the Borrower pursuant to Section
2.16 of the Revolving Credit Agreement as originally constituted (or any
successor provision of similar import), then (in the case of clause (i)) within
60 days after such demand (if, but only if, such payment demanded under Section
2.11(a), 2.11(b) or 2.14 has been made by the Borrower), or (in the case of
clause (ii)) within 60 days after such notice (if such suspension is still in
effect), or (in the case of clauses (iii) and (iv)) no later than 10 days prior
to the then effective Termination Date, as the case may be, the Borrower may
demand that such Lender assign in accordance with this Section 8.07 to one or
more Eligible Assignees designated by the Borrower and reasonably acceptable to
the Administrative Agent all (but not less than all) of such Lender's Commitment
and the Advances owing to it within the next succeeding 30 days (in the case of
clause (i) or clause (ii)), or within the next succeeding 5 days (in the case of
clauses (iii) and (iv)) . If any such Eligible Assignee designated by the
Borrower shall fail to consummate such assignment on terms acceptable to such
Lender, or if the Borrower shall fail to designate any such Eligible Assignee
for all of such Lender's Commitment or Advances, then such Lender may (but shall
not be required to) assign such Commitment and Advances to any other Eligible
Assignee in accordance with this Section 8.07 during such period.

         (h) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Bank") may grant to a special purpose funding vehicle (an
"SPC"), identified as such in writing from time to time by the Granting Bank to
the Administrative Agent and the Borrower, the option to provide to the Borrower
all or any part of any Advance that such Granting Bank would otherwise be

                                      -34-
<PAGE>

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

         SECTION 8.08. Governing Law. THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA.

         SECTION 8.09. Consent to Jurisdiction. THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF
PENNSYLVANIA AND ANY UNITED STATES DISTRICT COURT SITTING IN THE COMMONWEALTH OF
PENNSYLVANIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE NOTES AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.

         SECTION 8.10. Execution in Counterparts; Integration. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes all prior and contemporaneous agreements
and understandings, oral or written, relating to the subject matter hereof.

                [Remainder of the page intentionally left blank]

                                      -35-
<PAGE>

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

[SEAL]                          PECO ENERGY COMPANY

PECO ENERGY COMPANY
                                By /s/ J. B. Mitchell
                                   --------------------------------------------
                                   Name: J. B. Mitchell
                                   Title: Vice President - Finance and Treasurer
/s/ Todd D. Cutler
-------------------
Todd D. Cutler
Assistant Secretary

                                THE FIRST NATIONAL BANK OF CHICAGO,
                                as Administrative Agent

                                By /s/ Kenneth J. Bauer
                                   ------------------------------------
                                   Name: Kenneth J. Bauer
                                   Title: Authorized Agent

                                CITIBANK, N.A.,
                                as Documentation Agent

                                By: /s/ Robert J. Harrity, Jr.
                                   ----------------------------------------
                                Title: Managing Director

                                BANC ONE CAPITAL MARKETS, INC.,
                                as Lead Arranger

                                By /s/ Kenneth J. Bauer
                                   ------------------------------------
                                   Name: Kenneth J. Bauer
                                   Title: Vice President/Senior Banker

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -36-
<PAGE>

                                    THE BANKS

Commitment

$60,000,000
                                          THE FIRST NATIONAL BANK OF CHICAGO, as
                                          Administrative Agent and as Bank

                                          By /s/ Kenneth J. Bauer
                                            -----------------------------------
                                          Name: Kenneth J. Bauer
                                          Title: Authorized Agent

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -37-
<PAGE>

Commitment

$60,000,000
                                          CITIBANK, N.A., as Documentation Agent
                                          and as Bank

                                          By: /s/ Robert J. Harrity, Jr.
                                             --------------------------------
                                          Name:  Robert J. Harrity, Jr.
                                          Title: Managing Director

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -38-
<PAGE>

Commitment

$50,000,000
                                          BANK OF AMERICA, N.A.
                                          as Bank

                                          By /s/ Lawrence Saunders, Jr.
                                            -------------------------------
                                          Name:  Lawrence Saunders, Jr.
                                          Title: Managing Director

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -39-
<PAGE>

Commitment

$50,000,000
                                          THE BANK OF NEW YORK, as Bank

                                          By____________________________________
                                          Name: John N. Watt
                                          Title: Vice President

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -40-
<PAGE>

Commitment

$50,000,000
                                          CREDIT SUISSE FIRST BOSTON, as Bank

                                          By____________________________________
                                          Name:
                                          Title:

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -41-
<PAGE>

Commitment

$50,000,000
                                          FIRST UNION NATIONAL BANK, as Bank

                                          By____________________________________
                                          Name:
                                          Title:

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -42-
<PAGE>

Commitment

$50,000,000
                                          MELLON BANK, N.A., as Bank

                                          By____________________________________
                                          Name:
                                          Title:

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -43-
<PAGE>

Commitment

$25,000,000
                                          UNION BANK OF CALIFORNIA, N.A.,
                                          as Bank

                                          By____________________________________
                                          Name:
                                          Title:

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -44-
<PAGE>

Commitment

$25,000,000
                                          TORONTO DOMINION (TEXAS), INC.,
                                          as Bank

                                          By____________________________________
                                          Name:
                                          Title:

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -45-
<PAGE>

Commitment

$17,500,000
                                          COMMERCE BANK, N.A., as Bank

                                          By____________________________________
                                          Name:
                                          Title:

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -46-
<PAGE>

Commitment

$12,500,000
                                          BARCLAYS BANK PLC, as Bank

                                          By____________________________________
                                          Name:
                                          Title:

This is a signature page to the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger.

                                      -47-
<PAGE>

                                   SCHEDULE I

364-Day Credit Agreement, dated as of September 15, 1999, among PECO Energy
Company, as Borrower, the banks named therein, as Banks, The First National Bank
of Chicago, as Administrative Agent, Citibank, N.A., as Documentation Agent, and
Banc One Capital Markets, Inc., as Lead Arranger.

<TABLE>
<CAPTION>
                                       Domestic                                           Eurodollar
  Name of Bank                         Lending Office                                   Lending Office
  ------------                         --------------                                   --------------
<S>                                    <C>                                               <C>
  The First National Bank of           One First National Plaza                              Same
  Chicago                              Mail Suite 0634, 1FNP-10
                                       Chicago, IL 60670
                                       Attn: Gwendolyn Watson
                                       Phone: (312) 732-4509
                                       Fax: (312) 732-4840

  The Bank of New York                 One Wall Street, 19th Floor                           Same
                                       Energy Industries Division
                                       New York, NY 10286
                                       Attn: Theresa A. Foran
                                       Phone: (212) 635-7921
                                       Fax: (212) 635-7923

  Citibank, N.A.                       399 Park Avenue                                       Same
                                       4th Floor, Zone 20
                                       New York, NY 10043
                                       Attn: Tracy Smith
                                       Phone: (302) 894-6098
                                       Fax: (302) 894-6120

  Credit Suisse First Boston           11 Madison Avenue                                     Same
                                       20th Floor
                                       New York, NY 10010-3629
                                       Attn: Jenaro Sarasola
                                       Phone: (212) 322-1384
                                       Fax: (212) 325-0593/0576

  First Union National Bank            201 South College Street                              Same
                                       24th Floor
                                       Charlotte, NC 28288-1183
                                       Attn: Holly Benson
                                       Phone: (704) 383-0296
                                       Fax: (704) 383-7999

  Mellon Bank, N.A.                    Three Mellon Bank Center Room                         Same
                                       2303 (Loan Administration)
                                       Pittsburgh, PA 15259-0003
                                       Attn: Cathy Capp
                                       Phone: (412) 234-1870
                                       Fax: (412) 236-2027, 2028
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>                                      <C>                                                   <C>
  Union Bank of                        Energy Capital Services                               Same
  California, N.A.                     445 S. Figueroa Street
                                       20th Floor
                                       Los Angeles, CA 90071
                                       Attn: Yolande C. Hollis
                                       Phone: (213) 236-6199
                                       Fax: (213) 236-4096

  Commerce Bank, N.A.                  2005 Market Street                                    Same
                                       One Commerce Square
                                       2nd Floor
                                       Philadelphia, PA 19103
                                       Attn: Kim Dunda
                                       AIM #200-01-35
                                       Phone: (888) 751-9000 Ext. 8570
                                       Fax: (856) 642-7704

  Toronto Dominion (Texas) Inc.        909 Fannin, Suite 1700                                Same
                                       Houston, TX 77010
                                       Attn: Herbert Simien
                                       Phone: (713) 653-8242
                                       Fax: (713) 951-9921

  Barclays Bank PLC                    222 Broadway                                          Same
                                       New York, NY 10038
                                       Attn: Marsha L. Hamlette
                                       Phone: (212) 412-4081
                                       Fax: (212) 412-5306

  Bank of America, N.A.                6610 Rockledge Drive                                  Same
                                       6th Floor
                                       Bethesda, MD 20817
                                       Attn: Paula Kramp
                                       Phone: (301) 571-0713
                                       Fax: (301) 571-0719

</TABLE>

                                      -2-
<PAGE>

                                    EXHIBIT A

                                  FORM OF NOTE

$____________________                                           Dated: [ ], 1999

         FOR VALUE RECEIVED, the undersigned, PECO Energy Company, a
Pennsylvania corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order
of (the "Lender") for the account of its Applicable Lending Office (such term
and other capitalized terms herein being used as defined in the Credit Agreement
referred to below) on [insert then effective Termination Date] the principal sum
of U.S.$[amount of the Lender's Commitment in figures] or, if less, the
aggregate principal amount of the Advances made by the Lender to the Borrower
pursuant to the Credit Agreement outstanding on [insert then effective
Termination Date].

         The Borrower promises to pay interest on the unpaid principal amount of
each Advance from the date of such Advance until such principal amount is paid
in full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.

         Both principal and interest are payable in lawful money of the United
States of America to The First National Bank of Chicago, as Administrative
Agent, at One First National Plaza, Chicago, Illinois 60670, in same day funds.
Each Advance made by the Lender to the Borrower pursuant to the Credit
Agreement, and all payments made on account of principal thereof, shall be
recorded by the Lender and, prior to any transfer hereof, endorsed on the grid
attached hereto which is part of this Promissory Note.

         This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the 364-Day Credit Agreement, dated as of September
15, 1999 among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger (as amended, modified or supplemented from time to time, the "Credit
Agreement"). The Credit Agreement, among other things, (i) provides for the
making of Advances by the Lender to the Borrower from time to time in an
aggregate amount not to exceed at any time outstanding the U.S. dollar amount
first above mentioned, the indebtedness of the Borrower resulting from each such
Advance being evidenced by this Promissory Note, and (ii) contains provisions
for acceleration of the maturity hereof upon the happening of certain stated
events and also for prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified.

         The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.

<PAGE>

         THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.

                                               PECO ENERGY COMPANY

                                               By_______________________________
                                                   Name:
                                                   Title:

                                      -2-
<PAGE>

                 ADVANCES, MATURITIES, AND PAYMENTS OF PRINCIPAL

<TABLE>
<CAPTION>
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                                                                                Amount of
                                         Maturity            Principal          Unpaid
                      Amount of          of                  Paid or            Principal           Notation
Date                  Advance            Advance             Prepaid            Balance             Made By
<S>                     <C>                 <C>                 <C>               <C>                 <C>
---------------------------------------------------------------------------------------------------------------

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</TABLE>

<PAGE>

                                    EXHIBIT B

                              NOTICE OF A BORROWING

The First National Bank of Chicago, as Administrative Agent for the Lenders
parties to the Credit Agreement referred to below

One First National Plaza
Chicago, Illinois 60670

                                                                       [Date]

                  Attention:   Utilities Department
                               North American Finance Group

Ladies and Gentlemen:

         The undersigned, PECO Energy Company, refers to the 364-Day Credit
Agreement, dated as of September 15, 1999, among PECO Energy Company, as
Borrower, the banks named therein, as Banks, The First National Bank of Chicago,
as Administrative Agent, Citibank, N.A., as Documentation Agent, and Banc One
Capital Markets, Inc., as Lead Arranger (as amended, modified or supplemented
from time to time, the "Credit Agreement"), and hereby gives you notice,
irrevocably, pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to such Borrowing (the
"Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement:

               (i) The Business Day of the Proposed Borrowing is _____, 19/20__.

               (ii) The Type of Advances to be made in connection with the
         Proposed Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].

               (iii) The aggregate amount of the Proposed Borrowing is $_______.

               (iv) The Interest Period for each Advance made as part of the
         Proposed Borrowing is [____days] [___ month[s]].

         The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Borrowing:

               (A) the representations and warranties contained in Section 4.01
         are correct, before and after giving effect to the Proposed Borrowing
         and to the application of the proceeds therefrom, as though made on and
         as of such date; and

               (B) no event has occurred and is continuing, or would result from
         such Proposed Borrowing or from the application of the proceeds
         therefrom, that

<PAGE>

         constitutes an Event of Default or would constitute an Event of Default
         but for the requirement that notice be given or time elapse or both.

                                    Very truly yours,

                                    PECO ENERGY COMPANY

                                    By__________________________________________
                                       Name:
                                       Title:

                                      -2-

<PAGE>

                                    EXHIBIT C

                            ASSIGNMENT AND ACCEPTANCE

                            Dated _________, 19/20__

         Reference is made to the 364-Day Credit Agreement, dated as of
September 15, 1999 among PECO Energy Company, as Borrower, the banks named
therein, as Banks, The First National Bank of Chicago, as Administrative Agent,
Citibank, N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as
Lead Arranger (as amended, modified or supplemented from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement are used herein with
the same meaning.

         _____________ (the "Assignor") and _____________ (the "Assignee") agree
as follows:

         1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, that interest in and to
all of the Assignor's rights and obligations under the Credit Agreement as of
the date hereof which represents the percentage interest specified on Schedule 1
of all outstanding rights and obligations under the Credit Agreement, including,
without limitation, such interest in the Assignor's Commitment, the Advances
owing to the Assignor, and the Note[s] held by the Assignor. After giving effect
to such sale and assignment, the Assignee's Commitment and the amount of the
Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1.

         2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement or any other instrument or document furnished pursuant thereto;
and (iv) attaches the Note[s] referred to in paragraph 1 above and requests that
the Administrative Agent exchange such Note[s] for a new Note payable to the
order of the Assignee in an amount equal to the Commitment assumed by the
Assignee pursuant hereto or new Notes payable to the order of the Assignee in an
amount equal to the Commitment assumed by the Assignee pursuant hereto and the
Assignor in an amount equal to the Commitment retained by the Assignor under the
Credit Agreement, respectively as specified on Schedule 1 hereto.

         3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.01 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Administrative Agent, the Assignor or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender; (vi) none of
the consideration used to make the purchase being made by the Assignee hereunder
are "plan assets" as defined under ERISA and the rights and interests of the

<PAGE>

Assignee in and under the Credit Agreement will not be "plan assets" under ERISA
[and] (vii) specifies as its, Domestic Lending Office (and address for notices)
and Eurodollar Lending Office the offices set forth beneath its name on the
signature pages hereof [and (viii) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying that it is exempt from United
States withholding taxes with respect to all payments to be made to the Assignee
under the Credit Agreement and the Notes].(1)

         4. Following the execution of this Assignment and Acceptance by the
Assignor and the Assignee, it will be delivered to the Administrative Agent for
acceptance and recording by the Administrative Agent. The effective date of this
Assignment and Acceptance shall be the date of acceptance thereof by the
Administrative Agent, unless otherwise specified on Schedule 1 hereto (the
"Effective Date").

         5. Upon such acceptance and recording by the Administrative Agent, as
of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Acceptance, have the rights
and obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.

         6. Upon such acceptance and recording by the Administrative Agent, from
and after the Effective Date, the Administrative Agent shall make all payments
under the Credit Agreement and the Notes in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest and
commitment fees with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the Credit Agreement
and the Notes for periods prior to the Effective Date directly between
themselves.

         7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.

--------------
(1) If the Assignee is organized under the laws of a jurisdiction outside the
    United States.

                                      -2-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective officers thereunto duly
authorized, as of the date first above written, such execution being made on
Schedule 1 hereto.

                                              [NAME OF ASSIGNOR]

                                              By________________________________
                                                 Name:
                                                 Title:

                                              [NAME OF ASSIGNEE]

                                              By________________________________
                                                 Name:
                                                 Title:

                                              Domestic Lending Office (and
                                              address for notices):
                                                          [Address]

                                              Eurodollar Lending Office:
                                                          [Address]
Consented to this ___ day
of _________________, 19/20

PECO ENERGY COMPANY

By_________________________
   Name:
   Title:

Consented to and Accepted this __ day
of ____________, 19/20

[NAME OF ADMINISTRATIVE AGENT]

By_________________________
  Name:
  Title:

                                      -3-

<PAGE>

                                   Schedule 1

                                       to

                            Assignment and Acceptance

                             Dated _______, 19/20__

<TABLE>
<CAPTION>
<S>     <C>

Section 1.

                  Percentage Interest:                                                      __%

Section 2.

                   Assignee's Commitment:                                          $___________

                  Aggregate Outstanding Principal
                    Amount of Advances
                    owing to the Assignee:                                         $___________

                  A Note payable to the
                    order of the Assignee

                                                     Dated _______, 19/20__

                                                              Principal amount:    $___________

                  A Note payable to the
                    order of the Assignor

                                                     Dated _______, 19/20__

                                                              Principal amount:    $___________

Section 3.

         Effective Date(2):                                    _______, 19/20__

</TABLE>

---------------
(2) This date should be no earlier than the date of acceptance by the
    Administrative Agent.

<PAGE>

                                    EXHIBIT D

                        FORM OF OPINION OF BALLARD SPAHR
                               ANDREWS & INGERSOLL

                                                                _______, 19/20__

To each of the Banks, the Administrative Agent, and the Lead
Arranger  party to the 364-Day Credit Agreement, dated as of
September 15, 1999, among PECO Energy Company, as Borrower, the
banks named therein, as Banks, The First National Bank of
Chicago, as Administrative Agent, Citibank, N.A., as
Documentation Agent, and Banc One Capital Markets, Inc., as
Lead Arranger

                  Re:  PECO Energy Company

  Ladies and Gentlemen:

         This opinion is furnished to you pursuant to Section 3.01(a)(vi) of the
364-Day Credit Agreement, dated as of September 15, 1999, among PECO Energy
Company, as Borrower, the banks named therein, as Banks, The First National Bank
of Chicago, as Administrative Agent, Citibank, N.A., as Documentation Agent, and
Banc One Capital Markets Inc, as Lead Arranger (as amended, modified or
supplemented from time to time, the "Credit Agreement"). Unless otherwise
specified, terms defined in the Credit Agreement are used herein as therein
defined.

         We have acted as special counsel for the Borrower in connection with
the preparation, execution and delivery of the Credit Agreement. In that
capacity we have examined the following:

               (i) The Credit Agreement and the Notes;

               (ii) The documents furnished by the Borrower pursuant to Section
         3.01 of the Credit Agreement;

               (iii) The Amended and Restated Articles of Incorporation of the
         Borrower and all amendments thereto (the "Charter");

               (iv) The by-laws of the Borrower and all amendments thereto (the
         "By-laws"); and

               (v) A certificate of the Secretary of State of the Commonwealth
         of Pennsylvania, dated , 1999, attesting to the continued subsistence
         of the Borrower in Pennsylvania.

         We have also examined the originals, or copies certified to our
satisfaction, of such other corporate records of the Borrower, certificates of
public officials and of officers of the Borrower, and agreements, instruments
and documents, as we have deemed necessary as a basis for the opinions
hereinafter expressed. We have assumed the legal capacity and competence of
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to original documents
of documents submitted to us as certified, conformed or photostatic copies. We

<PAGE>

have assumed that the Agents and the Banks have duly executed and delivered,
with all necessary power and authority (corporate and otherwise), the Credit
Agreement.

         When an opinion or confirmation is given to our knowledge or with
reference to matters of which we are aware or which are known to us, or with
another similar qualification, the relevant knowledge or awareness is limited to
the actual knowledge or awareness of the lawyer who is the current primary
contact for the Borrower and the individual lawyers in this firm who have
participated in the specific transaction to which this opinion relates and
without any special or additional investigation undertaken for the purposes of
this opinion, except as otherwise noted herein. Based upon the foregoing and
subject to the exceptions, limitations and qualifications set forth herein, we
are of the following opinion:

               1. The Borrower is a corporation duly incorporated and validly
         subsisting under the laws of the Commonwealth of Pennsylvania.

               2. The execution, delivery and performance by the Borrower of the
         Credit Agreement and the Notes are within the Borrower's corporate
         powers, have been duly authorized by all necessary corporate action, do
         not contravene (i) the Charter or the By-laws or (ii) any law of the
         United States or the Commonwealth of Pennsylvania (including, without
         limitation, any order, rule or regulation of the PPUC or (iii) to the
         best of our knowledge, any agreement or instrument to which the
         Borrower is a party or by which it is bound, and do not result in or
         require the creation of any lien, security interest or other charge or
         encumbrance upon or with respect to any of its properties.

               3. No authorization, approval or other action by, and no notice
         to or filing with, any governmental authority or regulatory body of the
         United States or the Commonwealth of Pennsylvania is required for the
         due execution, delivery and performance by the Borrower of the Credit
         Agreement or the Notes except for the filing of the FERC Application
         with, and the final approval of, and the FERC Authorization issued by,
         FERC, which filing has been duly made and which final approval and FERC
         Authorization have been duly obtained; such FERC Authorization is in
         full force and effect and is final; and the action of FERC approving
         the FERC Application is no longer subject to appeal.

               4. The Credit Agreement and the Notes have been duly executed and
         delivered by the Borrower, and the Credit Agreement and the Notes are
         the legal, valid and binding obligations of the Borrower enforceable
         against the Borrower in accordance with their respective terms.

               5. The Borrower (i) is exempt from the provisions of the Public
         Utility Holding Company Act of 1935, as amended, other than Section
         9(a)(2) thereof, pursuant to Section 3(a)(2) thereof, and (ii) is not
         an "investment company" or a company "controlled" by an "investment
         company" within the meaning of the Investment Company Act of 1940, as
         amended.

               6. We confirm to you that to our knowledge, after inquiry of each
         lawyer who is the current primary contact for the Borrower or who has
         devoted substantive attention to matters on behalf of the Borrower
         during the preceding twelve months and who is still currently employed
         by or a member of this firm, except as disclosed in the Borrower's
         Annual Report on Form 10-K for the year ended December 31, 1998 and the
         Borrower's Quarterly Report on Form 10-Q for the quarter ended June 30,
         1999, no litigation or governmental proceeding is pending or threatened
         in writing against the Borrower (i) with respect to the Credit
         Agreement or the Notes, or (ii) which is likely to have a material

                                      -2-
<PAGE>

         adverse effect upon the financial condition, business, properties or
         prospects of the Borrower and its subsidiaries taken as a whole.

         We draw to your attention the existence of the following two
Pennsylvania statutes in connection with the fact that the Advances bear
floating rates of interest:

               (i) Section 911 of the Pennsylvania "Crime Code," 18 Pa. C.S.A.
         ss.911, enacted by the Act of December 6, 1972, P.L. 1482. Section 911
         of the Crime Code bears a close resemblance to certain of the
         provisions of the Federal Racketeer Influenced and Corrupt
         Organizations Act of 1970, 18 U.S.C. ss.ss.1961-1968, commonly known as
         RICO, and is referred to hereinafter as the "Pennsylvania RICO Act."
         The Pennsylvania RICO Act provides, among other things, that it is a
         criminal offense, punishable as a felony, to "use or invest, directly
         or indirectly ... in the acquisition of any interest in, or the
         establishment or operation of, any enterprise" any income collected in
         full or partial satisfaction of a loan made "at a rate of interest
         exceeding 25% per annum... ."

               (ii) The Act of December 29, 1982, P.L. 1671, 18 Pa.
         C.S.A.ss.4806.1 et seq. (superseded volume) (the "Criminal Usury
         Statute"). The Criminal Usury Statute provides, among other things,
         that it is a criminal offense, punishable as a felony, to engage in,
         "charging, taking or receiving any money ... on the loan ... of any
         money ... at a rate exceeding thirty-six percent per annum... ."

         The Criminal Usury Statute may have been repealed, but the manner in
which the repeal was enacted leaves the matter subject to uncertainty.

         Both the Pennsylvania RICO Act and the Criminal Usury Statute appear to
be intended by the legislature to apply only to racketeering and loan sharking
type activities, and not to the type of commercial loan transaction evidenced by
the Loan Document. Nevertheless, in view of the plain language of the
Pennsylvania courts, we cannot say that the ultimate resolution of this issue is
free from doubt.

         The foregoing opinions are subject to the following exceptions,
limitations and qualifications:

               (a) Our opinion is subject to the effect of applicable
         bankruptcy, insolvency, reorganization, moratorium, fraudulent
         conveyance, fraudulent transfer or similar laws affecting creditors'
         rights and remedies generally, general principles of equity, including
         without limitation, concepts of materiality, reasonableness, good faith
         and fair dealing (regardless of whether such enforceability is
         considered in a proceeding in equity or at law); and limitations on
         enforceability of rights to indemnification by federal or state
         securities laws or regulations or by public policy.

               (b) We express no opinion as to the application or requirements
         of the Pennsylvania Securities Act or federal or state securities,
         patent, trademark, copyright, antitrust and unfair competition, pension
         or employee benefit, labor, environmental health and safety or tax laws
         in respect of the transactions contemplated by or referred to in the
         Credit Agreement.

               (c) We express no opinion as to the validity or enforceability of
         any provision of the Credit Agreement or the Notes which (i) permits
         the Lenders to increase the rate of interest in the event of
         delinquency or default if such increase would be deemed a penalty under
         applicable law; (ii) purports to be a waiver by Borrower of any right
         or benefit except to the extent permitted by applicable law; (iii)

                                      -3-
<PAGE>

         purports to require that waivers must be in writing to the extent that
         an oral agreement or implied agreement by trade practice or course of
         conduct modifying provisions of the Credit Agreement or the Notes has
         been made; or (iv) purports to exculpate any party from its own
         negligent acts.

         We express no opinion as to the law of any jurisdiction other than the
law of the Commonwealth of Pennsylvania and the federal law of the United
States.

         The foregoing opinion is solely for your benefit in connection with the
consummation of the transaction described herein and may not be used or relied
upon by you or any other Person without our express written consent for any
other purpose other than (i) any Eligible Assignee that may become a Lender
under the Credit Agreement after the date hereof and (ii) Reed Smith Shaw &
McClay LLP, which may rely upon this opinion in rendering their opinion
furnished pursuant to Article III of the Credit Agreement. The opinions given
herein are as of the date hereof, and we assume no obligation to update or
supplement this opinion to reflect facts or circumstances which may hereafter
come to our attention or any changes in laws which may hereafter occur.

                                                     Very truly yours,

                                                     BALLARD SPAHR
                                                       ANDREWS & INGERSOLL

                                      -4-
<PAGE>

                                    EXHIBIT E

                 FORM OF OPINION OF REED SMITH SHAW & McCLAY LLP

                                                                __________, 1999

To each of the Banks, the Administrative Agent, and the Lead
Arranger party to the 364-Day Credit Agreement, dated as of
September 15, 1999 among PECO Energy Company, as Borrower, the
banks named therein, as Banks, The First National Bank of
Chicago, as Administrative Agent, Citibank, N.A., as
Documentation Agent, and Banc One Capital Markets, Inc., as
Lead Arranger

                  Re:  PECO Energy Company

  Ladies and Gentlemen:

         We have acted as counsel to The First National Bank of Chicago,
individually and as Administrative Agent, in connection with the preparation,
execution and delivery of the 364-Day Credit Agreement, dated as of September
15, 1999, among PECO Energy Company, as Borrower, the banks named therein, as
Banks, The First National Bank of Chicago, as Administrative Agent, Citibank,
N.A., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead
Arranger (as amended, modified or supplemented from time to time, the "Credit
Agreement"). We are delivering this opinion pursuant to Section 3.01(a)(vii) of
the Credit Agreement. Unless otherwise defined herein, terms defined in the
Credit Agreement are used herein as therein defined.

         In that connection, we have examined (i) counterparts of the Credit
Agreement, executed by the Borrower, the Banks, the Administrative Agent and the
Lead Arranger, (ii) the Notes, executed by the Borrower and (iii) the other
documents listed on Exhibit A hereto, including the opinion of Ballard Spahr
Andrews & Ingersoll, counsel to the Borrower (the "Opinion"), furnished to the
Administrative Agent pursuant to Section 3.01(a) of the Credit Agreement.

         In our examination of the documents referred to above, we have assumed
the authenticity of all such documents submitted to us as originals, the
genuineness of all signatures, the due authority of the parties executing such
documents and the conformity to the originals of all such documents submitted to
us as copies. We have also assumed that the Banks, the Administrative Agent and
the Lead Arranger have duly executed and delivered, with all necessary power and
authority (corporate and otherwise), the Credit Agreement. As to matters of
fact, we have relied solely upon the documents we have examined.

         Based upon the foregoing, we are of the opinion that, while we have not
independently considered the matters covered by the Opinion to the extent
necessary to enable us to express the conclusions stated therein, each of the
Opinion and the other documents listed in Exhibit A hereto are substantially
responsive to the corresponding requirements set forth in Section 3.01 of the
Credit Agreement pursuant to which the same have been delivered.

         Please note that Richard H. Glanton, Esquire, a partner in this firm,
is a director of PECO Energy Company. We have rendered and continue to render
legal services to PECO Energy Company.

         The foregoing opinion is solely for your benefit and may not be relied
upon by any other Person other than any Person that may become a lender under
the Credit Agreement after the date hereof.

                                                               Very truly yours,

NJS:RKM

<PAGE>

                                    EXHIBIT F

               FORM OF ANNUAL AND QUARTERLY COMPLIANCE CERTIFICATE

                                                 ______________________, 19/20__

         Pursuant to the 364-Day Credit Agreement, dated as of September 15,
1999, among PECO Energy Company, as Borrower, the banks named therein, as Banks,
The First National Bank of Chicago, as Administrative Agent, Citibank, N.A., as
Documentation Agent, and Banc One Capital Markets, Inc., as Lead Arranger (as
amended, modified or supplemented from time to time, the "Credit Agreement"),
the undersigned, being ______________________ of the Borrower, hereby certifies
on behalf of the Borrower as follows:

         1. Delivered herewith are the financial statements prepared pursuant to
Section 5.01(b)(ii) and Section 5.01(b)(iii) of the Credit Agreement, for the
fiscal ________ ended ___________, 19/20__. All such financial statements comply
with the applicable requirements of the Credit Agreement.

         2. Schedule I hereto sets forth in reasonable detail the information
and calculations necessary to establish compliance with the provisions of
Section 5.02(c) of the Credit Agreement as of the end of the fiscal period
referred to in paragraph 1 above.

         3. (Check one and only one:)

         __ No Event of Default, or event which with notice or lapse of time or
both would constitute an Event of Default, has occurred and is continuing or
exists.

         __ An Event of Default, or event which with notice or lapse of time or
both would constitute an Event of Default, has occurred and is continuing or
exists, and the document(s) attached hereto as Schedule II specify in detail the
nature and period of existence of such Event of Default or such other event as
well as any and all actions with respect thereto taken or contemplated to be
taken by the Borrower.

         4. The undersigned has personally reviewed the Credit Agreement, and
this certificate was based on an examination made by or under the supervision of
the undersigned sufficient to assure that this certificate is accurate.

         5. Capitalized terms used in this certificate and not otherwise defined
shall have the meanings given in the Credit Agreement.

                                       PECO ENERGY COMPANY

                                       By_______________________________________
                                       Name:____________________________________
                                       Title:___________________________________
Date:__________________

<PAGE>

                                    EXHIBIT G

                      FORM OF ADDITIONAL LENDER SUPPLEMENT

         THIS SUPPLEMENT, dated as of ____________, 19/20_____, by the
undersigned.

                                    Recitals:

         A. This Supplement is being executed and delivered in accordance with
Section 2.17 of the 364-Day Credit Agreement, dated as of September 15, 1999,
among PECO Energy Company, as Borrower, the banks named therein, as Banks, The
First National Bank of Chicago, as Administrative Agent, Citibank, N.A., as
Documentation Agent, and Banc One Capital Markets, Inc., as Lead Arranger (as
amended, modified or supplemented from time to time, the "Credit Agreement").
Capitalized terms used herein without definition have the meanings specified in
the Credit Agreement.

         B. The undersigned wishes to become a Lender party to the Credit
Agreement, as an Additional Lender.

         NOW, THEREFORE, the undersigned, intending to be legally bound, hereby
agrees as follows:

         1. The undersigned hereby becomes party to the Credit Agreement as
Lender thereunder, and shall be subject to and bound by all of the provisions
thereof.

         2. The Commitment of the undersigned shall be $_____________.

         3. The undersigned (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Additional Lender Supplement; (ii) agrees that it will, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender; (vi) none of
the consideration used to make the purchase being made by the undersigned
hereunder are "plan assets" as defined under ERISA and the rights and interests
of the undersigned in and under the Credit Agreement will not be "plan assets"
under ERISA [and] (vii) specifies as its Domestic Lending Office (and address
for notices) and Eurodollar Lending Office the offices set forth beneath its
name on the signature pages hereof [and (viii) attaches the forms prescribed by
the Internal Revenue Service of the United States certifying that it is exempt
from United States withholding taxes with respect to all payments to be made to
the undersigned under the Credit Agreement and the Notes].(3)

---------------------
(3) If the undersigned is organized under the laws of a jurisdiction outside the
    United States.

<PAGE>

         4. This Supplement shall be effective upon the date of acceptance
thereof by the Administrative Agent, unless otherwise specified under the
undersigned's name signature below.

         5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.

         IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.

                                            [NAME OF ADDITIONAL LENDER]

                                            By:_________________________________
                                            Name:_______________________________
                                            Title:______________________________

                                            Domestic Lending Office (and
                                            address for notices): [Address]

                                            Eurodollar Lending Office: [Address]

                                            Effective Date(4):________, 19/20__

CONSENTED TO:

[NAME OF ADMINISTRATIVE AGENT]

By:_________________________________
Name:_______________________________
Title:______________________________

CONSENTED TO:

PECO ENERGY COMPANY

By:_________________________________
Name:_______________________________
Title:______________________________

-----------------
(4) This date should be no earlier than the date of acceptance by the
    Administrative Agent.<PAGE>

================================================================================

                              AMENDED AND RESTATED
                                 TRUST AGREEMENT

                                       OF

                          PECO ENERGY CAPITAL TRUST II

                           PECO ENERGY CAPITAL, L.P.,

                                   as Grantor

                                       and

                FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION,

                                   as Trustee

                            Dated as of June 6, 1997

================================================================================

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
                                                     ARTICLE I

                                                    DEFINITIONS

                                                    ARTICLE II

                                               CONTINUATION OF TRUST

<S>              <C>                                                                                            <C>
SECTION 2.01.  Continuation of Trust............................................................................  4
SECTION 2.02.  Trust Account....................................................................................  5
SECTION 2.03.  Title to Trust Property..........................................................................  5
SECTION 2.04.  Situs of Trust...................................................................................  5
SECTION 2.05.  Powers of Trustee Limited........................................................................  5
SECTION 2.06.  Liability of Holders of Receipts.................................................................  5

                                                    ARTICLE III

                                          FORM OF RECEIPTS, EXECUTION AND
                                   DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS

SECTION 3.01.  Form and Transferability of Receipts.............................................................  5
SECTION 3.02.  Issuance of Receipts.............................................................................  6
SECTION 3.03.  Registration, Transfer and Exchange of Receipts..................................................  6
SECTION 3.04.  Lost or Stolen Receipts, Etc.....................................................................  8
SECTION 3.05.  Cancellation and Destruction of
               Surrendered Receipts.............................................................................  8

                                                    ARTICLE IV

                               DISTRIBUTIONS AND OTHER RIGHTS OF HOLDERS OF RECEIPTS

SECTION 4.01.  Distributions of Monthly Distributions
               on Preferred Securities.......................................................................... 10
SECTION 4.02.  Redemptions of Preferred Securities.............................................................. 10
SECTION 4.03.  Distributions in Liquidation of Grantor.......................................................... 11
SECTION 4.04.  Fixing of Record Date for Holders of Receipts.................................................... 12
SECTION 4.05.  Payment of Distributions......................................................................... 12
SECTION 4.06.  Special Representative and Voting Rights......................................................... 12
SECTION 4.07.  Changes Affecting Preferred Securities
               nd Reclassifications, Recapitalizations, Etc..................................................... 13

</TABLE>
                                       i
<PAGE>

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
                                                     ARTICLE V

                                                   THE GUARANTEE

<S>            <C>                                                                                              <C>
SECTION 5.01.  The Guarantee.................................................................................... 13

                                                    ARTICLE VI

                                                    THE TRUSTEE

SECTION 6.01.  Eligibility...................................................................................... 14
SECTION 6.02.  Obligations of the Trustee....................................................................... 14
SECTION 6.03.  Resignation and Removal of the
               Trustee; Appointment of Successor Trustee........................................................ 16
SECTION 6.04.  Corporate Notices and Reports.................................................................... 17
SECTION 6.05.  Status of Trust.................................................................................. 17
SECTION 6.06.  Appointment of Grantor to File on Behalf
               of Trust..........................................................................................18
SECTION 6.07.  Indemnification by the General Partner........................................................... 18
SECTION 6.08.  Fees, Charges and Expenses....................................................................... 18
SECTION 6.09.  Appointment of Co-Trustee or Separate Trustee.................................................... 19

                                                    ARTICLE VII

                                             AMENDMENT AND TERMINATION

SECTION 7.01.  Supplemental Trust Agreement..................................................................... 20
SECTION 7.02.  Termination...................................................................................... 21

                                                   ARTICLE VIII

                                      MERGER, CONSOLIDATION, ETC. OF GRANTOR

SECTION 8.01.  Limitation on Permitted Merger
               Consolidation, Etc. of Grantor................................................................... 21

                                                    ARTICLE IX

                                                   MISCELLANEOUS

SECTION 9.01.  Counterparts..................................................................................... 21
SECTION 9.02.  Exclusive Benefits of Parties.................................................................... 22
SECTION 9.03.  Invalidity of Provisions......................................................................... 22
SECTION 9.04.  Notices.......................................................................................... 22
SECTION 9.05.  Trustee's Agents................................................................................. 23
SECTION 9.06.  Holders of Receipts Are Parties.................................................................. 23
SECTION 9.07.  Governing Law.................................................................................... 23
SECTION 9.08.  Headings......................................................................................... 23
SECTION 9.09.  Receipts Non-Assessable and Fully Paid........................................................... 23
SECTION 9.10.  No Preemptive Rights............................................................................. 23

</TABLE>
                                       ii

<PAGE>

                              AMENDED AND RESTATED
                                 TRUST AGREEMENT

                  AMENDED AND RESTATED TRUST AGREEMENT, dated as of June 6, 1997
(as amended from time to time, this "Trust Agreement") is among PECO ENERGY
CAPITAL, L.P., a Delaware limited partnership, as grantor (the "Grantor"), FIRST
UNION TRUST COMPANY, NATIONAL ASSOCIATION, as trustee (the "Trustee"), and
joined in by PECO ENERGY CAPITAL CORP., a Delaware corporation and the general
partner of the Grantor, not as a grantor, trustee or beneficiary but solely for
the purposes stated herein (the "General Partner").

                              W I T N E S S E T H:

                  WHEREAS, the Trustee and the Grantor established the Trust (as
defined below) under the Delaware Business Trust Act (12 Del. C. ss. 3801, et
seq.) (as amended from time to time, the "Business Trust Act"), pursuant to a
Trust Agreement, dated as of May 20, 1997 (the "Original Trust Agreement"), and
a Certificate of Trust filed with the Secretary of State of the State of
Delaware on May 20, 1997; and

                  WHEREAS, the Trustee and the Grantor hereby desire to continue
the Trust and to amend and restate in its entirety the Original Trust Agreement;
and

                  WHEREAS, the Trust proposes to issue Receipts each
representing a 8% Cumulative Monthly Income Preferred Security, Series C,
representing a limited partner interest of the Grantor (the "Preferred
Securities"); and

                  WHEREAS, interests in the Trust are to be evidenced by Receipt
certificates issued by the Trustee in accordance with this Trust Agreement,
which are to be delivered to the Holders;

                  NOW, THEREFORE, in consideration of the premises contained
herein and intending to be legally bound hereby, it is agreed by and among the
parties hereto to amend and restate in its entirety the Original Trust Agreement
as follows:

                                    ARTICLE I

                                   DEFINITIONS

                  The following definitions shall apply to the respective terms
(in the singular and plural forms of such terms) used in this Trust Agreement
and the Receipts:

<PAGE>

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

                  "Business Day" means any day other than a day on which banking
institutions in the City of New York or the State of Delaware are closed for
business.

                  "Business Trust Act" shall have the meaning set forth in the
recitals to this Trust Agreement.

                  "Commission" shall have the meaning set forth in Section 6.06
of this Trust Agreement.

                  "Corporate Office" means the office of the Trustee at which at
any particular time its business in respect of matters governed by this Trust
Agreement shall be administered, which at the date of this Trust Agreement is
located at 1 Rodney Square, 920 King Street, First Floor, Wilmington, Delaware
19801.

                  "DTC" means the Depositary Trust Company or any successor
thereto.

                  "Exchange" shall have the meaning set forth in Section 6.06 to
this Trust Agreement.

                  "Exchange Act" shall have the meaning set forth in Section
6.06 to this Trust Agreement.

                  "Exchange Act Reports" shall have the meaning set forth in
Section 6.06 to this Trust Agreement.

                  "General Partner" means PECO Energy Capital Corp., a
Delaware corporation, as general partner of the Grantor, and any
successor thereto pursuant to the terms of the Partnership Agreement.

                  "Grantor" means PECO Energy Capital, L.P., a Delaware
limited partnership, and its successors.

                  "Guarantee" means the Payment and Guarantee Agreement dated as
of June 6, 1997, as amended from time to time with respect to the Preferred
Securities delivered by PECO Energy to the Grantor.

                                        2

<PAGE>

                  "Holder" means the Person in whose name a certificate
representing one or more Receipts is registered on the Register maintained by
the Registrar for such purposes.

                  "Partnership Agreement" means the Amended and Restated Limited
Partnership Agreement of the Grantor dated as of July 25, 1994, as amended from
time to time, together with any Action (as defined in the Partnership Agreement)
established by the General Partner.

                  "Paying Agent" means the Person from time to time acting as
Paying Agent as provided in Section 4.05 of this Trust Agreement.

                  "PECO Energy" means PECO Energy Company, a Pennsylvania
corporation.

                  "Person" means any individual, general partnership, limited
partnership, corporation, limited liability company, joint venture, trust,
business trust, cooperative or association and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.

                  "Preferred Securities" means the 8% Cumulative Monthly Income
Preferred Securities, Series C, representing limited partner interests of the
Grantor, or any Successor Securities issued to the Trust and held by the Trustee
(unless withdrawn under Section 3.06) from time to time under this Trust
Agreement for the benefit of the Holders.

                  "Receipt" shall mean a trust receipt issued hereunder
representing an interest in the Trust equal to and representing a Preferred
Security and evidenced by a certificate issued by the Trustee pursuant to
Article III.

                  "Redemption Date" shall have the meaning set forth in Section
4.02 of this Trust Agreement.

                  "Register" shall have the meaning set forth in Section 3.03 of
this Trust Agreement.

                  "Registrar" shall mean any bank or trust company appointed to
register Receipt certificates and to register transfers thereof as herein
provided.

                  "Special Representative" shall have the meaning set forth in
Section 13.02(d) of the Partnership Agreement.

                  "Successor Securities" shall have the meaning set forth in
Section 13.02(e) of the Partnership Agreement.

                                        3

<PAGE>

                  "Trust" means the trust governed by this Trust Agreement.

                  "Trust Agreement" shall mean this Amended and Restated Trust
Agreement, as the same may be amended, modified or supplemented from time to
time.

                  "Trust Estate" means all right, title and interest of the
Trust in and to the Preferred Securities (including any Successor Securities),
and all distributions and payments with respect thereto, including payments by
PECO Energy under the Guarantee. "Trust Estate" shall not include any amounts
paid or payable to the Trustee pursuant to this Trust Agreement, including,
without limitation, fees, expenses and indemnities.

                  "Trustee" shall mean First Union Trust Company, National
Association, a Delaware banking corporation, in its capacity as Trustee and not
in its individual capacity and any successor as trustee hereunder.

                  "1933 Act Registration Statement" shall have the meaning set
forth in Section 6.06 to this Trust Agreement.

                  "1934 Act Registration Statement" shall have the meaning set
forth in Section 6.06 to this Trust Agreement.

                                   ARTICLE II

                              CONTINUATION OF TRUST

                  SECTION 2.01. Continuation of Trust.

                           (a) The Trust continued hereby shall be known as
"PECO Energy Capital Trust II." The Trust exists for the sole purpose of issuing
Receipts representing the Preferred Securities held by the Trust and performing
functions directly related thereto. The Grantor hereby delivers to the Trustee
for deposit in the Trust a certificate representing 2,000,000 Preferred
Securities for the benefit of the Holders. Each Holder is intended by the
Grantor to be the beneficial owner of the number of Preferred Securities
represented by the Receipts held by such Holder, not to hold an undivided
interest in all of the Preferred Securities. To the fullest extent permitted by
law, without the need for any other action of any Person, including the Trustee
and any other Holder, each Holder shall be entitled to enforce in the name of
the Trust the Trust's rights under the Preferred Securities represented by the
Receipts held by such Holder and any recovery on such an enforcement action
shall belong solely to such Holder who brought the action, not to the Trust,
Trustee or any other Holder individually or to Holders as a group.  Subject to
Section 7.02, this Trust shall be irrevocable.

                                        4

<PAGE>

                           (b) The Trustee hereby acknowledges receipt of the
Preferred Securities, registered in the name of the Trust, and its acceptance on
behalf of the Trust of the Preferred Securities, and declares that it shall hold
the Preferred Securities (including any Successor Securities) in the Trust for
the benefit of the Holders.

                  SECTION 2.02. Trust Account. The Trustee shall open an account
entitled "PECO Energy Capital Trust II - Trust Account." All funds received by
the Trustee on behalf of the Trust from the Preferred Securities or pursuant to
Article V will be deposited in such account by the Trustee until distributed as
provided in Article IV.

                  SECTION 2.03. Title to Trust Property. Legal title to all of
the Trust Estate shall be vested at all times in the Trustee.

                  SECTION 2.04. Situs of Trust. The situs of the Trust shall be
in Wilmington, Delaware. The Trust's bank account shall be maintained with a
bank in the State of Delaware. The Trustee shall cause to be maintained the
books and records of the Trust at the Corporate Office. The Trust Estate shall
be held in the State of Delaware. Notwithstanding the foregoing, the Trustee may
transfer such of the books and records of the Trust to a Co-Trustee appointed
pursuant to Section 6.09 or to such agents as it may appoint in accordance with
the Section 9.05 hereof, as shall be reasonably necessary (and for so long as
may be reasonably necessary) to enable such Co-Trustee or agents to perform the
duties and obligations for which such Co-Trustee or agents may be so employed.

                  SECTION 2.05. Powers of Trustee Limited. The Trustee shall
have no power to create, assume or incur indebtedness or other liabilities in
the name of the Trust. The Trustee shall have full power to conduct the business
of the Trust of holding the Preferred Securities for the Holders and taking the
other actions provided by this Trust Agreement.

                  SECTION 2.06. Liability of Holders of Receipts. With respect
to the Trust, Holders of Receipts shall be entitled to the same limitation of
personal liability to which stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware are
extended.

                                        5

<PAGE>

                                   ARTICLE III

                         FORM OF RECEIPTS, EXECUTION AND
                  DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS

                  SECTION 3.01.  Form and Transferability of Receipts.

                  (a) Except as otherwise required by DTC, Receipts shall be
evidenced by certificates engraved or printed or lithographed with
steel-engraved borders and underlying tint in substantially the form set forth
in Exhibit A annexed to this Trust Agreement, with the appropriate insertions,
modifications and omissions, as hereinafter provided.

                  (b) Certificates evidencing Receipts shall be executed by the
Trustee by the manual signature of a duly authorized signatory of the Trustee,
provided, however, that such signature may be a facsimile if a Registrar (other
than the Trustee) shall have countersigned the Receipts by manual signature of a
duly authorized signatory of the Registrar. No certificate evidencing one or
more Receipts shall be entitled to any benefit under this Trust Agreement or be
valid or obligatory for any purpose unless it shall have been executed as
provided in the preceding sentence. The Registrar shall record on the Register
each Receipt certificate executed as provided above and delivered as hereinafter
provided.

                  (c) Certificates evidencing Receipts shall be in denominations
of any whole number of Preferred Securities. All Receipt certificates shall be
dated the date of their execution or countersignature.

                  (d) Certificates evidencing Receipts may be endorsed with or
have incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Trust Agreement as may be required by
the Trustee or required to comply with any applicable law or regulation or with
the rules and regulations of any securities exchange upon which the Receipts may
be listed or to conform with any usage with respect thereto.

                  (e) Title to any Receipt certificate that is properly endorsed
or accompanied by a properly executed instrument of transfer or endorsement
shall be transferable by delivery with the same effect as in the case of a
negotiable instrument; provided, however, that until the transfer shall be
registered on the Register as provided in Section 3.03, the Trust, the Trustee,
the Registrar and the Grantor may, notwithstanding any notice to the contrary,
treat the Holder thereof at such time as the absolute owner thereof for the
purpose of determining the Person entitled to distributions or to any notice
provided for in this Trust Agreement and for all other purposes.

                                        6

<PAGE>

                  SECTION 3.02. Issuance of Receipts. Upon receipt by the
Trustee on behalf of the Trust of a certificate or certificates for the
Preferred Securities, subject to the terms and conditions of this Trust
Agreement, the Trustee, on behalf of the Trust, shall execute and deliver to DTC
certificates evidencing the Receipts in the name of DTC's nominee, who shall
thereupon be the initial Holder of Receipts.

                  SECTION 3.03. Registration, Transfer and Exchange of Receipts.
The Trustee shall cause the Register to be kept at the office of the Registrar
in which, subject to such reasonable regulations as the Trustee and the
Registrar may prescribe, the Trustee shall provide for the registration of
Receipt certificates and of transfers and exchanges of Receipt certificates as
herein provided. The Grantor hereby appoints First Union Trust Company, National
Association as the Registrar. The Registrar shall also act as transfer agent.
The Grantor may remove the Registrar and, upon removal or resignation of the
Registrar, appoint a successor Registrar. Subject to the terms and conditions of
this Trust Agreement, the Registrar shall register the transfers on the Register
from time to time of Receipt certificates upon any surrender thereof by the
Holder in person or by a duly authorized attorney, properly endorsed or
accompanied by a properly executed instrument of transfer or endorsement,
together with evidence of the payment of any transfer taxes as may be required
by law. Upon such surrender, the Trustee shall execute a new Receipt certificate
representing the same number of Preferred Securities in accordance with Section
3.01(b) and deliver the same to or upon the order of the Person entitled
thereto.

                  At the option of a Holder, Receipt certificates may be
exchanged for other Receipt certificates representing the same number of
Preferred Securities. Upon surrender of a Receipt certificate at the office of
the Registrar or such other office as the Trustee may designate for the purpose
of effecting an exchange of Receipt certificates, subject to the terms and
conditions of this Trust Agreement, the Trustee shall execute and deliver a new
Receipt certificate representing the same number of Preferred Securities as the
Receipt certificate surrendered.

                  As a condition precedent to the registration of the transfer
or exchange of any Receipt certificate, the Registrar may require (i) production
of proof satisfactory to it as to the identity and genuineness of any signature;
and (ii) compliance with such regulations, if any, as the Trustee or the
Registrar may establish not inconsistent with the provisions of this Trust
Agreement.

                  No service charge shall be made to a Holder of Receipts for
any registration of transfer or exchange of Receipt certificates, but the
Trustee or the Registrar shall require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer
or exchange of Receipt certificates.

                                        7

<PAGE>

                  Neither the Trustee nor the Registrar shall be required (a) to
register the transfer of or exchange any Receipt certificate for a period
beginning at the opening of business ten days preceding any selection of
Receipts to be redeemed and ending at the close of business on the day of the
mailing a notice of redemption of Receipts or (b) to register the transfer of or
exchange of Receipts called or being called for redemption in whole or in part,
except as provided in Section 4.02.

                  SECTION 3.04. Lost or Stolen Receipts, Etc. In case any
Receipt certificate shall be mutilated or destroyed or lost or stolen and in the
absence of notice to the Trustee that such Receipt has been acquired by a bona
fide purchaser, the Trustee shall execute and deliver a Receipt certificate of
like form and tenor in exchange and substitution for such mutilated Receipt
certificate or in lieu of and in substitution for such destroyed, lost or stolen
Receipt certificate, provided, however, that the Holder thereof provides the
Trustee with (i) evidence satisfactory to the Trustee of such destruction, loss
or theft of such Receipt certificate, of the authenticity thereof and of his
ownership thereof, (ii) reasonable indemnification satisfactory to the Trustee
and (iii) payment of any expense (including fees, charges and expenses of the
Trustee) in connection with such execution and delivery. Any duplicate Receipt
certificate issued pursuant to this Section 3.04 shall constitute complete and
indefeasible evidence of ownership in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Receipt certificate shall be found
at any time.

                  SECTION 3.05. Cancellation and Destruction of Surrendered
Receipts. All Receipt certificates surrendered to the Trustee shall be cancelled
by the Trustee. Except as prohibited by applicable law or regulation, at any
time after six years from the date of surrender of any Receipt certificate, the
Trustee may destroy such cancelled Receipt certificates.

                  SECTION 3.06. Surrender of Receipts and Withdrawal of
Preferred Securities. Any beneficial owner of Receipts may withdraw all, but not
less than all, of the Preferred Securities represented by such Receipts by
providing a written notice and an agreement to be bound by the terms of the
Partnership Agreement to the Trustee at the Corporate Office or at such other
office as the Trustee may designate for such withdrawals, all in form
satisfactory to the Trustee, in its sole discretion. Within a reasonable period
after such request has been properly made, the Trustee shall instruct DTC to
reduce the number of Receipts represented by the global certificate held by DTC
by an amount equal to the number of Receipts to be so withdrawn by the

                                        8

<PAGE>

withdrawing owner, the Trustee shall issue to the withdrawing owner a
certificate, in form substantially similar to that certificate attached hereto
as Exhibit A, representing the number of Preferred Securities so withdrawn and
the Trustee shall reduce the number of Preferred Securities represented by the
global certificate held by the Trustee by a like amount; provided, that the
Trustee shall not issue any fractional number of Preferred Securities. If a
withdrawing owner of Receipts withdraws Preferred Securities in accordance with
this Section 3.06, such withdrawing owner of Receipts shall cease to be a
beneficial owner in the Trust. The Series C Preferred Securities will only be
issued in certificated form.

                  A withdrawing owner who wishes to withdraw Series C Preferred
Securities in accordance with this Section 3.06 will be required to provide the
Grantor with a completed Form W-8 or such other documents or information as are
requested by the Grantor for tax reporting purposes and thereafter shall be
admitted to the Grantor as a preferred partner of the Grantor upon such
withdrawing owner's receipt of a certificate evidencing such Preferred
Securities registered in such withdrawing owner's name.

                  The Trustee shall deliver the Preferred Securities represented
by the Receipts surrendered to the withdrawing owner in accordance with this
Section 3.06 at the Corporate Office, except that, at the request, risk and
expense of the withdrawing owner and for the account of the withdrawing owner
thereof, such delivery may be made at such other place as may be designated by
such withdrawing owner.

                  Notwithstanding anything in this Section 3.06 to the contrary,
if the Preferred Securities represented by Receipts have been called for
redemption in accordance with the Partnership Agreement, no withdrawing owner of
such Receipts may withdraw any or all of the Preferred Securities represented by
such Receipts.

                  SECTION 3.07. Redeposit of Preferred Securities. Subject to
the terms and conditions of this Trust Agreement, any holder of Preferred
Securities may redeposit withdrawn Preferred Securities under this Trust
Agreement by delivery to the Trustee of a certificate or certificates for the
Preferred Securities to be deposited, properly endorsed or accompanied, if
required by the Trustee, by a properly executed instrument of transfer or
endorsement in form satisfactory to the Trustee and in compliance with the terms
of the Partnership Agreement, together with all such certifications as may be
required by the Trustee in its sole discretion and in accordance with the
provisions of this Trust Agreement. Within a reasonable period after such
deposit is properly made, the Trustee shall instruct DTC to increase the number
of Receipts represented by the global certificate held by DTC by an amount equal
to the Preferred Securities to be

                                        9

<PAGE>

deposited. The Preferred Trust Receipts will not be issued in certificated form.
The Trustee will only accept the deposit of such Preferred Securities upon
payment by such holder of Preferred Securities to the Trustee of all taxes and
other governmental charges and any fees payable in connection with such deposit
and the transfer of the deposited Preferred Securities.

                  If required by the Trustee, Preferred Securities presented for
deposit at any time shall also be accompanied by an agreement or assignment, or
other instrument satisfactory to the Trustee, that will provide for the prompt
transfer to the Trustee or its nominee of any distribution or other right that
any Person in whose name the Preferred Securities are registered may thereafter
receive upon or in respect of such deposited Preferred Securities, or in lieu
thereof such agreement of indemnity or other agreement as shall be satisfactory
to the Trustee.

                  SECTION 3.08. Filing Proofs, Certificates, and Other
Information. Any Person presenting Preferred Securities for redeposit in
accordance with Section 3.07 may be required from time to time to file such
proof of residence or other information, to execute such Preferred Security
certificates and to make such representations and warranties as the Trustee may
reasonably deem necessary or proper. The Trustee may withhold or delay the
delivery of any Receipt or Receipts, the transfer, redemption or exchange of any
Receipt or Receipts or the making of any distribution until such proof or other
information is filed, such certificates are executed or such representations and
warranties are made.

                                   ARTICLE IV

              DISTRIBUTIONS AND OTHER RIGHTS OF HOLDERS OF RECEIPTS

                  SECTION 4.01. Distributions of Monthly Distributions on
Preferred Securities. Whenever the Trustee shall receive any cash distribution
representing a monthly distribution on the Preferred Securities (whether or not
distributed by the Grantor on the regular monthly distribution date therefor) or
payment under the Guarantee in respect thereof pursuant to Article V of this
Agreement, the Trustee acting directly or through any Paying Agent shall
distribute to Holders of Receipts on the record date fixed pursuant to Section
4.04, such amounts in proportion to the respective numbers of Preferred
Securities represented by the Receipts held by such Holders.

                  SECTION 4.02. Redemptions of Preferred Securities. Whenever
the Grantor shall elect or is required to redeem Preferred Securities in
accordance with the Partnership Agreement, it shall (unless otherwise agreed in
writing with the Trustee) give the Trustee not less than 40 days' prior notice

                                       10

<PAGE>

thereof. The Trustee shall, as directed by the Grantor, mail, or cause to be
mailed, first-class postage prepaid, notice of the redemption of Preferred
Securities and the proposed simultaneous redemption of the Receipts to be
redeemed in connection herewith, not less than 30 and not more than 60 days
prior to the date fixed for redemption (the "Redemption Date") of the Receipts.
Such notice shall be mailed to the Holders of the Receipts to be redeemed, at
the addresses of such Holders as the same appear on the records of the
Registrar. No defect in the notice of redemption or in the mailing or delivery
thereof or publication of its contents shall affect the validity of the
redemption proceedings. The Grantor shall provide the Trustee with such notice,
and each such notice shall state: the Redemption Date; the redemption price at
which the Receipts and the Preferred Securities are to be redeemed; that all
outstanding Receipts are to be redeemed or, in the case of a redemption of fewer
than all outstanding Receipts in connection with a partial redemption of
Preferred Securities, the number of such Receipts to be so redeemed; the place
or places where Receipts to be redeemed are to be surrendered for redemption;
and specifying the CUSIP number assigned to the Receipts. In case fewer than all
the outstanding Receipts are to be redeemed, the Receipts to be redeemed shall
be selected by lot or pro rata (as nearly as may be practicable without creating
fractional shares) or by any other equitable method determined by the Trustee.

                  The Grantor agrees that if a partial redemption of the
Preferred Securities would result in a delisting of the Receipts from any
national exchange on which the Receipts are then listed, the Grantor will only
redeem the Preferred Securities in whole.

                  On the date of any such redemption of Preferred Securities,
provided that the Grantor (or PECO Energy pursuant to the Guarantee) shall then
have deposited with the Trustee the aggregate amount payable upon redemption of
the Preferred Securities to be redeemed, the Trustee shall redeem (using the
funds so deposited with it) Receipts representing the same number of Preferred
Securities redeemed by the Grantor.

                  Notice having been mailed by the Trustee as aforesaid, from
and after the Redemption Date (unless the Grantor shall have failed to redeem
the Preferred Securities to be redeemed by it as set forth in the Grantor's
notice provided for in this Section 4.02 and PECO Energy shall have failed to
pay the redemption price of the Preferred Securities under the Guarantee), the
Receipts called for redemption shall be deemed no longer to be outstanding and
all rights of the Holders of Receipts (except the right to receive cash upon
surrender of Receipts) shall cease and terminate. Upon surrender in accordance
with said notice of the Receipts endorsed or assigned for transfer, if the
Trustee shall so require, the Holders of such Receipts shall receive for each
such Receipt an amount equal to the redemption price for each Preferred
Security, in addition to accrued and unpaid distributions thereon to the date
fixed for redemption.

                                       11

<PAGE>

                  If fewer than all of the Receipts of any Holder are called for
redemption, the Registrar will deliver to the Holder of such Receipts upon
surrender of the certificate evidencing such Receipts a new certificate
evidencing the number of Receipts not called for redemption.

                  SECTION 4.03. Distributions in Liquidation of Grantor. Upon
receipt by the Trust of any distribution from the Grantor upon the liquidation
of the Grantor or any payment under the Guarantee in respect thereof pursuant to
Article V of this Trust Agreement, after satisfaction of creditors of the Trust
as required by applicable law, the Trustee shall distribute to the Holders of
Receipts on the record date fixed pursuant to Section 4.04, such amounts in
proportion to the respective number of Preferred Securities which were
represented by the Receipts held by such Holders.

                  SECTION 4.04. Fixing of Record Date for Holders of Receipts.
Whenever any distribution (other than upon any redemption) shall become payable,
or whenever the Trustee shall receive notice of any meeting at which holders of
Preferred Securities are entitled to vote or of which holders of Preferred
Securities are entitled to notice, the Trustee shall in each such instance fix a
record date (which shall be the same date as the record date fixed by the
General Partner with respect to the Preferred Securities) for the determination
of the Holders of Receipts who shall be entitled (i) to receive such
distribution, and (ii) to receive notice of, and to give instructions for the
exercise of voting rights at, any such meeting.

                  SECTION 4.05. Payment of Distributions. The Grantor shall
appoint one or more Paying Agents for the purpose of paying monthly
distributions on, the redemption price of, and distributions in liquidation on
the Receipts. The Grantor hereby appoints First Union Trust Company, National
Association to act as Paying Agent and designates the Wilmington office of the
Paying Agent as the place of payment of the redemption price of and of
distributions in liquidation on the Receipts. The aforesaid appointment and
designation shall remain in effect until changed by the Grantor. Payments of
monthly distributions on the Receipts shall be payable by wire transfer into the
accounts of or check mailed to the addresses of the Holders thereof on the
record date therefor. Payments of the redemption price of Receipts and
distributions in liquidation shall be made upon surrender of such Receipts at
the office of the Paying Agent. The Trustee is hereby authorized to direct the
Grantor to pay monthly distributions on, the redemption price of, and
distributions in liquidation on, the Preferred Securities directly to the Paying
Agent for distribution in accordance with the terms of this Trust Agreement.

                                       12

<PAGE>

                  SECTION 4.06.  Special Representative and Voting Rights.

                  (a) If the holders of the Preferred Partner Interests (as
defined in the Partnership Agreement), acting as a single class, are entitled to
appoint and authorize a Special Representative pursuant to Section 13.02(d) of
the Partnership Agreement, the Trustee shall notify the Holders of the Receipts
of such right, request direction of each Holder of a Receipt as to the
appointment of a Special Representative and vote the Preferred Securities
represented by such Receipt in accordance with such direction. If the General
Partner fails to convene a general meeting of the Partnership as required in
Section 13.02(d) of the Partnership Agreement, the Trustee shall notify the
Holders of the Receipts and, if so directed by the Holders of Receipts
representing Preferred Securities constituting at least 10% of the aggregate
stated liquidation preference of the outstanding Preferred Partner Interests (as
defined in the Partnership Agreement) shall convene such meeting.

                  (b) Upon receipt of notice of any meeting at which the Holders
of Preferred Securities are entitled to vote, the Trustee shall, as soon as
practicable thereafter, mail to the Holders of Receipts a notice, which shall be
provided by the General Partner and which shall contain (i) such information as
is contained in such notice of meeting, (ii) a statement that the Holders of
Receipts at the close of business on a specified record date fixed pursuant to
Section 4.04 will be entitled, subject to any applicable provision of law or of
the Partnership Agreement, to instruct the Trustee as to the exercise of the
voting rights pertaining to the amount of Preferred Securities represented by
their respective Receipts, and (iii) a brief statement as to the manner in which
such instructions may be given. Upon the written request of a Holder of a
Receipt on such record date, the Trustee shall vote or cause to be voted the
number of Preferred Securities represented by the Receipts evidenced by such
Receipt in accordance with the instructions set forth in such request. The
Grantor hereby agrees to take all reasonable action that may be deemed necessary
by the Trustee in order to enable the Trustee to vote such Preferred Securities
or cause such Preferred Securities to be voted. In the absence of specific
instructions from the Holder of a Receipt, the Trustee will abstain from voting
to the extent of the Preferred Securities represented by such Receipt.

                  SECTION 4.07. Changes Affecting Preferred Securities and
Reclassifications, Recapitalizations, Etc. Upon any consolidation, amalgamation,
merger, replacement or conveyance, transfer or lease by the Partnership of its
properties and assets

                                       13

<PAGE>

as an entirety in accordance with Section 13.02(e) of the Partnership Agreement,
the Trustee shall, upon the instructions of the Grantor, treat any Successor
Securities or other property (including cash) that shall be received by the
Trustee in exchange for or upon conversion of or in respect of the Preferred
Securities as part of the Trust Estate and Receipts then outstanding shall
thenceforth represent the proportionate interests of Holders thereof in the new
deposited property so received in exchange for or upon conversion or in respect
of such Preferred Securities.

                                    ARTICLE V

                                  THE GUARANTEE

                  SECTION 5.01. The Guarantee. In connection with the issuance
of the Preferred Securities, PECO Energy has delivered to the General Partner
the Guarantee for the benefit of the holders of the Preferred Securities. If the
General Partner or the Grantor receives any payment under the Guarantee, the
General Partner or the Grantor, as the case may be, will immediately transfer
such payment to the Trustee. All rights to enforce the Guarantee shall remain in
the General Partner, except to the extent set forth in Section 2.04 of the
Guarantee.

                                   ARTICLE VI

                                   THE TRUSTEE

                  SECTION 6.01. Eligibility. This Trust Agreement shall at all
times have a Trustee which is a bank that has its principal place of business in
the State of Delaware and shall have a combined capital and surplus of at least
$50,000,000. If such corporation publishes reports of conditions at least
annually, pursuant to law or to the requirements of Federal, State, Territorial
or District of Columbia supervising or examining authority, then for the
purposes of this Section 6.01, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of conditions so published.

                  In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.01, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.03.

                  The Trustee shall make available for inspection by Holders of
Receipts at the Corporate Office and at such other places as it may from time to
time deem advisable during normal business hours any reports and communications
received from the Grantor, the General Partner or PECO Energy by the Trustee as
the holder of Preferred Securities.

                                       14

<PAGE>

                  Promptly upon request from time to time by the Grantor, the
Trustee shall cause the Registrar to furnish to it a list, at the sole expense
of the General Partner, as of a recent date, of the names, addresses and
holdings of all Persons in whose names Receipts are registered on the Register.

                  SECTION 6.02. Obligations of the Trustee. The Trustee does not
assume any obligation nor shall it be subject to any liability under this Trust
Agreement or any Receipt to Holders of Receipts other than that it agrees to use
good faith in the performance of such duties as are specifically assigned to the
Trustee in this Trust Agreement.

                  The Trustee shall not be under any obligation to appear in,
prosecute or defend any action, suit or other proceeding with respect to
Preferred Securities or Receipts that in its opinion may involve it in expense
or liability, unless indemnity satisfactory to it against all expense and
liability be furnished as often as may be required.

                  In the event that the Trustee is uncertain as to application
or interpretation of any provision of this Trust Agreement or must choose
between alternative courses of action, the Trustee may seek the instructions of
the Grantor (or the Special Representative if one has been appointed) by written
notice requesting instructions. The Trustee shall take and be protected in
taking such action as has been directed by the Grantor (or the Special
Representative if one has been approved) provided that if the Trustee does not
receive instructions within 10 days or such shorter time as is set forth in the
Trustee notice, the Trustee shall be under no duty to take or refrain from
taking such action not inconsistent with this Trust Agreement as it shall deem
advisable and in the interest of the Holders.

                  The Trustee shall not be liable to any Holder or any other
party having an interest hereunder for any action or any failure to act by it in
reliance upon the advice of or information from legal counsel, accountants, any
Holder of a Receipt or any other Person believed by it in good faith to be
competent to give such advice or information. The Trustee may rely and shall be
protected from any and all liability in acting upon any written notice, request,
direction or other document believed by it to be genuine and to have been signed
or presented by the proper party or parties.

                  The Trustee, its parent, Affiliates or subsidiaries may own,
buy, sell or deal in any class of securities of the Grantor, the General Partner
or PECO Energy and its Affiliates and in

                                       15

<PAGE>

Receipts or become pecuniarily interested in any transaction in which the
Grantor, the General Partner or PECO Energy or its Affiliates may be interested
or contract with or lend money to or otherwise act as fully or as freely as if
it were not the Trustee hereunder. The Trustee may also act as transfer agent or
registrar of any of the securities of the Grantor, the General Partner or PECO
Energy and its Affiliates or act in any other capacity for PECO Energy or its
Affiliates.

                  The Trustee (and its officers, directors, employees and
agents) makes no representation nor shall it have any liability for or
responsibility with respect to the issuance of Receipts or as to the validity of
the registration statement pursuant to which the Receipts are registered under
the Securities Act, the Preferred Securities, the Guarantee or the Receipts
(except for its counter-signatures thereon) or any instruments referred to
therein or herein, or as to the correctness of any statement made therein or
herein; provided, however, that the Trustee is responsible for its
representations in this Trust Agreement.

                  The Trustee assumes no responsibility for the correctness of
the description that appears in the Receipts, which can be taken as a statement
of the Grantor summarizing certain provisions of this Trust Agreement.
Notwithstanding any other provision herein or in the Receipts, the Trustee makes
no warranties or representations as to the validity, genuineness or sufficiency
of any Preferred Securities or the Guarantee or of the Receipts, as to the
validity or sufficiency of this Trust Agreement, as to the value of the Receipts
or as to any right, title or interest of the Holders of Receipts, except that
the Trustee hereby represents and warrants as follows: (i) the Trustee has been
duly organized and is validly existing and in good standing under federal law,
with full power, authority and legal right under such laws to execute, deliver
and carry out the terms of this Trust Agreement; (ii) this Trust Agreement has
been duly authorized, executed and delivered by the Trustee; and (iii) this
Section 6.02 of the Trust Agreement constitutes a valid and binding obligation
of the Trustee enforceable against the Trustee in accordance with its terms
subject to equitable principles and laws affecting the enforcement of creditors'
rights generally.

                  SECTION 6.03. Resignation and Removal of the Trustee;
Appointment of Successor Trustee. The Trustee may at any time resign as Trustee
hereunder by notice of its election to do so delivered to the Grantor and the
General Partner, such resignation to take effect upon the appointment of a
successor trustee and its acceptance of such appointment as hereinafter
provided.

                  The Trustee may at any time be removed by the Grantor,
provided that an Event of Default has not occurred and is then continuing under
the Indenture dated as of July 1, 1994 between

                                       16

<PAGE>

PECO Energy and First Union National Bank, as successor trustee, as
supplemented, or the Guarantee, by notice of such removal delivered to the
Trustee, such removal to take effect upon the appointment of a successor trustee
and its acceptance of such appointment as hereinafter provided.

                  In case at any time the Trustee acting hereunder shall resign
or be removed, the Grantor shall, within 45 days after the delivery of the
notice of resignation or removal, as the case may be, appoint a successor
trustee, which shall be a bank or trust company, or an Affiliate of a bank or
trust company, having its principal office in the State of Delaware and having a
combined capital and surplus of at least $50,000,000. If a successor Trustee
shall not have been appointed in 45 days, the resigning Trustee may petition a
court of competent jurisdiction to appoint a successor trustee, and the expenses
of such proceeding shall be borne by the General Partner. Every successor
trustee shall execute and deliver to its predecessor and to the Grantor and the
General Partner an instrument in writing accepting its appointment hereunder,
and thereupon such successor trustee, without any further act or deed, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor and for all purposes shall be the Trustee under this Trust
Agreement, and such predecessor, upon payment of all sums due it and on the
written request of the Grantor, shall promptly execute and deliver an instrument
transferring to such successor all rights and powers of such predecessor
hereunder, shall duly assign, transfer and deliver all rights, title and
interest in the Preferred Securities and any moneys or property held hereunder
to such successor and shall deliver to such successor a list of the Holders of
all outstanding Receipts. Any successor Trustee shall promptly mail notice of
its appointment to the Holders of Receipts.

                  Any Person into or with which the Trustee may be merged,
consolidated or converted, or any Person succeeding to the corporate trust
business of the Trustee, shall be the successor of such Trustee without the
execution or filing of any document or any further act, provided such Person
shall be eligible under the provisions of the immediately preceding paragraph.

                  SECTION 6.04. Corporate Notices and Reports. The General
Partner agrees that it will give timely notice to the Trustee and any Paying
Agent of any record date, which record date shall become the record date with
respect to the Receipts pursuant to Section 4.04 hereof, for the Preferred
Securities and that it will deliver to the Trustee, and the Trustee will,
promptly after receipt thereof, transmit to the Holders of Receipts, in each
case at the address recorded on the Register, copies of all notices and reports
(including financial statements) required by law, by the rules of any national

                                       17

<PAGE>

securities exchange upon which the Receipts are listed or by the Partnership
Agreement to be furnished to holders of Preferred Securities. Such transmission
will be at the expense of the General Partner and the General Partner will
provide the Trustee with such number of copies of such documents as the Trustee
may reasonably request. In addition, the Trustee will transmit to the Holders of
Receipts at the Grantor's expense such other documents as may be requested by
the Grantor.

                  SECTION 6.05. Status of Trust. It is intended that the Trust
shall not be an "investment company" under the Investment Company Act of 1940,
as amended. While it is expressly understood and agreed that the Trustee is
acting only in a ministerial capacity hereunder, the Securities and Exchange
Commission (the "Commission") has determined that as of the date hereof, the
Trust is an issuer under the Federal securities laws and is thus required to
sign any registration statement filed or to be filed in connection with the
Receipts.

                  SECTION 6.06. Appointment of Grantor to File on Behalf of
Trust. The Grantor and the Trustee hereby authorize and direct the Grantor, as
the sponsor of the Trust (i) to file with the Commission and execute, in each
case on behalf of the Trust, (a) the Registration Statement on Form S-3 (the
"1933 Act Registration Statement"), including any pre-effective or post-
effective amendments to such 1933 Act Registration Statement (including the
prospectus and the exhibits contained therein), relating to the registration
under the Securities Act of 1933, as amended, of the Receipts of the Trust and
certain other securities; (b) a Registration Statement on Form 8-A (the "1934
Act Registration Statement"), including all pre-effective and post-effective
amendments thereto relating to the registration of the Receipts under Section
12(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act");
and (c) any reports or other papers or documents required to be filed by, or
desirable to be filed with, the Commission, under the Exchange Act ("Exchange
Act Reports"); (ii) to file with the New York Stock Exchange or Philadelphia
Stock Exchange (each an "Exchange") and execute on behalf of the Trust one or
more listing applications and all other applications, statements, certificates,
agreements and other instruments as shall be necessary or desirable to cause the
Receipts to be listed on any of the Exchanges; and (iii) to file and execute on
behalf of the Trust such applications, reports, surety bonds, irrevocable
consents, appointments of attorney for service of process and other papers and
documents as shall be necessary or desirable to register the Receipts under the
securities or "Blue Sky" laws of such jurisdictions as the Grantor, on behalf of
the Trust, may deem necessary or desirable.

                  SECTION 6.07. Indemnification by the General Partner. To the
fullest extent permitted by law, the General Partner agrees to indemnify and
defend the Trustee, the Registrar and any

                                       18

<PAGE>

Paying Agent and their directors, officers, employees and agents against, and
hold each of them harmless from, any liability, costs and expenses (including
reasonable attorneys' fees) that may arise out of or in connection with its
acting as the Trustee or the Registrar or Paying Agent, respectively, under this
Trust Agreement and the Receipts, except for any liability arising out of
negligence, bad faith or willful misconduct on the part of any such Person or
Persons.

                  SECTION 6.08. Fees, Charges and Expenses. No fees, charges or
expenses of the Trustee or any Trustee's agent hereunder or of any Registrar
shall be payable by any Person other than the General Partner, provided that if
the Trustee incurs fees, charges or expenses for which it is not otherwise
liable under this Trust Agreement due to any action taken at the election of a
Holder of Receipts or other Person, such Holder or other Person will be liable
for such fees, charges and expenses.

                  SECTION 6.09.  Appointment of Co-Trustee or Separate Trustee.

                  (a) Notwithstanding any other provisions of this Trust
Agreement, at any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any property of the Trust must at the time be located, the
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Holders,
such title to the Trust, or any part thereof, and, subject to the other
provisions of this Section 6.09, such powers, duties, obligations, rights and
trusts as the Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
successor trustee under Section 6.03 and no notice to the Holders of the
appointment of any co-trustee or separate trustee shall be required.

                  (b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:

                           (i) all rights, powers, duties and obligations
         conferred or imposed upon and exercised or performed by the Trustee and
         such separate trustee or co-trustee jointly (it being understood that
         such separate trustee or co-trustee is not authorized to act separately
         without the Trustee joining in such act), except to the extent that
         under any laws of any jurisdiction in which any particular act or acts
         are to be performed, the Trustee shall be incompetent or unqualified to
         perform such act or acts, in which event such rights, powers, duties
         and obligations (including the

                                       19

<PAGE>

         holding of title to the Trust or any portion thereof in any such
         jurisdiction) shall be exercised and performed singly by such separate
         trustee or co-trustee, but solely at the direction of the Trustee;

                           (ii)  no Trustee hereunder shall be personally
         liable by reason of any act or omission of any other trustee
         hereunder; and

                           (iii) the Trustee may at any time accept the
         resignation of or remove any separate trustee or co-trustee.

                  (c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Trust
Agreement. Each separate trustee and co-trustee, upon its acceptance of the
trusts conferred, shall be vested with the estates or property specified in its
instrument of appointment, either jointly with the Trustee or separately, as may
be provided therein, subject to all the provisions of this Trust Agreement,
specifically including every provision of this Trust Agreement relating to the
conduct of, affecting the liability of, or affording protection to, the Trustee.
Every such instrument shall be filed with the Trustee and a copy thereof given
to the Grantor.

                  (d) Any separate trustee or co-trustee may at any time
constitute the Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect to this Trust Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.

                                   ARTICLE VII

                            AMENDMENT AND TERMINATION

                  SECTION 7.01. Supplemental Trust Agreement. The Grantor or the
General Partner may, and the Trustee shall, at any time and from time to time,
without the consent of the Holders, enter into one or more agreements
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:

                           (a) to evidence the succession of another
partnership, corporation or other entity to the Grantor or the General Partner
and the assumption by any such successor of the covenants of the Grantor or the
General Partner herein contained; or

                                       20

<PAGE>

                           (b) to add to the covenants of the Grantor or the
General Partner for the benefit of the Holders, or to surrender any right or
power herein conferred upon the Grantor or the General Partner; or

                           (c) (i) to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein or (ii)
to make any other provisions with respect to matters or questions arising under
this Trust Agreement, provided that any such action taken under subsection
(c)(ii) hereof shall not materially adversely affect the interests of the
Holders; or

                           (d) to cure any ambiguity or correct any mistake.

                  Any other amendment or agreement supplemental hereto must be
in writing and approved by Holders of 66-2/3% of the then outstanding Receipts.

                  SECTION 7.02. Termination. The Trust Agreement shall terminate
on the date that all outstanding Receipts have been redeemed or there has been a
final distribution in respect of the Preferred Securities in connection with any
liquidation, dissolution or winding up of the Grantor and such distribution has
been made to the Holders of the Receipts. Except as provided in Section 6.07 and
Section 6.08, upon termination of this Trust Agreement and the Trust in
accordance with the foregoing, the respective obligations and responsibilities
of the Trustee, the Grantor and the General Partner created hereby shall
terminate.

                                  ARTICLE VIII

                     MERGER, CONSOLIDATION, ETC. OF GRANTOR

                  SECTION 8.01. Limitation on Permitted Merger Consolidation,
Etc. of Grantor. The Grantor agrees that it will not consolidate, amalgamate,
merge with or into, or be replaced by, or convey, transfer or lease its
properties and assets substantially in their entirety to any corporation or
other entity without the consent of the Holders of 66-2/3% of the Receipts
unless permitted by Section 13.02(e) of the Partnership Agreement and (i) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not cause the Receipts to be delisted by any national securities exchange
or other organization on which the Receipts are then listed, (ii) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
cause the Receipts to be downgraded by any "nationally recognized statistical
rating

                                       21

<PAGE>

organization," as that term is defined by the Commission for purposes of Rule
436(g)(2) under the Securities Act of 1933, as amended, and (iii) prior to such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
PECO Energy has 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 Holders of outstanding Receipts will not recognize
any gain or loss for Federal income tax purposes as a result of the merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease.

                                   ARTICLE IX

                                  MISCELLANEOUS

                  SECTION 9.01. Counterparts. This Trust Agreement may be
executed by the Grantor, the Trustee and the General Partner in separate
counterparts, each of which counterparts, when so executed and delivered shall
be deemed an original, but all such counterparts taken together shall constitute
one and the same instrument. Delivery of an executed counterpart of a signature
page to this Trust Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Trust Agreement. Copies of this Trust
Agreement shall be filed with the Trustee and the Trustee's agents and shall be
open to inspection during business hours at the Corporate Office and the
respective offices of the Trustee's agents, if any, by any Holder of a Receipt.

                  SECTION 9.02. Exclusive Benefits of Parties. This Trust
Agreement is for the exclusive benefit of the parties hereto and the Holders of
the Receipts and the Preferred Securities, and their respective successors
hereunder, and shall not be deemed to give any legal or equitable right, remedy
or claim to any other Person whatsoever.

                  SECTION 9.03. Invalidity of Provisions. In case any one or
more of the provisions contained in this Trust Agreement or in the Receipts
should be or become invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein or therein shall in no way be affected, prejudiced or disturbed thereby.

                  SECTION 9.04. Notices. Any notices to be given to the Grantor
or the General Partner hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or sent by mail, or by telegram or telex
or telecopier confirmed by letter, addressed to the General Partner at 1013
Centre Road, Suite 350F, Wilmington, Delaware 19805, Attention: President, or at
any other place to which the General Partner may have transferred its principal
executive office.

                                       22

<PAGE>

                  Any notices to be given to the Trustee hereunder or under the
Receipts shall be in writing and shall be deemed to have been duly given if
personally delivered or sent by mail, or by telegram or telex or telecopier
confirmed by letter, addressed to the Trustee at the Corporate Office.

                  Any notices given to any Holder of a Receipt hereunder or
under the Receipts shall be in writing and shall be deemed to have been duly
given if personally delivered or sent by mail, or by telegram or telex or
telecopier confirmed by letter, addressed to such Holder at the address of such
Holder as it appears on the books of the Trustee or, if such Holder shall have
timely filed with the Trustee a written request that notices intended for such
Holder be mailed to some other address, at the address designated in such
request.

                  Delivery of a notice sent by mail, or by telegram or telex or
telecopier shall be deemed to be effected at the time when a duly addressed
letter containing the same (or a duly addressed letter confirming an earlier
notice in the case of a telegram or telex or telecopier message) is deposited,
postage prepaid, in a post office letter box. The Trustee may, however, act upon
any telegram or telex or telecopier message received by it from the other or
from any Holder of a Receipt, notwithstanding that such telegram or telex or
telecopier message shall not subsequently be confirmed by letter as aforesaid.

                  SECTION 9.05. Trustee's Agents. The Trustee may from time to
time appoint agents to act in any respect for the Trustee for the purposes of
this Trust Agreement. The Trustee shall have no liability for the acts or
omissions of agents selected by it with due care. The Trustee will notify the
General Partner prior to any such action.

                  SECTION 9.06. Holders of Receipts Are Parties. Notwithstanding
that Holders of Receipts have not executed and delivered this Trust Agreement or
any counterpart thereof, the Holders of Receipts from time to time shall be
bound by all of the terms and conditions hereof and of the Receipts by
acceptance of delivery of Receipts.

                  SECTION 9.07. Governing Law. This Trust Agreement and the
Receipts and all rights hereunder and thereunder and provisions hereof and
thereof shall be governed by, and construed in accordance with, the law of the
State of Delaware without giving effect to principles of conflict of laws.

                  SECTION 9.08.  Headings.  The headings of articles and
sections of this Trust Agreement and in the form of the Receipt

                                       23

<PAGE>

set forth in Exhibit A hereto have been inserted for convenience only and are
not to be regarded as part of this Trust Agreement or to have any bearing upon
the meaning or interpretation of any provision contained herein or in the
Receipts.

                  SECTION 9.09. Receipts Non-Assessable and Fully Paid. The
Holders of the Receipts shall not be personally liable for obligations of the
Trust, the interests in the Trust represented by the Receipts shall be
non-assessable for any losses or expenses of the Trust or for any reason
whatsoever, and the Receipts upon delivery thereof by the Trustee pursuant to
this Trust Agreement are and shall be deemed fully paid.

                  SECTION 9.10. No Preemptive Rights. No Holder shall be
entitled as a matter of right to subscribe for or purchase, or have any
preemptive right with respect to, any part of any new or additional interest in
the Trust, whether now or hereafter authorized and whether issued for cash or
other consideration or by way of distribution.

                                       24

<PAGE>

                  IN WITNESS WHEREOF, the Grantor and the Trustee and the
General Partner have duly executed this Trust Agreement as of the day and year
first above set forth.

                                         PECO ENERGY CAPITAL, L.P.

                                         By: PECO ENERGY CAPITAL CORP.,
                                           its general partner

                                         By:________________________________
                                             Name:  J. Barry Mitchell
                                             Title: President

                                         FIRST UNION TRUST COMPANY,
                                           NATIONAL ASSOCIATION, as
                                           trustee

                                         By:________________________________
                                              Name:
                                              Title:

         The General Partner joins in this Trust Agreement solely for the
purposes of obligating itself under Sections 6.04, 6.07 and 6.08 of this Trust
Agreement and not as grantor, trustee or beneficiary.

                                         PECO ENERGY CAPITAL CORP.

                                         By:            /s/
                                            --------------------------------
                                               Name:  J. Barry Mitchell
                                               Title: President

                                       25

<PAGE>

                                    EXHIBIT A

                                 TRUST RECEIPTS
                        OF PECO ENERGY CAPITAL TRUST II,
                           a Delaware Business Trust,
                      each Representing an ____% Cumulative
                 Monthly Income Preferred Security, Series C of
           PECO Energy Capital, L.P. (a Delaware limited partnership)

No. _________     ___________ Receipts

                  First Union Trust Company, National Association, not in its
individual capacity, but solely as Trustee (the "Trustee"), hereby certifies
that ______________ is the registered owner of __________ Receipts (the
"Receipts"), each representing a ____% Cumulative Monthly Income Preferred
Security, Series C (the "Preferred Securities") of PECO Energy Capital, L.P., a
Delaware limited partnership (the "Grantor"), deposited in trust by the Grantor
with the Trustee pursuant to an Amended and Restated Trust Agreement of PECO
Energy Capital Trust II dated as of June ___, 1997 (as amended or supplemented
from time to time, the "Trust Agreement") among the Grantor, the Trustee and
PECO Energy Capital Corp., the general partner of the Grantor (the "General
Partner"). Subject to the terms of the Trust Agreement, the registered Holder
hereof is entitled to a full interest in the same number of Preferred Securities
held by the Trustee under the Trust Agreement, as are represented by the
Receipts including the distribution, voting, liquidation and other rights of the
Preferred Securities specified in the Amended and Restated Limited Partnership
Agreement of the Grantor, as amended, a copy of which is on file at the
Corporate Office.

                  1. The Trust Agreement. The Receipts are issued upon the terms
and conditions set forth in the Trust Agreement. The Trust Agreement (a copy of
which is on file at the Corporate Office of the Trustee) sets forth the rights
of Holders of Receipts and the rights and duties of the Trustee, the Grantor and
the General Partner. The statements made herein are summaries of certain
provisions of the Trust Agreement and are subject to the detailed provisions
thereof, to which reference is hereby made. In the event of any conflict or
discrepancy between the provisions hereof and the provisions of the Trust
Agreement, the provisions of the Trust Agreement will govern. Unless otherwise
expressly herein provided, all defined terms used herein shall have the meanings
ascribed thereto in the Trust Agreement.

                  2. Enforcement of Rights; Withdrawal of Preferred Securities.
To the fullest extent permitted by law, without the need for any other action of
any Person, including the Trustee and any other Holder, each Holder shall be
entitled to enforce in

                                       A-1

<PAGE>

the name of the Trust the Trust's rights under the Preferred Securities
represented by the Receipts held by such Holder and any recovery on such an
enforcement action shall belong solely to such Holder who brought the action,
not to the Trust, Trustee or any other Holder individually or to Holders as a
group. Any beneficial owner of Receipts may withdraw all, but not less than all,
of the Preferred Securities represented by such Receipts by providing a written
notice and an agreement to be bound by the terms of the Partnership Agreement to
the Trustee at the Corporate Office, with evidence of beneficial ownership in
form satisfactory to the Trustee; provided, however, that the Trustee shall not
issue any fractional number of Preferred Securities.

                  3. Distributions of Monthly Distributions on Preferred
Securities. Whenever the Trustee shall receive any cash distribution
representing a monthly distribution on the Preferred Securities (whether or not
distributed by the Grantor on the regular monthly distribution date therefor) or
payment by PECO Energy Company ("PECO Energy") under the Payment and Guarantee
Agreement dated as of June ___, 1997 (the "Guarantee") in respect thereof, the
Trustee acting directly or through any Paying Agent shall distribute to Holders
of Receipts on the record date therefor, such amounts in proportion to the
respective numbers of Preferred Securities represented by the Receipts held by
such Holders.

                  4. Redemptions of Preferred Securities. Whenever the Grantor
shall elect or is required to redeem Preferred Securities in accordance with the
Partnership Agreement, it shall (unless otherwise agreed in writing with the
Trustee) give the Trustee not less than 40 days' prior notice thereof. The
Trustee shall, as directed by the Grantor, mail, first-class postage prepaid,
notice of the redemption of Preferred Securities and the proposed simultaneous
redemption of the Receipts to be redeemed, not less than 30 and not more than 60
days prior to the date fixed for redemption of such Preferred Securities and
Receipts. Such notice shall be mailed to the Holders of the Receipts, at the
addresses of such Holders as the same appear on the records of the Trustee. No
defect in the notice of redemption or in the mailing or delivery thereof or
publication of its contents shall affect the validity of the redemption
proceedings. In case fewer than all the outstanding Receipts are to be redeemed,
the Receipts to be redeemed shall be selected by lot or pro rata (as nearly as
may be practicable without creating fractional shares) or by any other equitable
method determined by the Grantor. On the date of any such redemption of
Preferred Securities, provided that the Grantor (or PECO Energy pursuant to the
Guarantee) shall then have deposited with the Trustee the aggregate amount
payable upon redemption of the Preferred Securities to be redeemed, the Trustee
shall redeem (using the funds so deposited with it) Receipts representing the
same number of Preferred Securities to be redeemed by the Grantor.

                                       A-2

<PAGE>

                  5. Distributions in Liquidation. Upon receipt by the Trustee
of any distribution from the Grantor upon the liquidation of the Grantor or any
payment under the Guarantee in respect thereof, after satisfaction of creditors
of the Trust required by applicable law, the Trustee shall distribute to Holders
of Receipts on the record date therefor, such amounts in proportion to the
respective number of Preferred Securities which were represented by the Receipts
held by such Holders.

                  6. Fixing of Record Date for Holders of Receipts. Whenever any
distribution (other than upon any redemption) shall become payable, or whenever
the Trustee shall receive notice of any meeting at which holders of Preferred
Securities are entitled to vote or of which holders of Preferred Securities are
entitled to notice, the Trustee shall in each such instance fix a record date
(which shall be the same date as the record date fixed by the General Partner
with respect to the Preferred Securities) for the determination of the Holders
of Receipts who shall be entitled (i) to receive such distribution or (ii) to
receive notice of, and to give instructions for the exercise of voting rights
at, any such meeting.

                  7. Payment of Distributions. Payments of monthly distributions
on the Receipts shall be payable by wire transfer into the accounts of or check
mailed to the addresses of the Holders thereof on the record date therefor.
Payments of the redemption price of Receipts and distributions in liquidation
shall be made against surrender of such Receipts at the office of First Union
Trust Company, National Association, as the Paying Agent.

                  8. Special Representative; Voting Rights. (a) If the holders
of the Preferred Partner Interests (as defined in the Partnership Agreement),
acting as a single class, are entitled to appoint and authorize a Special
Representative pursuant to Section 13.02(d) of the Partnership Agreement, the
Trustee shall notify the Holders of the Receipts of such right, request
direction of each Holder of a Receipt and vote the Preferred Securities
represented by such Receipt in accordance with such direction. If the General
Partner fails to convene a general meeting of the Partnership as required in
Section 13.02(d) of the Partnership Agreement, the Trustee shall notify the
Holders of the Receipts and, if so directed by the Holders of Receipts
representing Preferred Securities constituting at least 10% of the aggregated
stated liquidation preference of the outstanding Preferred Partner Interests (as
defined in the Partnership Agreement) shall convene such meeting.

                           (b) Upon receipt of notice of any meeting at which
the holders of Preferred Securities are entitled to vote, the Trustee shall, as
soon as practicable thereafter, mail to the Holders of Receipts a notice, which
shall be provided by the

                                       A-3

<PAGE>

Grantor and which shall contain (i) such information as is contained in such
notice of meeting, (ii) a statement that the Holders of Receipts at the close of
business on a specified record date therefor will be entitled, subject to any
applicable provision of law or of the Partnership Agreement, to instruct the
Trustee as to the exercise of the voting rights pertaining to the amount of
Preferred Securities represented by their respective Receipts, and (iii) a brief
statement as to the manner in which such instructions may be given. Upon the
written request of a Holder of a Receipt on such record date, the Trustee shall
vote or cause to be voted the number of Preferred Securities represented by the
Receipts in accordance with the instructions set forth in such request. In the
absence of specific instructions from the Holder of a Receipt, the Trustee will
abstain from voting to the extent of the Preferred Securities represented by
such Receipt.

                  9. Changes Affecting Preferred Securities and
Reclassifications, Recapitalizations, Etc. Upon any consolidation, amalgamation,
merger, replacement or conveyance, transfer or lease by the Grantor of its
properties and assets substantially in their entirety in accordance with Section
13.02(e) of the Partnership Agreement, the Trustee shall, upon the instructions
of the Grantor, treat any Successor Securities or other property that shall be
received by the Trustee in exchange for or upon conversion of or in respect of
the Preferred Securities as part of the Trust Estate, and Receipts then
outstanding shall thenceforth represent the proportionate interests of Holders
thereof in the new deposited property so received in exchange for or upon
conversion or in respect of such Preferred Securities.

                  10. Transfer and Exchange of Receipts. Subject to the terms
and conditions of the Trust Agreement, the Trustee shall register the transfer
on its books from time to time of Receipt certificates upon any surrender
thereof by the Holder in person or by a duly authorized attorney, properly
endorsed or accompanied by a properly executed instrument of transfer or
endorsement, together with evidence of the payment of any transfer taxes as may
be required by law. Upon such surrender, the Trustee shall execute a new Receipt
representing the same aggregate number of the Receipts surrendered in accordance
with the Trust Agreement and deliver the same to or upon the order of the Person
entitled thereto.

                  Upon surrender of a Receipt at the Corporate Office or such
other office as the Trustee may designate for the purpose of effecting an
exchange of Receipt certificates, subject to the terms and conditions of the
Trust Agreement, the Trustee shall execute and deliver a new Receipt certificate
representing the same number of Preferred Securities as the Receipt certificate
surrendered.

                                       A-4

<PAGE>

                  As a condition precedent to the registration of transfer or
exchange of any Receipt certificate, the Registrar, may require (i) the
production of proof satisfactory to it as to the identity and genuineness of any
signature; and (ii) compliance with such regulations, if any, as the Trustee or
the Registrar may establish not inconsistent with the provisions of the Trust
Agreement.

                  Neither the Trustee nor the Registrar shall be required (a) to
register the transfer or exchange of any Receipt certificate for a period
beginning at the opening of business ten days next preceding any selection of
Receipts to be redeemed and ending at the close of business on the day of the
mailing a notice of redemption of Receipts or (b) to transfer or exchange
Receipts called or being called for redemption in whole or in part.

                  11. Title to Receipts. It is a condition of the Receipt, and
every successive Holder hereof by accepting or holding the same consents and
agrees, that title to this Receipt certificate, when properly endorsed or
accompanied by a properly executed instrument of transfer or endorsement, is
transferable by delivery with the same effect as in the case of a negotiable
instrument; provided, however, that until the transfer of this Receipt
certificate shall be registered on the books of the Trustee, the Trustee may,
notwithstanding any notice to the contrary, treat the Holder hereof at such time
as the absolute owner hereof for the purpose of determining the Person entitled
to distributions or to any notice provided for in the Trust Agreement and for
all other purposes.

                  12. Reports, Inspection of Transfer Books. The Trustee shall
make available for inspection by Holders of Receipts at the Corporate Office and
at such other places as it may from time to time deem advisable during normal
business hours any reports and communications received by the Trustee as the
record holder of Preferred Securities. The Registrar shall keep books at the
corporate office for the registration of transfer of Receipts, which books at
all reasonable times will be open for inspection by the Holders of Receipts as
and to the extent provided by applicable law.

                  13. Supplemental Trust Agreement. The Grantor or the General
Partner may, and the Trustee shall, at any time and from time to time, without
the consent of the Holders, enter into one or more agreements supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another partnership, corporation or other
entity to the Grantor or the General Partner and the assumption by any such
successor of the covenants of the Grantor or the General Partner herein
contained; or (b) to add to the covenants of the Grantor or the General Partner
for the benefit of the

                                       A-5

<PAGE>

Holders, or to surrender any right or power herein conferred upon the Grantor or
the General Partner; or (c)(i) to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein or (ii)
to make any other provisions with respect to matters or questions arising under
this Trust Agreement, provided that any such action taken under subsection (ii)
hereof shall not materially adversely affect the interests of the Holders; or
(d) to cure any ambiguity or correct any mistake. Any other amendment or
agreement supplemental hereto must be in writing and approved by Holders of
66-2/3% of the then outstanding Receipts.

                  14. Governing Law. The Trust Agreement and this Receipt and
all rights thereunder and hereunder and provisions thereof and hereof shall be
governed by, and construed in accordance with, the law of the State of Delaware
without giving effect to principles of conflict of laws.

                  15. Receipt Non-Assessable and Fully Paid. Holders of Receipts
shall not be personally liable for obligations of the Trust, the interest in the
Trust represented by the Receipts shall be non-assessable for any losses or
expenses of the Trust or for any reason whatsoever and the Receipts upon
delivery thereof by the Trustee pursuant to the Trust Agreement are and shall be
deemed fully paid.

                  16. Liability of Holders of Receipts. Holders of Receipts
shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.

                  17. No Preemptive Rights. No Holder shall be entitled as a
matter of right to subscribe for or purchase, or have any preemptive right with
respect to, any part of any new or additional interest in the Trust, whether now
or hereafter authorized and whether issued for cash or other consideration or by
way of distribution.

                  This Receipt certificate shall not be entitled to any benefits
under the Trust Agreement or be valid or obligatory for any purpose unless this
Receipt certificate shall have been executed manually or, if a Registrar for the
Receipts (other than the Trustee) shall have been appointed, by facsimile
signature of a duly authorized signatory of the Trustee and, if executed by
facsimile signature of the Trustee, shall have been countersigned manually by
such Registrar by the signature of a duly authorized signatory.

                  THE TRUSTEE IS NOT RESPONSIBLE FOR THE VALIDITY OF ANY
PREFERRED SECURITIES. THE TRUSTEE ASSUMES NO RESPONSIBILITY FOR THE CORRECTNESS
OF THE FOREGOING DESCRIPTION WHICH CAN BE TAKEN

                                       A-6

<PAGE>

AS A STATEMENT OF THE GRANTOR SUMMARIZING CERTAIN PROVISIONS OF THE TRUST
AGREEMENT. THE TRUSTEE MAKES NO WARRANTIES OR REPRESENTATIONS AS TO THE
VALIDITY, GENUINENESS OR SUFFICIENCY OF PREFERRED SECURITIES OR OF RECEIPTS; AS
TO THE VALIDITY OR SUFFICIENCY OF THE TRUST AGREEMENT; AS TO THE VALUE OF
RECEIPTS OR AS TO ANY RIGHT, TITLE OR INTEREST OF THE HOLDERS OF RECEIPTS IN AND
TO RECEIPTS.

Dated:  June ___, 1997

                                         First Union Trust Company, National
                                           Association, as Trustee,

                                         By:________________________________
                                              Name:
                                              Title:

                                       A-7

<PAGE>

                              [FORM OF ASSIGNMENT]

                  FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto ____________________ the within Receipt and all rights and
interests represented by the Receipts evidenced thereby, and hereby irrevocably
constitutes and appoints ____________________ attorney, to transfer the same on
the books of the within-named Trustee, with full power of substitution in the
premises.

Dated:_________________                     Signature:________________________
                                                  NOTE:  The signature to this
                                                  assignment must correspond
                                                  with the name as written upon
                                                  the face of the Receipt in
                                                  every particular, without
                                                  alteration or enlargement, or
                                                  any change whatever.

Signature Guarantee:

_______________________

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