Document:

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                              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

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                                TABLE OF CONTENTS
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                                                     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

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                                                     ARTICLE V

                                                   THE GUARANTEE

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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

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                              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:

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                  "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

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                  "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

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                  "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

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                           (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

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

                                         FIRST UNION TRUST COMPANY,
                                           NATIONAL ASSOCIATION, as
                                           trustee

                                         By: /s/ George Rayzis
                                             ---------------------------------
                                              Name: George Rayzis
                                              Title: Vice President

         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/ J. Barry Mitchell
                                            --------------------------------
                                               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:

_______________________<PAGE>   1
                                                                   EXHIBIT 10.35

                           LOAN AND SECURITY AGREEMENT

         This Loan and Security Agreement (the "Agreement"), effective as of the
date accepted by WILLIAM P. O'REILLY (herein referred to as "you" or "your"),
sets forth the terms and conditions upon which you will make loans and advances
and extend other financial accommodations to ELTRAX SYSTEMS, INC., a Minnesota
corporation (herein referred to as "we", "us" or "our"):

                                    RECITALS

         1.      DEFINITIONS. As used herein:

         (A)     "COLLATERAL" means all of our presently owned and hereafter
                 acquired:

         (i)          accounts (whether or not earned by performance), proceeds
                      of any letter of credit naming us as a beneficiary,
                      chattel paper, contracts, contract rights, instruments and
                      documents, general intangibles (including without
                      limitation tax refunds, tax refund claims, trade names,
                      trademarks, copyrights, patents and licenses with respect
                      to the foregoing), (individually and collectively referred
                      to as "RECEIVABLES");

         (ii)         goods, merchandise and other personal property, wherever
                      located, to be furnished under any contract of service or
                      held for sale or lease, all raw materials, work in
                      process, finished goods and materials and supplies of any
                      kind, nature or description which are or might be used or
                      consumed in our business or used in connection with the
                      manufacture, packing, shipping, advertising, selling or
                      finishing of such goods, merchandise and other personal
                      property including without limitation such goods which
                      give rise to any Receivables and which goods have been
                      returned to or repossessed or stopped in transit by us
                      ("INVENTORY");

         (iii)        tangible goods (other than Inventory), equipment and
                      fixtures including without limitation office machines,
                      tools, dies, furniture, and vehicles together with all
                      accessions, parts and appurtenances thereto appertaining
                      or attached or kept or used or intended for use in
                      connection therewith, and all substitutions, renewals,
                      improvements and replacements of and additions thereto
                      (sometimes hereinafter individually and collectively
                      referred to as "EQUIPMENT");

         (iv)         general intangibles, including without limitation, tax
                      refunds, tax refund claims, trade names, trade marks,
                      choses-in-action, copyrights, patents and licenses
                      ("GENERAL INTANGIBLES");

         (v)          property now or at any time hereafter in our possession
                      (including monies, deposit accounts, claims and credit
                      balances); and

         (vi)         books, blueprints, drawings and records related to any of
                      the foregoing as described in subsection (i) through (v)
                      above;

and all proceeds (including proceeds of any insurance policies) and products of
and accessions to all the foregoing described property in which we may have any
right, title or interest.

         (B)   "DEFAULT" shall have the meaning set forth in Paragraph 11 of
this Agreement.

<PAGE>   2

         (C)     "INDEBTEDNESS" means all of our present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred acquired, owing or arising, whether under
written or oral agreement, operation of law, or otherwise, and includes, without
limiting the foregoing (i) Obligations, (ii) obligations and liabilities of any
Person secured by a lien, claim, encumbrance, or security interest upon property
owned by us, even though we have not assumed or become liable therefor, (iii)
obligations and liabilities created or arising under any lease (including
capitalized leases) or conditional sales contract or other title retention
agreement with respect to property used or acquired by us, even though the
rights and remedies of the lessor, seller or lender are limited to repossession,
(iv) all unfunded pension fund obligations and liabilities, and (v) deferred
taxes.

         (D)     "OBLIGATIONS" means all present and future loans, advances,
debts, liabilities, obligations, covenants, duties and Indebtedness owing by us
to you, whether evidenced by any note, or other instrument or document, whether
arising from an extension of credit, opening of a letter of credit, loan,
guaranty, indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by you in
our debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees and any other sums chargeable to us hereunder or under any other agreement
with you.

         (E)     "OBLIGOR" means us or any guarantor of the Obligations,
individually or collectively.

         (F)     "PERSON" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, government, or any agency or political division thereof, or any
other entity.

         (G)     "PRIME RATE" means the Prime Rate published from day to day in
The Wall Street Journal in its "Money Rates" column as the "Prime Rate," should
such publication not continue to publish the Prime Rate or a substitute rate
then you will select a comparable announced rate. The interest rate charged for
any loan based upon the Prime Rate will change at any time the prime rate
changes.

         (H)     "SENIOR LIEN" means any and all liens, encumbrances and claims
upon the Collateral in favor of Citizens Bank of Massachusetts (successor in
interest to State Street Bank and Trust Company) or any lender which has
refinanced the Senior Indebtedness ("CITIZENS BANK").

         (I)     "SENIOR INDEBTEDNESS" means all loans advanced to us by
Citizens Bank, or any lender which has refinanced such loans, and all costs and
expenses related thereto.

         (J)     Any accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings customarily given to them in accordance with
generally accepted accounting principles.

         (K)     All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Uniform Commercial Code of
the state set forth in Paragraph 14(B) ("CODE") to the extent the same are
defined therein.

         2.      LOANS AND COLLATERAL.

         (A)     Loan advances. Subject to the terms of this Agreement, you may,
                 in your sole discretion and upon our request, make loan
                 advances to us from time to time.

                                     - 2 -

<PAGE>   3

                 You may, in your sole discretion and without notice to us,
                 disburse any or all of the proceeds of any or all of the
                 advances made by you to such person or persons as you deem
                 necessary to insure that the security interest in or lien upon
                 the Collateral shall at all times have the priority represented
                 by us in this Agreement.

         (B)     Promissory Notes. Loans under this Agreement shall be evidenced
                 by promissory notes executed by us, in form satisfactory to
                 you, and shall be payable at your principal place of business.
                 Interest and principal payable by us under such promissory
                 notes shall be paid at the times, in the amounts, on the terms
                 and at the rates set forth in the applicable promissory note.
                 All amounts owing to you as evidenced by the promissory notes
                 or otherwise shall constitute part of the Obligations.

         (C)     Interest and Other Charges. We shall pay you interest on the
                 daily outstanding balance of the various notes at a rate equal
                 to the Prime Rate plus 1.5%. In addition, we shall also pay you
                 on the first day of each month, with respect to the prior
                 calendar month or portion thereof 1/12 of one percent of the
                 amount of the loans not utilized. In no event whatsoever shall
                 the interest rate and other charges charged hereunder exceed
                 the highest rate permissible under any law which a court of
                 competent jurisdiction shall, in the final determination, deem
                 applicable hereto. In the event that a court determines that
                 you have received interest or other charges hereunder in excess
                 of the highest rate applicable hereto, you shall promptly, in
                 your sole discretion, either apply such amount to the
                 Obligations or refund such amount to us and the provisions
                 herein shall be deemed amended to provide for such permissible
                 rate.

         (D)     Term. The Term of this Agreement and of loans shall be on
                 demand, but if demand is not made, then no later than December
                 31, 2000.

         (E)     Monthly Accounting. You will provide us, monthly, with an
                 account of advances, charges and payments made pursuant to this
                 Agreement. Such account shall be deemed correct, accurate and
                 binding upon us, unless we notify you in writing to the
                 contrary within thirty (30) days after each account is
                 rendered.

         (F)     Collateral. As security for the Obligations, we hereby grant
                 you a continuing security interest in the Collateral, subject
                 only to the prior interest of the Senior Lien. We acknowledge
                 that nothing contained in this Agreement shall be (i) construed
                 as your agreement to resort or look to a particular type of
                 Collateral as security for any loan to us, or limit in any way
                 your right to resort to any or all of the Collateral as
                 security for any of the Obligations, or (ii) deemed to limit or
                 reduce any security interest in or lien upon any portion of the
                 Collateral for the Obligations.

         3.      PERFECTION OF SECURITY INTEREST; PROTECTION OF SECURITY
INTEREST. We shall, at our expense, perform all steps requested by you at any
time to perfect, maintain, protect, and enforce your security interest in the
Collateral, including, without limitation, executing and filing financing or
continuation statements, and amendments thereof, in form and substance
satisfactory to you, placing notations on our books of account to disclose your
security interest therein, and taking such other steps as are deemed necessary
by you to maintain your control of and security interest in the Collateral. You
may file, without our signature, one or more financing statements disclosing
your security interest under this Agreement. We agree that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. If any Collateral is
at any time in the possession or control of any warehouseman, bailee or any of
our agents or

                                     - 3 -

<PAGE>   4

processors, we shall notify such person of your security interest in such
Collateral and, upon your request, instruct them to hold all such Collateral for
your account subject to your instructions. From time to time, we shall, upon
your request, execute and deliver confirmatory written instruments pledging to
you the Collateral, but our failure to do so shall not affect or limit your
security interest or other rights in and to the Collateral. Until all
Obligations have been fully satisfied, your security interest in the Collateral
shall continue in full force and effect.

         4.      CHARGES AND INSURANCE.

         (A)     You may, in your discretion, at any time discharge any lien or
encumbrance or bond the same, pay any insurance, pay any service bureau, or
obtain any record and charge the cost thereof to our loan account.

         (B)     At your request, we shall insure the Collateral in your name
against loss or damage by fire, theft, burglary, pilferage, loss in transit and
such other hazards as you shall specify in amounts, under policies and by
insurers acceptable to you. Each policy shall include a provision for thirty
(30) days prior written notice to you of any cancellation or substantial
modification and shall show you as mortgagee and loss payee in a manner
acceptable to you. All premiums shall be paid by us and the policies shall be
delivered to you. If we fail to do so, you may (but shall not be required to)
procure such insurance at our expense.

         5.      EXAMINATION OF RECORDS; REPORTING.

         (A)     You may at all reasonable times have access to, examine, audit,
make extracts from and inspect our records, files, books of account and the
Collateral. We will deliver to you any instrument necessary for you to obtain
records from any service bureau maintaining records for us. All instruments and
certificates prepared by us showing the value of any of the Collateral shall be
accompanied, upon request, by copies of related purchase orders and invoices.
You may, at any time after default, remove from our premises our books and
records or require us to deliver them to you and you may, without expense to
you, use such of our personnel, supplies and premises as may be reasonably
necessary for maintaining or enforcing your security interest.

         (B)     We shall furnish you, upon request, information and statements
showing our business affairs, financial condition and the results of our
operations. We will provide you within thirty (30) days after the end of each
calendar quarter, our internally prepared income statement and balance sheet
prepared on a basis consistent with such statement prepared in prior months and
in accordance with generally accepted accounting principles, and within ninety
(90) days after the end of each of our fiscal years, our financial statements
prepared by our independent, certified public accountants prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
prior year-end statements (said interim and year-end financial statements
hereinafter referred to as "FINANCIALS").

         6.      OTHER LIENS. We represent and warrant that all Collateral is
and will continue to be owned by us free and clear of all liens, claims and
encumbrances whatsoever, except for the Senior Lien, whether prior or
subordinate to the liens we have granted you and that we will not, subject to
the terms of the Senior Indebtedness, without your prior written approval, which
may be withheld in your sole discretion, sell, encumber or dispose of or permit
the sale, encumbrance or disposal of any Collateral, except for sales of
inventory in the ordinary course of business.

                                     - 4 -

<PAGE>   5

         7.      GENERAL WARRANTIES AND REPRESENTATIONS.

We warrant and represent that:

         (A)     We are duly organized and existing in good standing under the
laws of Minnesota, are qualified to do business and are in good standing in all
states in which qualification and good standing are necessary in order for us to
conduct our business and own our property and have all requisite power and
authority to conduct our business, to own our property and to execute, deliver
and perform all of our Obligations;

         (B)     We have not, during the preceding five (5) years, been known by
or used any other assumed names;

         (C)     The execution, delivery and performance by us of this Agreement
will not constitute a violation of any applicable law or of our Articles of
Incorporation, By-Laws or any agreement, or document to which we are a party or
bound, except for the Senior Indebtedness;

         (D)     We possess adequate assets, licenses, patents, patent
applications, copyrights, trademarks, trademark applications, and tradenames for
the conduct of our business;

         (E)     We have capital sufficient to conduct our business, are solvent
and able to pay our debts as they mature and own property having a fair value
greater than the amount required to pay our debts;

         (F)     Except for trade payables arising in the ordinary course of our
business, we have (i) no pending or threatened litigation, actions or
proceedings which would materially and adversely affect our business assets,
operations or condition, financial or otherwise, or the Collateral and (ii) no
Indebtedness, other than the Obligations and the Senior Indebtedness;

         (G)     We have good, indefeasible, and merchantable title to the
Collateral, and there is no lien or encumbrance thereon other than the security
interest granted to you, except for the Senior Lien;

         (H)     We are not a party to any contract, or subject to any charge,
corporate restriction, judgment, decree or order materially and adversely
affecting our business, assets, operations or condition, financial or otherwise,
and are not subject to any labor dispute; and, no labor contract is scheduled to
expire during the term of this Agreement, except as heretofore disclosed to you
in writing;

         (I)     We are not in violation of any applicable statute, regulation
or ordinance, in any respect materially and adversely affecting the Collateral
or our business, assets, operations or condition, financial or otherwise;

         (J)     Other than the Senior Indebtedness, we are not in default with
respect to any note, indenture, loan agreement, mortgage, lease, deed or other
agreement to which we are a party or bound;

         (K)     The financial statements delivered to you fairly present our
financial condition and results of operations and those of such other Persons
described therein as of the date thereof; and there has been no material and
adverse change in such financial condition or operations since the date of the
statements;

         (L)     We have received no notice that we are not in full compliance
with any of the requirements of the Employee Retirement Income Security Act of
1974, as amended,

                                     - 5 -

<PAGE>   6

("ERISA") and its regulations and, to the best of our knowledge, there exists no
event described in Section 4043 of ERISA, excluding subsections 4043(b)(2) and
4043(b)(3) thereof, with respect to us;

         (M)     We have filed all tax returns and other reports we are required
by law to file and have paid all taxes and similar charges that are due and
payable;

         (N)     Our chief executive office, principal place of business and the
location of collateral records is at 900 Circle 75 Parkway, Suite 1700, Atlanta,
Georgia 30339;

         (O)     We have not received any notice alleging and are not aware of
any facts indicating noncompliance with any state or federal law governing the
use, generation, storage or release of any hazardous waste or substance;

         8.      AFFIRMATIVE COVENANTS. We covenant that, so long as any
Obligations remain outstanding and this Agreement is in effect, we shall:

         (A)     Pay to you on demand all fees and expenses which you incur in
connection with (i) the forwarding of loan proceeds, (ii) the processing of loan
advances, (iii) the establishment and maintenance of any lock box and of all
other accounts created in connection with the transaction contemplated hereby,
and (iv) the examination of the Collateral;

         (B)     Promptly file all tax returns and other reports which we are
required to file and promptly pay all taxes, assessments and other charges;

         (C)     Promptly notify you in writing of any litigation affecting us,
whether or not the claim is covered by insurance, and of any suit or
administrative proceeding which may materially and adversely affect the
Collateral or our business, assets, operations or condition, financial or
otherwise;

         (D)     Notify you in writing (i) promptly upon the occurrence of any
event described in Section 4043 of ERISA, other than a termination, partial
termination or merger of a "Plan" (as defined in ERISA) or a transfer of a
Plan's assets, and (ii) prior to any termination, partial termination or merger
of a Plan or a transfer of a Plan's assets;

         (E)     Give you thirty (30) days prior written notice of our opening
or closing any place of business;

         (F)     Maintain our corporate existence and our qualification and good
standing in all states necessary to conduct our business and own our property
and maintain adequate assets, licenses, patents, copyrights, trademarks and
tradenames to conduct our business;

         (G)     Promptly notify you in writing of any labor dispute to which we
are or may become subject and the expiration of any labor contract to which we
are a party or bound;

         (H)     Promptly notify you in writing of any violation of any law,
statute, regulation or ordinance of any governmental entity, or of any agency
thereof, applicable to us which may materially and adversely affect the
Collateral or our business, assets, operations or condition, financial or
otherwise;

         (I)     Notify you in writing within five (5) business days of our
default under any note, indenture, loan agreement, mortgage, lease, or other
agreement to which we are a party or bound;

                                     - 6 -
<PAGE>   7

         (J)     Promptly notify you in writing of any default under any
Indebtedness or indebtedness owing to us;

         (K)     Promptly notify you in writing of the making of any capital
expenditures materially affecting our business, assets, operations or
conditions, financial or otherwise;

         (L)     Execute and deliver to you, upon request, such documents and
agreements as you may, from time to time, reasonably request to carry out the
terms and conditions of this Agreement;

         (M)     Promptly, and in any event within five (5) days of the receipt
thereof, deliver any communication in any way concerning any act or omission on
our part regarding the use, generation, storage or release of a hazardous waste
or substance. We agree to indemnify and hold you harmless from any and all loss,
damage, cost, liability or expense (including reasonable attorney fees) arising
out of our use, generation, storage or release of any hazardous waste or
substance;

         (N)     Promptly, and in any event within five (5) days of the receipt
thereof, deliver to you a copy of any communication from the Federal Department
of Labor concerning any alleged act or omission on our part in connection with
the payment of minimum and/or overtime wages to an employee;

         (O)     Promptly, and in any event within five (5) days of the receipt
thereof, deliver to you a copy of any communication concerning any violation of
a state or Federal law which could result in the forfeiture of the Collateral;
and

         (P)     Maintain the liens and security interests granted to you,
subordinate only to the Senior Indebtedness.

         9.      NEGATIVE COVENANTS. Without your prior written consent, we
covenant that, so long as any Obligations remain outstanding and this Agreement
is in effect, we shall not:

         (A)     Merge or consolidate with or acquire any other Person;

         (B)     Declare or pay cash dividends upon any of our stock or
distribute any of our property or make (except in the ordinary course of
business) any loans or extensions of credit, or investments in, any Person, or
redeem, retire, purchase or acquire, directly or indirectly any of our stock,
other than pursuant to employee incentive or stock purchase plans, or make any
material change in our capital structure or in our business or operations which
might adversely affect the repayment of the Obligations;

         (C)     Enter into any transaction which materially and adversely
affects the Collateral or our ability to repay the Obligations;

         (D)     Become liable for the indebtedness of any Person, except by
endorsement of instruments for deposit;

         (E)     Incur Indebtedness, other than trade payables arising in the
ordinary course of our business, the Senior Indebtedness and the Obligations;

         (F)     Make a sale to any customer on a bill-and-hold, guaranteed
sale, sale and return, sale on approval, consignment, or any other repurchase or
return basis;

         (G)     Use any other corporate or fictitious name; or

                                     - 7 -

<PAGE>   8

         (H)     Prepay any Indebtedness.

         10.     TERMINATION. Either party shall have the right to terminate
this Agreement at any time hereafter by giving the other party written notice by
registered or certified mail not less than sixty (60) days prior to the
effective date of such termination. Upon the effective date of termination, all
Obligations shall become immediately due and payable.

         11.     DEFAULT. Any one or more of the following events shall
constitute a default ("DEFAULT") under this Agreement: (a) we shall fail to pay
when due, or breach, any Obligations, or (b) we shall (i) become insolvent, (ii)
generally not pay our respective debts as they become due, (iii) make an
assignment for the benefit of creditors, or (iv) make any misrepresentation to
you or fail to observe or perform any covenants or conditions in connection with
this Agreement or any other instrument related to the loan hereto, or (c) there
shall be filed by or against us a petition in bankruptcy for liquidation or for
reorganization, or a custodian, receiver or agent is appointed or authorized to
take charge of its properties, or we authorize any such action, or (d) there
hereafter occur any material and adverse change in the business, assets,
operations and condition, financial or otherwise, or (e) we shall be in default
under any agreement to which we are a party, or (f) any guaranty of the
Obligations shall be terminated or revoked.

         We acknowledge that while there are events of default set forth above,
the Obligations are due upon demand, and if demand is not made, then the
Obligations are due and payable by December 31, 2000. Demand may occur with or
without there being an event of default.

         12.     YOUR RIGHTS AND REMEDIES.

         (A)     If a Default occurs under this Agreement or any other document
or instrument executed by the undersigned, you may, at your election, without
notice of your election and without demand, do any one or more of the following:
(a) declare our Obligations, whether evidenced by a revolving credit note, a
demand note or otherwise, to be immediately due and payable; (b) stop advancing
money or extending credit to or for our benefit under the Agreement; (c)
exercise any and all of the rights accruing to a secured party under the Code
and any other applicable law; (d) take possession of the Collateral and keep it
on our premises, at no cost to you, or remove any part of it to such other
place(s) as you may desire or we shall, upon your demand, at our cost, assemble
the Collateral and make it available to you at a place reasonably convenient to
you.

         (B)     You may sell and deliver any Collateral at public or private
sales, for cash, upon credit or otherwise, at such prices and upon such terms as
you deem advisable, at your discretion, and may, if you deem it reasonable,
postpone or adjourn any sale of the Collateral by an announcement at the time
and place of sale of such postponed or adjourned sale without giving a new
notice of sale. We agree that you have no obligation to preserve rights to the
Collateral or marshall any Collateral for the benefit of any Person. You are
hereby granted a license or other right to use, without charge, our labels,
patents, copyrights, name, trade secrets, trade names, trademarks and
advertising matter, or any similar property, in completing production,
advertising or selling any Collateral and our rights under all licenses and all
franchise agreements shall inure to your benefit. Any requirement of reasonable
notice shall be met if such notice is mailed postage prepaid to us at our
address set forth below at least five (5) days before sale or other disposition.
The proceeds of sale shall be applied first to all expenses of sale, including
attorneys' fees, and second to (in whatever order you elect) all Obligations.
You will return any excess to us and we shall remain liable for any deficiency.

                                     - 8 -

<PAGE>   9

         (C)     IN THE EVENT OF A DEFAULT HEREUNDER, WE HEREBY WAIVE ALL RIGHTS
TO NOTICE AND HEARING PRIOR TO THE EXERCISE BY YOU OF YOUR RIGHTS TO REPOSSESS
THE COLLATERAL WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT NOTICE OR HEARING AND ALL RIGHTS OF SET-OFF AND COUNTERCLAIM
AGAINST YOU.

         13.     WAIVER; AMENDMENTS; SUCCESSORS AND ASSIGNS. Your failure to
exercise any right, remedy or option under this Agreement or other agreement
between you and us or delay by you in exercising the same will not operate as a
waiver. No waiver by you will be effective unless in writing and then only to
the extent stated. No waiver by you shall affect your right to require strict
performance of this Agreement. Your rights and remedies will be cumulative and
not exclusive. This Agreement cannot be changed or terminated orally. All terms,
conditions, promises, covenants, provisions and warranties shall inure to the
benefit of and bind your and our respective representatives, successors and
assigns.

         14.     MISCELLANEOUS.

         (A)     If any provision of this Agreement shall be prohibited or
invalid, under applicable law, it shall be ineffective only to such extent,
without invalidating the remainder of this Agreement.

         (B)     This Agreement shall be interpreted in accordance with the
governing law of the state of Georgia.

         (C)     All of our representations and warranties contained in this
Agreement shall survive the execution, delivery and acceptance thereof by the
parties.

         (D)     No termination of this Agreement or of any guaranty of the
Obligations shall affect or impair the powers, obligations, duties, rights,
warranties, representations or liabilities of the parties hereto and all shall
survive such termination.

         (E)     Each Obligation may, in your discretion, be evidenced by notes
or other instruments issued or made by us to you. If not so evidenced, such
Obligation shall be evidenced solely by entries upon your books and records.

         (F)     All Obligations shall constitute one loan secured by the
Collateral. You may, in your sole discretion, subject to the Senior
Indebtedness: (i) exchange, enforce, waive or release any of the Collateral or
(ii) apply Collateral and direct the order or manner without affecting your
right to take any other action with respect to any other Collateral.

         (G)     You shall have the continuing and exclusive right to apply or
reverse and re-apply any and all payments to any portion of the Obligations. To
the extent that we make a payment or you receive any payment or proceeds of the
Collateral for our benefit, which are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by you.

         (H)     We shall reimburse you for all expenses incurred or to be
incurred by you in connection with (a) the negotiation, preparation and closing
of this Agreement; (b) the protection, perfection or preservation of your
security interest in or lien upon the Collateral; (c) your inspection or
verification of the Collateral; (d) any court or bankruptcy proceeding relating
to the Agreement or any claim or action by any Person against you which would
not have been asserted were it not for your relationship with us hereunder or
otherwise; (e) actions taken with

                                     - 9 -

<PAGE>   10

respect to the Collateral and your security interest or lien therein; and (f)
enforcement of any of your rights and remedies with respect to the Obligations
or Collateral. The foregoing expenses shall include, without limitation: (i)
reasonable fees, costs and expenses of your attorneys and paralegals; (ii)
interest on the foregoing at the highest applicable interest rate provided under
this Agreement, which shall be part of the Obligations, payable on demand and
secured by the Collateral. In recognition of your right to have all your
expenses incurred or to be incurred in connection with this Agreement and the
fees due you secured by the Collateral, you shall not be required to record any
discharge of your lien or termination of your security interest unless and until
we deliver to you a general release acceptable to you.

         (I)     We agree to give you written notice of any action or omission
by you or your agents in connection with this Agreement that may be actionable
against you or that may be a defense to payment of the Obligations for any
reasons. We further agree that unless such a notice specifically describing the
action or omission is given by us within thirty (30) days after we have
knowledge or with the exercise of reasonable diligence should have had knowledge
of the occurrence of said action or omission we shall not assert, and we shall
be deemed to have waived, any claim or defense arising therefrom.

         (J)     If you shall breach your obligation under this Agreement to
make an advance under the terms of this Agreement, notwithstanding our
conformance with the provisions thereof, we agree that our sole remedy on
account thereof shall be to recover liquidated damages on account of such
breach, computed as hereinafter provided, in recognition of the fact that the
damages which we might incur are uncertain and speculative. Liquidated damages
to which we shall be entitled shall be equal to sixty (60) times the interest
payable for one day on the loans outstanding as of the day that you are deemed
to have failed to fund. In any event, you shall never be liable to us for
special, indirect and consequential damages, whatever the nature of your breach
hereunder.

         (K)     We authorize and direct you to disburse, for our account, the
proceeds of loans made by you to us to such Person as any of our officers or
directors shall direct, whether in writing or orally.

         (L)     Any notice required hereunder shall be in writing, and
addressed to the party to be notified as follows:

         If to you, to:             William P. O'Reilly
                                    2000 Town Center, Suite 690
                                    Southfield, Michigan  48075

         If to us, to:              Eltrax Systems, Inc.
                                    900 Circle 75 Parkway, Suite 1700
                                    Atlanta, Georgia  30339
                                    Attention: William A. Fielder, III, CFO

or to such other address as each party may designate for itself by like notice.

         (M)     We represent and warrant to you that, with respect to the
financing transaction herein contemplated, no Person is entitled to any
brokerage fee or other commission and we agree to indemnify and hold you
harmless against any and all such claims.

         (N)     The paragraph titles contained in this Agreement are without
substantive meaning and are not part of the Agreement.

                                     - 10 -

<PAGE>   11

         (O)     You acknowledge that you have been given full access to all of
the documents pertaining to the Senior Indebtedness and Senior Lien and
understand fully that our ability to repay the Obligations, as well as secure
the Collateral, is circumscribed by the terms and conditions of such documents.

         15.     WAIVER OF JURY TRIAL. Our legal counsel has advised us that (i)
there may be a constitutional right to a jury trial in connection with any
claim, dispute or lawsuit arising out of this Agreement and (ii) such
constitutional right may be waived. After consultation with our counsel (which
has included our counsel's review of this Agreement), we believe that it is in
our best interest in this commercial transaction to waive such right.
Accordingly, we hereby waive our right to a jury trial, and further agree that
the best forum for hearing any claim, dispute or lawsuit, if any, arising in
connection with this Agreement or our relationship with you, shall be a court of
competent jurisdiction sitting without a jury.

         16.     NO ORAL AGREEMENTS. We acknowledge that this Agreement
represents the final agreement between you and us and the terms of such
documents may not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements that may have or will be exchanged between you
(including your officers, employees and agents) and us.

                                         Very truly yours,

                                         ELTRAX SYSTEMS, INC.
                                         a Minnesota corporation

                                         By: /s/ Don G. Hallacy
                                             -------------------------------
                                             Don G. Hallacy, President

Accepted on December 30, 1999:

/s/ William P. O'Reilly
-----------------------------------
William P. O'Reilly

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