Document:

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                                                                   EXHIBIT 10.18

                                PLEDGE AGREEMENT

      THIS PLEDGE AGREEMENT (this "Agreement"), dated as of June 29, 2004, is
made by VISKASE COMPANIES, INC., a Delaware corporation (the "Company"), and
each of its Domestic Restricted Subsidiaries (such capitalized term and other
capitalized terms used but not defined herein having the meanings respectively
ascribed thereto in the Security Agreement (as defined below)) hereafter party
hereto (such Subsidiaries, together with Company, each, a "Pledgor" and,
collectively, the "Pledgors"), in favor of LASALLE BANK NATIONAL ASSOCIATION
("LaSalle"), as collateral agent (together with its successor(s) thereto in such
capacity, "Pledgee") for the Trustee and Holders, in light of the following:

                                    RECITALS:

      A. The Company and LaSalle, as collateral agent and as trustee, have
entered into an Indenture, dated as of June 29, 2004 (as amended, restated,
supplemented or otherwise modified from time to time, the "Indenture"), pursuant
to which the Company has issued 90,000 Units (and, together with any additional
units that may be issued from time to time thereunder or exchanged therefor or
for such additional units, the "Units"), each of which consists of an 11-1/2%
Senior Secured Note due 2011 in a principal amount of $1,000 (and, together with
any additional notes that may be issued by the Company from time to time
thereunder or exchanged therefor or for such additional notes, the "Notes") and
a warrant to purchase 8.947 shares of common stock of the Company, at an
exercise price of $0.01 per share, subject to adjustment.

      B. Each Domestic Restricted Subsidiary of the Company that is not an
Immaterial Subsidiary is required under the Indenture to (a) become a party to
the Indenture and deliver a Guarantee to guarantee the payment of the Notes and
the other Obligations of the Company thereunder and the other Indenture
Documents to which the Company is a party and (b) become a party hereto as a
Pledgor and secure its Obligations under the Indenture, such Guarantee and the
other Indenture Documents to which it is a party pursuant to the terms hereof.

      C. The Pledgors and the Pledgee have entered into that certain Security
Agreement, dated as of June 29, 2004 (as amended, restated, supplemented or
otherwise modified from time to time, the "Security Agreement"), pursuant to
which the Pledgors have granted security interests in certain of their assets
(including the Collateral) as more fully described therein.

      D. The Company and Wells Fargo Foothill, Inc. ("Foothill") have entered
into that certain Loan and Security Agreement dated as of June 29, 2004 (as
amended, restated, supplemented, replaced or otherwise modified from time to
time, the "Credit Agreement").

      E. The Pledgors and Foothill have entered into one or more pledge
agreements, dated as of June 29, 2004 (such pledge agreement(s), together with
any others entered into after the date hereof, the "Credit Agreement Pledge
Agreement"), pursuant to which the Pledgors have granted a security interest in
the Collateral in favor of the Administrative Agent.

      F. The Pledgee, the Administrative Agent and the Company have entered into
that certain Intercreditor and Lien Subordination Agreement, dated as of June
29, 2004 (as amended,

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restated, supplemented, replaced or otherwise modified from time to time, the
"Intercreditor Agreement"), which agreement, among other things, sets forth, as
between the Pledgee and the Administrative Agent, the relative priority of their
respective Liens in the Collateral and their rights with respect thereto.

      G. The Company desires to secure its Obligations under the Notes, the
Indenture and each other Indenture Document to which it becomes a party and each
other Pledgor that becomes a party hereto desires to secure its Guarantee, the
Indenture and each other Indenture Document to which it becomes a party by
granting to the Pledgee, for the benefit of itself and the other Secured
Parties, security interests in the Collateral as set forth herein.

      H. To induce the Initial Purchaser to purchase the Units and the
underlying Notes, each Holder to hold the Units and the underlying Notes to be
held by it and LaSalle to act in its capacities as trustee and collateral agent,
each Pledgor desires to pledge, grant, transfer, and assign to the Pledgee, for
the benefit of itself and the other Secured Parties, a security interest in the
Collateral to secure the Obligations, as provided herein.

      NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and each intending
to be bound hereby, the Pledgee and each Pledgor agree as follows:

      1. SECURITY FOR OBLIGATIONS. This Agreement is for the benefit of the
Pledgee and the other Secured Parties to secure the prompt and complete payment
and performance when due of any and all of the Obligations.

      2. DEFINITION OF ISSUERS; DESIGNATED NUMBER; CAPITAL STOCK; PLEDGED
INTERESTS; PLEDGED COLLATERAL. As used herein, (A) the term "Issuers" shall
mean, with respect to each Pledgor, each of the Persons identified as an Issuer
on Annex A attached hereto of such Pledgor (or any addendum or supplement
thereto), and any successors thereto, whether by merger or otherwise; (B) the
term "Designated Number" shall mean, with respect to any Issuer that is (1) a
Domestic Subsidiary of a Pledgor, all of the Capital Stock of such Issuer held
by such Pledgor and (2) a Foreign Subsidiary of a Pledgor, with respect to its
Capital Stock that is (x) not Voting Stock, all of such Capital Stock of such
Issuer held by such Pledgor and (y) Voting Stock, the largest whole number of
shares or units, as the case may be, of Voting Stock of such Issuer held by such
Pledgor representing not greater than sixty- five percent (65%) of all of the
fully diluted issued and outstanding Voting Stock of such Issuer (whether or not
owned by such Pledgor); (C) the term "Pledged Interest" means, with respect to
each Issuer, the Designated Number of Capital Stock identified as Pledged
Interests of such Issuer on Annex A attached hereto of the Pledgor that is a
holder of the Capital Stock of such Issuer (or any addendum or supplement
thereto); (D) the term "Pledged Collateral" means the "Pledged Interests" and
the "Future Rights" as defined in and acquired pursuant to Section 3.2 below,
collectively, and (E) "Excluded Capital Stock" means, with respect to any Issuer
that is a

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Subsidiary of the Company, that portion of such Issuer's Capital Stock that
would otherwise constitute Collateral to the extent the greater of the par
value, book value as carried by the Pledgor that is the holder thereof or the
market value of any such Capital Stock is equal to or greater than 20% of the
aggregate principal amount of the Notes then outstanding. Notwithstanding
anything to the contrary in the immediately preceding sentence, neither the
Pledged Collateral nor the Future Interests relating to any Issuer shall include
any Excluded Capital Stock. Annex A of any Pledgor may be supplemented from time
to time pursuant to Section 3.2 below. Each Pledgor represents and warrants to
the Pledgee for the benefit of the Pledgee and the other Secured Parties that on
the date hereof (a) Annex A attached hereto of such Pledgor correctly identifies
the Pledged Interests and the Pledged Collateral owned by such Pledgor with
respect to Issuers; and (b) such Pledgor is the holder of record and sole
beneficial and legal owner of such Pledged Interests and Pledged Collateral.

      3. PLEDGE OF PLEDGED COLLATERAL AND OTHER COLLATERAL.

      3.1 Pledge. (i) To secure the Obligations and for the purposes set forth
in Section 1 hereof, each Pledgor hereby pledges and collaterally assigns, and
grants a security interest in and lien on, in favor of Pledgee for the benefit
of the Pledgee and the other Secured Parties, all of such Pledgor's right, title
and interest in, to, and under (A) the Pledged Collateral, (B) any additional
Pledged Collateral acquired pursuant to Section 3.2 below (whether by purchase,
dividend, merger, consolidation, sale of assets, split, spin-off, or any other
dividend or distribution of any kind or otherwise), (C) all distributions,
dividends, cash, certificates, liquidation rights and interests, options,
rights, warrants, instruments or other property from time to time received,
receivable or otherwise distributed in respect of or in exchange or substitution
for any and all of the Pledged Collateral (excluding any of the foregoing items
in the preceding clause with respect to an Issuer to the extent and only to the
extent that their inclusion would cause (i) the number of shares or units, as
the case may be, of Capital Stock pledged under this Agreement to exceed, with
respect to such Issuer, the Designated Number or (ii) such Pledged Collateral to
constitute Excluded Capital Stock, in each case, after giving effect to such
issuances), (D) such Pledgor's right to vote the Pledged Collateral, and (E) all
proceeds, products, replacements and substitutions for any of the foregoing, in
each case whether now owned or hereafter acquired by such Pledgor (collectively,
the "Collateral"). Notwithstanding the foregoing, the term Collateral shall in
no event include the Excluded Capital Stock of any Issuer.

      (ii) If the Pledged Collateral is evidenced by certificates, then such
Pledgor shall concurrently herewith deposit with the Pledgee, for the benefit of
itself, the other Secured Parties and the Administrative Agent, in accordance
with the terms of the Intercreditor Agreement, the Pledged Collateral owned by
such Pledgor on the date hereof and the certificates representing the Pledged
Collateral endorsed in blank by such Pledgor or accompanied by undated stock
powers or instruments of transfer, in each case, duly executed in blank by such
Pledgor. If any Capital Stock does not constitute Pledged Collateral but instead
constitutes Excluded Capital Stock that is evidenced by certificates, then such
Pledgor shall concurrently herewith deposit with the Pledgee, (x) for the
benefit of the Administrative Agent (and not any Secured Party), in accordance
with the terms of the Intercreditor Agreement and (y) on behalf of such Pledgor,
such

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Excluded Capital Stock owned by such Pledgor on the date hereof and the
certificates representing such Excluded Capital Stock endorsed in blank by such
Pledgor or accompanied by undated stock powers or instruments of transfer, in
each case, duly executed in blank by such Pledgor. For the avoidance of doubt,
if any certificate or instrument representing any Pledged Collateral also
represents any Excluded Capital Stock, the Lien created hereunder shall only
attach to the Capital Stock evidenced thereby to the extent such Capital Stock
does not constitute Excluded Capital Stock.

      (iii) Whether or not the Pledged Collateral is evidenced by certificates,
such Pledgor shall, and hereby authorizes the Pledgee to, file a Code Financing
Statement naming such Pledgor as debtor and the Pledgee as secured party with
respect to the Collateral in the applicable filing office and in such form and
containing such substance as may be necessary to perfect the security interest
of the Pledgee in the Pledged Collateral by the filing of a Code Financing
Statement; provided, however, that no such authorization shall obligate the
Pledgee to make any such filing. Notwithstanding anything to the contrary
contained in this Agreement, the Pledgee shall not as a result of this Agreement
be responsible or liable for any obligations or liabilities of such Pledgor in
such Pledgor's capacity as a holder of any Capital Stock of any Issuer, and the
Pledgee shall not be deemed to have assumed any of such obligations or
liabilities.

      3.2 Subsequently Acquired Pledged Collateral. (i) If at any time or from
time to time after the date hereof during the term of this Agreement, any
Pledgor shall acquire any additional Pledged Interests, including any further
stock, or equity in each Issuer (whether by purchase, dividend, merger,
consolidation, sale of assets, split, spin-off, or any other dividend or
distribution of any kind or otherwise) (collectively, the "Future Rights")
(provided, however, that Future Rights under this clause shall exclude any
Future Rights to the extent and only to the extent that (i) their inclusion
would cause the number of shares or units, as the case may be, of Capital Stock
pledged hereunder to exceed the Designated Number or (ii) such Future Rights
would constitute Excluded Capital Stock, in each case, after giving effect to
the issuance of such Future Rights and any related issuances).

      (ii) Such Pledgor will forthwith pledge and, if applicable, deposit such
additional Pledged Collateral with the Pledgee, for the benefit of itself, the
other Secured Parties and the Administrative Agent in accordance with the terms
of the Intercreditor Agreement and deliver to the Pledgee, for the benefit of
itself, the other Secured Parties and the Administrative Agent in accordance
with the terms of the Intercreditor Agreement, certificates or instruments
therefor, endorsed in blank by such Pledgor or accompanied by undated stock
powers or instruments of transfer, in each case, duly executed in blank by such
Pledgor, and will promptly thereafter deliver to the Pledgee, for the benefit of
itself, the other Secured Parties and the Administrative Agent in accordance
with the terms of the Intercreditor Agreement, a certificate (which shall be
deemed to supplement Annex A attached hereto of such Pledgor) executed by such
Pledgor describing such Pledged Collateral and the other Pledged Collateral
pledged to the Pledgee, and certifying that the same have been duly pledged with
the Pledgee hereunder. If any Capital Stock does not constitute any such
additional Pledged Collateral but instead constitutes Excluded Capital Stock
that is evidenced by certificates, then such Pledgor shall concurrently promptly
thereafter deposit with the Pledgee, (x) for the benefit of the Administrative
Agent (and not any

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Secured Party), in accordance with the terms of the Intercreditor Agreement and
(y) on behalf of such Pledgor, such Excluded Capital Stock owned by such Pledgor
on the date hereof and the certificates representing such Excluded Capital Stock
endorsed in blank by such Pledgor or accompanied by undated stock powers or
instruments of transfer, in each case, duly executed in blank by such Pledgor.
For the avoidance of doubt, if any certificate or instrument representing any
such additional Pledged Collateral also represents any Excluded Capital Stock,
the Lien created hereunder shall only attach to the Capital Stock evidenced
thereby to the extent such Capital Stock does not constitute Excluded Capital
Stock.

      (iii) Whether or not such additional Pledged Collateral is evidenced by
certificates, such Pledgor shall, and hereby authorizes the Pledgee to, file a
Code Financing Statement naming such Pledgor as debtor and the Pledgee as
secured party with respect to the additional Collateral in the applicable filing
office and in such form and containing such substance as may be necessary to
perfect the security interest of the Pledgee in the additional Collateral by the
filing of a Code Financing Statement; provided, however, that no such
authorization shall obligate the Pledgee to make any such filing.

      3.3 Uncertificated Pledged Collateral. In addition to anything contained
in Sections 3.1 and 3.2 hereof, if any Pledged Collateral (whether now owned or
hereafter acquired) is not certificated or becomes an uncertificated security,
the applicable Pledgor shall promptly notify the Pledgee thereof and shall
promptly take all actions required to perfect or improve the perfection of the
security interest and pledge in favor of the Pledgee under applicable law
(including, in any event, any action required or appropriate under this
Agreement or the Code). Such Pledgor further agrees to take such actions as may
be necessary to permit the Pledgee to exercise any of its rights and remedies
hereunder.

      4. VOTING, ETC. Until the occurrence and continuance of an Event of
Default, each Pledgor shall be entitled to vote any and all of the Pledged
Collateral and the Excluded Capital Stock; provided, however, that no vote shall
be cast or any action taken by such Pledgor with respect to any Pledged
Collateral or Excluded Capital Stock which would violate or be materially
inconsistent with any of the terms of this Agreement, the Indenture, any other
Indenture Document, or which would have the effect of materially impairing the
position or interests of the Pledgee or which would authorize or effect actions
prohibited under the terms of the Indenture or any Indenture Document. All such
rights of such Pledgor to vote any Pledged Collateral shall cease upon the
occurrence and during the continuance of an Event of Default, if the Pledgee so
directs and provides notice to such Pledgor to do so; provided, however, that
upon the cure or waiver of such Event of Default, all rights of the Pledgee to
vote any and all of the Pledged Collateral shall cease. Upon the giving of any
such notice by the Pledgee, such Pledgor shall retain the right to exercise all
voting and other consensual rights relating to all Excluded Capital Stock
applicable to it so long as it exercises any such voting or other consensual
right in a manner identical to the exercise by the Pledgee of any such voting or
other consensual right of the Capital Stock (of the Issuer of such Excluded
Capital Stock) constituting Pledged Collateral applicable to such Pledgor.

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      5. PAYMENTS AND OTHER DISTRIBUTIONS. Until the occurrence and continuance
of an Event of Default and subject in all cases to the Intercreditor Agreement,
all cash, dividends or distributions payable in respect of the Pledged
Collateral (to the extent such payments shall be permitted pursuant to the terms
and provisions of the Indenture) shall be paid to the applicable Pledgor;
provided, however, upon the occurrence and during the continuance of an Event of
Default, all cash, dividends or distributions payable in respect of the Pledged
Collateral shall be paid to the Pledgee as security for the Obligations if the
Pledgee so directs and provides notice to such Pledgor to that effect (it being
understood and agreed that such Pledgor shall retain the right, whether an Event
of Default is outstanding, to receive all cash, dividends or distributions
payable in respect of the Excluded Capital Stock so long as the cash, dividends
or distributions payable in respect of the Excluded Capital Stock are made on a
pro rata basis with the Capital Stock (of the Issuer of such Excluded Capital
Stock) that constitute Pledged Collateral applicable to such Pledgor); provided
further, that upon the cure or waiver of such Event of Default, all cash
dividends or distributions payable in respect of the Pledged Collateral shall be
paid to such Pledgor. The Pledgee shall be entitled to receive directly, and to
retain as part of the Collateral:

            (a) all other or additional securities or investment property, or
      rights to subscribe for or purchase any of the foregoing, or property
      (other than cash) paid or distributed by way of dividend in respect of the
      Pledged Collateral (excluding any of the foregoing items in the preceding
      clause with respect to an Issuer to the extent and only to the extent that
      their inclusion would cause (i) the number of shares or units, as the case
      may be, of such other or additional securities or investment property
      pledged hereunder to exceed the Designated Number or (ii) such other or
      additional securities or investment property to constitute Excluded
      Capital Stock, in each case, after giving effect to such issuances); and

            (b) all other or additional securities, investment property or
      property (including cash) paid or distributed in respect of the Pledged
      Collateral by way of split, spin-off, split-up, reclassification,
      combination of shares or similar rearrangement (excluding any of the
      foregoing items in the preceding clause with respect to an Issuer to the
      extent and only to the extent that their inclusion would cause (i) the
      number of shares or units, as the case may be, of Capital Stock pledged
      hereunder to exceed the Designated Number or (ii) such other or additional
      securities or investment property to constitute Excluded Capital Stock, in
      each case, after giving effect to such issuances).

      Subject to the Intercreditor Agreement, if at any time any Pledgor shall
obtain or possess any of the foregoing Collateral described in this Section,
such Pledgor shall be deemed to hold such Collateral in trust for the Pledgee
for the benefit of the Pledgee and the other Secured Parties, and such Pledgor
shall promptly surrender and deliver such Collateral to the Pledgee.

      6. REMEDIES IN CASE OF AN EVENT OF DEFAULT. (i) Subject to the
Intercreditor Agreement, upon the occurrence and during the continuance of an
Event of Default, the Pledgee shall be entitled to exercise all of the rights,
powers and remedies (whether vested in it by this Agreement, the Indenture, any
other Indenture Documents, and/or in equity or by law,

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and including, without limitation, all rights and remedies of a secured party of
a debtor in default under the Code) for the protection and enforcement of its
rights in respect of the Pledged Collateral, and to the fullest extent permitted
by applicable law, the Pledgee shall be entitled, without limitation, to
exercise the following rights, which each Pledgor hereby agrees to be
commercially reasonable:

            (a) to receive all amounts payable to such Pledgor in respect of the
      Pledged Collateral in accordance with Section 5 hereof;

            (b) to transfer all or any part of the Pledged Collateral into the
      Pledgee's name or the name of its nominee or nominees for the benefit of
      the Pledgee and the other Secured Parties;

            (c) to vote all or any part of the Pledged Collateral and otherwise
      act with respect thereto as though it were the outright owner thereof in
      accordance with Section 4 hereof;

            (d) at any time or from time to time to sell, assign and deliver, or
      grant options to purchase, all or any part of the Pledged Collateral in
      one or more parcels, or any interest therein, at any public or private
      sale at any exchange, broker's board or at any of the Pledgee's offices or
      elsewhere, without demand of performance, advertisement or notice of
      intention to sell or of time or place of sale or adjournment thereof or to
      redeem (all of which, except as may be required by mandatory provisions of
      applicable law, are hereby expressly and irrevocably waived by such
      Pledgor) for cash, on credit or for other property, for immediate or
      future delivery without any assumption of credit risk, and for such price
      or prices and on such terms as the Pledgee in its commercially reasonable
      judgment may determine. Such Pledgor agrees that to the extent that notice
      of sale shall be required by law that at least ten (10) calendar days'
      notice to such Pledgor of the time (which shall be during normal business
      hours) and place of any public sale or the time after which any private
      sale is to be made shall constitute reasonable notification. The Pledgee
      shall not be obligated to make any sale of Pledged Collateral regardless
      of notice of sale having been given. The Pledgee may adjourn any public or
      private sale from time to time by announcement at the time and place fixed
      therefor, and any such sale may, without further notice, be made at the
      time and place to which it was so adjourned. Such Pledgor hereby waives
      and releases to the fullest extent permitted by law any right or equity of
      redemption with respect to the Pledged Collateral, whether before or after
      sale hereunder, and all rights, if any of marshalling the Pledged
      Collateral and any other security for the Obligations or otherwise. At any
      such sale, unless prohibited by applicable law, the Pledgee may bid for
      and purchase all or any part of the Pledged Collateral so sold free from
      any such right or equity of redemption. Neither the Pledgee nor any of the
      other Secured Parties shall be liable for failure to collect or realize
      upon any or all of the Pledged Collateral or for any delay in so doing nor
      shall the Pledgee nor any of the other Secured Parties be under any
      obligation to take any action whatsoever with regard thereto;

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            (e) to settle, adjust, compromise and arrange all accounts,
      controversies, questions, claims and demands whatsoever in relation to all
      or any part of the Pledged Collateral;

            (f) in respect of the Pledged Collateral, to execute all such
      contracts, agreements, deeds, documents and instruments, to bring, defend
      and abandon all such actions, suits and proceedings, and to take all
      actions in relation to all or any part of the Pledged Collateral as the
      Pledgee in its reasonable discretion may determine;

            (g) to appoint managers, sub-agents, officers and servants for any
      of the purposes mentioned in the foregoing provisions of this Section and
      to dismiss the same, all as the Pledgee in its reasonable discretion may
      determine; and

            (h) generally, to take all such other action as the Pledgee in its
      reasonable discretion may determine as incidental or conducive to any of
      the matters or powers mentioned in the foregoing provisions of this
      Section and which the Pledgee may or can do lawfully and to use the name
      of such Pledgor for the purposes aforesaid and in any proceedings arising
      therefrom.

      (ii) During the continuance of any Event of Default, each Pledgor shall
retain the right to exercise all voting and other consensual rights relating to
all Excluded Capital Stock applicable to it so long as it exercises any such
voting or other consensual right in a manner identical to the exercise by the
Pledgee of any such voting or other consensual right of the Capital Stock (of
the Issuer of such Excluded Capital Stock) constituting Pledged Collateral
applicable to such Pledgor and (ii) receive and retain all cash, dividends and
distributions that it would otherwise be entitled to exercise or receive and
retain in respect of the Excluded Capital Stock applicable to it to the extent,
and solely to the extent, that such cash, dividends and distributions are made
on a pro rata basis with the Capital Stock (of the Issuer of such Excluded
Capital Stock) that constitute Pledged Collateral applicable to such Pledgor.

      7. REMEDIES, ETC., CUMULATIVE. (a) Each right, power and remedy of the
Pledgee (for the benefit of the Pledgee and the other Secured Parties) provided
for in this Agreement, the Indenture, any Indenture Document or any other
security agreement, mortgage, guaranty or now or hereafter existing at law or in
equity or by statute shall be cumulative and concurrent and shall be in addition
to every other such right, power or remedy. The exercise or beginning of the
exercise by the Pledgee (for the benefit of the Pledgee and the other Secured
Parties) of any one or more of the rights, powers or remedies provided for in
this Agreement, the Indenture, or any other Indenture Document or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Pledgee of all such other
rights, powers or remedies, and no failure or delay on the part of the Pledgee
to exercise any such right, power or remedy shall operate as a waiver thereof.

      (b) Each Pledgor authorizes the Pledgee to sell all or any portion of the
Excluded Capital Stock together with all of the Pledged Interests of the Issuer
of such Excluded Capital Stock to the same extent as it is permitted to
authorize the sale of the Pledged Interests hereunder

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without any liability thereto or any duty owed thereby other than as otherwise
expressly required hereunder with respect to such Pledged Interests in the same
sale and on the same terms and for the same consideration as provided in such
sale of the Pledged Interests and at the same price per share or unit of Pledged
Interest as the Excluded Capital Stock; provided that the Pledgee shall promptly
upon receipt of such consideration turn over to such Pledgor (after deducting a
pro rata portion of the costs and expenses incurred in connection with such
sale) the proceeds of such sale relating to the Excluded Capital Stock so sold,
together with a copy of any instruments or other documentation evidencing such
share and an accounting of the costs and expenses applied thereto. Each Pledgor
agrees that the foregoing provisions of this Section 9 shall apply to such
Excluded Capital Stock as if such Excluded Capital Stock were Pledged Interests,
subject to the immediately preceding sentence, the last sentence of Section 4
and Section 6(ii).

      8. APPLICATION OF PROCEEDS. Subject to any mandatory requirements of
applicable law and the terms of the Indenture and the Intercreditor Agreement,
all moneys collected by the Pledgee (for the benefit of the Pledgee and the
other Secured Parties) upon sale or other disposition of the Collateral,
together with all other moneys received by the Pledgee hereunder, shall be
turned over to the Trustee for distribution in accordance with Section 6.10 of
the Indenture.

      9. INDEMNITY. Without duplication of any amounts payable under any other
similar indemnity provision set forth in the Indenture or any other Indenture
Documents, each Pledgor shall, jointly and severally: (i) pay all out-of-pocket
costs and expenses of the Pledgee incurred in connection with the administration
of and in connection with the preservation of rights under, and enforcement of,
and any renegotiation or restructuring of this Agreement and any amendment,
waiver or consent relating thereto (including, without limitation, the
reasonable fees and disbursements of counsel for the Pledgee); (ii) pay and hold
the Pledgee and the other Secured Parties harmless from and against any and all
present and future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with respect to
this Agreement and save the Pledgee and the other Secured Parties harmless from
and against any and all liabilities with respect to or resulting from any delay
or omission to pay any such taxes, charges or levies; and (iii) indemnify the
Pledgee and each of the other Secured Parties, and each of their respective
officers, directors, shareholders, employees, representatives and agents from
and hold each of them harmless against any and all costs, losses, liabilities,
claims, obligations, suits, penalties, judgments, damages or expenses incurred
by or asserted against any of them (whether or not any of them is designated a
party thereto) arising out of or by reason of this Agreement or any transaction
contemplated hereby (including, without limitation, any investigation,
litigation or other proceeding related to this Agreement), including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding.
Notwithstanding anything in this Agreement to the contrary, such Pledgor shall
not be responsible to the Pledgee or any other Secured Party for any costs,
losses, damages, liabilities or expenses which result from the gross negligence
or willful misconduct on the part of such Pledgee or any other Secured Party.
Each Pledgor's obligations under this Section shall survive any termination of
this Agreement.

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      10. FURTHER ASSURANCES. (a) Each Pledgor agrees that, at any time and from
time to time, such Pledgor will join with the Pledgee in executing and, at such
Pledgor's own expense, will file and refile under the Code such financing
statements, continuation statements and other documents in such offices as may
be necessary and wherever required or permitted by law in order to perfect and
preserve the Pledgee's security interest in the Collateral, and hereby
authorizes the Pledgee to file financing statements and amendments thereto
relative to all or any part of the Collateral (provided, however, that no such
authorization shall obligate the Pledgee to make any such filing), and agrees to
do such further acts and things and to promptly execute and deliver to the
Pledgee such additional conveyances, assignments, agreements and instruments as
may be required to carry into effect the purpose of this Agreement or to further
assure and confirm unto the Pledgee its rights, powers and remedies hereunder.

      (b) In addition, Pledgee shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral and
Excluded Capital Stock for certificates or instruments of smaller or larger
denominations or for certificates or instruments separately evidencing Capital
Stock constituting Pledged Collateral and Capital Stock constituting Excluded
Capital Stock.

      11. REASONABLE CARE BY PLEDGEE. The Pledgee shall be deemed by each
Pledgor to have exercised reasonable care in the custody and preservation of the
Collateral and the Excluded Capital Stock in its possession if the Collateral
and the Excluded Capital Stock is accorded treatment substantially equal to that
which the Pledgee accords its own similar property.

      12. TRANSFER BY EACH PLEDGOR. Except as otherwise permitted under the
Indenture, if at all, the Pledgor shall not Dispose of, grant any option with
respect to, or pledge or otherwise encumber any of the Collateral, any Excluded
Capital Stock or any interest therein.

      13. REPRESENTATIONS AND WARRANTIES OF EACH PLEDGOR. Each Pledgor hereby
represents and warrants to the Pledgee for the benefit of the Pledgee and the
other Secured Parties, which representations and warranties shall survive the
execution and delivery of this Agreement, as follows:

      13.1 Validity, Perfection and Priority. (a) The pledge and security
interests in the Pledged Collateral granted to the Pledgee constitute valid and
continuing security interests in the Pledged Collateral.

      (b) Subject to the Intercreditor Agreement, the security interests in the
Collateral granted to the Pledgee for the benefit of itself, the other Secured
Parties and the Administrative Agent hereunder and under the Credit Agreement
Pledge Agreement constitute valid and perfected security interests therein
superior and prior to the rights or claims of any other person or entity
therein.

      13.2 No Liens; Other Financing Statements.

                                     - 10 -
<PAGE>

      (a) Such Pledgor is the sole legal and beneficial owner of, and has good
and marketable title to, the Pledged Collateral.

      (b) Except for any filing made by the Administrative Agent, no financing
statement or other evidence of lien covering or purporting to cover any of the
Pledged Collateral is on file in any public office.

      13.3 Pledged Collateral.

      (a) The Pledged Collateral described in Annex A attached hereto of such
Pledgor is, and all other Pledged Collateral in which such Pledgor shall
hereafter grant a lien or security interest pursuant to Section 2 hereof will
be, duly authorized, validly issued, and fully paid, and, except for the pledge
provided in Section 3.1 hereof in favor of Pledgee and in the Credit Agreement
Pledge Agreement in favor of the Administrative Agent, none of such Pledged
Collateral is or will be subject to any legal or contractual restriction. The
Pledged Collateral is, as of the date hereof, and shall be at all times
hereafter during the term of this Agreement, freely transferable without
restriction or limitation (except as limited by the terms of this Agreement).

      (b) The Pledged Collateral described in Annex A hereto of such Pledgor
constitutes all of the issued and outstanding securities and investment property
legally and beneficially owned by such Pledgor on the date hereof in or relating
to each of the Issuers.

      13.4 Power and Authority. Such Pledgor has the power and authority to
pledge and collaterally assign all of the Pledged Collateral pursuant to this
Agreement.

      13.5 Article 8 Securities. The Pledged Interests that are Capital Stock in
general partnerships, limited partnerships or limited liability companies (i)
are not dealt in or traded on securities exchanges or in securities markets,
(ii) do not have terms expressly providing that they are securities governed by
Article 8 of the Code, and (iii) are not investment company securities, and are
not, therefore, "securities" governed by Article 8 of the Code.

      13.6 Litigation. There are no actions, suits or proceedings pending or, to
such Pledgor's best knowledge, threatened against or involving such Pledgor
before any court with respect to any of the transactions contemplated by this
Agreement or the ability of such Pledgor to perform any of the obligations of
such Pledgor hereunder.

      13.7 State of Organization. Such Pledgor's state of organization is
specified on Annex A of such Pledgor.

      13.8 Continued Existence. Upon any transfer of the Pledged Collateral to
any Person as permitted upon the occurrence and during the continuance of an
Event of Default in accordance with Section 6 hereof, each of the Issuers shall
continue in existence.

      13.9 Neither the pledge of the Pledged Collateral pursuant to this
Agreement nor the extensions of credit represented by the Obligations violates
Regulation T, U or X of the Board of Governors of the Federal Reserve System.

                                     - 11 -
<PAGE>

      13.10 Each direct Subsidiary of such Pledgor is an Issuer of Pledged
Interests that have been pledged hereunder.

      14. COVENANTS OF EACH PLEDGOR. Each Pledgor covenants and agrees with the
Pledgee that on and after the date hereof and until all of the Obligations shall
have been paid and performed in full (other than contingent indemnification
obligations) or the Defeasance thereof shall have been consummated and this
Agreement terminates in accordance with its terms:

      14.1 Collateral. (a) Such Pledgor will use its commercially reasonable
efforts to defend the Pledgee's right, title and security interest in and to the
Collateral against the claims and demands of all Persons whomsoever; (b) such
Pledgor will have good and marketable title to and right to pledge any other
property at any time hereafter constituting Collateral and will likewise use its
commercially reasonable efforts to defend the right thereto and security
interest therein of the Pledgee; and (c) such Pledgor will not, with respect to
any Pledged Collateral, enter into any shareholder type agreements, voting
agreements, voting trusts, trust deeds, irrevocable proxies or any other similar
agreements or instruments, other than any shareholder type agreements, voting
agreements, voting trusts, trust deeds, irrevocable proxies or any other similar
agreements or instruments which would not (x) be inconsistent with the terms of
this Agreement, (y) materially and adversely affect the Pledgee's interest in
any of the Pledged Collateral or (z) have a Material Adverse Effect.

      14.2 Right of Inspection. To the extent permitted in Section 2.6 of the
Security Agreement, the Pledgee and its representatives shall have access to all
the books, correspondence and records of such Pledgor relating to the
Collateral, if any, and the Pledgee and its representatives may examine the
same, take extracts therefrom and make photocopies thereof.

      14.3 Compliance with Laws. Such Pledgor will comply with all requirements
of law applicable to the Pledged Collateral or any part thereof, except where
the failure to comply could not reasonably be expected to have a Material
Adverse Effect.

      14.4 Non-Pro Rata Dividends. To the extent it may lawfully do so, such
Pledgor shall use its best efforts to prevent the Issuers from issuing Future
Rights, cash, dividends and any other distributions unless made on a pro rata
basis between Capital Stock of such Issuers constituting Pledged Interests and
Excluded Capital Stock.

      14.5 No Impairment. Such Pledgor will not take or permit to be taken any
action which could materially impair the Pledgee's rights in the Pledged
Collateral. Such Pledgor will not create, incur or permit to exist, will use its
commercially reasonable efforts to defend the Pledged Collateral against and
will take such other action as is necessary to remove, any lien or claim on or
to the Pledged Collateral, other than the liens created hereby and liens in
favor of the Administrative Agent in accordance with the Intercreditor
Agreement, and will use its commercially reasonable efforts to defend the right,
title and interest of the Pledgee in and to any of the Pledged Collateral
against the claims and demands of all Persons whomsoever.

                                     - 12 -
<PAGE>

      14.6 Performance by Pledgee of Such Pledgor's Obligations. If such Pledgor
fails to perform or comply with any of the agreements contained herein, the
Pledgee may, upon the occurrence and during the continuance of an Event of
Default, without notice to or consent by such Pledgor, perform or comply or
cause performance or compliance therewith; provided, however, the Pledgee shall
not be under any obligation to taken any such action.

      14.7 Further Identification of Pledged Collateral. Such Pledgor will
furnish to the Pledgee from time to time such reports in connection with the
Pledged Collateral as the Pledgee may reasonably request from time to time.

      14.8 Continuous Perfection. No Pledgor will change its name,
organizational identification number, state of organization or organizational
identity unless such Pledgor shall within ten Business Days of any such change
provide written notice to the Pledgee of such change and file any financing
statements or amendments thereto necessary to continue the perfection of the
Liens of the Pledgee on the Collateral.

      14.9 Stay or Extension Laws. Such Pledgor will not at any time claim,
take, insist upon or invoke the benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisement of the Pledged
Collateral prior to any sale or sales thereof to be made pursuant to the
provisions hereof or pursuant to the decree, judgment, or order of any court of
competent jurisdiction; nor, after such sale or sales, claim or exercise any
right under any statute now or hereafter made or enacted by any state to redeem
the property so sold or any part thereof, and such Pledgor hereby expressly
waives (to the extent not prohibited by applicable law), on behalf of such
Pledgor and each and every person or entity claiming by, through and under such
Pledgor, all benefit and advantage of any such law or laws, and covenants that
such Pledgor will not invoke or utilize any such law or laws or otherwise
hinder, delay or impede the execution of any power, right or remedy herein or
hereby granted and delegated to the Pledgee, but will authorize, allow and
permit the execution of every such power, right or remedy as though no such law
or laws had been made or enacted.

      14.10 The Issuers' Records. Such Pledgor shall cause each of the Issuers
to make a notation on its respective records indicating the interest granted
hereby in favor of the Pledgee.

      15. EACH PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement shall be absolute and unconditional in accordance
with its terms and shall remain in full force and effect (except as otherwise
provided herein under Section 19) without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (a) any change in the
time, place or manner of payment of, or in any other term of, all or any of the
Obligations, any waiver, indulgence, renewal, extension, amendment or
modification of or addition, consent or supplement to or deletion from or any
other action or inaction under or in respect of this Agreement, the Indenture or
any other Indenture Document, or any of the other documents, instruments or
agreements relating to the Obligations or any other instrument or agreement
referred to therein or any assignment or transfer of any thereof; (b) any lack
of validity or enforceability of the Indenture, or any other Indenture Document,
or any other

                                     - 13 -
<PAGE>

documents, instruments or agreement referred to therein or any assignment or
transfer of any thereof; (c) any furnishing of any additional security or
collateral to the Pledgee, for the benefit of the Pledgee and/or the other
Secured Parties; or its assignees or any acceptance thereof or any release of
any security by the Pledgee or its assignees; (d) any limitation on any party's
liability or obligations under any such instrument or agreement or any
invalidity or unenforceability, in whole or in part, of any such instrument or
agreement or any term thereof; (e) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceeding
relating to such Pledgor or any other Person, as applicable, or any action taken
with respect to this Agreement by any trustee or receiver, or by any court, in
any such proceeding, whether or not such Pledgor shall have notice or knowledge
of any of the foregoing; (f) any exchange, release or nonperfection of any other
collateral, or any release, or amendment or waiver of or consent to departure
from any guaranty or security, for all or any of the Obligations; or (g) any
other circumstance which might otherwise constitute a defense available to, or a
discharge of, such Pledgor.

      16. NOTICES, ETC. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in the form and manner, and shall be addressed to the parties set forth in the
Indenture.

      17. POWER OF ATTORNEY. Each Pledgor hereby absolutely and irrevocably
constitutes and appoints the Pledgee for the benefit of the Pledgee and the
other Secured Parties as such Pledgor's true and lawful agent and
attorney-in-fact with full power of substitution, in the name of such Pledgor
upon the occurrence and during the continuance of an Event of Default: (a) to
execute and do all such assurances, acts and things which such Pledgor ought to
do but has failed to do under the covenants and provisions contained in this
Agreement; (b) to take any and all such action as may be necessary for the
purpose of maintaining preserving or protecting the security constituted by this
Agreement or any of the rights, remedies, powers or privileges of the Pledgee
under this Agreement; and (c) generally, in the name of such Pledgor, exercise
all or any of the powers, authorities, and discretions conferred on or reserved
to the Pledgee by or pursuant to this Agreement, and (without prejudice to the
generality of any of the foregoing) to deliver or otherwise perfect any deed,
assurance, agreement, instrument or act as may be proper in or for the purpose
of exercising any of such powers, authorities or discretions. Such Pledgor
hereby ratifies and confirms, and hereby agrees to ratify and confirm, whatever
lawful acts the Pledgee or any of the Pledgee's sub-agents or attorneys shall do
or purport to do in the exercise of the power of attorney granted to the Pledgee
pursuant to this Section, which power of attorney, being coupled with an
interest and given for security, is irrevocable; provided, however, that such
Pledgor neither ratifies nor confirms any acts of the Pledgee or any of the
Pledgee's sub-agents or attorneys do in the exercise of this power of attorney
if such acts constitute the negligence, bad faith or willful misconduct of such
Person.

      18. MISCELLANEOUS. Each Pledgor agrees with the Pledgee that each of the
obligations and liabilities of such Pledgor to the Pledgee under this Agreement
may be enforced against such Pledgor without the necessity of joining any other
Person as a party. This Agreement shall create a continuing security interest in
the Pledged Collateral and shall be binding upon the heirs and legal
beneficiaries, and permitted successors and assigns, of such

                                     - 14 -
<PAGE>

Pledgor, as applicable, and shall inure to the benefit of and be enforceable by
the Pledgee and its successors and assigns; provided, however, that no party may
assign this Agreement or any rights or duties hereunder other than pursuant to
the terms of the Indenture. Unless otherwise defined herein, terms defined in
the Code are used herein as therein defined. The headings and titles in this
Agreement are for convenience of reference only and shall not limit or define
the meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one instrument. If any provision of this Agreement shall prove to be
invalid or unenforceable, such provision shall be deemed to be severable from
the other provisions of this Agreement which shall remain binding on all parties
hereto. No Pledgor shall have any right of subrogation as to any of the Pledged
Collateral until full and complete performance and payment of the Obligations
(other than contingent indemnification obligations) or the Defeasance thereof. A
signature hereto distributed by facsimile or electronic mail shall be deemed to
be as legally binding as a signed original.

      19. TERMINATION; RECOVERY CLAIM. This Agreement shall terminate after the
Obligations are paid in full (other than contingent indemnification obligations)
or the Defeasance thereof. Upon the termination of this Agreement, or as
otherwise provided in the Indenture, the Pledgee, at the request of any
applicable Pledgor and at the cost and expense of such Pledgor, will promptly
execute and deliver to such Pledgor the proper instruments acknowledging the
termination of this Agreement and the security interest and lien on the Pledged
Collateral created hereby and will duly assign, transfer and deliver to such
Pledgor or to whomsoever shall be lawfully entitled to receive the same (without
recourse and without any representation or warranty of any kind) such of the
Pledged Collateral and Excluded Capital Stock as may be in the possession of the
Pledgee and has not theretofore been sold or otherwise applied or released
pursuant to this Agreement. Should a claim ("Recovery Claim") be made upon the
Pledgee or any or all of the other Secured Parties at any time for recovery of
any amount received by the Pledgee or any or all of the other Secured Parties in
payment of the Obligations (whether received such Pledgor or otherwise) and
should the Pledgee or any or all of the other Secured Parties repay all or part
of said amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over the Pledgee or any or all of the
other Secured Parties or any of their respective property; or (b) any settlement
or compromise of any such Recovery Claim effected by the Pledgee or any or all
of the other Secured Parties with the claimant (including, without limitation,
such Pledgor), this Agreement and the security interests granted to the Pledgee
for the benefit of the Pledgee and the other Secured Parties hereunder shall
continue in effect with respect to the amount so repaid to the same extent as if
such amount had never originally been received by the Pledgee or any or all of
the other Secured Parties, notwithstanding any prior termination of this
Agreement, the return of this Agreement to such Pledgor, or the cancellation of
any note or other instrument evidencing the Obligations.

      20. AMENDMENTS; MARSHALLING, ETC. (a) None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified except
by a written instrument executed by such Pledgor and the Pledgee.
Notwithstanding the foregoing, the parties hereto agree that in the event that
Rule 3-16 of Regulation S-X under the Securities Act is amended, modified or
interpreted by the SEC to require (or is replaced with another rule or
regulation, or any other law, rule or regulation is adopted, which would
require)

                                     - 15 -
<PAGE>

the filing with the SEC of separate financial statements of any Issuer whose
Capital Stock constitute Pledged Collateral, the term "Excluded Capital Stock"
shall be deemed amended (without further action or consent by any Pledgor, the
Pledgee, the Trustee or any Noteholder) to the extent, and only to the extent,
necessary to avoid the requirement of filing with the SEC of such separate
audited financial statements of such Issuer, and for the avoidance of doubt,
Pledged Interests shall not include any Excluded Capital Stock as amended.

      (b) The Pledgee shall be under no obligation to marshal any assets or
collateral in favor of such Pledgor or any other person or entity or against or
in payment of any or all of the Obligations. All indemnities set forth herein
shall survive the execution and delivery of this Agreement and the making and
repayment of the Obligations or the Defeasance thereof. The Secured Parties
(other than the Pledgee) are the intended third party beneficiaries of this
Agreement.

      21. REVIEW OF AGREEMENT BY EACH PLEDGOR. Each Pledgor acknowledges that
such Pledgor has thoroughly read and reviewed the terms and provisions of this
Agreement, and that such terms and provisions are clearly understood by such
Pledgor, and has been fully and unconditionally consented to by such Pledgor
with the full benefit and advice of counsel chosen by such Pledgor, and that
such Pledgor has freely and voluntarily signed this Agreement without duress.

      22. WAIVER OF CLAIMS. Except as otherwise provided in this Agreement or
prohibited by law, EACH PLEDGOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE PLEDGEE'S
TAKING POSSESSION OR SALE OR THE PLEDGEE'S DISPOSITION OF ANY OF THE COLLATERAL,
INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY
PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH PLEDGOR WOULD
OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF
ANY STATE, and each Pledgor hereby further waives (and releases any cause of
action and claim against the Pledgee as a result of), to the fullest extent
permitted by law: (a) all damages occasioned by such taking of possession,
collection or sale except any damages which are the direct result of the
Pledgee's gross negligence or willful misconduct; (b) all other requirements as
to the time, place and terms of sale or other requirements with respect to the
enforcement of the Pledgee's rights hereunder; (c) demand of performance or
other demand, notice of intent to demand or accelerate, notice of acceleration,
presentment, protest, advertisement or notice of any kind to or upon such
Pledgor or any other person or entity; and (d) all rights of redemption,
appraisement, valuation, diligence, stay, extension or moratorium now or
hereafter in force under any applicable law in order to delay the enforcement of
this Agreement.

      23. REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or payment
of the Obligations by any Pledgor or the transfer by any Pledgor to the Pledgee
of any property of such Pledgor should for any reason subsequently be declared
to be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to

                                     - 16 -
<PAGE>

fraudulent conveyances, preferences, or other voidable or recoverable payments
of money or transfers of property (collectively, a "Voidable Transfer"), and if
the Pledgee is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that the Pledgee
is required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Pledgee related thereto, the liability of
such Pledgor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.

      24. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.

      25. WAIVER OF TRIAL BY JURY. EACH PLEDGOR HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

      26. INTEGRATION. This Agreement, together with the other Indenture
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.

      27. Intercreditor Agreement.

      (a) The Liens granted hereunder in favor of the Pledgee for the benefit of
itself and the other Secured Parties in respect of the Collateral and the
exercise of any right related thereto thereby shall be subject, in each case, to
the terms of the Intercreditor Agreement.

      (b) In the event of any direct conflict between the express terms and
provisions of this Agreement and of the Intercreditor Agreement, the terms and
provisions of the Intercreditor Agreement shall control.

                                     - 17 -
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement
to be duly executed and delivered as of the date first above written.

                                            PLEDGOR
                                            VISKASE COMPANIES, INC., a Delaware
                                              corporation

                                            By: /s/ Gordon S. Donovan
                                                Title: Vice President

                                            PLEDGEE:
                                            LASALLE BANK NATIONAL
                                              ASSOCIATION, as Collateral Agent

                                            By: /s/ Victoria Y. Douyon
                                                Title: First Vice Presidentexv4w1w1

 

Exhibit 4-1-1

PECO ENERGY COMPANY

TO

WACHOVIA BANK, NATIONAL ASSOCIATION, TRUSTEE

(formerly, First Union National Bank)

ONE HUNDRED AND FIRST SUPPLEMENTAL

INDENTURE DATED AS OF

APRIL 15, 2004

TO

FIRST AND REFUNDING MORTGAGE

OF

THE COUNTIES GAS AND ELECTRIC

COMPANY

TO

FIDELITY TRUST COMPANY, TRUSTEE

DATED MAY 1, 1923

5.90% SERIES DUE 2034

 

 

     THIS SUPPLEMENTAL INDENTURE dated as of April 15, 2004, by and between
PECO ENERGY COMPANY, a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania (hereinafter called the Company), party of the
first part, and WACHOVIA BANK, NATIONAL ASSOCIATION (formerly, First Union
National Bank), a national banking association organized and existing under the
laws of the United States of America (hereinafter called the Trustee), as
Trustee under the Mortgage hereinafter mentioned, party of the second part,
Witnesseth that

     WHEREAS, The Counties Gas and Electric Company (hereinafter called
Counties Company), a Pennsylvania corporation and a predecessor to the Company,
duly executed and delivered to Fidelity Trust Company, a Pennsylvania
corporation to which the Trustee is successor, as Trustee, a certain indenture
of mortgage and deed of trust dated May 1, 1923 (hereinafter called the
Mortgage), to provide for the issue of, and to secure, its First and Refunding
Mortgage Bonds, issuable in series and without limit as to principal amount
except as provided in the Mortgage, the initial series of Bonds being
designated the 6% Series of 1923, and the terms and provisions of other series
of bonds secured by the Mortgage to be determined as provided in the Mortgage;
and

     WHEREAS, thereafter Counties Company, Philadelphia Suburban-Counties Gas
and Electric Company (hereinafter called Suburban Company), and the Company,
respectively, have from time to time executed and delivered indentures
supplemental to the Mortgage, providing for the creation of additional series
of bonds secured by the Mortgage and for amendment of certain of the terms and
provisions of the Mortgage and of indentures supplemental thereto, or
evidencing the succession of Suburban Company to Counties Company and of the
Company to Suburban Company, such indentures supplemental to the Mortgage, the
respective dates, parties thereto, and purposes thereof, being as follows:

2

 

	 	 	 	 	 
	Supplemental Indenture	 	 	 	 
	and Date
	 	Parties
	 	Providing for:

	First

September 1, 1926

	 	Counties Company to
Fidelity-Philadelphia
Trust Company
(Successor to Fidelity
Trust Company)
	 	Bonds of 5% Series of
1926
	 
	 	 	 	 
	Second

May 1, 1927

	 	Suburban Company to
Fidelity-Philadelphia
Trust Company
	 	Evidencing succession of
Suburban Company to
Counties Company
	 
	 	 	 	 
	Third

May 1, 1927

	 	Suburban Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 4-1/2% Series
due 1957; amendment of
certain provisions of
Mortgage
	 
	 	 	 	 
	Fourth

November 1, 1927

	 	Suburban Company to
Fidelity-Philadelphia
Trust Company
	 	Additional Bonds of
4-1/2% Series due 1957
	 
	 	 	 	 
	Fifth 

January 31, 1931

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Evidencing succession of
Company to
Suburban Company
	 
	 	 	 	 
	Sixth

February 1, 1931

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 4% Series
due 1971
	 
	 	 	 	 
	Seventh

March 1, 1937

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 3-1/2% Series
due 1967; amendment of
certain provisions of
Mortgage
	 
	 	 	 	 
	Eighth

December 1, 1941

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 2-3/4% Series
due 1971; amendment of
certain provisions of
Mortgage
	 
	 	 	 	 
	Ninth

November 1, 1944

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 2-3/4% Series
due 1967 and 2-3/4% Series
due 1974; amendment of
certain provisions of
Mortgage
	 
	 	 	 	 
	Tenth

December 1, 1946

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 2-3/4% Series
due 1981; amendment of
certain provisions of
Mortgage*

3

 

	 	 	 	 	 
	Supplemental Indenture	 	 	 	 
	and Date
	 	Parties
	 	Providing for:

	Eleventh

February 1, 1948

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 2-7/8% Series
due 1978*
	 
	 	 	 	 
	Twelfth

January 1, 1952

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 3-1/4% Series
due 1982*
	 
	 	 	 	 
	Thirteenth

May 1, 1953

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 3-7/8% Series
due 1983*
	 
	 	 	 	 
	Fourteenth

December 1, 1953

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 3-1/8% Series
due 1983*
	 
	 	 	 	 
	Fifteenth

April 1, 1955

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 3-1/8% Series
due 1985*
	 
	 	 	 	 
	Sixteenth

September 1, 1957

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 4-5/8% Series
due 1987; amendment of
certain provisions of
Mortgage*
	 
	 	 	 	 
	Seventeenth

May 1, 1958

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 3-3/4% Series
due 1988; amendment of
certain provisions of
Mortgage*
	 
	 	 	 	 
	Eighteenth

December 1, 1958

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 4-3/8% Series
due 1986*
	 
	 	 	 	 
	Nineteenth

October 1, 1959

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 5% Series
due 1989*
	 
	 	 	 	 
	Twentieth

May 1, 1964

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 4-1/2% Series
due 1994*
	 
	 	 	 	 
	Twenty-first

October 15, 1966

	 	Company to
Fidelity-Philadelphia
Trust Company
	 	Bonds of 6% Series due
1968-1973*
	 
	 	 	 	 
	Twenty-second

June 1, 1967

	 	Company to The Fidelity Bank
(formerly
Fidelity-Philadelphia
Trust Company)
	 	Bonds of 5-1/4 % Series due
1968-1973 and 5-3/4 %
Series due 1977*
	 
	 	 	 	 
	Twenty-third

October 1, 1957

	 	Company to The Fidelity
Bank
	 	Bonds of 6-1/8 % Series
due 1997*

4

 

	 	 	 	 	 
	Supplemental Indenture	 	 	 	 
	and Date
	 	Parties
	 	Providing for:

	Twenty-fourth

March 1, 1968

	 	Company to The Fidelity
Bank
	 	Bonds of 6-1/2% Series
due 1993; amendment of
Article XIV of
Mortgage*
	 
	 	 	 	 
	Twenty-fifth

September 10, 1968

	 	Company to The Fidelity
Bank
	 	Bonds of 1968 Series due
1969-1976*
	 
	 	 	 	 
	Twenty-sixth

August 15, 1969

	 	Company to The Fidelity
Bank
	 	Bonds of 8% Series due
1975*
	 
	 	 	 	 
	Twenty-seventh

February 1, 1970

	 	Company to The Fidelity
Bank
	 	Bonds of 9% Series due
1995*
	 
	 	 	 	 
	Twenty-eighth

May 1, 1970

	 	Company to The Fidelity
Bank
	 	Bonds of 8-1/2% Series
due 1976*
	 
	 	 	 	 
	Twenty-ninth

December 15, 1970

	 	Company to The Fidelity
Bank
	 	Bonds of 7-3/4% Series
due 2000*
	 
	 	 	 	 
	Thirtieth

August 1, 1971

	 	Company to The Fidelity
Bank
	 	Bonds of 8-1/4% Series
due 1996*
	 
	 	 	 	 
	Thirty-first

December 15, 1971

	 	Company to The Fidelity
Bank
	 	Bonds of 7-3/8% Series
due 2001; amendment of
Article XI of Mortgage*
	 
	 	 	 	 
	Thirty-second

June 15, 1972

	 	Company to The Fidelity
Bank
	 	Bonds of 7-1/2% Series
due 1998*
	 
	 	 	 	 
	Thirty-third

January 15, 1973

	 	Company to The Fidelity
Bank
	 	Bonds of 7-1/2% Series
due 1999*
	 
	 	 	 	 
	Thirty-fourth

January 15, 1974

	 	Company to The Fidelity
Bank
	 	Bonds of 8-1/2% Series
due 2004
	 
	 	 	 	 
	Thirty-fifth

October 15, 1974

	 	Company to The Fidelity
Bank
	 	Bonds of 11% Series
due 1980*
	 
	 	 	 	 
	Thirty-sixth

April 15, 1975

	 	Company to The Fidelity
Bank
	 	Bonds of 11-5/8% Series
due 2000*
	 
	 	 	 	 
	Thirty-seventh

August 1, 1975

	 	Company to The Fidelity
Bank
	 	Bonds of 11% Series due
2000*
	 
	 	 	 	 
	Thirty-eighth

March 1, 1976

	 	Company to The Fidelity
Bank
	 	Bonds of 9-1/8% Series
due 2006*
	 
	 	 	 	 
	Thirty-ninth

August 1, 1976

	 	Company to The Fidelity
Bank
	 	Bonds of 9-5/8% Series
due 2002*

5

 

	 	 	 	 	 
	Supplemental Indenture	 	 	 	 
	and Date
	 	Parties
	 	Providing for:

	Fortieth

February 1, 1977

	 	Company to The Fidelity
Bank
	 	Bonds of Pollution
Control Series A
and Pollution
Control Series B*
	 
	 	 	 	 
	Forty-first

March 15, 1977

	 	Company to The Fidelity
Bank
	 	Bonds of 8-5/8% Series
due 2007*
	 
	 	 	 	 
	Forty-second

July 15, 1977

	 	Company to The Fidelity
Bank
	 	Bonds of 8-5/8% Series
due 2003*
	 
	 	 	 	 
	Forty-third

March 15, 1978

	 	Company to The Fidelity
Bank
	 	Bonds of 9-1/8% Series
due 2008*
	 
	 	 	 	 
	Forty-fourth

October 15, 1979

	 	Company to The Fidelity
Bank
	 	Bonds of 12-1/2% Series
due 2005*
	 
	 	 	 	 
	Forty-fifth

October 15, 1980

	 	Company to The Fidelity
Bank
	 	Bonds of 13-3/4% Series
due 1992*
	 
	 	 	 	 
	Forty-sixth

March 1, 1981

	 	Company to The Fidelity
Bank
	 	Bonds of 15-1/4% Series
due 1996; amendment of
Article VIII of
Mortgage*
	 
	 	 	 	 
	Forty-seventh

March 1, 1981

	 	Company to The Fidelity
Bank
	 	Bonds of 15% Series due
1996; amendment of
Article VIII of
Mortgage*
	 
	 	 	 	 
	Forty-eighth

July 1, 1981

	 	Company to The Fidelity
Bank
	 	Bonds of 17-5/8% Series
due 2011*
	 
	 	 	 	 
	Forty-ninth

September 15, 1981

	 	Company to The Fidelity
Bank
	 	Bonds of 18-3/4% Series
due 2009*
	 
	 	 	 	 
	Fiftieth

April 1, 1982

	 	Company to The Fidelity
Bank
	 	Bonds of 18% Series due
2012*
	 
	 	 	 	 
	Fifty-first

October 1, 1982

	 	Company to The Fidelity
Bank
	 	Bonds of 15-3/8% Series
due 2010*
	 
	 	 	 	 
	Fifty-second

June 15, 1983

	 	Company to The Fidelity
Bank
	 	Bonds of 13-3/8% Series
due 2013*
	 
	 	 	 	 
	Fifty-third

November 15, 1984

	 	Company to Fidelity Bank,
National Association
(formerly The Fidelity Bank)
	 	Bonds of 13.05% Series
due 1994; amendment
of Article VIII of
Mortgage*

6

 

	 	 	 	 	 
	Supplemental Indenture	 	 	 	 
	and Date
	 	Parties
	 	Providing for:

	Fifty-fourth

December 1, 1984

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 14% Series due
1988-1994; amendment
of Article VIII of
Mortgage*
	 
	 	 	 	 
	Fifty-fifth

May 15, 1985

	 	Company to Fidelity Bank,
National Association
	 	Bonds of Pollution
Control Series C*
	 
	 	 	 	 
	Fifty-sixth

October 1, 1985

	 	Company to Fidelity Bank,
National Association
	 	Bonds of Pollution
Control Series D*
	 
	 	 	 	 
	Fifty-seventh

November 15, 1985

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 10-7/8% Series
due 1995*
	 
	 	 	 	 
	Fifty-eighth

November 15, 1985

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 11-3/4% Series
due 2014*
	 
	 	 	 	 
	Fifty-ninth

June 1, 1986

	 	Company to Fidelity Bank,
National Association
	 	Bonds of Pollution
Control Series E*
	 
	 	 	 	 
	Sixtieth

November 1, 1986

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 10-1/4% Series
due 2016*
	 
	 	 	 	 
	Sixty-first

November 1, 1986

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 8-3/4% Series
due 1994*
	 
	 	 	 	 
	Sixty-second

April 1, 1987

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 9-3/8% Series
due 2017*
	 
	 	 	 	 
	Sixty-third

July 15, 1987

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 11% Series due
2016*
	 
	 	 	 	 
	Sixty-fourth

July 15, 1987

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 10% Series due
1997*
	 
	 	 	 	 
	Sixty-fifth

August 1, 1987

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 10-1/4% Series
due 2007*
	 
	 	 	 	 
	Sixty-sixth

October 15, 1987

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 11% Series due
1997*
	 
	 	 	 	 
	Sixty-seventh

October 15, 1987

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 12-1/8% Series
due 2016*
	 
	 	 	 	 
	Sixty-eighth

April 15, 1988

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 10% Series due
1998*
	 
	 	 	 	 
	Sixty-ninth

April 15, 1988

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 11% Series due
2018*

7

 

	 	 	 	 	 
	Supplemental Indenture	 	 	 	 
	and Date
	 	Parties
	 	Providing for:

	Seventieth

June 15, 1989

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 10% Series due
2019*
	 
	 	 	 	 
	Seventy-first

October 1, 1989

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 9-7/8% Series
due 2019*
	 
	 	 	 	 
	Seventy-second

October 1, 1989

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 9-1/4% Series
due 1999*
	 
	 	 	 	 
	Seventy-third

October 1, 1989

	 	Company to Fidelity Bank,
National Association
	 	Medium-Term Note
Series A*
	 
	 	 	 	 
	Seventy-fourth

October 15, 1990

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 10-1/2% Series
due 2020*
	 
	 	 	 	 
	Seventy-fifth

October 15, 1990

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 10% Series due
2000*
	 
	 	 	 	 
	Seventy-sixth

April 1, 1991

	 	Company to Fidelity Bank,
National Association
	 	Bonds of Pollution
Control Series F
and Pollution
Control Series G*
	 
	 	 	 	 
	Seventy-seventh

December 1, 1991

	 	Company to Fidelity Bank,
National Association
	 	Bonds of Pollution
Control Series H*
	 
	 	 	 	 
	Seventy-eighth

January 15, 1992

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 7-1/2% 1992
Series due 1999*
	 
	 	 	 	 
	Seventy-ninth

April 1, 1992

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 8% Series due
2002*
	 
	 	 	 	 
	Eightieth

April 1, 1992

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 8-3/4% Series
due 2022*
	 
	 	 	 	 
	Eighty-first

June 1, 1992

	 	Company to Fidelity Bank,
National Association
	 	Bonds of Pollution
Control Series I*
	 
	 	 	 	 
	Eighty-second

June 1, 1992

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 8-5/8% Series
due 2022*
	 
	 	 	 	 
	Eighty-third

July 15, 1992

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 7-1/2% Series
due 2002*
	 
	 	 	 	 
	Eighty-fourth

September 1, 1992

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 8-1/4% Series
due 2022*
	 
	 	 	 	 
	Eighty-fifth

September 1, 1992

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 7-1/8% Series
due 2002*

8

 

	 	 	 	 	 
	Supplemental Indenture	 	 	 	 
	and Date
	 	Parties
	 	Providing for:

	Eighty-sixth

March 1, 1993

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 6-5/8% Series
due 2003*
	 
	 	 	 	 
	Eighty-Seventh

March 1, 1993

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 7-3/4% Series
due 2023*
	 
	 	 	 	 
	Eighty-eighth

March 1, 1993

	 	Company to Fidelity Bank,
National Association
	 	Bonds of Pollution
Control Series J,
Pollution Control
Series K, Pollution
Control Series L
and Pollution Control
Series M*
	 
	 	 	 	 
	Eighty-ninth

May 1, 1993

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 6-1/2% Series
due 2003*
	 
	 	 	 	 
	Ninetieth

May 1, 1993

	 	Company to Fidelity Bank,
National Association
	 	Bonds of 7-3/4% Series
2 due 2023*
	 
	 	 	 	 
	Ninety-first

August 15, 1993

	 	Company to First Fidelity Bank,
N.A., Pennsylvania (formerly
Fidelity Bank, National
Association)
	 	Bonds of 7-1/8% Series
due 2023*
	 
	 	 	 	 
	Ninety-second

August 15, 1993

	 	Company to First Fidelity Bank,
N.A., Pennsylvania
	 	Bonds of 6-3/8% Series
due 2005*
	 
	 	 	 	 
	Ninety-third

August 15, 1993

	 	Company to First Fidelity Bank,
N.A., Pennsylvania
	 	Bonds of 5-3/8% Series
due 1998*
	 
	 	 	 	 
	Ninety-fourth

November 1, 1993

	 	Company to First Fidelity Bank,
N.A., Pennsylvania
	 	Bonds of 7-1/4% Series
due 2024*
	 
	 	 	 	 
	Ninety-fifth

November 1, 1993

	 	Company to First Fidelity Bank,
N.A., Pennsylvania
	 	Bonds of 5-5/8% Series
due 2001*
	 
	 	 	 	 
	Ninety-sixth

May 1, 1995

	 	Company to First Fidelity Bank,
N.A., Pennsylvania
	 	Medium Term Note Series B*
	 
	 	 	 	 
	Ninety-seventh

October 15, 2001

	 	Company to First Union
National Bank (formerly First
Fidelity Bank, N.A.,
Pennsylvania)
	 	Bonds of 5.95% Series
due 2011*
	 
	 	 	 	 
	Ninety-eighth

October 1, 2002

	 	Company to Wachovia Bank,
National Association (formerly
First Union National Bank)
	 	Bonds of 5.95% Series
Due 2011*
	 
	 	 	 	 
	Ninety-ninth

September 15, 2002

	 	Company to Wachovia Bank,
National Association (formerly
First Union National Bank)
	 	Bonds of 4.75% Series
Due 2012*

9

 

	 	 	 	 	 
	Supplemental Indenture	 	 	 	 
	and Date
	 	Parties
	 	Providing for:

	One Hundredth

April 15, 2003

	 	Company to Wachovia Bank,
National Association (formerly
First Union National Bank)
	 	Bonds of 3.50% Series
Due 2008*

	 	 	*And amendment of certain provisions of the Ninth Supplemental Indenture.

10

 

     WHEREAS, the respective principal amounts of the bonds of each series
presently outstanding under the Mortgage and the several supplemental
indentures above referred to, are as follows:

	 	 	 	 	 
	 	 	PRINCIPAL
	Series
	 	AMOUNT

	3.50%     Series due 2008
	 	 	450,000,000	 
	Pollution Control Series J due 2012
	 	 	50,000,000	 
	Pollution Control Series K due 2012
	 	 	50,000,000	 
	Pollution Control Series L due 2012
	 	 	50,000,000	 
	Pollution Control Series M due 2012
	 	 	4,200,000	 
	4.75%     Series due 2012 
	 	 	225,000,000	 
	5.95%     Series due 2011 
	 	 	250,000,000	 
	Total
	 	$	1,079,200,000	 
	 
	 	 	
 	 

     WHEREAS, the Company deems it advisable and has determined, pursuant to
Article XI of the Mortgage,

     (a) to convey, pledge, transfer and assign to the Trustee and to subject
specifically to the lien of the Mortgage additional property not therein or in
any supplemental indenture specifically described but now owned by the Company
and acquired by it by purchase or otherwise; and

     (b) to create a new series of bonds to be issued from time to time under,
and secured by, the Mortgage, to be designated PECO Energy Company First and
Refunding Mortgage Bonds, 5.90% Series due 2034, (hereinafter sometimes called
the “bonds of the New Series” or the “bonds of the 5.90% Series due 2034”); and
for the above-mentioned purposes to execute, deliver and record this
Supplemental Indenture; and

     WHEREAS, the Company has determined by proper corporate action that the
terms, provisions and form of the bonds of the New Series shall be
substantially as follows:

11

 

UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

(Form of Face of Bond)

PECO ENERGY COMPANY

			
	REGISTERED

NUMBER
	 	REGISTERED

FIRST AND REFUNDING MORTGAGE BOND,

5.90% SERIES DUE 2034,

DUE MAY 1, 2034

     PECO Energy Company, a Pennsylvania corporation (hereinafter called the
Company), for value received, hereby promises to pay to                     
or registered assigns,

     Dollars on May 1, 2034, at the office or agency of the Company, in the
City of Philadelphia, Pennsylvania, or, at the option of the holder, at the
office or agency of the Company, in the Borough of Manhattan, The City of New
York, in such coin or currency of the United States of America as at the time
of payment shall constitute legal tender for the payment of public and private
debts, and to pay interest (computed on the basis of a 360-day year of twelve
30-day months) thereon from the date hereof at the rate of 5.90 percent per
annum in like coin or currency, payable at either of the offices aforesaid on
May 1 and November 1, commencing on November 1, 2004, in each year until the
Company’s obligation with respect to the payment of such principal shall have
been discharged.

     The Company may fix a date, not more than fourteen calendar days prior to
any interest payment date, as a record date for determining the registered
holder of this bond entitled to such interest payment, in which case only the
registered holder on such record date shall be entitled to receive such
payment, notwithstanding any transfer of this bond upon the registration books
subsequent to such record date.

     This bond shall not be valid or become obligatory for any purpose unless
it shall have been authenticated by the certificate of the Trustee under said
Mortgage endorsed hereon.

12

 

     The provisions of this bond are continued on the reverse hereof and such
continued provisions shall for all purposes have the same effect as though
fully set forth at this place.

     IN WITNESS WHEREOF, PECO Energy Company has caused this instrument to be
signed in its corporate name with the manual or facsimile signature of its
President or a Vice President and its corporate seal to be impressed or a
facsimile imprinted hereon, duly attested by the manual or facsimile signature
of its Secretary or an Assistant Secretary.

	 	 	 	 	 
	Dated:
	 	 	 	 
	 
	 	 	 	 
	 	 	PECO ENERGY COMPANY
	

	 	By	 	 
	

	 	 	 	
 
	

	 	 	 	Senior Vice President,
Treasurer and Chief Financial
Officer
	 
	 	 	 	 
	(SEAL)
	 	 	 	 
	 
	 	 	 	 
	

	 	Attest:	 	 
	

	 	 	 	
 
	

	 	 	 	Assistant Secretary

13

 

(Form of Reverse of New Series of Bond)

PECO ENERGY COMPANY

First and Refunding Mortgage Bond,

5.90% Series Due 2034

Due May 1, 2034

(CONTINUED)

     This bond is one of a duly authorized issue of bonds of the Company,
unlimited as to amount except as provided in the Mortgage hereinafter mentioned
or in any indenture supplemental thereto, and is one of a series of said bonds
known as First and Refunding Mortgage Bonds, 5.90% Series due 2034. This bond
and all other bonds of said issue are issued and to be issued under and
pursuant to and are all secured equally and ratably by an indenture of mortgage
and deed of trust dated May 1, 1923, duly executed and delivered by The
Counties Gas and Electric Company (to which the Company is successor) to
Fidelity Trust Company, as Trustee (to which Wachovia Bank, National
Association, a national banking association organized and existing under the
laws of the United States of America, is successor Trustee), as amended,
modified or supplemented by certain supplemental indentures from the Company or
its predecessors to said successor Trustee or its predecessors, said mortgage,
as so amended, modified or supplemented being herein called the Mortgage.
Reference is hereby made to the Mortgage for a statement of the property
mortgaged and pledged, the nature and extent of the security, the rights of the
holders of said bonds and of the Trustee in respect of such security, the
rights, duties and immunities of the Trustee, and the terms and conditions upon
which said bonds are and are to be secured, and the circumstances under which
additional bonds may be issued.

     As provided in the Mortgage, the bonds secured thereby may be for various
principal sums and are issuable in series, which series may mature at different
times, may bear interest at different rates, and may otherwise vary. The bonds
of this series mature on May 1, 2034, and are issuable only in registered form
without coupons in any denomination authorized by the Company.

     Any bond or bonds of this series may be exchanged for another bond or
bonds of this series in a like aggregate principal amount in authorized
denominations, upon presentation at the office of the Trustee in the City of
Philadelphia, Pennsylvania, or, at the option of the holder, at the office or
agency of the Company in the Borough of Manhattan, The City of New York, all
subject to the terms of the Mortgage but without any charge other than a sum
sufficient to reimburse the Company for any stamp tax or other governmental
charge incident to the exchange.

     The bonds of this series are redeemable at the option of the Company, as a
whole or in part, at any time upon notice sent by the Company through the mail,
postage prepaid, at least thirty (30) days and not more than forty-five (45)
days prior to the date fixed for redemption, to the registered holder of each
bond to be redeemed, addressed to such holder at his address appearing upon the
registration books, at a redemption price equal to the greater of (1) 100% of
the principal amount of the bonds to be redeemed, plus accrued interest to the
redemption date, or (2) as determined by the Quotation Agent, the sum of the
present values of the remaining

14

 

scheduled payments of principal and interest on the bonds to be redeemed
(not including any portion of payments of interest accrued as of the redemption
date) discounted to the redemption date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate
plus 20 basis points, plus accrued interest to the redemption date. Unless the
Company defaults in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the bonds of this series or
portions of the bonds of this series called for redemption.

     “Adjusted Treasury Rate” means, with respect to any redemption date, the
rate per year equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for the redemption date.

     “Business Day” means any day that is not a day on which banking
institutions in New York City are authorized or required by law or regulation
to close.

     “Comparable Treasury Issue” means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the
remaining term of the bonds of this series that would be used, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of the bonds of this series.

     “Comparable Treasury Price” means, with respect to any redemption date:

	 	•	 	the average of the Reference Treasury Dealer Quotations for
that redemption date, after excluding the highest and lowest of the
Reference Treasury Dealer Quotations; or

	 	•	 	if the Trustee obtains fewer than three Reference Treasury
Dealer Quotations, the average of all Reference Treasury Dealer
Quotations so received.

     “Quotation Agent” means the Reference Treasury Dealer appointed by the
Company.

     “Reference Treasury Dealer” means (1) each of BNP Paribas Securities Corp.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated and their respective
successors, unless any of them ceases to be a primary U.S. Government
securities dealer in New York City (a “Primary Treasury Dealer”), in which case
the Company shall substitute another Primary Treasury Dealer; and (2) any other
Primary Treasury Dealer selected by the Company.

     “Reference Treasury Dealer Quotations” means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by that Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third business day preceding that redemption date.

     The principal of this bond may be declared or may become due on the
conditions, in the manner and with the effect provided in the Mortgage upon the
happening of an event of default as in the Mortgage provided.

15

 

     This bond is transferable by the registered holder hereof in person or by
attorney, duly authorized in writing, at the office of the Trustee in the City
of Philadelphia, Pennsylvania, or, at the option of the holder, at the office
or agency of the Company in the Borough of Manhattan, The City of New York, in
books of the Company to be kept for that purpose, upon surrender and
cancellation hereof, and upon any such transfer, a new registered bond or
bonds, without coupons, of this series and for the same aggregate principal
amount, will be issued to the transferee in exchange herefor, all subject to
the terms of the Mortgage but without payment of any charge other than a sum
sufficient to reimburse the Company for any stamp tax or other governmental
charge incident to the transfer. The Company, the Trustee, and any paying agent
may deem and treat the person in whose name this bond is registered as the
absolute owner hereof for the purpose of receiving payment of or on account of
the principal and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any paying agent shall be affected by any
notice to the contrary.

     No recourse shall be had for the payment of the principal of or interest
on this bond to any incorporator or any past, present or future stockholder,
officer or director of the Company or of any predecessor or successor
corporation, either directly or indirectly, by virtue of any statute or by
enforcement of any assessment or otherwise, and any and all liability of the
said incorporators, stockholders, officers or directors of the Company or of
any predecessor or successor corporation in respect to this bond is hereby
expressly waived and released by every holder hereof, except to the extent that
such liability may not be waived or released under the provisions of the
Securities Act of 1933 or of the rules and regulations of the Securities and
Exchange Commission thereunder.

(End of Form of Reverse of Bond)

16

 

and

     WHEREAS, on the face of each of the bonds of the New Series, there is to
be endorsed a certificate of the Trustee in substantially the following form,
to wit:

(Form of Trustee’s Certificate)

     This bond is one of the bonds, of the series designated therein, provided
for in the within-mentioned Mortgage and in the One Hundred and First
Supplemental Indenture dated as of April 15, 2004.

	 	 	 	 	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION

 	 
	 	By  	 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 

and

     WHEREAS, all acts and things necessary to make the bonds of the New
Series, when duly executed by the Company and authenticated by the Trustee as
provided in the Mortgage and indentures supplemental thereto, and issued by the
Company, the valid, binding and legal obligations of the Company, and this
Supplemental Indenture a valid and enforceable supplement to the Mortgage, have
been done, performed and fulfilled and the execution and delivery hereof have
been in all respects duly and lawfully authorized.

          NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

     That in order to secure the payment of the principal of and interest on
all bonds issued and to be issued under the Mortgage and/or under any indenture
supplemental thereto, according to their tenor and effect, and according to the
terms of the Mortgage and of any indenture supplemental thereto, and to secure
the performance of the covenants and obligations in the bonds and in the
Mortgage and any indenture supplemental thereto respectively contained, and for
the proper assuring, conveying, and confirming unto the Trustee, its successors
in trust and its and their assigns forever, upon the trusts and for the
purposes expressed in the Mortgage and in any indentures supplemental thereto,
all and singular the estates, property and franchises of the Company thereby
mortgaged or intended so to be, the Company, for and in consideration of the
premises and of the sum of One Dollar ($1.00) in hand paid by the Trustee to
the Company upon the execution and delivery of this Supplemental Indenture,
receipt whereof is hereby acknowledged, and of other good and valuable
consideration, has granted, bargained, sold, conveyed, released, confirmed,
pledged, assigned, transferred and set over and by these presents does grant,
bargain, sell, convey, release, confirm, pledge, assign, transfer, and set over
to Wachovia Bank, National Association, as Trustee, and to its successors in
trust and its and their assigns forever, all the following described property,
real, personal and mixed of the Company, viz.:

17

 

     The real property set forth in Schedule A, attached hereto and hereby made
a part hereof, with any improvements thereon erected as may be owned by the
Company but not specifically described in the Mortgage or in any indenture
supplemental thereto heretofore executed, in the places set forth in Schedule
A.

     All of the real property with any improvements thereon erected as may be
owned by the Company and described in the Mortgage or in any indenture
supplemental thereto as may heretofore have been executed, delivered and
recorded, but excluding therefrom all real property heretofore released from
the lien of the Mortgage. The purpose of restating such prior conveyances as
security is to confirm that the obligations of the Company as provided in this
Supplemental Indenture are included within the lien and security of the
Mortgage, and that public record be made of such purpose and fact by the
recording of this Supplemental Indenture.

     Together with all gas works, electric works, plants, buildings,
structures, improvements and machinery located upon such real estate or any
portion thereof, and all rights, privileges and easements of every kind and
nature appurtenant thereto, and all and singular tenements, hereditaments and
appurtenances belonging to the real estate or any part thereof hereinbefore
described or referred to or intended so to be, or in any way appertaining
thereto, and the reversions, remainders, rents, issues and profits thereof;
also all the estate, right, title, interest, property, possession, claim and
demand whatsoever, as well in law as in equity, of the Company, of, in and to
the same and any and every part thereof, with the appurtenances.

     Also all the Company’s electric transmission and distribution lines and
systems, substations, transforming stations, structures, machinery, apparatus,
appliances, devices and appurtenances.

     Also all the Company’s gas transmission and distribution mains, pipes,
pipe lines and systems, storage facilities, structures, machinery, apparatus,
appliances, devices and appurtenances.

     Also all plants, systems, works, improvements, buildings, structures,
fixtures, appliances, engines, furnaces, boilers, machinery, retorts, tanks,
condensers, pumps, gas tanks, holders, reservoirs, expansion tanks, gas mains
and pipes, tunnels, service pipe, pipe lines, fittings, gates, valves,
connections, gas and electric meters, generators, dynamos, fans, supplies,
tools and implements, tracks, sidings, motor and other vehicles, all electric
light lines, electric power lines, transmission lines, distribution lines,
conduits, cables, stations, substations, and distributing systems, motors,
conductors, converters, switchboards, shafting, belting, wires, mains, feeders,
poles, towers, mast arms, brackets, pipes, lamps, insulators, house wiring
connections and all instruments, appliances, apparatus, fixtures, fittings and
equipment and all stores, repair parts, materials and supplies of every nature
and kind whatsoever now or hereafter owned by the Company in connection with or
appurtenant to its plants and systems for production, purchase, storage,
transmission, distribution, utilization and sale of gas and its by-products and
residual products, and/or for the generation, production, purchase, storage,
transmission, distribution, utilization and sale of electricity, or in
connection with such business.

     Also all the goodwill of the business of the Company, and all rights,
claims, contracts, leases, patents, patent rights, and agreements, all accounts
receivable, accounts, claims, demands,

18

 

choses in action, books of account, cash assets, franchises, ordinances,
rights, powers, easements, water rights, riparian rights, licenses, privileges,
immunities, concessions and consents now or hereafter owned by the Company in
connection with or appurtenant to its said business.

     Also all the right, title and interest of the Company in and to all
contracts for the purchase, sale or supply of gas, and its by-products and
residual products of electricity and electrical energy, now or hereafter
entered into by the Company with the right on the part of the Trustee, upon the
happening of an event of default as defined in the Mortgage as supplemented by
any supplemental indenture, to require a specific assignment of any and all
such contracts, whenever it shall request the Company to make the same.

     Also all rents, tolls, earnings, profits, revenues, dividends and income
arising or to arise from any property now owned, leased, operated or controlled
or hereafter acquired, leased, operated or controlled by the Company and
subject to the lien of the Mortgage and indentures supplemental thereto.

     Also all the estate, right, title and interest of the Company, as lessee,
in and to any and all demised premises under any and all agreements of lease
now or at any time hereafter in force, insofar as the same may now or hereafter
be assignable by the Company.

     Also all other property, real, personal and mixed not hereinbefore
specified or referred to, of every kind and nature whatsoever, now owned, or
which may hereafter be owned by the Company (except shares of stock, bonds or
other securities not now or hereafter specifically pledged under the Mortgage
and indentures supplemental thereto or required to be pledged thereunder by the
provisions of the Mortgage or any indenture supplemental thereto), together
with all and singular the tenements, hereditaments and appurtenances thereunto
belonging or in any way appertaining and the reversions, remainder or
remainders, rents, issues and profits thereof; and also all the estate, right,
title, interest, property, claim and demand whatsoever as well in law as in
equity of the Company of, in and to the same and every part and parcel thereof.

     It is the intention and it is hereby agreed that all property and the
earnings and income thereof acquired by the Company after the date hereof shall
be as fully embraced within the provisions hereof and subject to the lien
hereby created for securing the payment of all bonds, together with the
interest thereon, as if the property were now owned by the Company and were
specifically described herein and conveyed hereby, provided nevertheless, that
no shares of stock, bonds or other securities now or hereafter owned by the
Company, shall be subject to the lien of the Mortgage and indentures
supplemental thereto unless now or hereafter specifically pledged or required
to be pledged thereunder by the provisions of the Mortgage or any indenture
supplemental thereto.

     TO HAVE AND TO HOLD, all and singular the property, rights, privileges and
franchises hereby conveyed, transferred or pledged or intended so to be,
including after-acquired property, together with all and singular the
reversions, remainders, rents, revenues, income, issues and profits, privileges
and appurtenances, now or hereafter belonging or in any way appertaining
thereto, unto the Trustee and its successors in the trust hereby created, and
its and their assigns forever;

19

 

     IN TRUST NEVERTHELESS, for the equal and pro rata benefit and security of
each and every person or corporation who may be or become the holders of bonds
secured by the Mortgage and indentures supplemental thereto, without
preference, priority or distinction (except as provided in Section 1 of Article
VIII of the Mortgage) as to lien or otherwise of any bond of any series over or
from any other bond, so that (except as aforesaid) each and every of the bonds
issued or to be issued, of whatsoever series, shall have the same right, lien,
privilege under the Mortgage and indentures supplemental thereto and shall be
equally secured thereby and hereby, with the same effect as if the bonds had
all been made, issued and negotiated simultaneously on the date of the
Mortgage.

     AND THIS SUPPLEMENTAL INDENTURE FURTHER WITNESSETH:

     It is hereby covenanted that all bonds secured by the Mortgage and
indentures supplemental thereto with the coupons appertaining thereto, are
issued to and accepted by each and every holder thereof, and that the property
aforesaid and all other property subject to the lien of the Mortgage and
indentures supplemental thereto is held by or hereby conveyed to the Trustee,
under and subject to the trusts, conditions and limitations set forth in the
Mortgage and indentures supplemental thereto and upon and subject to the
further trusts, conditions and limitations hereinafter set forth, as follows,
to wit:

ARTICLE I.

AMENDMENTS OF MORTGAGE

     Article II of the Ninth Supplemental Indenture to the Mortgage, as
heretofore amended, is hereby further amended as follows:

     By adding to paragraph (d) of Section 5 and to the first clause of Section
9, the following:

     “5.90% Series due 2034”

ARTICLE II.

BONDS OF THE NEW SERIES

     Section 1. The bonds of the New Series shall be designated as hereinabove
specified for such designation in the recital immediately preceding the form of
bonds of the New Series, subject however, to the provisions of Section 2 of
Article I of the Mortgage, as amended, and are issuable only as registered
bonds without coupons, substantially in the form hereinbefore recited; and the
issue thereof shall be limited to $75,000,000 principal amount.

     The bonds of the New Series shall bear interest from the date thereof and
shall be dated as of the interest payment date to which interest was paid next
preceding the date of issue unless (a) such date of issue is an interest
payment date to which interest was paid, in which event such bonds shall be
dated as of such interest payment date, or (b) issued prior to the occurrence
of the

20

 

first interest payment date on which interest is to be paid, in which
event such bonds shall be dated April 23, 2004. The bonds of the New Series
shall mature on May 1, 2034.

     The bonds of the New Series shall bear interest (computed on the basis of
a 360-day year of twelve 30-day months) at the rate provided in the form of
bond hereinbefore recited, payable on May 1 and November 1 in each year
commencing on November 1, 2004 until the Company’s obligation with respect to
the payment of principal thereof shall have been discharged. Both principal
and interest on bonds of the New Series shall be payable at the office or
agency of the Company in the City of Philadelphia, Pennsylvania, or, at the
option of the holder, at the office or agency of the Company in the Borough of
Manhattan, The City of New York, and shall be payable in such coin or currency
of the United States of America as at the time of payment shall constitute
legal tender for the payment of public and private debts.

     The bonds of the New Series shall be in any denomination authorized by the
Company.

     Any bond or bonds of the New Series shall be exchangeable for another bond
or bonds of the New Series in a like aggregate principal amount. Any such
exchange may be made upon presentation at the office of the Trustee in the City
of Philadelphia, Pennsylvania, or, at the option of the holder, at the office
or agency of the Company in the Borough of Manhattan, The City of New York,
without any charge other than a sum sufficient to reimburse the Company for any
stamp tax or other governmental charge incident to the exchange.

     Section 2. (a) Initially, the bonds of the New Series shall be issued
pursuant to a book-entry system administered by The Depository Trust Company
(or its successor, referred to herein as the “Depository”) as a global security
with no physical distribution of bond certificates to be made except as
provided in this Section 2. Any provisions of the Mortgage or the bonds of the
New Series requiring physical delivery of bonds shall, with respect to any
bonds of the New Series held under the book-entry system, be deemed to be
satisfied by a notation on the bond registration books maintained by the
Trustee that such bonds are subject to the book-entry system.

          (b) So long as the book-entry system is being used, one or more bonds of
the New Series in the aggregate principal amount of the bonds of the New Series
and registered in the name of the Depository’s nominee (the “Nominee”) will be
issued and required to be deposited with the Depository and held in its
custody. The book-entry system will be maintained by the Depository and its
participants and indirect participants and will evidence beneficial ownership
of the bonds of the New Series, with transfers of ownership effected on the
records of the Depository, the participants and the indirect participants
pursuant to rules and procedures established by the Depository, the
participants and the indirect participants. The principal of and any premium
on each bond of the New Series shall be payable to the Nominee or any other
person appearing on the registration books as the registered holder of such
bond or its registered assigns or legal representative at the office of the
office or agency of the Company in the City of Philadelphia, Pennsylvania or
the Borough of Manhattan, The City of New York. So long as the book-entry
system is in effect, the Depository will be recognized as the holder of the
bonds of the New Series for all purposes. Transfers of principal, interest and
any premium payments or notices to participants and indirect participants will
be the responsibility of the Depository, and transfers of principal, interest
and any premium payments or notices to beneficial owners will be

21

 

the responsibility of participants and indirect participants. No other
party will be responsible or liable for such transfers of payments or notices
or for maintaining, supervising or reviewing such records maintained by the
Depository, the participants or the indirect participants. While the Nominee
or the Depository, as the case may be, is the registered owner of the bonds of
the New Series, notwithstanding any other provisions set forth herein, payments
of principal of, redemption premium, if any, and interest on the bonds of the
New Series shall be made to the Nominee or the Depository, as the case may be,
by wire transfer in immediately available funds to the account of such holder.
Without notice to or consent of the beneficial owners, the Trustee with the
consent of the Company and the Depository may agree in writing to make payments
of principal, redemption price and interest in a manner different from that set
forth herein. In such event, the Trustee shall make payment with respect to
the bonds of the New Series in such manner as if set forth herein.

          (c) The Company may at any time elect (i) to provide for the replacement
of any Depository as the depository for the bonds of the New Series with
another qualified depository, or (ii) to discontinue the maintenance of the
bonds of the New Series under book-entry system. In such event, the Trustee
shall give 30 days prior notice of such election to the Depository (or such
fewer number of days acceptable to such Depository).

          (d) Upon the discontinuance of the maintenance of the bonds of the New
Series under a book-entry system, the Company will cause the bonds to be issued
directly to the beneficial owners of the bonds of the New Series, or their
designees, as further described below. In such event, the Trustee shall make
provisions to notify participants and beneficial owners of the bonds of the New
Series, by mailing an appropriate notice to the Depository, that bonds of the
New Series will be directly issued to beneficial owners of the bonds as of a
date set forth in such notice (or such fewer number of days acceptable to such
Depository).

          (e) In the event that bonds of the New Series are to be issued to
beneficial owners of the bonds, or their designees, the Company shall promptly
have bonds of the New Series prepared in certificated form registered in the
names of the beneficial owners of such bonds shown on the records of the
participants provided to the Trustee, as of the date set forth in the notice
above. Bonds issued to beneficial owners, or their designees shall be
substantially in the form set forth in this Supplemental Indenture, but will
not include the provision related to global securities.

          (f) If the Depository is replaced as the depository for the bonds of the
New Series with another qualified depository, the Company will issue a
replacement global security substantially in the form set forth in this
Supplemental Indenture.

          (g) The Company and the Trustee shall have no liability for the failure of
any Depository to perform its obligations to any participant, any indirect
participant or any beneficial owner of any bonds of the New Series, and the
Company and the Trustee shall not be liable for the failure of any participant,
indirect participant or other nominee of any beneficial owner or any bonds of
the New Series to perform any obligation that such participant, indirect
participant or other nominee may incur to any beneficial owner of the bonds of
the New Series.

22

 

          (h) Notwithstanding any other provision of the Mortgage, on or prior to
the date of issuance of the bonds of the New Series the Trustee shall have
executed and delivered to the initial Depository a Letter of Representations
governing various matters relating to the Depository and its activities
pertaining to the bonds of the New Series. The terms and provisions of such
Letter of Representations are incorporated herein by reference and, in the
event there shall exist any inconsistency between the substantive provisions of
the said Letter of Representations and any provisions of the Mortgage, then,
for as long as the initial Depository shall serve as depository with respect to
the bonds of the New Series, the terms of the Letter of Representations shall
govern.

          (i) The Company and the Trustee may rely conclusively upon (i) a
certificate of the Depository as to the identity of a participant in the
book-entry system; (ii) a certificate of any participant as to the identity of
any indirect participant and (iii) a certificate of any participant or any
indirect participant as to the identity of, and the respective principal amount
of bonds of the New Series owned by, beneficial owners.

     Section 3. So long as the bonds of the New Series are held by The
Depository Trust Company, such bonds of the New Series shall bear the following
legend:

     UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.

     Section 4. So long as any of the bonds of the New Series remain
outstanding, the Company shall keep at its office or agency in the Borough of
Manhattan, The City of New York, as well as at the office of the Trustee in the
City of Philadelphia, Pennsylvania, books for the registry and transfer of
outstanding bonds of the New Series, in accordance with the terms and
provisions of the bonds of the New Series and the provisions of Section 8 of
Article I of said Mortgage.

     Section 5. So long as any bonds of the New Series remain outstanding, the
Company shall maintain an office or agency in the City of Philadelphia,
Pennsylvania, and an office or agency in the Borough of Manhattan, The City of
New York, for the payment upon proper demand of the principal of, the interest
on, or the redemption price of the outstanding bonds of the New Series, and
will from time to time give notice to the Trustee of the location of such
office or agency. In case the Company shall fail to maintain for such purpose
an office or agency in the City of Philadelphia or shall fail to give such
notice of the location thereof, then notices, presentations and demands in
respect of the bonds of the New Series may be given or made to or upon the
Trustee at its office in the City of Philadelphia and the principal of, the

23

 

interest on, and the redemption price of said bonds in such event be
payable at said office of the Trustee. All bonds of the New Series when paid
shall forthwith be cancelled.

     Section 6. The Company may fix a date, not more than fourteen calendar
days prior to any interest payment date, as a record date for determining the
registered holder of each bond of the New Series entitled to such interest
payment, in which case only the registered holder of such bond on such record
date shall be entitled to receive such payment, notwithstanding any transfer of
such bond upon the registration books subsequent to such record date.

     Section 7. The bonds of the New Series shall be issued under and subject
to all of the terms and provisions of the Mortgage, of the indentures
supplemental thereto referred to in the recitals hereof and of this
Supplemental Indenture which may be applicable to such bonds or applicable to
all bonds issued under the Mortgage and indentures supplemental thereto.

ARTICLE III.

ISSUE AND AUTHENTICATION OF

BONDS OF THE NEW SERIES

     In addition to any bonds of any series which may from time to time be
executed by the Company and authenticated and delivered by the Trustee upon
compliance with the provisions of the Mortgage and/or of any indenture
supplemental thereto, bonds of the New Series of an aggregate principal amount
not exceeding $75,000,000 shall forthwith be executed by the Company and
delivered to the Trustee, and the Trustee shall thereupon, whether or not this
Supplemental Indenture shall have been recorded, authenticate and deliver said
bonds to or upon the written order of the President, a Vice President, or the
Treasurer of the Company, under the terms and provisions of paragraph (c) of
Section 3 of Article II of the Mortgage, as amended.

ARTICLE IV.

REDEMPTION OF BONDS OF THE

NEW SERIES

     Section 1. The bonds of the New Series shall be redeemable, at the option
of the Company, as a whole or in part, at any time upon notice sent by the
Company through the mail, postage prepaid, at least thirty (30) days and not
more than forty-five (45) days prior to the date fixed for redemption, to the
registered holder of each bond to be redeemed in whole or in part, addressed to
such holder at his address appearing upon the registration books, at a
redemption price equal to the greater of (1) 100% of the principal amount of
the bonds to be redeemed, plus accrued interest to the redemption date, or (2)
as determined by the Quotation Agent, the sum of the present values of the
remaining scheduled payments of principal and interest on the bonds to be
redeemed (not including any portion of payments of interest accrued as of the
redemption date) discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate plus 20 basis points, plus accrued interest to the redemption
date. Unless the Company defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the bonds of this
series or portions of the bonds of this series called for redemption.

24

 

     “Adjusted Treasury Rate” means, with respect to any redemption date, the
rate per year equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for the redemption date.

     “Business Day” means any day that is not a day on which banking
institutions in New York City are authorized or required by law or regulation
to close.

     “Comparable Treasury Issue” means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the
remaining term of the bonds of this series that would be used, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of the bonds of the New Series.

     “Comparable Treasury Price” means, with respect to any redemption date:

	 	•	 	the average of the Reference Treasury Dealer Quotations for
that redemption date, after excluding the highest and lowest of the
Reference Treasury Dealer Quotations; or

	 	•	 	if the Trustee obtains fewer than three Reference Treasury
Dealer Quotations, the average of all Reference Treasury Dealer
Quotations so received.

     “Reference Treasury Dealer” means (1) each of BNP Paribas Securities Corp.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated and their respective
successors, unless any of them ceases to be a primary U.S. Government
securities dealer in New York City (a “Primary Treasury Dealer”), in which case
the Company shall substitute another Primary Treasury Dealer; and (2) any other
Primary Treasury Dealer selected by the Company.

     “Reference Treasury Dealer Quotations” means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by that Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third business day preceding that redemption date.

     Section 2. In case the Company shall desire to exercise such right to
redeem and pay off all or any part of such bonds of the New Series as
hereinbefore provided it shall comply with all the terms and provisions of
Article III of the Mortgage, as amended, applicable thereto, and such
redemption shall be made under and subject to the terms and provisions of
Article III and in the manner and with the effect therein provided, but at the
time or times and upon mailing of notice, all as hereinbefore set forth in
Section 1 of this Article. No publication of notice of any redemption of any
bonds of the New Series shall be required.

25

 

ARTICLE V.

CERTAIN EVENTS OF DEFAULT; REMEDIES

     Section 1. So long as any bonds of the New Series remain outstanding, in
case one or more of the following events shall happen, such events shall, in
addition to the events of default heretofore enumerated in paragraphs (a)
throughout (d) of Section 2 of Article VIII of the Mortgage, constitute an
“event of default” under the Mortgage, as fully as if such events were
enumerated therein:

     (e) default shall be made in the due and punctual payment of the
principal (including the full amount of any applicable optional
redemption price) of any bond or bonds of the New Series whether at the
maturity of said bonds, or at a date fixed for redemption of said bonds,
or any of them, or by declaration as authorized by the Mortgage;

     Section 2. So long as any bonds of the New Series remain outstanding,
Section 10 of Article VIII of the Mortgage, as heretofore amended, is hereby
further amended by inserting in the first paragraph of such Section 10,
immediately after the words “as herein provided,” at the end of clause (2)
thereof, the following:

     “or (3) in case default shall be made in any payment of any interest on
any bond or bonds secured by this indenture or in the payment of the principal
(including any applicable optional redemption price) of any bond or bonds
secured by this indenture, where such default is not of the character referred
to in clause (1) or (2) of this Section 10 but constitutes an event of default
within the meaning of Section 2 of this Article VIII.”

ARTICLE VI.

CONCERNING THE TRUSTEE

     The Trustee hereby accepts the trust herein declared and provided and
agrees to perform the same upon the terms and conditions set forth in the
Mortgage, as amended and supplemented, and upon the following terms and
conditions:

     The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity of this Supplemental Indenture or the due execution
hereof by the Company or for or in respect of the recitals contained herein,
all of which recitals are made by the Company solely.

ARTICLE VII.

MISCELLANEOUS

     Section 1. Unless otherwise clearly required by the context, the term
“Trustee,” or any other equivalent term used in this Supplemental Indenture,
shall be held and construed to mean the trustee under the Mortgage for the time
being whether the original or a successor trustee.

26

 

     Section 2. The headings of the Articles of this Supplemental Indenture
are inserted for convenience of reference only and are not to be taken to be
any part of this Supplemental Indenture or to control or affect the meaning of
the same.

     Section 3. Nothing expressed or mentioned in or to be implied from this
Supplemental Indenture or in or from the bonds of the New Series is intended,
or shall be construed, to give any person or corporation, other than the
parties hereto and their respective successors, and the holders of bonds
secured by the Mortgage and the indentures supplemental thereto, any legal or
equitable right, remedy or claim under or in respect of such bonds or the
Mortgage or any indenture supplemental thereto, or any covenant, condition or
provision therein or in this Supplemental Indenture contained. All the
covenants, conditions and provisions thereof and hereof are for the sole and
exclusive benefit of the parties hereto and their successors and of the holders
of bonds secured by the Mortgage and indentures supplemental thereto.

     Section 4. This Supplemental Indenture may be executed in several
counterparts, each of which shall be an original and all collectively but one
instrument.

     Section 5. This Supplemental Indenture is dated and shall be effective as
of April 15, 2004, but was actually executed and delivered on April 16, 2004.

[Remainder of this page intentionally left blank]

27

 

     IN WITNESS WHEREOF, the parties of the first and second parts hereto have
caused their corporate seals to be hereunto affixed and the President or a Vice
President of the party of the first part and the President or a Vice President
of the party of the second part, under and by the authority vested in them,
have hereto affixed their signatures and their Secretaries or Assistant
Secretaries have duly attested the execution hereof the 15th day of April,
2004.

	 	 	 	 	 
	 	PECO ENERGY COMPANY

 	 
	 	By  	/s/  J. Barry Mitchell
 	 
	 	 	J. Barry Mitchell 	 
	 	 	Senior Vice President,
Treasurer and Chief Financial
Officer 	 
	 
	 	[SEAL]

 	 
	 	Attest  /s/  Bruce G. Wilson
 	 
	 	Bruce G. Wilson 	 
	 	Assistant Secretary 	 
	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION

 	 
	 	By  	/s/  Terence C. McPoyle
 	 
	 	 	Terence C. McPoyle 	 
	 	 	Vice President 	 
	 
	 	[SEAL]

 	 
	 	Attest  /s/  James M. Matthews
 	 
	 	James M. Matthews 	 
	 	Assistant Secretary 	 
	 

28

 

STATE OF ILLINOIS

ss.

COUNTY OF COOK

     BE IT REMEMBERED, that on the    day of April, 2004, before me, a Notary
Public in and for said County and State, residing in Chicago, personally came
Bruce G. Wilson, who being duly sworn according to law deposes and says that he
was personally present and did see the common or corporate seal of the above
named PECO Energy Company affixed to the foregoing Supplemental Indenture, that
the seal so affixed is the common or corporate seal of the said PECO Energy
Company, and was so affixed by the authority of the said corporation as the act
and deed thereof; that the above named J. Barry Mitchell is a Vice President of
the said corporation, and did sign the said Supplemental Indenture as such in
the presence of this deponent that this deponent is Assistant Secretary of the
said corporation; and the name of the deponent, above signed in attestation of
the due execution of the said Supplemental Indenture, is in this deponent’s own
proper handwriting.

     Sworn to and subscribed before me the day and year aforesaid.

                      
                      
                      
                      

Notarial Seal

                    Notary Public,

City of Chicago, Cook County

My Commission Expires                    ,                    

[SEAL]

29

 

COMMONWEALTH OF PENNSYLVANIA

ss.

COUNTY OF PHILADELPHIA

     BE IT REMEMBERED, that on the    day of April, 2004, before me, the
subscriber, a Notary Public in and for said County and Commonwealth, residing
in Philadelphia, personally came James M. Matthews, who being duly sworn
according to law deposes and says that he was personally present and did see
the common or corporate seal of the above named Wachovia Bank, National
Association, affixed to the foregoing Supplemental Indenture, that the seal so
affixed is the common or corporate seal of the said Wachovia Bank, National
Association, and was so affixed by the authority of the said corporation as the
act and deed thereof, that the above named Terence C. McPoyle is a Vice
President of the said corporation, and did sign the said Supplemental Indenture
as such in the presence of this deponent; that this deponent is an Assistant
Secretary of the said corporation; and that the name of this deponent, above
signed in attestation of the due execution of the said Supplemental Indenture,
is in this deponent’s own proper handwriting.

     Sworn to and subscribed before me the day and year aforesaid.

     I hereby certify that I am not an officer of director of said Wachovia
Bank, National Association.

                      
                      
                      
                      

Notarial Seal

                   , Notary Public

City of Philadelphia, Philadelphia County

My Commission Expires                    ,                    

[SEAL]

30

 

CERTIFICATE OF RESIDENCE

     Wachovia Bank, National Association, Mortgagee and Trustee within named,
hereby certifies that its precise residence in the City of Philadelphia is N.E.
Cor. Broad and Walnut Streets in the City of Philadelphia, Pennsylvania.

	 	 	 	 	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION

 	 
	 	By  	/s/  Terecen C. McPoyle
 	 
	 	 	Terence C. McPoyle 	 
	 	 	Vice President 	 
	 

31

 

SCHEDULE A

COMMONWEALTH OF PENNSYLVANIA

DELAWARE COUNTY

			
	CONCORD TOWNSHIP
	 	(PE-10582)

ALL that certain tract or parcel of land situate in the Township of Concord,
County of Delaware, Commonwealth of Pennsylvania and being more particularly
bounded and described as follows:

BEGINNING at an iron pin at the southwesternmost corner of the lands herein
described on the westerly right-of-way line of Stoney Bank Road, being a corner
common to the lands now and formerly owned by Michael L. and Lois R. Fiorelli
and the lands herein described; thence, with the lands of said Fiorelli;

     South 63o 38’ 59” West 308.47 feet to an iron pin on line of lands of said
Fiorelli on the easterly right-of-way line of a 100 foot gas line easement;
thence, with said easterly right-of-way line, through the lands of which this
is part;

     North 23o 09’ 15” West 756.24 feet to an iron pin; thence continuing
through the lands of which this is part;

     North 63o 59’ 18” East 95.22 feet to an iron pin on the westerly
right-or-way line of Great Oak Drive; thence, with said westerly right-of-way
line with a curve to the left having a radius of 175.00 feet, an arc length of
163.18 feet, the chord of which bears;

     South 89o 17’ 57” East 157.34 feet to an iron pin; thence, continuing with
said westerly right-of-way line;

     North 63o 59’ 18” East 10.00 feet to a point; thence, with a curve to the
right having a radius of 25.00 feet, an arc length of 39.27 feet, the chord of
which bears;

     South 71o 00’ 42” East 35.36 feet to a point on the westerly right-of-way
line of aforementioned Stoney Bank Road; thence, with said westerly
right-of-way line of Stoney Bank Road;

     South 26o 00’ 42” East 657.75 feet to an iron pin the point and place of
beginning. Containing 4.796 acres, more or less, as shown on a Plan of
Subdivision for Edgewood Memorial Park, dated July 28, 2003 as prepared by CPS
Surveys, Inc., Ebensburg, Pennsylvania.

CONTAINING 4.796 acres, more or less.

BEING part of Folio # 13-00-00007-00.

A-1

 

BEING the same premises which SCI Pennsylvania Funeral Services, Inc., a
Pennsylvania corporation, by Deed dated September 24, 2003 and recorded in the
Delaware County Recorder of Deeds Office on October 14, 2003, granted and
conveyed to PECO Energy Company, in fee.

A-2

 

	 	 	 	 	 
	Prepared by/Return to

	 	 	 	Counterpart    of 27
	

	 	Susan S. Foehl	 	 
	

	 	Assistant General Counsel	 	 
	

	 	PECO Energy Company	 	 
	

	 	2301 Market Street, S23-1	 	 
	

	 	Philadelphia, PA 19103	 	 
	

	 	(215)841-4261	 	 

PECO ENERGY COMPANY

TO

WACHOVIA BANK, NATIONAL ASSOCIATION, TRUSTEE

(formerly, First Union National Bank)

ONE HUNDRED AND FIRST SUPPLEMENTAL

INDENTURE DATED AS OF

APRIL 15, 2004

TO

FIRST AND REFUNDING MORTGAGE

OF

THE COUNTIES GAS AND ELECTRIC

COMPANY

TO

FIDELITY TRUST COMPANY, TRUSTEE

DATED MAY 1, 1923

5.90% SERIES DUE 2034

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