TRUST AGREEMENT
This TRUST AGREEMENT of PECO Energy Capital Trust III
(the "Trust"), dated as of March 13, 1998, between PECO Energy
Capital, L.P., a Delaware limited partnership (the "Depositor"),
First Union Trust Company, National Association, a national
association (the "Bank"), not in its individual capacity but
solely in its capacity as trustee of the Trust (the "Trustee").
The Depositor and the Trustee hereby agree as follows:
1. The trust created hereby shall be known as "PECO Energy
Capital Trust III," for which the Trustee, or the Depositor to
the extent provided herein, may conduct the business of the
Trust, make and execute contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys
and sets over to the Trustee the sum of $10. The Trustee hereby
acknowledges receipt of such amount in trust from the Depositor,
which amount shall constitute the initial trust estate. The
Trustee hereby declares that it will hold the trust estate in
trust for the Depositor. It is the intention of the parties
hereto that the Trust created hereby constitutes a business trust
under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
Section 3801, et seq. (the "Business Trust Act"), and that this
document constitutes the governing instrument of the Trust. The
Trustee is hereby authorized, empowered, and directed to execute
and file a certificate of trust with the Delaware Secretary of
State in accordance with the provisions of the Business Trust
Act.
3. The Depositor and the Trustee will enter into an
Amended and Restated Trust Agreement, in form and substance
satisfactory to each such party and substantially in the form
included as an exhibit to the 1933 Act Registration Statement
referred to below, to provide for, among other things, the
issuance of the capital securities of the Trust referred to
therein. Prior to the execution and delivery of such Amended and
Restated Trust Agreement, the Trustee shall not have any duty or
obligation with respect to the Trust or the trust estate, except
as otherwise expressly set forth herein, and the Depositor shall
take any action as may be necessary to obtain prior to such
execution and delivery of any licenses, consents or approval as
required by applicable law or otherwise.
4. The Depositor is hereby authorized and directed,
if the Depositor deems it necessary, appropriate or convenient to
do, as the sponsor of the Trust, (i) to file with the Securities
and Exchange Commission (the "Commission") and execute, in each
case on behalf of the Trust, (a) the Registration Statement on
Form S-3 (the "1933 Act Registration Statement"), including any
pre-effective or post-effective amendments to such 1933 Act
Registration Statement (including the prospectus and the exhibits
contained therein), relating to the registration under the
Securities Act of 1933, as amended, of the capital securities of
the Trust and certain other securities and (b) a Registration
Statement on Form 8-A (the "1934 Act Registration Statement")
(including all pre-effective and post-effective amendments
thereto) relating to the registration of the capital securities
of the Trust under the Securities Exchange Act of 1934, as
amended; (ii) to file with the New York Stock Exchange,
Philadelphia Stock Exchange or any other exchange (each, an
"Exchange") and execute on behalf of the Trust one or more
listing applications and all other applications, statements,
certificates, agreements and other instruments as shall be
necessary or desirable to cause the capital securities of the
Trust to be listed on any of the Exchanges; (iii) to file and
execute on behalf of the Trust such applications, reports, surety
bonds, irrevocable consents, appointments of attorney for service
of process and other papers and documents as shall be necessary
or desirable to register the capital securities of the Trust
under the securities or "Blue Sky" laws of such jurisdictions as
the Depositor, on behalf of the Trust, may deem necessary or
desirable and (iv) to execute on behalf of the Trust that certain
Underwriting Agreement relating to the capital securities of the
Trust, among PECO Energy Company, a Pennsylvania corporation, the
Depositor and the several Underwriters named therein,
substantially in the form included as an exhibit to the 1933 Act
Registration Statement. In the event that any filing referred to
in clauses (i), (ii) and (iii) above is required by the rules and
regulations of the Commission, the Exchanges or state securities
or "Blue Sky" laws, to be executed on behalf of the Trust by the
Trustee, then the Trustee, not in its individual capacity, but
solely in its capacity as trustee of the Trust, is hereby
authorized, empowered, and directed to join in any such filing
and to execute on behalf of the Trust any and all of the
foregoing. In connection with all of the foregoing, the
Depositor hereby constitutes and appoints J. Barry Mitchell as
its true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for the Depositor or in the
Depositor's name, place and stead, in any and all capacities, to
sign any and all amendments (including post-effective amendments)
to the 1933 Act Registration Statement and the 1934 Act
Registration Statement and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as the Depositor might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his respective substitute or
substitutes, shall do or cause to be done by virtue hereof.
5. This Trust Agreement may be executed in one or
more counterparts.
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6. The number of trustees of the Trust initially
shall be one (1) and thereafter the number of trustees of the
Trust shall be such number as shall be fixed from time to time by
a written instrument signed by the Depositor which may increase
or decrease the number of trustees; provided, however, that to
the extent required by the Business Trust Act, one trustee shall
either be a natural person who is a resident of the State of
Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware and
otherwise meets the requirements of applicable Delaware law; and
provided, further, that the addition of any co-trustee shall be
approved by the Trustee, which approval shall not be unreasonably
withheld. Subject to the foregoing, the Depositor is entitled to
appoint or remove without cause the Trustee or any co-trustee at
any time. The Trustee may resign upon thirty (30) days prior
notice to the Depositor.
7. This Trust Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware
(without regard to conflict of laws principles).
8. To the fullest extent permitted by law, PECO
Energy Capital Corp., the general partner of the Depositor (the
"General Partner"), agrees to indemnify and defend the Trustee
(in its individual capacity), the registrar and any paying agent
and their directors, officers, employees and agents against, and
hold each of them harmless from, any liability, costs and
expenses (including reasonable attorneys' fees) that may arise
out of or in connection with the capital securities of the Trust
or the Bank acting as Trustee or as the registrar or paying
agent, respectively, under this Trust Agreement, except for any
liability arising out of gross negligence, bad faith or willful
misconduct on the part of any such person or persons.
9. In the event that the Trustee is uncertain as to
application or interpretation of any provision of this Trust
Agreement or must choose between alternative courses of action,
the Trustee may seek the instructions of the Depositor by written
notice requesting instructions. The Trustee shall take and be
fully protected in taking such action as has been directed by the
Depositor provided that if the Trustee does not receive
instructions within ten (10) days or such shorter time as is set
forth in the Trustee notice, the Trustee shall be under no duty
to take or refrain from taking such action as it shall deem
advisable.
The Trustee shall not be personally liable for any
action or any failure to act by it in reliance upon the advice of
or information from legal counsel, accountants or any other
person believed by it in good faith to be competent to give such
advice or information. The Trustee may rely and shall be
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protected in acting upon any written notice, request, direction
or other document believed by it to be genuine and to have been
signed or presented by the proper party or parties.
IN WITNESS WHEREOF, the parties hereto have caused this
Trust Agreement to be duly executed as of the day and year first
above written.
PECO ENERGY CAPITAL, L.P.
By: PECO Energy Capital Corp.,
its general partner
By: /s/ J.B. Mitchell
______________________________
Name: J.B. Mitchell
Title: President
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely in its capacity
as Trustee
By: /s/ Edward L. Truitt, Jr.
______________________________
Name: Edward L. Truitt, Jr.
Title: Assistant Vice President
The General Partner joins in this Trust Agreement solely
for the purposes of obligating itself under Section 8 of this Trust
Agreement and not as grantor, trustee or beneficiary.
PECO ENERGY CAPITAL CORP.
By: /s/ J.B. Mitchell
______________________________
Name: J.B. Mitchell
Title: President
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