Document:

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                                                                     EXHIBIT 4.2
                                                                     -----------
                              EXELON CORPORATION

                         1989 LONG-TERM INCENTIVE PLAN
                         -----------------------------

            (As amended and restated effective October [__], 2000)

     PECO Energy Company ("PECO") originally established the PECO Energy Company
1989 Long-Term Incentive Plan (the "Plan").  The outstanding shares of PECO were
subsequently exchanged with shares of Exelon Corporation ("Exelon" or the
"Company") causing Exelon to become PECO's parent (the "Share Exchange").
Immediately thereafter, Unicom Corporation merged with and into Exelon (the
"Merger").  In connection with the Share Exchange and Merger, Exelon assumed
sponsorship of the Plan and changed the Plan's name to the Exelon 1989 Long-Term
Incentive Plan.

     The purpose of the Plan is to encourage designated key employees of Exelon
and its subsidiaries to contribute materially to the growth of the Company,
thereby benefiting the Company's shareholders.

     1.   Administration.
          --------------

     (a)  Committee.  The Plan shall be administered and interpreted by a
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committee (the "Committee") appointed by the Board of Directors of Exelon (the
"Board").  The Committee shall consist of two or more persons appointed by the
Board, all of whom shall be "outside directors" as defined under section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code") and related
Treasury regulations, and "non-employee directors" as defined under Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

     (b)  Committee Authority.  The Committee shall have the sole authority to
          -------------------
(i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability (iv) amend
the terms of any previously issued Grant, and (v) deal with any other matters
arising under the Plan.

     (c)  Committee Determinations.  The Committee shall have full power and
          ------------------------
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion.  The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder.  All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
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     2.   Grants.
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     Awards under the Plan may consist of grants of incentive stock options as
described in Section 5 ("Incentive Stock Options"), nonqualified stock options
as described in Section 5 ("Nonqualified Stock Options") (Incentive Stock
Options and Nonqualified Stock Options are collectively referred to as
"Options"), restricted stock as described in Section 6 ("Restricted Stock"),
stock appreciation rights as described in Section 7 ("SARs"), performance units
as described in Section 8 ("Performance Units"), performance shares as described
in Section 8 ("Performance Shares"), phantom stock as described in Section 9
("Phantom Stock"), and dividend equivalents as described in Section 10
("Dividend Equivalents") (hereinafter collectively referred to as "Grants").
All Grants shall be subject to the terms and conditions set forth herein and to
such other terms and conditions consistent with this Plan as the Committee deems
appropriate and as are specified in writing by the Committee to the individual
in a grant instrument (the "Grant Instrument") or an amendment to the Grant
Instrument.  The Committee shall approve the form and provisions of each Grant
Instrument.  Grants under a particular Section of the Plan need not be uniform
as among the grantees.

     3.   Shares Subject to the Plan.
          --------------------------

     (a)  Shares Authorized. Subject to the adjustment specified in Section 3(c)
          -----------------
below, the aggregate number of shares of common stock of the Company ("Company
Stock") that may be issued or transferred under the Plan is sixteen million,
subject to the adjustment specified in Section 3(c) below.  The shares may be
authorized but unissued shares of Company Stock or reacquired shares of Company
Stock, including treasury shares and shares purchased by the Company on the open
market for purposes of the Plan.  If and to the extent Options or SARs granted
under the Plan terminate, expire, or are canceled, forfeited, exchanged, or
surrendered without having been exercised or if any shares of Restricted Stock,
Performance Units, Performance Shares, or Phantom Stock are forfeited, the
shares (if any) subject to such Grants shall again be available for purposes of
the Plan.

     (b)  Individual Limit.  During any calendar year, no individual may be
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granted Options or other Grants under the Plan that, in the aggregate,  may be
settled by delivery of more than five hundred thousand shares of Company Stock,
subject to adjustment as provided in Section 3(c).  In addition, with respect to
Grants the value of which is based on the Fair Market Value of Company Stock and
that may be settled in cash (in whole or in part), no individual may be paid
during any calendar year cash amounts relating to such Grants that exceed the
greater of the Fair Market Value (as defined in Section 5(b)(iii)) of the number
of shares of Company Stock set forth in the preceding sentence either at the
date of grant or at the date of settlement.  This provision sets forth two
separate limitations, so that Grants that may be settled solely by delivery of
Company Stock will not operate to reduce the amount or value of cash-only
Grants, and vice versa; nevertheless, Grants that may be settled in Company
Stock or cash must not exceed either limitation.

     With respect to Grants, the value of which is not based on the Fair Market
Value of  Company Stock, no individual may receive during any calendar year cash
or shares of Company

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Stock with a Fair Market Value at date of settlement that, in the aggregate,
exceeds two million dollars.

     (c)  Adjustments. If there is any change in the number or kind of shares of
          -----------
Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Grants, the maximum number of shares of Company Stock that
any individual participating in the Plan may be granted in any year, the number
of shares covered by outstanding Grants, the kind of shares issued under the
Plan, and the price per share or the applicable market value of such Grants may
be appropriately adjusted by the Committee to reflect any increase or decrease
in the number of, or change in the kind or value of, issued shares of Company
Stock to preclude, to the extent practicable, the enlargement or dilution of
rights and benefits under such Grants; provided, however, that any fractional
shares resulting from such adjustment shall be eliminated.  Any adjustments
determined by the Committee shall be final, binding and conclusive.  If and to
the extent that any such change in the number or kind of shares of Company Stock
outstanding is effected solely by application of a mathematical formula (e.g., a
2-for-1 stock split), the adjustment described in this Section 3(c) shall be
made and shall occur automatically by application of such formula, without
further action by the Committee.

     4.   Eligibility for Participation.
          -----------------------------

     (a)  Eligible Persons.  All key employees of Exelon and its Subsidiaries
          ----------------
("Employees"), including Employees who are officers or members of the Board,
shall be eligible to participate in the Plan.  Members of the Board who are not
Employees shall not be eligible to participate in the Plan.  "Subsidiary" shall
mean a corporation in which the Company owns, directly or indirectly, at least
50% of the of the combined voting power of all classes of stock entitled to
vote.

     (b)  Selection of Grantees.  The Committee shall select the Employees to
          ---------------------
receive Grants and shall determine the number of shares of Company Stock subject
to a particular Grant, and/or shall establish such other terms and conditions
applicable to such Grant, in such manner as the Committee determines.  Employees
who receive Grants under this Plan shall hereinafter be referred to as
"Grantees."

     5.   Granting of Options.
          -------------------

     (a)  Number of Shares.  The Committee shall determine the number of shares
          ----------------
of Company Stock that will be subject to each Grant of Options.

     (b)  Type of Option and Price.
          ------------------------

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          (i)   The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of section
422 of the Code or Nonqualified Stock Options that are not intended so to
qualify or any combination of Incentive Stock Options and Nonqualified Stock
Options, all in accordance with the terms and conditions set forth herein.

          (ii)  The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Committee and may be equal to or
greater than the Fair Market Value (as defined below) of a share of Company
Stock on the date the Option is granted; provided, however, that an Incentive
Stock Option may not be granted to an Employee who, at the time of grant, owns
stock possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or any parent or Subsidiary of the Company,
unless the Exercise Price per share is not less than 110% of the Fair Market
Value of Company Stock on the date of grant.

          (iii) The Fair Market Value per share shall be the closing sale price
of a share of Company Stock on the composite tape of New York Stock Exchange, or
if there is not such sale on the relevant date, then on the last previous day on
which a sale was reported.

     (c)  Option Term.  The Committee shall determine the term of each Option.
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The term of any Option shall not exceed ten years from the date of grant.
However, an Incentive Stock Option that is granted to an Employee who, at the
time of grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company, or any parent or Subsidiary
of the Company, may not have a term that exceeds five years from the date of
grant.

     (d)  Exercisability of Options.  Options shall become exercisable in
          -------------------------
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument or an
amendment to the Grant Instrument.  The Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason.

     (e)  Termination of Employment, Disability, or Death.
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          (i)   If Grantee's employment by the Company terminates by reason of
Retirement, death, or Disability, then on the date of such Retirement, death, or
Disability, such Option shall, notwithstanding Section 5(e)(i) hereof, become
exercisable as to all of the shares of Company Stock remaining subject to such
Option and may (1) in the cases of Retirement or Disability, be exercised by
such Grantee or his or her legal representative, Successor Grantee, or permitted
transferees, as the case may be, until the last day of the term of the Option or
(2) in the case of death, be exercised by such Grantee's legal representative,
Successor Grantee, or permitted transferees, as the case may be, until 11:59
p.m. (Chicago time) on the third anniversary of the date the of death; provided,
however, that in any case such exercisability is conditioned upon such Grantee's
or his or her legal representative's, Successor Grantee's, or permitted
transferees', as the case  may be, continued "acceptable conduct," as determined
by the Committee in its sole discretion.  For purposes of the foregoing,
"acceptable conduct" shall mean

                                      -4-
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without limitation, refraining from engaging in activities which (i) are
competitive to the business of the Company or its subsidiaries, (ii) promote or
assist competitors of the Company or its subsidiaries, or (iii) reflect
negatively on the Company, its subsidiaries, or any of their directors,
officers, employees, or agents.

          (ii)  If Grantee's employment is terminated by the Company for Cause
or by the Optionee (other than Retirement or for Good Reason following a Change
in Control), such Grantee's Option shall expire on the effective date of such
termination of employment and shall not thereafter be exercisable.

          (iii) Except as provided in section 5(e)(iv), if Grantee's employment
by the Company terminates for any reason other than Retirement, death, or
Disability, or as specified in Section 5(e)(ii), such Grantee's Option shall be
exercisable only to the extent it is exercisable on the effective date of such
termination of employment and may thereafter be exercised by such Grantee or his
or her legal representative until and including the earlier to occur of (i) the
date which is three months after the effective date of such termination of
employment and (ii) the last day of the term of the Option.

          (iv)  Notwithstanding any provision of the Plan or any Grant
Instrument to the contrary, if within 24 months following a Change in Control,
Grantee's employment is terminated (i) by the Company other than for Cause, or
(ii) by the Grantee for Good Reason, outstanding Options shall immediately
become fully exercisable; provided however, that a termination of employment
with the Company or a subsidiary thereof and immediate reemployment by an entity
which purchases or otherwise acquires Company assets shall not be a termination
of employment within the meaning of this Section 5(e)(iv).

          (v)   For purposes of this Section 5(e) and Sections 6, 7 and 8:

                (A)  "Change in Control" shall mean:

                     (1)  the acquisition by any individual, entity or group (a
                          "Person"), including any "person" within the meaning
                          of Section 13(d)(3) or 14(d)(2) of the Securities
                          Exchange Act of 1934, as amended (the "Exchange Act"),
                          of beneficial ownership within the meaning of Rule
                          13d-3 promulgated under the Exchange Act, of 20% or
                          more of either (i) the then outstanding shares of
                          Company Stock (the "Outstanding Company Common Stock")
                          or (ii) the combined voting power of the then
                          outstanding securities of the Company entitled to vote
                          generally in the election of directors (the
                          "Outstanding Company Voting Securities"); excluding,
                          however, the following: (A) any acquisition directly
                          from the Company (excluding any acquisition resulting
                          from the exercise of an exercise, conversion or
                          exchange privilege unless the security being so
                          exercised, converted or exchanged was acquired
                          directly from the

                                      -5-
<PAGE>

                          Company), (B) any acquisition by the Company, (C) any
                          acquisition by an employee benefit plan (or related
                          trust) sponsored or maintained by the Company or any
                          corporation controlled by the Company, or (D) any
                          acquisition by any corporation pursuant to a
                          transaction which complies with clauses (i), (ii) and
                          (iii) of subsection (3) of this Section 5(e)(v)(A);
                          provided further, that for purposes of clause (B), if
                          any Person (other than the Company or any employee
                          benefit plan (or related trust) sponsored or
                          maintained by the Company or any corporation
                          controlled by the Company) shall become the beneficial
                          owner of 20% or more of the Outstanding Company Common
                          Stock or 20% or more of the Outstanding Company Voting
                          Securities by reason of an acquisition by the Company,
                          and such Person shall, after such acquisition by the
                          Company, become the beneficial owner of any additional
                          shares of the Outstanding Company Common Stock or any
                          additional Outstanding Company Voting Securities
                          (other than pursuant to any dividend reinvestment plan
                          or arrangement maintained by the Company) and such
                          beneficial ownership is publicly announced, such
                          additional beneficial ownership shall constitute a
                          Change in Control;

                     (2)  individuals who, as of the date hereof, constitute the
                          Board of Directors (the "Incumbent Board") cease for
                          any reason to constitute at least a majority of such
                          Board; provided that any individual who becomes a
                          director of the Company subsequent to the date hereof
                          whose election, or nomination for election by the
                          Company's stockholders, was approved by the vote of at
                          least a majority of the directors then comprising the
                          Incumbent Board shall be deemed a member of the
                          Incumbent Board; and provided further, that any
                          individual who was initially elected as a director of
                          the Company as a result of an actual or threatened
                          election contest, as such terms are used in Rule 14a-
                          11 of Regulation 14A promulgated under the Exchange
                          Act, or any other actual or threatened solicitation of
                          proxies or consents by or on behalf of any Person
                          other than the Board shall not be deemed a member of
                          the Incumbent Board;

                     (3)  approval by the stockholders of the Company of a
                          reorganization, merger or consolidation or sale or
                          other disposition of more than 50% of the operating
                          assets of the Company (determined on a consolidated
                          basis) other than

                                      -6-
<PAGE>

                          in connection with an arrangement resulting in the
                          continued utilization of such assets by the Company (a
                          "Corporate Transaction"): excluding however, a
                          Corporate Transaction pursuant to which (i) all or
                          substantially all of the individuals or entities who
                          are the beneficial owners, respectively, of the
                          Outstanding Company Common Stock and the Outstanding
                          Company Voting Securities immediately prior to such
                          Corporate Transaction will beneficially own, directly
                          or indirectly, more than 60% of, respectively, the
                          outstanding shares of common stock, and the combined
                          voting power of the outstanding securities of such
                          corporation entitled to vote generally in the election
                          of directors, as the case may be, of the corporation
                          resulting from such Corporate Transaction (including,
                          without limitation, a corporation which as a result of
                          such transaction owns the Company or all or
                          substantially all of the Company's assets either
                          directly or indirectly (in substantially the same
                          proportions relative to each other as their ownership,
                          immediately prior to such Corporate Transaction, of
                          the Outstanding Company Common Stock and the
                          Outstanding Company Voting Securities, as the case may
                          be, (ii) no Person (other than: the Company, any
                          employee benefit plan (or related trust) sponsored or
                          maintained by the Company or any corporation
                          controlled by the Company; the corporation resulting
                          from such Corporate Transaction; and any Person which
                          beneficially owned, immediately prior to such
                          Corporate Transaction, directly or indirectly, 20% or
                          more of the Outstanding Company Common Stock or the
                          Outstanding Company Voting Securities as the case may
                          be) will beneficially own, directly or indirectly, 20%
                          or more of, respectively, the outstanding shares of
                          common stock of the corporation resulting from such
                          Corporate Transaction or the combined voting power of
                          the outstanding securities of such corporation
                          entitled to vote generally in the election of
                          directors and (iii) individuals who were members of
                          the Incumbent Board will constitute at least a
                          majority of the members of the board of directors of
                          the corporation resulting from such Corporate
                          Transaction; or

                     (4)  the approval by the shareholders of a plan of complete
                          liquidation or dissolution of the Company, other than
                          a plan of liquidation or dissolution which results in
                          the acquisition of all or substantially all of the
                          assets of Commonwealth Edison by the Company or any
                          affiliate thereof.

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<PAGE>

                (B)  "Company" shall mean the Company and its Subsidiary
corporations.

                (C)  "Cause" means:

                     (1)  the Grantee's willful commission of acts or omissions
                          which have, have had, or are likely to have a material
                          adverse effect on the business, operations, financial
                          condition or reputation of the Company or any of its
                          affiliates;

                     (2)  the Grantee's conviction (including a plea of guilty
                          or nolo contendre) of a felony or any crime of fraud,
                          theft, dishonesty or moral turpitude; or,

                     (3)  the Grantee's material violation of any statutory or
                          common law duty of loyalty to the Company or any of
                          its affiliates.

                (D)  "Disability" shall have the meaning specified in any long
term disability plan or arrangement maintained by the Company or, if no such
plan or arrangement is then in effect, as determined by the Committee.

                (E)  "Good Reason" means the occurrence of any of the following:

                     (1)  the failure to maintain the Grantee in the office or
                          position or in a substantially equivalent office or
                          position, held by the Grantee immediately prior to
                          Change in Control;

                     (2)  a material adverse alteration in the nature or scope
                          of the Grantee's position, duties, functions,
                          responsibilities or authority;

                     (3)  a material reduction of the Grantee's salary,
                          incentive compensation or benefits, unless such
                          reduction is part of a policy, program or arrangement
                          applicable to peer executives of the Company and its
                          subsidiaries of any successor entity;

                     (4)  a determination by the Grantee, made in good faith,
                          that, as a result of Change in Control, the Grantee is
                          substantially unable to perform, or that there has
                          been a material reduction in any of the Grantee's
                          duties, functions, responsibility or authority;

                                      -8-
<PAGE>

                     (5)  the failure of any successor to the Company to assume
                          any agreement or arrangement made with respect to a
                          Grantee which provides benefits in the event of a
                          Change in Control, or a material breach of any such
                          agreement or arrangement by the Company or its
                          successor;

                     (6)  a relocation of more than 50 miles of (i) the
                          Grantee's workplace, or (ii) the principal offices of
                          the Company (if such offices are the Grantee's
                          workplace), in each case without consent of the
                          Grantee; or

                     (7)  a requirement of at least 20% more business travel
                          than was required of the Grantee prior to Change in
                          Control.

                (F)  "Retirement" shall mean retirement from the employment of
the Company on or after attaining the minimum age specified for early or normal
retirement in any then effective retirement policy of the Company, after a
minimum of ten years employment with the Company.

     (f)  Exercise of Options.  A Grantee may exercise an Option that has become
          -------------------
exercisable, in whole or in part, by delivering a notice of exercise to the
Company with payment of the Exercise Price.  The Grantee shall pay the Exercise
Price for an Option as specified by the Committee (x) in cash, (y) with the
approval of the Committee, by delivering shares of Company Stock owned by the
Grantee (including Company Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or (z) by such other method as the Committee may approve, including attestation
(on a form prescribed by the Committee) to ownership of shares of Company Stock
having a Fair Market Value on the date of exercise equal to the Exercise Price,
or payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board.  In addition, the Committee may
authorize loans by the Company to Grantees in connection with the exercise of an
Option, upon such terms and conditions that the Committee, in its sole
discretion, deems appropriate.  Shares of Company Stock used to exercise an
Option shall have been held by the Grantee for the requisite period of time to
avoid adverse accounting consequences to the Company with respect to the Option.
The Grantee shall pay the Exercise Price and the amount of any withholding tax
due (pursuant to Section 11) at the time of exercise.  Shares of the Company
Stock shall not be issued upon exercise of an Option until the Exercise Price is
fully paid and any required withholding is made.  In the event that shares of
Company Stock are used to exercise an Option, the terms of such Option may
provide for a Grant of additional Options, or the Committee may grant additional
Options, to purchase, at Fair Market Value as of the date of exercise of the
Option or the date of grant of such additional Options, whichever is later, for
a term equal to the unexpired term of the exercised Option, a number of shares
of Company Stock equal to the sum of the number of whole shares used to exercise
the Option and the number of whole shares, if any, withheld in payment of any
withholding taxes.

                                      -9-
<PAGE>

     (g)  Limits on Incentive Stock Options.  Each Incentive Stock Option shall
          ---------------------------------
provide that, if the aggregate Fair Market Value of the stock on the date of
grant with respect to which Incentive Stock Options are exercisable for the
first time by a Grantee during any calendar year, under the Plan or any other
stock option plan of the Company or a parent or Subsidiary, exceeds one hundred
thousand dollars, then the Option, as to the excess, shall be treated as a
Nonqualified Stock Option.

     (h)  Dividend Equivalents.  The Committee may grant dividend equivalents in
          --------------------
connection with Options granted under the Plan.  Such dividends may be paid
currently or accrued as contingent cash obligations and may be payable in cash
or shares of Company Stock, upon such terms as the Committee may establish,
including the achievement of specific performance goals.

     6.   Restricted Stock Grants.
          -----------------------

     The Committee may issue or transfer shares of Company Stock to a Grantee
under a Grant of Restricted Stock, upon such terms as the Committee deems
appropriate.  The following provisions are applicable to Restricted Stock:

     (a)  General Requirements.  Shares of Company Stock issued or transferred
          --------------------
pursuant to Restricted Stock Grants may be issued or transferred for
consideration or for no consideration, as determined by the Committee.  The
Committee may establish conditions under which restrictions on shares of
Restricted Stock shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate including, without limitation,
restrictions based upon the achievement of specific performance goals.  The
period of time during which the Restricted Stock will remain subject to
restrictions will be designated in the Grant Instrument as the "Restriction
Period."

     (b)  Number of Shares.  The Committee shall determine the number of shares
          ----------------
of Company Stock to be issued or transferred pursuant to a Restricted Stock
Grant and the restrictions applicable to such shares.

     (c)  Requirement of Employment. If the Grantee ceases to be employed by the
          -------------------------
Company during the Restriction Period, or if other specified conditions are not
met, the Restricted Stock Grant shall terminate as to all shares covered by the
Grant as to which the restrictions have not lapsed at the close of business on
the Grantee's last day of employment, and those shares of Company Stock must be
immediately returned to the Company.  The Committee may, however, accelerate the
termination of the restrictions for all or a portion of such Restricted Stock as
it deems appropriate.

     (d)  Restrictions on Transfer and Legend on Stock Certificate.  During the
          --------------------------------------------------------
Restriction Period, a Grantee may not sell, assign, transfer, pledge, or
otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee under Section 12(a).  Each certificate for a share of Restricted Stock
shall contain a legend giving appropriate notice of the restrictions in the
Grant.  The Grantee shall be entitled to have the legend removed from the stock
certificate covering the shares subject to restrictions when all restrictions on
such shares have lapsed.  The

                                      -10-
<PAGE>

Committee may determine that the Company will not issue certificates for shares
of Restricted Stock until all restrictions on such shares have lapsed, or that
the Company will retain possession of certificates for shares of Restricted
Stock until all restrictions on such shares have lapsed.

     (e)  Right to Vote and to Receive Dividends.  Unless the Committee
          --------------------------------------
determines otherwise, during the Restriction Period the Grantee shall not have
the right to vote shares of Restricted Stock.  During the Restriction Period the
Grantee shall have the right to receive any dividends or other distributions
paid on such shares, subject to any restrictions deemed appropriate by the
Committee.  Such dividends may be paid currently, accrued as contingent cash
obligations, or converted into additional shares of Restricted Stock, upon such
terms as the Committee may establish, including the achievement of specific
performance goals.

     (f)  Lapse of Restrictions.  All restrictions imposed on Restricted Stock
          ---------------------
shall lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions imposed by the Committee.  The Committee may
terminate the restrictions, as to any or all Restricted Stock Grants, without
regard to any Restriction Period.

     7.   Stock Appreciation Rights.
          -------------------------

     (a)  General Requirements.  The Committee may grant SARs to a Grantee
          --------------------
separately or in tandem with any Option (for all or a portion of the applicable
Option).  Tandem SARs may be granted either at the time the Option is granted or
at any time thereafter while the Option remains outstanding; provided, however,
that, in the case of an Incentive Stock Option, SARs may be granted only at the
time of grant of the Incentive Stock Option.  The Committee shall establish the
base amount of the SAR at the time the SAR is granted.  Unless the Committee
determines otherwise, the base amount of each SAR shall be equal to the per
share Exercise Price of the related Option or, if there is no related Option,
the Fair Market Value of a share of Company Stock as of the date of grant of the
SAR.

     (b)  Tandem SARs. In the case of tandem SARs, the number of SARs granted to
          -----------
a Grantee that shall be exercisable during a specified period shall not exceed
the number of shares of Company Stock that the Grantee may purchase upon the
exercise of the related Option during such period.  Upon the exercise of an
Option, the SARs relating to the Company Stock covered by such Option shall
terminate.  Upon the exercise of SARs, the related Option shall terminate to the
extent of an equal number of shares of Company Stock.

     (c)  Exercisability.  An SAR shall be exercisable during the period
          --------------
specified by the Committee in the Grant Instrument and shall be subject to such
vesting and other restrictions as may be specified in the Grant Instrument;
provided, however, that the term of the SAR shall not exceed ten years.  The
Committee may accelerate the exercisability of any or all outstanding SARs at
any time for any reason.  SARs may only be exercised while the Grantee is
employed by the Company or during the applicable period after termination of
employment as described in Section 5(e) for Options.  For purposes of the
preceding sentence, the rules applicable to a tandem SAR shall be the rules
applicable under Section 5(e) to the Option to which it relates, and the rules
applicable to any other SAR shall be the rules applicable under Section 5(e) and
a

                                      -11-
<PAGE>

Nonqualified Stock Option. A tandem SAR shall be exercisable only during the
period when the Option to which it is related is also exercisable.

     (d)  Value of SARs.  When a Grantee exercises SARs, the Grantee shall
          -------------
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised, payable in cash, Company Stock,
or a combination thereof.  The stock appreciation for a SAR is the amount by
which the Fair Market Value of the underlying Company Stock on the date of
exercise of the SAR exceeds the base amount of the SAR as described in
Subsection (a).

     (e)  Form of Payment.  The Committee shall determine whether the
          ---------------
appreciation in a SAR shall be paid in the form of cash, shares of Company
Stock, or a combination of the two, in such proportion as the Committee deems
appropriate.  For purposes of calculating the number of shares of Company Stock
to be received, shares of Company Stock shall be valued at their Fair Market
Value on the date of exercise of the SAR.  If shares of Company Stock are to be
received upon exercise of a SAR, cash shall be delivered in lieu of any
fractional share.

     8.   Performance Units and Performance Shares.
          ----------------------------------------

     (a)  General Requirements.  The Committee may grant Performance Units or
          --------------------
Performance Shares to a Grantee.  Each Performance Unit/Share shall represent
the right of the Grantee to receive an amount based on the value of the
Performance Unit/Share, if performance goals established by the Committee are
met.  A Performance Unit shall have a value based on such measurements or
criteria as the Committee determines.  A Performance Share shall have a value
equal to the Fair Market Value of a share of Company Stock.  The Committee shall
determine the number of Performance Units/Shares to be granted and the
requirements applicable to such Units/Shares.

     (b)  Performance Period and Performance Goals.  When Performance
          ----------------------------------------
Units/Shares are granted, the Committee shall establish the performance period
during which performance shall be measured (the "Performance Period"),
performance goals applicable to the Units/Shares ("Performance Goals") and such
other conditions of the Grant as the Committee deems appropriate.

     (c)  Payment with respect to Performance Units/Shares.  At the end of each
          ------------------------------------------------
Performance Period, the Committee shall determine to what extent the Performance
Goals and other conditions of the Performance Units/Shares are met, the value of
the Performance Units (if applicable) and the amount, if any, to be paid with
respect to the number of Performance Units/Shares that have been earned.
Payments with respect to Performance Units/Shares shall be made in cash, in
Company Stock, or in a combination of the two, as determined by the Committee.

     (d)  Requirement of Employment. If the Grantee ceases to be employed by the
          -------------------------
Company during a Performance Period, or if other conditions established by the
Committee are not met, the Grantee's Performance Units/Shares shall be forfeited
at the close of business on the Grantee's last day of employment.  The Committee
may, however, provide for complete or

                                      -12-
<PAGE>

partial exceptions to this requirement as it deems appropriate. If the Grantee
ceases to be employed by the Company after the expiration of a Performance
Period but prior to payment, payment shall be made to the Grantee or the
Successor Grantee, if applicable.

     9.   Phantom Stock.
          -------------

     (a)  General Requirements.  The Committee may grant Phantom Stock to a
          --------------------
Grantee in such amounts and upon such terms, and at any time and from time to
time, as shall be determined by the Committee.

     (b)  Value of Phantom Stock.  The Committee shall establish the initial
          ----------------------
value of the Phantom Stock at the time of grant which may be greater than, equal
to or less than the Fair Market Value of a share of Company Stock.

     (c)  Dividend Equivalents.  The Committee may grant dividend equivalents in
          --------------------
connection with Phantom Stock granted under the Plan.  Such dividends may be
paid currently or accrued as contingent cash obligations and may be payable in
cash or shares of Company Stock, upon such terms as the Committee may establish,
including the achievement of specific performance goals.

     (d)  Form and Timing of Payment.  The Committee shall determine whether the
          --------------------------
Phantom Stock shall be paid in the form of cash, shares of Company Stock or a
combination of the two, in such proportion as the Committee deems appropriate.
Cash payments shall be in an amount equal to the Fair Market Value on the
payment date of the number of shares of Company Stock equal to the number of
shares of Phantom Stock with respect to which payment is made.  The number of
shares of Company Stock distributed in settlement of a Phantom Stock Grant shall
equal the number of shares of Phantom Stock with respect to which settlement is
made.  Payment shall be made in accordance with the terms and at such times as
determined by the Committee at the time of grant.

     (e)  Requirement of Employment. If the Grantee ceases to be employed by the
          -------------------------
Company prior to becoming vested or otherwise entitled to payment, the Grantee's
Phantom Stock shall be forfeited at the close of business on the Grantee's last
day of employment.  The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.

     10.  Dividend Equivalents.
          --------------------

     (a)  General Requirements.  The Committee may grant Dividend Equivalents to
          --------------------
a Grantee in such number and upon such other terms, including in either case the
achievement of specific performance goals, and at any time and from time to
time, as shall be determined by the Committee.  Each Dividend Equivalent shall
represent the right to receive an amount in cash, or shares of Company Stock
having a Fair Market Value, equal to the amount of dividends paid on one share
of Company Stock during such period as may be established by the Committee.

                                      -13-
<PAGE>

     (b)  Form and Timing of Payment. Dividend Equivalents may be paid currently
          --------------------------
or accrued as contingent cash obligations, upon such terms as the Committee may
establish.  The Committee shall determine whether Dividend Equivalents shall be
paid in the form of cash, shares of Company Stock or a combination of the two,
in such proportion as the Committee deems appropriate.  The number of any shares
of Common Stock payable in satisfaction of Dividend Equivalents shall be
determined by dividing the amount credited to the Grantee with respect to such
Dividend Equivalents by the Fair Market Value on the day instructions are given
to the Company's Treasurer or transfer agent to issue or purchase such shares.
Cash shall be delivered in lieu of any fractional shares.  Payment shall be made
at such times as determined by the Committee at the time of grant.

     (c)  Requirement of Employment. If the Grantee ceases to be employed by the
          -------------------------
Company prior to becoming entitled to payment, the Grantee's Dividend
Equivalents shall be forfeited at the close of business on the Grantee's last
day of employment.  The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.

     11.  Withholding of Taxes.
          --------------------

     (a)  Required Withholding.  All Grants under the Plan shall be subject to
          --------------------
applicable federal (including FICA), state, and local tax withholding
requirements.  The Company shall have the right to deduct from all Grants paid
in cash, or from other wages paid to the Grantee, any federal, state or local
taxes required by law to be withheld with respect to such Grants.  In the case
of Options and other Grants paid in Company Stock, the Company may require the
Grantee or other person receiving such shares to pay to the Company the amount
of any such taxes that the Company is required to withhold with respect to such
Grants, or the Company may deduct from other wages paid by the Company the
amount of any withholding taxes due with respect to such Grants.

     (b)  Election to Withhold Shares.  If the Committee so permits, a Grantee
          ---------------------------
may elect to satisfy the Company's income tax withholding obligation with
respect to an Option, SAR, Restricted Stock, Performance Units, Performance
Shares, Phantom Stock, or Dividend  Equivalents, any of which is  paid in
Company Stock, by having shares withheld having a Fair Market Value up to an
amount that does not exceed the Grantee's minimum applicable withholding tax
rate for federal (including FICA), state, and local tax liabilities.  The
election must be in a form and manner prescribed by the Committee and shall be
subject to the prior approval of the Committee.

     12.  Transferability of Grants.
          -------------------------

     (a)  Nontransferability of Grants.  Except as provided below, only the
          ----------------------------
Grantee may exercise rights under a Grant during the Grantee's lifetime.  A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, with respect to Grants other than Incentive Stock Options,
if permitted in any specific case by the Committee, pursuant to a domestic
relations order (as defined under the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the regulations thereunder).  When a
Grantee dies, the personal representative or other person entitled to succeed to
the rights of the Grantee

                                      -14-
<PAGE>

("Successor Grantee") may exercise such rights which have not been extinguished
by the Grantee's death. A Successor Grantee must furnish proof satisfactory to
the Company of his or her right to receive the Grant under the Grantee's will or
under the applicable laws of descent and distribution.

     (b)   Transfer of Nonqualified Stock Options. Notwithstanding the
           --------------------------------------
foregoing, the Committee may provide in a Grant Instrument that a Grantee may
transfer Nonqualified Stock Options to family members or other persons or
entities according to such terms as the Committee may determine; provided that
the Grantee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable to the Option immediately before the transfer.

     13.   Grants Subject to Code Section 162(m).
           -------------------------------------

     (a)   Performance Based Grants.  Any Grant to a Grantee who is a "covered
           ------------------------
employee" within the meaning of Code Section 162(m), the exercisability or
settlement of which is subject to the achievement of performance goals, shall
qualify as "qualified performance-based compensation" within the meaning of Code
Section 162(m) and regulations thereunder.  The performance goals for such a
Grant shall consist of one or more of the business criteria set forth in Section
13(b), below, and a targeted level or levels of performance with respect to such
criteria, as specified by the Committee in writing prior to (or within 90 days
after commencement of ) the applicable performance period.  Performance goals
shall be objective and shall otherwise meet the requirements of Section
162(m)(4)(C) of the Code and regulations thereunder.   Performance goals may
differ for such Grants to different Grantees.  The Committee shall specify the
weighting to be given to each performance goal for purposes of determining the
final amount payable with respect to any such Grant.  The Committee may, in its
discretion, reduce the amount of a payout otherwise to be made in connection
with such a Grant, but may not exercise discretion to increase such amount.  All
determinations by the Committee as to the achievement of performance goals shall
be certified in writing prior to payment under the Plan, in the form of minutes
of a meeting of the Committee or otherwise.

     (b)   Business Criteria. Unless and until the Committee proposes for
           -----------------
shareholder approval and the Company's shareholders approve a change in the
general business criteria set forth in this Section, the attainment of which may
determine the amount and/or vesting with respect to Grants, the business
criteria to be used for purposes of establishing performance goals for such
Grants shall be selected from among the following alternatives, each of which
may be based on absolute standards or peer industry group comparatives and may
be applied at various organizational levels (e.g., corporate, business unit,
division):

     (i)   Total shareholder return
     (ii)  Stock price increase
     (iii) Dividend payout as percentage of net income
     (iv)  Return on equity
     (v)   Return on capital
     (vi)  Cash flow, including operating cash flows, free cash flow, discounted
           cash flow return on investment, and cash flow in excess of cost of
           capital

                                      -15-
<PAGE>

     (vii)   Economic value added
     (viii)  Cost per kilowatt hour
     (ix)    Market share
     (x)     Customer/employee satisfaction as measured by survey instruments
     (xi)    Earnings per share
     (xii)   Revenue
     (xiii)  Workforce diversity
     (xiv)   Safety
     (xv)    Personal performance
     (xvi)   Productivity measures
     (xvii)  Diversification of business opportunities
     (xviii) Price to earnings ratio
     (xix)   Expense ratios
     (xx)    Total expenditures
     (xxi)   Completion of key projects

     In the event that Code Section 162(m) or applicable tax and/or securities
laws change to permit Committee discretion to alter the governing performance
measures without disclosing to shareholders and obtaining shareholder approval
of such changes and without thereby exposing the Company to potentially adverse
tax or other legal consequences, the Committee shall have sole discretion to
make such changes without obtaining shareholder approval.

     14.     Deferrals.
             ---------

     The Committee may permit or require a Grantee to defer receipt of the
payment of cash or the delivery of Shares that would otherwise be due to such
Grantee by virtue of the exercise of any Option or SAR, the lapse or waiver of
restrictions applicable to Restricted Stock, the satisfaction of any
requirements or objectives with respect to Performance Units/Shares, or the
vesting or satisfaction of any terms applicable to Phantom Stock or Dividend
Equivalents.  If any such deferral election is permitted or required, the
Committee shall, in its sole discretion, establish rules and procedures for such
deferrals.

     15.     Requirements for Issuance or Transfer of Shares.
             -----------------------------------------------

     No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee.  The Committee shall have the right to condition
any Grant made to any Grantee hereunder on such Grantee's undertaking in writing
to comply with such restrictions on his or her subsequent disposition of such
shares of Company Stock as the Committee shall deem necessary or advisable as a
result of any applicable law, regulation or official interpretation thereof, and
certificates representing such shares may be legended to reflect any such
restrictions.  Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations, and
interpretations, including any requirement that a legend be placed thereon.

                                      -16-
<PAGE>

     16.   Amendment and Termination of the Plan.
           -------------------------------------

     (a)   Amendment.  The Compensation Committee of PECO may amend or terminate
           ---------
the Plan at any time prior to the date of Merger.  Effective as of the date of
Merger, the Compensation Committee of the Board of Directors of Exelon shall
have the exclusive authority to amend or terminate the Plan at any time.
Neither the Committee nor Exelon shall amend the Plan without shareholder
approval if such approval is required by Section 162(m) of the Code or the rules
of any stock exchange on which Company Stock is listed.

     (b)   Termination of Plan.  Prior to the date of Merger, the Plan shall
           -------------------
terminate on the day immediately preceding the tenth anniversary of its
effective date, unless the Plan is terminated earlier by the Compensation
Committee of PECO or is extended by the Compensation Committee of PECO with the
approval of the shareholders.  Effective as of the date of Merger, the
Compensation Committee of the Board of Directors of Exelon shall the exclusive
authority to shorten the term of the Plan or extend its term with the approval
of Exelon's shareholders.

     (c)   Termination and Amendment of Outstanding Grants.  A termination or
           -----------------------------------------------
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 22(b).  The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant.  Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 22(b) or may be amended by agreement of the
Company and the Grantee consistent with the Plan.

     (d)   Governing Document.  The Plan shall be the controlling document.  No
           ------------------
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner.  The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.

     17.   Funding of the Plan.
           -------------------

     This Plan shall be unfunded.  Exelon shall not be required to establish any
special or separate fund or to make any other segregation of assets to assure
the payment of any Grants under this Plan.  In no event shall interest be paid
or accrued on any Grant, including unpaid installments of Grants.

     18.   Rights of Participants.
           ----------------------

     Nothing in this Plan shall entitle any Employee or other person to any
claim or right to be granted a Grant under this Plan, and no Grant shall entitle
any Employee or other person to any future Grant.  Neither this Plan nor any
action taken hereunder shall be construed as giving any individual any rights to
be retained by or in the employ of the Company or any other employment rights.

                                      -17-
<PAGE>

     19.   No Fractional Shares.
           --------------------

     No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan or any Grant.  The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.

     20.   Headings.
           --------

     Section headings are for reference only.  In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.

     21.   Effective Date of the Plan.
           --------------------------

     This Plan was originally effective in 1989, as approved by the shareholders
of the Company on April 12, 1989.  The Board of Directors of PECO and PECO's
shareholders approved the extension of the Plan effective April 19, 1997 and
such date shall be the effective date of the Plan for purposes of future Grants
of Incentive Stock Options and other Grants hereunder, and for purposes of
termination of the Plan in accordance with Section 16(b) hereof.

     22.   Miscellaneous.
           -------------

     (a)   Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation, or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan.  Without limiting the foregoing, the Committee may make a
Grant to an employee of another corporation who becomes an Employee by reason of
a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its Subsidiaries
in substitution for a stock option or restricted stock grant made by such
corporation.  The terms and conditions of the substitute grants may vary from
the terms and conditions required by the Plan and from those of the substituted
stock incentives.  The Committee shall prescribe the provisions of the
substitute grants.

     (b)   Compliance with Law.  The Plan, the exercise of Options and SARs, and
           -------------------
the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required.  With respect to persons
subject to Section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act.  In
particular, and without otherwise limiting the provisions of this Section 21(b),
no Grantee subject to section 16 of the Exchange Act may exercise any Option or
SAR except in accordance with applicable requirements of Rule 16b-3 or its
successors under the Exchange Act.  The Committee may revoke any Grant if it is
contrary to law or modify a Grant to bring it into compliance with any

                                      -18-
<PAGE>

valid and mandatory government regulation. The Committee may also adopt rules
regarding the withholding of taxes on payments to Grantees. The Committee may,
in its sole discretion, agree to limit its authority under this Section.

     (c)   Governing Law. The validity, construction, interpretation, and effect
           -------------
of the Plan and Grant Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the Commonwealth of
Pennsylvania.

                                      -19-<PAGE>

                                                                     EXHIBIT 4.3
                                                                     -----------

                              PECO ENERGY COMPANY

                            1998 STOCK OPTION PLAN

                         (EFFECTIVE SEPTEMBER 28, 1998
                                      as
              Amended and Restated effective October [__], 2000)
<PAGE>

                              PECO ENERGY COMPANY

                            1998 STOCK OPTION PLAN
                            ----------------------

     PECO Energy Company ("PECO") originally established the PECO Energy Company
1998 Stock Option Plan (the "Plan"). The outstanding shares of PECO were
subsequently exchanged with shares of Exelon Corporation ("Exelon" or the
"Company") causing Exelon to become PECO's parent (the "Share Exchange").
Immediately thereafter, Unicom Corporation merged with and into Exelon (the
"Merger"). In connection with the Share Exchange and Merger, Exelon assumed
sponsorship of the Plan.

     The purpose of the Plan is to encourage eligible employees of PECO and its
subsidiaries to contribute materially to the growth of the Company, thereby
benefiting the Company's shareholders.

     1.   Administration.
          --------------

     (a)  Committee. The Plan shall be administered and interpreted by the
          ---------
Compensation Committee (the "Committee") of the Board of Directors of PECO (the
"Board").

     (b)  Committee Authority. Subject to Section 1(d) below, the Committee
          -------------------
shall have the sole authority to (i) determine the size and terms of the grants
to be made to specified classifications of Eligible Employees, if any, including
the exclusion of certain groups of Eligible Employees, (ii) determine the time
when the grants will be made and the duration of any applicable exercise period,
including the criteria for exercisability and the acceleration of
exercisability, (iii) amend the terms of any previously issued Grant, and (iv)
deal with any other matters arising under the Plan.

     (c)  Committee Determinations. The Committee shall have full power and
          ------------------------
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such  rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion.  The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder.  All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.

     (d)  CEO Authority. Notwithstanding the foregoing, the Board in its
          -------------
discretion may delegate the following authority to the Chief Executive Officer
of PECO (the "CEO"), which authority may be exercised by the CEO in addition to
and independent of the authority of  the Committee under the Plan: (i) the
authority to establish classifications of Eligible Employees (as defined in
Section 4) for purposes of differentiating with respect to the number and/or
terms of Options granted to the Eligible Employees in each such classification,
(ii) the authority to accelerate the time at which an Option may be exercised
pursuant to Section 5(d) of the Plan, and

                                      -2-
<PAGE>

(iii) the authority to extend the period during which a Grantee may exercise an
Option pursuant to Section 5(e) of the Plan.

     2.   Grants.
          ------

     Awards under the Plan shall consist of grants of nonqualified stock options
("Options" or "Grants").  All Grants shall be subject to the terms and
conditions set forth herein and to such other terms and conditions consistent
with this Plan as the Committee deems appropriate and as are specified in
writing by the Committee to the individual in a grant instrument (the "Grant
Instrument") or an amendment to the Grant Instrument.  The Committee shall
approve the form and provisions of each Grant Instrument.  Grants under the Plan
need not be uniform as among the Grantees.

     3.   Shares Subject to the Plan.
          --------------------------

     (a)  Shares. The shares that may be issued under the Plan may be authorized
          ------
but unissued shares of common stock of the Company (the "Company Stock") or
reacquired shares of Company Stock, including treasury shares and shares
purchased by the Company on the open market for purposes of the Plan.

     (b)  Adjustments. If there is any change in the number or kind of shares of
          -----------
Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the number of shares covered by
outstanding Grants, the kind of shares issued under the Plan, and the price per
share or the applicable market value of such Grants may be appropriately
adjusted by the Committee to reflect any increase or decrease in the number of,
or change in the kind or value of, issued shares of Company Stock to preclude,
to the extent practicable, the enlargement or dilution of rights and benefits
under such Grants; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated. Any adjustments determined by the Committee
shall be final, binding and conclusive. If and to the extent that any such
change in the number or kind of shares of Company Stock outstanding is effected
solely by application of a mathematical formula (e.g., a 2-for-1 stock split),
the adjustment described in this Section 3(b) shall be made and shall occur
automatically by application of such formula, without further action by the
Committee.

                                      -3-
<PAGE>

     4.   Eligibility for Participation.
          -----------------------------

     Employees of PECO and its subsidiaries who have received a performance
rating of "satisfactory" or higher as of their most recent performance
evaluation or newly hired employees who have not received a performance
evaluation prior to the date of a Grant, other than those employees who are
eligible to participate in the PECO's Management Incentive Compensation Plan,
shall be eligible to receive Options under the Plan and shall be referred to
herein as "Eligible Employees."

     5.   Granting of Options.
          -------------------

     (a)  Number of Shares. The Committee shall determine the number of shares
          ----------------
of Company Stock and/or such other terms and conditions applicable to Grants, in
such manner as the Committee determines, which number and terms and conditions
may differ among the classifications of Eligible Employees established by the
CEO in accordance with Section 1(d).  Eligible Employees who receive Grants
under this Plan shall be referred to herein as "Grantees."

     (b)   Type of Option and Price.
           ------------------------

          (i)    The Committee may grant nonqualified stock options that are not
intended to qualify as "incentive stock options" within the meaning of section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), in accordance
with the terms and conditions set forth herein.

          (ii)   The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be equal to the Fair Market Value (as defined in
paragraph (iii) below) of a share of Company Stock on the date the Option is
granted.

          (iii)  The Fair Market Value per share shall be the closing sale price
of a share of Company Stock on the composite tape of New York Stock Exchange, or
if there is not such sale on the relevant date, then on the last previous day on
which a sale was reported.

     (c)  Option Term. The Committee shall determine the term of each Option.
          -----------
The term of any Option shall not exceed ten years from the date of grant.

     (d)  Exercisability of Options. Options shall become exercisable in
          -------------------------
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument or an
amendment to the Grant Instrument.  The Committee or the CEO may accelerate the
exercisability of any or all outstanding Options at any time for any reason.

     (e)  Termination of Employment, Disability, or Death.
          -----------------------------------------------

          (i)    If Grantee's employment by PECO terminates by reason of
Retirement, death, or Disability, then on the date of such Retirement, death, or
Disability, such Option shall, notwithstanding Section 5(e)(i) hereof, become
exercisable as to all of the shares of Company

                                      -4-
<PAGE>

Stock remaining subject to such Option and may (1) in the cases of Retirement or
Disability, be exercised by such Grantee or his or her legal representative,
Successor Grantee or permitted transferees, as the case may be, until the last
day of the term of the Option or (2) in the case of death, be exercised by such
Grantee's legal representative, Successor Grantee, or permitted transferees, as
the case may be, until 11:59 p.m. (Chicago time) on the third anniversary of the
date the of death; provided, however, that in any case such exercisability is
conditioned upon such Grantee's or his or her legal representative's, Successor
Grantee's, or permitted transferees', as the case may be, continued "acceptable
conduct," as determined by the Committee in its sole discretion. For purposes of
the foregoing, "acceptable conduct" shall mean without limitation, refraining
from engaging in activities which (i) are competitive to the business of the
Company or its subsidiaries, (ii) promote or assist competitors of the Company
or its subsidiaries, or (iii) reflect negatively on the Company, its
subsidiaries, or any of their directors, officers, employees, or agents.

          (ii)   If Grantee's employment is terminated by PECO for Cause or poor
work performance or by the Optionee (other than Retirement or for Good Reason
following a Change in Control), such Grantee's Option shall expire on the
effective date of such termination of employment and shall not thereafter be
exercisable.

          (iii)  Except as provided in section 5(e)(iv) hereof, if Grantee's
employment by PECO terminates for any reason other than Retirement, death, or
Disability, or as specified in Section 5(e)(ii), such Grantee's Option shall be
exercisable only to the extent it is exercisable on the effective date of such
termination of employment and may thereafter be exercised by such Grantee or his
or her legal representative until and including the earlier to occur of (i) the
date which is three years after the effective date of such termination of
employment and (ii) the last day of the term of the Option.

          (iv)   Notwithstanding any provision of the Plan or any Grant
Instrument to the contrary, if within 24 months following a Change in Control,
Grantee's employment is terminated (i) by PECO other than for Cause, or (ii) by
the Grantee for Good Reason, outstanding Options shall immediately become fully
exercisable; provided however, that a termination of employment with PECO or a
subsidiary thereof and immediate reemployment by an entity which purchases or
otherwise acquires PECO assets shall not be a termination of employment within
the meaning of this Section 5(e)(iv).

          (v)    For purposes of this Section 5(e) and Sections 6, 7, and 8:

                 (A)  "Change in Control" shall mean:

                      (1)  the acquisition by any individual, entity or group (a
                           "Person"), including any "person" within the meaning
                           of Section 13(d)(3) or 14(d)(2) of the Securities
                           Exchange Act of 1934, as amended (the "Exchange
                           Act"), of beneficial ownership within the meaning of
                           Rule 13d-3 promulgated under the Exchange Act, of 20%
                           or more of either (i) the then outstanding shares of
                           Company Stock (the

                                      -5-
<PAGE>

                           "Outstanding Company Common Stock") or (ii) the
                           combined voting power of the then outstanding
                           securities of the Company entitled to vote generally
                           in the election of directors (the "Outstanding
                           Company Voting Securities"); excluding, however, the
                           following: (A) any acquisition directly from the
                           Company (excluding any acquisition resulting from the
                           exercise of an exercise, conversion or exchange
                           privilege unless the security being so exercised,
                           converted or exchanged was acquired directly from the
                           Company), (B) any acquisition by the Company, (C) any
                           acquisition by an employee benefit plan (or related
                           trust) sponsored or maintained by the Company or any
                           corporation controlled by the Company, or (D) any
                           acquisition by any corporation pursuant to a
                           transaction which complies with clauses (i), (ii) and
                           (iii) of subsection (3) of this Section 5(e)(v)(A);
                           provided further, that for purposes of clause (B), if
                           any Person (other than the Company or any employee
                           benefit plan (or related trust) sponsored or
                           maintained by the Company or any corporation
                           controlled by the Company) shall become the
                           beneficial owner of 20% or more of the Outstanding
                           Company Common Stock or 20% or more of the
                           Outstanding Company Voting Securities by reason of an
                           acquisition by the Company, and such Person shall,
                           after such acquisition by the Company, become the
                           beneficial owner of any additional shares of the
                           Outstanding Company Common Stock or any additional
                           Outstanding Company Voting Securities (other than
                           pursuant to any dividend reinvestment plan or
                           arrangement maintained by the Company) and such
                           beneficial ownership is publicly announced, such
                           additional beneficial ownership shall constitute a
                           Change in Control;

                      (2)  individuals who, as of the date hereof, constitute
                           the Board of Directors (the "Incumbent Board") cease
                           for any reason to constitute at least a majority of
                           such Board; provided that any individual who becomes
                           a director of the Company subsequent to the date
                           hereof whose election, or nomination for election by
                           the Company's stockholders, was approved by the vote
                           of at least a majority of the directors then
                           comprising the Incumbent Board shall be deemed a
                           member of the Incumbent Board; and provided further,
                           that any individual who was initially elected as a
                           director of the Company as a result of an actual or
                           threatened election contest, as such terms are used
                           in Rule 14a-11 of Regulation 14A promulgated under
                           the Exchange

                                      -6-
<PAGE>

                           Act, or any other actual or threatened solicitation
                           of proxies or consents by or on behalf of any Person
                           other than the Board shall not be deemed a member of
                           the Incumbent Board;

                      (3)  approval by the stockholders of the Company of a
                           reorganization, merger, or consolidation or sale or
                           other disposition of more than 50% of the operating
                           assets of the Company (determined on a consolidated
                           basis) other than in connection with an arrangement
                           resulting in the continued utilization of such assets
                           by the Company (a "Corporate Transaction"): excluding
                           however, a Corporate Transaction pursuant to which
                           (i) all or substantially all of the individuals or
                           entities who are the beneficial owners, respectively,
                           of the Outstanding Company Common Stock and the
                           Outstanding Company Voting Securities immediately
                           prior to such Corporate Transaction will beneficially
                           own, directly or indirectly, more than 60% of,
                           respectively, the outstanding shares of common stock,
                           and the combined voting power of the outstanding
                           securities of such corporation entitled to vote
                           generally in the election of directors, as the case
                           may be, of the corporation resulting from such
                           Corporate Transaction (including, without limitation,
                           a corporation which as a result of such transaction
                           owns the Company or all or substantially all of the
                           Company's assets either directly or indirectly (in
                           substantially the same proportions relative to each
                           other as their ownership, immediately prior to such
                           Corporate Transaction, of the Outstanding Company
                           Common Stock and the Outstanding Company Voting
                           Securities, as the case may be, (ii) no Person (other
                           than: the Company, any employee benefit plan (or
                           related trust) sponsored or maintained by the Company
                           or any corporation controlled by the Company; the
                           corporation resulting from such Corporate
                           Transaction; and any Person which beneficially owned,
                           immediately prior to such Corporate Transaction,
                           directly or indirectly, 20% or more of the
                           Outstanding Company Common Stock or the Outstanding
                           Company Voting Securities (as the case may be) will
                           beneficially own, directly or indirectly, 20% or more
                           of, respectively, the outstanding shares of common
                           stock of the corporation resulting from such
                           Corporate Transaction or the combined voting power of
                           the outstanding securities of such corporation
                           entitled to vote generally in the election of
                           directors and (iii) individuals who were members of
                           the Incumbent Board will constitute at least a
                           majority of the

                                      -7-
<PAGE>

                           members of the board of directors of the corporation
                           resulting from such Corporate Transaction; or

                      (4)  the approval by the shareholders of a plan of
                           complete liquidation or dissolution of the Company,
                           other than a plan of liquidation or dissolution which
                           results in the acquisition of all or substantially
                           all of the assets of Commonwealth Edison by the
                           Company or any affiliate thereof.

                 (B)  "PECO" shall mean PECO and its Subsidiary corporations.

                 (C)  "Cause" means:

                      (1)  the Grantee's willful commission of acts or omissions
                           which have, have had, or are likely to have a
                           material adverse effect on the business, operations,
                           financial condition, or reputation of the Company or
                           any of its affiliates;

                      (2)  the Grantee's conviction (including a plea of guilty
                           or nolo contendre) of a felony or any crime of fraud,
                           theft, dishonesty, or moral turpitude; or,

                      (3)  the Grantee's material violation of any statutory or
                           common law duty of loyalty to the Company or any of
                           its affiliates.

                 (D)  "Disability" shall have the meaning specified in any long
term disability plan or arrangement maintained by PECO or, if no such plan or
arrangement is then in effect, as determined by the Committee.

                 (E)  "Good Reason" means the occurrence of any of the
following:

                      (1)  the failure to maintain the Grantee in the office or
                           position or in a substantially equivalent office or
                           position, held by the Grantee immediately prior to
                           Change in Control;

                      (2)  a material adverse alteration in the nature or scope
                           of the Grantee's position, duties, functions,
                           responsibilities, or authority;

                      (3)  a material reduction of the Grantee's salary,
                           incentive compensation, or benefits, unless such
                           reduction is part of a policy, program, or
                           arrangement applicable to peer executives of the
                           Company and its subsidiaries of any successor entity;

                                      -8-
<PAGE>

                      (4)  a determination by the Grantee, made in good faith,
                           that, as a result of Change in Control, the Grantee
                           is substantially unable to perform, or that there has
                           been a material reduction in any of the Grantee's
                           duties, functions, responsibility, or authority;

                      (5)  the failure of any successor to the Company to assume
                           any agreement or arrangement made with respect to a
                           Grantee which provides benefits in the event of a
                           Change in Control, or a material breach of any such
                           agreement or arrangement by the Company or its
                           successor;

                      (6)  a relocation of more than 50 miles of (i) the
                           Grantee's workplace, or (ii) the principal offices of
                           the Company if such offices are the Grantee's
                           workplace), in each case without consent of the
                           Grantee; or

                      (7)  a requirement of at least 20% more business travel
                           than was required of the Grantee prior to Change in
                           Control.

                 (F)  "Retirement" shall mean retirement from the employment of
the Company on or after attaining the minimum age specified for early or normal
retirement in any then effective retirement policy of the Company, after a
minimum of ten years employment with the Company.

     (f)  Exercise of Options. A Grantee may exercise an Option that has become
          -------------------
exercisable, in whole or in part, by delivering a notice of exercise to the
Company with payment of the Exercise Price.  The Grantee shall pay the Exercise
Price for an Option as specified by the Committee (i) in cash, (ii) with the
approval of the Committee, by delivering shares of Company Stock owned by the
Grantee (including Company Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or (iii) by such other method as the Committee may approve, including payment
through a broker in accordance with procedures permitted by Regulation T of the
Federal Reserve Board.  Shares of Company Stock used to exercise an Option shall
have been held by the Grantee for the requisite period of time to avoid adverse
accounting consequences to the Company with respect to the Option.  The Grantee
shall pay the Exercise Price and the amount of any withholding tax due (pursuant
to Section 6) at the time of exercise.  Shares of the Company Stock shall not be
issued upon exercise of an Option until the Exercise Price is fully paid and any
required withholding is made.

                                      -9-
<PAGE>

     6.   Withholding of Taxes.
          --------------------

     (a)  Required Withholding. All Grants under the Plan shall be subject to
          --------------------
applicable federal (including FICA), state, and local tax withholding
requirements. PECO may require the Grantee or other person receiving such shares
to pay to PECO the amount of any such taxes that PECO is required to withhold
with respect to such Grants, or PECO may deduct from other wages paid by PECO
the amount of any withholding taxes due with respect to such Grants.

     (b)  Election to Withhold Shares. If the Committee so permits, a Grantee
          ---------------------------
may elect to satisfy applicable withholding requirements by having shares
withheld having a Fair Market Value up to an amount that does not exceed the
Grantee's minimum applicable withholding tax rate for federal (including FICA),
state and local tax liabilities. The election must be in a form and manner
prescribed by the Committee and shall be subject to the prior approval of the
Committee.

     7.   Nontransferability of Grants. Except as provided below, only the
          ----------------------------
Grantee may exercise rights under a Grant during the Grantee's lifetime.  A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, if permitted in any specific case by the Committee,
pursuant to a domestic relations order (as defined under the Code or Title I of
the Employee Retirement Income Security Act of 1974, as amended, or the
regulations thereunder).  When a Grantee dies, the personal representative or
other person entitled to succeed to the rights of the Grantee ("Successor
Grantee") may exercise such rights which have not been extinguished by the
Grantee's death.  A Successor Grantee must furnish proof satisfactory to the
Company of his or her right to receive the Grant under the Grantee's will or
under the applicable laws of descent and distribution.

     8.   Requirements for Issuance or Transfer of Shares.
          -----------------------------------------------

     No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee.  The Committee shall have the right to condition
any Grant made to any Grantee hereunder on such Grantee's undertaking in writing
to comply with such restrictions on his or her subsequent disposition of such
shares of Company Stock as the Committee shall deem necessary or advisable as a
result of any applicable law, regulation or official interpretation thereof, and
certificates representing such shares may be legended to reflect any such
restrictions.  Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.

     9.   Amendment and Termination of the Plan.
          -------------------------------------

     (a)  Amendment. The Committee may amend or terminate the Plan at any time
          ---------
prior to the Merger Date. Effective as of the date of Merger, the Compensation
Committee of the Board of Directors of Exelon shall have the exclusive authority
to amend or terminate the Plan by resolutions duly adopted.

                                      -10-
<PAGE>

     (b)  Termination of Plan. The Plan shall terminate on the day immediately
          -------------------
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier or extended by the Committee prior to the Merger Date.  The
Compensation Committee of the Board of Directors of Exelon shall have the
exclusive authority to shorten or extend the term of the Plan, effective as of
the Merger Date.

     (c)  Termination and Amendment of Outstanding Grants. A termination or
          -----------------------------------------------
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 15(b).  The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant.  Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 15(b) or may be amended by agreement of the
Company and the Grantee consistent with the Plan.

     (d)  Governing Document. The Plan shall be the controlling document. No
          ------------------
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner.  The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.

     10.  Funding of the Plan.
          -------------------

     This Plan shall be unfunded.  Exelon shall not be required to establish any
special or separate fund or to make any other segregation of assets to assure
the payment of any Grants under this Plan.  In no event shall interest be paid
or accrued on any Grant, including unpaid installments of Grants.

     11.  Rights of Participants.
          ----------------------

     Nothing in this Plan shall entitle any Eligible Employee or other person to
any claim or right to be granted a Grant under this Plan, and no Grant shall
entitle any Eligible Employee or other person to any future Grant.  Neither this
Plan nor any action taken hereunder shall be construed as giving any individual
any rights to be retained by or in the employ of the Company or any other
employment rights.

     12.  No Fractional Shares.
          --------------------

     No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan or any Grant.  The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.

     13.  Headings.
          --------

     Section headings are for reference only.  In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.

                                      -11-
<PAGE>

14.  Effective Date of the Plan.
     ---------------------------

     The effective date of the Plan is September 28, 1998.

     15.  Miscellaneous.
          -------------

     (a)  Grants in Connection with Corporate Transactions and Otherwise.
          --------------------------------------------------------------
Nothing contained in this Plan shall be construed to (i) limit the right to make
Grants under this Plan in connection with the acquisition, by purchase, lease,
merger, consolidation, or otherwise, of the business or assets of any
corporation, firm or association, including Grants to employees thereof who
become Eligible Employees, or for other proper corporate purposes, or (ii) limit
the right of the Company to grant stock options or make other awards outside of
this Plan.  Without limiting the foregoing, a Grant may be made to an employee
of another corporation who becomes an Eligible Employee by reason of a corporate
merger, consolidation, acquisition of stock, or property, reorganization or
liquidation involving the Company or any of its subsidiaries in substitution for
a stock option made by such corporation.  The terms and conditions of the
substitute grants may vary from the terms and conditions required by the Plan
and from those of the substituted stock options.  The Committee shall prescribe
the provisions of the substitute grants.

     (b)  Compliance with Law. The Plan, the exercise of Options, and the
          -------------------
obligations of the Company to issue or transfer shares of Company Stock under
Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. The Committee may revoke
any Grant if it is contrary to law or modify a Grant to bring it into compliance
with any valid and mandatory government regulation.  The Committee may also
adopt rules regarding the withholding of taxes on payments to Grantees.  The
Committee may, in its sole discretion, agree to limit its authority under this
Section.

     (c)  Governing Law. The validity, construction, interpretation and effect
          -------------
of the Plan and Grant Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the Commonwealth of
Pennsylvania.

                                      -12-

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