PAYMENT AND GUARANTEE AGREEMENT
THIS PAYMENT AND GUARANTEE AGREEMENT ("Guarantee
Agreement"), dated as of _______ ___, 1994, is executed and
delivered by PECO Energy Company, a Pennsylvania corporation (the
"Guarantor"), for the benefit of the Holders (as defined below)
from time to time of the Series A Preferred Securities (as
defined below) of PECO Energy Capital, L.P., a Delaware limited
partnership ("PECO Energy Capital"), the general partner of which
is PECO Energy Capital Corp. (the "General Partner"), a Delaware
corporation and a wholly owned subsidiary of the Guarantor.
WHEREAS, PECO Energy Capital is issuing on the date hereof
$___________ aggregate stated liquidation preference of limited
partner interests of a series designated the __% Cumulative
Monthly Income Preferred Securities, Series A (the "Series A
Preferred Securities"), and the Guarantor desires to enter into
this Guarantee Agreement for the benefit of the Holders, as
provided herein;
WHEREAS, PECO Energy Capital will loan the proceeds from the
issuance and sale of the Preferred Securities and the related
capital contribution of the General Partner to PECO Energy
Capital (the "G.P. Capital Contribution") to the Guarantor, and
the Guarantor will issue Subordinated Debentures in accordance
with the Indenture (as defined below) to evidence such loan; and
WHEREAS, the Guarantor desires to irrevocably and
unconditionally agree to the extent set forth herein to pay to
the Holders the Guarantee Payments (as defined below) and to make
certain other undertakings on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and other
consideration, receipt of which is hereby acknowledged, the
Guarantor, intending to be legally bound hereby, agrees as
follows:
ARTICLE I
---------
As used in this Guarantee Agreement, each term set forth
below shall, unless the context otherwise requires, have the
following meaning. Each capitalized term used but not otherwise
defined herein shall have the meaning assigned to such term in
the Amended and Restated Limited Partnership Agreement of PECO
Energy Capital dated as of _______ __, 1994 (the "Limited
Partnership Agreement").
"Guarantee Payments" shall mean the following payments,
without duplication, to the extent not paid by PECO Energy
Capital: (i) any accumulated and unpaid monthly distributions on
the Series A Preferred Securities out of moneys legally available
therefor held by PECO Energy Capital, (ii) the Redemption Price
2
(as defined below) payable with respect to any Series A Preferred
Securities called for redemption by PECO Energy Capital out of
moneys legally available therefor held by PECO Energy Capital,
and (iii) upon a liquidation of PECO Energy Capital, the lesser
of (a) the Liquidation Distribution (as defined below) and (b)
the amount of assets of PECO Energy Capital available for
distribution to Holders in liquidation of PECO Energy Capital,
and (iv) any Additional Amounts (as defined in the Action of the
General Partner creating the Series A Preferred Securities under
the Limited Partnership Agreement) payable by PECO Energy Capital
in respect of the Series A Preferred Securities.
"Holder" shall mean any person in whose name a Series A
Preferred Security is registered on the registration books
maintained by PECO Energy Capital; provided, however, that in
determining whether the Holders of the requisite percentage of
Series A Preferred Securities have given any request, notice,
consent or waiver hereunder, "Holder" shall not include the
Guarantor or any entity owned more than 50% by the Guarantor,
either directly or indirectly.
"Indenture" shall mean the Indenture, dated
___________________, 1994, between the Guarantor and Meridian
Trust Company and pursuant to which the Guarantor has issued its
__% Subordinated Debentures, Series A (the "Series A Subordinated
Debentures") in an amount equal to the aggregate stated
3
liquidation preference of the Series A Preferred Securities and
the G.P. Capital Contribution.
"Liquidation Distribution" shall mean the aggregate of the
stated liquidation preference of $25 per Series A Preferred
Security and all accumulated and unpaid distributions to the date
of payment.
"Redemption Price" shall mean the aggregate of $25 per
Series A Preferred Security and all accumulated and unpaid
distributions to the date fixed for redemption.
"Special Representative" shall mean any representative of
the holders of the limited partner interests of PECO Energy
Capital appointed pursuant to Section 13.02(d) of the Limited
Partnership Agreement.
ARTICLE II
----------
SECTION 2.01. The Guarantor hereby irrevocably and
unconditionally agrees to pay in full to the Holders the
Guarantee Payments, as and when due (except to the extent paid by
PECO Energy Capital), to the fullest extent permitted by law,
regardless of any defense, right of set-off or counterclaim which
the Guarantor may have or assert against PECO Energy Capital or
the General Partner. The Guarantor's obligation to make a
4
Guarantee Payment may be satisfied by direct payment by the
Guarantor to the Holders or by payment of such amounts by PECO
Energy Capital to the Holders. Notwithstanding anything to the
contrary herein, the Guarantor retains all of its rights under
Section 4.01(b) of the Indenture to extend the interest payment
period on the Series A Subordinated Debentures and the Guarantor
shall not be obligated hereunder to pay during an Extension
Period any monthly distributions on the Series A Preferred
Securities which are not paid by PECO Energy Capital during such
Extension Period.
SECTION 2.02. The Guarantor hereby waives notice of
acceptance of this Guarantee Agreement and of any liability to
which it applies or may apply, presentment, demand for payment,
protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 2.03. Except as otherwise set forth herein, the
obligations, covenants, agreements and duties of the Guarantor
under this Guarantee Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of
the following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by PECO
Energy Capital of any express or implied agreement,
5
covenant, term or condition relating to the Series A
Preferred Securities to be performed or observed by
PECO Energy Capital;
(b) the extension of time for the payment by PECO
Energy Capital of all or any portion of the
distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms
of the Series A Preferred Securities or the extension
of time for the performance of any other obligation
under, arising out of, or in connection with, the
Series A Preferred Securities;
(c) any failure, omission, delay or lack of
diligence on the part of the Holders or the Special
Representative to enforce, assert or exercise any
right, privilege, power or remedy conferred on the
Holders or the Special Representative pursuant to the
terms of the Series A Preferred Securities, or any
action on the part of PECO Energy Capital granting
indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors,
reorganization, arrangement, composition or
6
readjustment of debt of, or other similar proceedings
affecting, PECO Energy Capital or any of the assets of
PECO Energy Capital;
(e) any invalidity of, or defect or deficiency
in, any of the Series A Preferred Securities; or
(f) the settlement or compromise of any
obligation guaranteed hereby or hereby incurred.
There shall be no obligation to the Holders to give notice to, or
obtain the consent of, the Guarantor with respect to the
occurrence of any of the foregoing.
SECTION 2.04. The Guarantor expressly acknowledges that (i)
this Guarantee Agreement will be deposited with the General
Partner to be held for the benefit of the Holders; (ii) in the
event of the appointment of a Special Representative, the Special
Representative may enforce this Guarantee Agreement for such
purpose; (iii) if no Special Representative has been appointed,
the General Partner has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iv) the Holders of not less
than 10% in aggregate stated liquidation preference of the Series
A Preferred Securities have the right to direct the time, method
and place of conducting any proceeding for any remedy available
in respect of this Guarantee Agreement including the giving of
7
directions to the General Partner or the Special Representative
as the case may be; and (v) if the General Partner or Special
Representative fails to enforce this Guarantee Agreement as above
provided, any Holder may institute a legal proceeding directly
against the Guarantor to enforce its rights under this Guarantee
Agreement, without first instituting a legal proceeding against
PECO Energy Capital or any other person or entity.
SECTION 2.05. This is a guarantee of payment and not of
collection. A Holder or the Special Representative may enforce
this Guarantee Agreement directly against the Guarantor, and the
Guarantor will waive any right or remedy to require that any
action be brought against PECO Energy Capital or any other person
or entity before proceeding against the Guarantor. The Guarantor
agrees that this Guarantee Agreement shall not be discharged
except by payment of the Guarantee Payments in full (to the
extent not paid by PECO Energy Capital) and by complete
performance of all obligations of the Guarantor contained in this
Guarantee Agreement.
SECTION 2.06. The Guarantor will be subrogated to all
rights of the Holders against PECO Energy Capital in respect of
any amounts paid to the Holders by the Guarantor under this
Guarantee Agreement and shall have the right to waive payment by
PECO Energy Capital pursuant to Section 2.01; provided, however,
that the Guarantor shall not (except to the extent required by
8
mandatory provisions of law) exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of a payment under this
Guarantee Agreement, if, at the time of any such payment, any
amounts remain due and unpaid under this Guarantee Agreement. If
any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to pay over such amount
to the Holders.
SECTION 2.07. The Guarantor acknowledges that its
obligations hereunder are independent of the obligations of PECO
Energy Capital with respect to the Series A Preferred Securities
and that the Guarantor shall be liable as principal and sole
debtor hereunder to make Guarantee Payments pursuant to the terms
of this Guarantee Agreement notwithstanding the occurrence of any
event referred to in subsections (a) through (f), inclusive, of
Section 2.03 hereof.
ARTICLE III
-----------
SECTION 3.01. So long as any Series A Preferred Securities
remain outstanding, neither the Guarantor nor any majority-owned
subsidiary of the Guarantor shall declare or pay any dividend on,
or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock (other than dividends by a
wholly-owned subsidiary) if at such time the Guarantor shall be
9
in default with respect to its payment or other obligations
hereunder or there shall have occurred any event that, with the
giving of notice or the lapse of time or both, would constitute
an Event of Default under the Indenture. The Guarantor shall
take all actions necessary to ensure the compliance of its
subsidiaries with this Section 3.01.
SECTION 3.02. So long as any Series A Preferred Securities
are outstanding, the Guarantor agrees to maintain its corporate
existence; provided that the Guarantor may consolidate with or
merge with or into, or sell, convey, transfer or lease all or
substantially all of its assets (either in one transaction or a
series of transactions) to, any person, corporation, partnership,
limited liability company, joint venture association, joint stock
company, trust or unincorporated association if such entity
formed by or surviving such consolidation or merger or to which
such sale, conveyance, transfer or lease shall have been made, if
other than the Guarantor, (i) is organized and existing under the
laws of the United States of America or any state thereof or the
District of Columbia, and (ii) shall expressly assume all the
obligations of the Guarantor under this Agreement.
SECTION 3.03. This Guarantee Agreement will constitute an
unsecured obligation of the Guarantor and will rank subordinate
and junior in right of payment to all general liabilities of the
Guarantor.
10
ARTICLE IV
----------
This Guarantee Agreement shall terminate and be of no
further force and effect upon full payment of the Redemption
Price of all Series A Preferred Securities or upon full payment
of the amounts payable to the Holders upon liquidation of PECO
Energy Capital; provided, however, that this Guarantee Agreement
shall continue to be effective or shall be reinstated, as the
case may be, if at any time any Holder must restore payments of
any sums paid under the Series A Preferred Securities or under
this Guarantee Agreement for any reason whatsoever.
ARTICLE V
---------
SECTION 5.01. All guarantees and agreements contained in
this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and
shall inure to the benefit of the Holders. Except as provided in
Section 3.01, the Guarantor may not assign its obligations
hereunder without the prior approval of the Holders of not less
than 66 2/3% of the aggregate stated liquidation preference of
all Series A Preferred Securities then outstanding.
SECTION 5.02. This Guarantee Agreement may only be amended
by a written instrument executed by the Guarantor; provided that,
so long as any of the Series A Preferred Securities remain
11
outstanding, any such amendment that adversely affects the
holders of Series A Preferred Securities, any termination of this
Guarantee Agreement and any waiver of compliance with any
covenant hereunder shall be effected only with the prior approval
of the Holders of not less than 66 2/3% of the aggregate
liquidation preference of all Series A Preferred Securities then
outstanding.
SECTION 5.03. All notices, requests or other communications
required or permitted to be given hereunder to the Guarantor
shall be deemed given if in writing and delivered personally or
by recognized overnight courier or express mail service or by
facsimile transmission (confirmed in writing) or by registered or
certified mail (return receipt requested), addressed to the
Guarantor at the following address (or at such other address as
shall be specified by notice to the Holders):
PECO Energy Company
2301 Market Street
P.O. Box 8699
Philadelphia, Pennsylvania 19101
Facsimile No.: (215) 841-5743
Attention: Treasurer
All notices, requests or other communications required or
permitted to be given hereunder to the Holders shall be deemed
given if in writing and delivered by the Guarantor in the same
manner as notices sent by PECO Energy Capital to the Holders.
12
SECTION 5.04. This Guarantee Agreement is solely for the
benefit of the Holders and is not separately transferable from
the Series A Preferred Securities.
SECTION 5.05. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA WITHOUT GIVING EFFECT TO CONFLICT OF
LAW PRINCIPLES THEREOF.
THIS GUARANTEE AGREEMENT is executed as of the day and year
first above written.
PECO ENERGY COMPANY
By:________________________
Name:
Title:
13