PAYMENT AND GUARANTEE AGREEMENT
THIS PAYMENT AND GUARANTEE AGREEMENT ("Guarantee
Agreement"), dated as of ______________, 1998, is executed and
delivered by PECO Energy Company, a Pennsylvania corporation (the
"Guarantor"), for the benefit of the Holders (as defined below)
of the Series D 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 $78,105,000 aggregate stated liquidation preference of
limited partner interests of a series designated the __%
Cumulative Preferred Securities, Series D (the "Series D
Preferred Securities"), and the Guarantor desires to enter into
this Guarantee Agreement for the benefit of the Holders, as
provided herein;
WHEREAS, the Guarantor will issue Series D Subordinated
Debt Securities (as defined below) in accordance with the
Indenture (as defined below) to PECO Energy Capital in an amount
equal to the aggregate stated liquidation preference of the
Series D Preferred Securities and the capital contribution of the
General Partner to PECO Energy Capital (the "G.P. Capital
Contribution"); 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, unless the context otherwise requires, shall 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 July 25, 1994 (as amended from
time to time, the "Limited Partnership Agreement").
"Capital Securities" shall mean the Capital Trust Pass-
through Securities issued by the Trust each representing a Series
D Preferred Security.
"Guarantee Payments" shall mean the following payments,
without duplication, to the extent not paid by PECO Energy
Capital: (i) any accumulated and unpaid semiannual distributions
on the Series D Preferred Securities out of moneys legally
available therefor held by PECO Energy Capital, (ii) the
Redemption Price (as defined below) payable with respect to any
Series D Preferred Securities called for redemption by PECO
Energy Capital out of moneys legally available therefor held by
PECO Energy Capital, and (iii) upon 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 the Holders in liquidation
of PECO Energy Capital.
"Holders" shall mean the persons or entities in whose
name any Series D Preferred Securities are registered on the
registration books maintained by PECO Energy Capital; provided,
however, that in determining whether the Holders of the requisite
percentage of Series D 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 as of
July 1, 1994 (the "Original Indenture"), as supplemented by the
First Supplemental Indenture, dated as of December 1, 1995,
between the Guarantor and First Union National Bank, as successor
trustee, the Second Supplemental Indenture, dated as of June 1,
1997, between the Guarantor and First Union National Bank, as
trustee, and the Third Supplemental Indenture, dated as of
_______________, 1998, between the Guarantor and First Union
National Bank, as trustee, pursuant to which the Guarantor has
issued and will issue its Deferrable Interest Subordinated
Debentures in series.
"Liquidation Distribution" shall mean the aggregate of
the stated liquidation preference of $1,000 per Series D
Preferred Security and all accumulated and unpaid distributions
to the date of payment.
"Redemption Price" shall mean the aggregate of $1,000
per Series D Preferred Security and all accumulated and unpaid
distributions to the date fixed for redemption.
"Special Representative" shall mean any representative
of the Holders appointed pursuant to Section 13.02(d) of the
Limited Partnership Agreement.
"Supplemental Indenture" shall mean the Third
Supplemental Indenture, dated as of __________, 1998, between the
Guarantor and First Union National Bank, as trustee, pursuant to
which the Guarantor has issued its __% Subordinated Deferrable
Interest Debentures, Series D (the "Series D Subordinated Debt
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Securities") in an amount equal to the aggregate stated
liquidation preference of the Series D Preferred Securities and
the G.P. Capital Contribution.
"Trust" shall mean PECO Energy Capital Trust III, a
Delaware business trust.
"Trust Agreement" shall mean the Amended and Restated
Trust Agreement of PECO Energy Capital Trust III, as amended from
time to time, among PECO Energy Capital, L.P., as Grantor, First
Union National Bank, as trustee, and the General Partner, for the
limited purpose stated therein, dated as of ____________, 1998.
"Trustee" shall mean First Union National Bank or a
successor trustee under the Trust 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,
the General Partner, the Trust or the Trustee. The Guarantor's
obligation to make a 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 D Subordinated Debt
Securities and the Guarantor shall not be obligated hereunder to
pay during an Extension Period any semiannual distributions on
the Series D 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, covenant, term or
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condition relating to the Series D 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 D Preferred Securities or
the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Series D
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 D
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 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 D 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
Capital Securities, together with the holders of the Series D
Preferred Securities other than the Trust, representing not less
than 10% in aggregate stated liquidation preference of the Series
D 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
directions to the General Partner or the Special Representative
as the case may be; and (v) if the General Partner or the Special
Representative fails to enforce this Guarantee Agreement as above
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provided, any holder of Capital Securities representing Series D
Preferred Securities 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. The General Partner or 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
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 D 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 D 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 in default with respect to its
payment or other obligations hereunder or there shall have
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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 D 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 Guarantee 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.
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 D 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 the Holders must restore payments of
any sums paid under the Series D 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 3.02, 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 D Preferred Securities then outstanding.
SECTION 5.02. This Guarantee Agreement may only be
amended by a written instrument executed by the Guarantor;
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provided that, so long as any of the Series D Preferred
Securities remain outstanding, any amendment that materially
adversely affects the Holders, any termination of this Guarantee
Agreement or any waiver of compliance with any covenant hereunder
shall be effected only with the prior approval of the holders of
Capital Securities together with the holders of Series D
Preferred Securities other than the Trust, representing not less
than 66-2/3% of the aggregate liquidation preference of all Series D
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 like notice to the
Holders):
PECO Energy Company
2301 Market Street
P.O. Box 8699
Philadelphia, Pennsylvania 19101
Facsimile No.: (215) 557-9885
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.
SECTION 5.04. This Guarantee Agreement is solely for
the benefit of the Holders and is not separately transferable
from the Series D 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
the conflict of law principles thereof.
THIS GUARANTEE AGREEMENT is executed as of the day and
year first above written.
PECO ENERGY COMPANY
By: ______________________________
Name: J. Barry Mitchell
Title: Vice President-Finance
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