-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KGeGxy5tJvTNBehkfuf0e7YJvsQsOro5A5imbU+7YsDed0b4es2lT0AdPDFS7gGl 8vizkuRSIZc1x4v+nM97Zw== 0000898430-99-001421.txt : 19990405 0000898430-99-001421.hdr.sgml : 19990405 ACCESSION NUMBER: 0000898430-99-001421 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990318 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDISON MISSION ENERGY CENTRAL INDEX KEY: 0000930835 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 954031807 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-24890 FILM NUMBER: 99586307 BUSINESS ADDRESS: STREET 1: 18101 VON KARMAN AVE STREET 2: STE 1700 CITY: IRVINE STATE: CA ZIP: 92715 BUSINESS PHONE: 7147525588 MAIL ADDRESS: STREET 1: 18101 VON KARMAN AVE STREET 2: STE 1700 CITY: IRVINE STATE: CA ZIP: 92715 FORMER COMPANY: FORMER CONFORMED NAME: MISSION ENERGY CO DATE OF NAME CHANGE: 19941003 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Amendment No. 1 to Application or Report Filed Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported) March 18, 1999 Edison Mission Energy (Exact name of registrant as specified in its charter) California (State or other jurisdiction of incorporation or organization) 1-13434 95-4031807 (Commission File Number) (I.R.S. Employer Identification No.) 18101 Von Karman Avenue Irvine, California 92612 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (949) 752-5588 Not Applicable (Former name or former address, if changed since last report.) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On March 18, 1999, EME Homer City Generation L.P. (EME Homer City), an indirect, wholly owned affiliate of Edison Mission Energy (EME), completed a transaction with GPU, Inc., New York State Electric & Gas Corporation and their respective affiliates to acquire the 1,884 megawatt (MW) Homer City Electric Generating Station and certain facilities and other assets associated therewith (collectively, Homer City). Homer City is one of the largest coal-fired generating plants in the mid-Atlantic region of the United States. Consideration for Homer City consisted of a cash payment of approximately $1.8 billion. Pursuant to the Asset Purchase Agreement, EME guarantees all obligations of EME Homer City under the Asset Purchase Agreement. Homer City is expected to continue to operate as a coal-fired generating station with revenue primarily derived from the sale of electricity under bilateral arrangements with domestic utilities and power marketers under short-term contracts (two years or less) or to the Pennsylvania-New Jersey-Maryland Power Pool (PJM) or the New York Power Pool (NYPP). These pools have short-term markets, which establish an hourly clearing price. Homer City is situated in the PJM Control Area and is physically connected to high-voltage transmission lines serving both the PJM and NYPP markets. Power can also be transmitted to the Midwestern U.S. On March 18, 1999, Edison Mission Energy Holdings Co. (EME Holdings), parent company of EME Homer City, closed a $1.1 billion financing and EME closed a $700 million financing. The EME Holdings financing consists of (1) an $800 million, 364-day interest only term loan, (2) a $250 million, five-year interest only construction term loan and (3) a $50 million, five-year interest only revolving loan. These loans are structured on a limited-recourse basis, in which the lenders look primarily to the cash generated by EME Holdings and its subsidiaries to repay the debt and have taken a security interest in the assets of EME Holdings and its subsidiaries. The EME financing consists of a $700 million, 364-day interest only revolving credit facility, structured on a recourse, unsecured basis. The proceeds of EME Holdings' $800 million loan and EME's $700 million loan combined with cash of approximately $300 million were used to finance the acquisition of Homer City. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of business acquired. As of the date of filing of this Current Report on Form 8-K, it is impracticable for EME to provide the financial information required by this Item 7(a). In accordance with Item 7(a)(4) of Form 8-K, such financial information will be filed by amendment to this Form 8-K no later than 60 days after this report on Form 8-K is required to be filed. (b) Pro forma financial information. As of the date of filing of this Current Report on Form 8-K, it is impracticable for EME to provide the pro forma financial information required by this Item 7(b). In accordance with Item 7(b)(2) of Form 8-K, such pro forma financial information will be filed by amendment to this Form 8-K no later than 60 days after this report on Form 8-K is required to be filed. (c) Exhibits.
Exhibit No. Description - ----------- ----------- 10.55 Credit Agreement, dated as of March 18, 1999 among Edison Mission Holdings Co. and Certain Commercial Lending Institutions, and Citicorp USA, Inc. 10.56 Guarantee and Collateral Agreement made by Edison Mission Holdings Co., Edison Mission Finance Co., Homer City Property Holdings, Inc., Chestnut Ridge Energy Co., Mission Energy Westside, Inc., EME Homer City Generation L.P. and Edison Mission Energy in favor of United States Trust Company of New York, dated as of March 18, 1999. 10.57 Collateral Agency and Intercreditor Agreement among Edison Mission Holdings Co., Edison Mission Finance Co., Homer City Property Holdings, Inc., Chestnut Ridge Energy Co., Mission Energy Westside, Inc., EME Homer City Generation L.P., The Secured Parties' Representatives, Citicorp USA, Inc. as Administrative Agent and United States Trust Company of New York, as Collateral Agent, dated as of March 18, 1999. 10.58 Security Deposit Agreement among Edison Mission Holdings Co., Edison Mission Finance Co., Homer City Property Holdings, Inc., Chestnut Ridge Energy Co., Mission Energy Westside, Inc., EME Homer City Generation L.P. and United States Trust Company of New York, as Collateral Agent, dated as of March 18, 1999. 10.59 Credit Support Guarantee, dated as of March 18, 1999, made by Edison Mission Energy in favor of United States Trust Company of New York. 10.60 Debt Service Reserve Guarantee, dated as of March 18, 1999 made by Edison Mission Energy in favor of United States Trust Company of New York on behalf of the various financial institutions (Lenders) as are or may become parties to the Credit Agreement, dated as of March 18, 1999 among Edison Mission Holdings Co., the Lenders and Citicorp USA, Inc. 10.61 Credit Agreement, dated March 18, 1999 among Edison Mission Energy, Certain Commercial Lending Institutions and Citicorp USA, Inc.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Edison Mission Energy --------------------- (Registrant) By /s/ JAMES V. IACO, JR. ---------------------------------- JAMES V. IACO, JR., SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Date: April 1, 1999 ------------- EX-10.55 2 CREDIT AGREEMENT DATED 3/18/1999 Exhibit 10.55 EXECUTION COPY CREDIT AGREEMENT dated as of March 18, 1999 among EDISON MISSION HOLDINGS CO. and CERTAIN COMMERCIAL LENDING INSTITUTIONS, and CITICORP USA, INC. as the Administrative Agent for the Lenders Arranged by CREDIT SUISSE FIRST BOSTON, LEHMAN BROTHERS INC., SALOMON SMITH BARNEY INC. and SOCIETE GENERALE TABLE OF CONTENTS ----------------- Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS................................................................ 1 1.1 Defined Terms.................................................................................. 1 1.2 Use of Defined Terms........................................................................... 20 1.3 Cross-References............................................................................... 20 1.4 Accounting and Financial Determinations........................................................ 20 ARTICLE II COMMITMENTS AND BORROWING PROCEDURES........................................................... 20 2.1 Term Loan Commitments.......................................................................... 20 2.1.1 Term Loan Commitment................................................................ 20 2.1.2 Procedure for Term Loan Borrowing................................................... 20 2.2 Revolving Loan Commitment...................................................................... 21 2.2.1 Revolving Loan Commitment.......................................................... 21 2.2.2 Procedure for Revolving Loan Borrowing............................................. 21 2.3 Lenders Not Required To Make Loans............................................................ 22 2.4 Reduction of the Commitments.................................................................. 22 2.5 Continuation and Conversion Elections......................................................... 23 2.6 Funding....................................................................................... 23 ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES.................................................... 24 3.1 Repayments and Prepayments.................................................................... 24 3.1.1 Optional Prepayments and Commitment Reductions..................................... 24 3.1.2 Mandatory Prepayments and Commitment Reductions.................................... 25 3.2 Interest Provisions........................................................................... 26 3.2.1 Rates.............................................................................. 26 3.2.2 Post-Maturity Rates; Default Rates................................................. 26 3.2.3 Payment Dates...................................................................... 27 3.2.4 Interest Rate Determination........................................................ 27 3.3 Fees.......................................................................................... 27 3.3.1 Facility Fee....................................................................... 27 3.3.2 Administrative Agent's Fee and Miscellaneous Fees.................................. 28 ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS......................................................... 28 4.1 LIBO Rate Lending Unlawful.................................................................... 28 4.2 Inability to Determine Rates.................................................................. 28
-ii- Page 4.3 Increased LIBO Rate Loan Costs................................................................ 29 4.4 Obligation to Mitigate........................................................................ 29 4.5 Funding Losses................................................................................ 30 4.6 Increased Capital Costs....................................................................... 31 4.7 Taxes......................................................................................... 31 4.8 Payments, Computations........................................................................ 32 4.9 Sharing of Payments........................................................................... 33 4.10 Set-off...................................................................................... 33 4.11 Replacement of Lender........................................................................ 34 ARTICLE V DEBT SERVICE RESERVE ACCOUNT.................................................................... 35 5.1 Debt Service Reserve Account.................................................................. 35 5.2 Debt Service Reserve Requirement.............................................................. 35 ARTICLE VI CONDITIONS TO LOANS............................................................................ 35 6.1 Conditions to Effectiveness................................................................... 35 6.1.1 Loan Documents...................................................................... 35 6.1.2 Acquisition......................................................................... 35 6.1.3 EME Credit Support.................................................................. 36 6.1.4 Debt Ratings........................................................................ 36 6.1.5 Financial Statements................................................................ 36 6.1.6 Projections; Rating Agency Presentations............................................ 36 6.1.7 Closing Fees, Expenses.............................................................. 36 6.1.8 Approvals........................................................................... 36 6.1.9 Consultants' Reports................................................................ 37 6.1.10 Lien Search; Recordings and Filings................................................ 37 6.1.11 Resolutions........................................................................ 37 6.1.12 Officer's Certificate.............................................................. 38 6.1.13 Opinions of Counsel................................................................ 38 6.1.14 Establishment of Accounts.......................................................... 38 6.1.15 Surveys............................................................................ 38 6.1.16 Title Insurance.................................................................... 38 6.1.17 Insurance.......................................................................... 39 6.2 All Loans....................................................................................... 39 6.2.1 Representations and Warranties; No Default.......................................... 39 6.2.2 Borrowing Request................................................................... 40 6.2.3 Satisfactory Legal Form............................................................. 40
-iii- Page ARTICLE VII REPRESENTATIONS AND WARRANTIES............................................................. 40 7.1 Financial Information........................................................................ 40 7.2 Organization; Power.......................................................................... 40 7.3 Due Authorization; Non-Contravention......................................................... 41 7.4 Approvals.................................................................................... 41 7.5 No Material Adverse Change................................................................... 41 7.6 Accuracy of Information...................................................................... 41 7.7 Validity..................................................................................... 42 7.8 Compliance with Law and Contractual Obligations.............................................. 42 7.9 Regulations T, U and X....................................................................... 42 7.10 Litigation.................................................................................. 42 7.11 Ownership of Properties..................................................................... 42 7.12 Taxes....................................................................................... 43 7.13 Investment Company Act; Public Utility Holding Company Act; Other Regulations......................................................................... 43 7.14 Environmental Warranties.................................................................... 43 7.15 The Obligations............................................................................. 44 7.16 Year 2000 Matters........................................................................... 44 7.17 Pension and Welfare Plans................................................................... 44 7.18 Subsidiaries................................................................................ 45 ARTICLE VIII COVENANTS................................................................................. 45 8.1 Affirmative Covenants........................................................................ 45 8.1.1 Financial Information, Reports, Notices............................................ 45 8.1.2 Continuation of Business and Maintenance of Existence.............................. 48 8.1.3 Compliance with Requirements of Law and Contractual Obligations and Laws......................................................................... 48 8.1.4 Maintenance of Generating Station.................................................. 48 8.1.5 Insurance.......................................................................... 49 8.1.6 Books and Records.................................................................. 50 8.1.7 Year 2000 Matters.................................................................. 50 8.1.8 Environmental Covenant............................................................. 50 8.1.9 Further Assurances................................................................. 51 8.1.10 Additional Collateral............................................................. 51 8.1.11 Use of Proceeds................................................................... 51 8.1.12 Recovery Events................................................................... 51 8.2 Negative Covenants........................................................................... 52 8.2.1 Restrictions on Indebtedness....................................................... 52
-iv- Page 8.2.2 Liens................................................................................ 54 8.2.3 Consolidation, Merger................................................................ 55 8.2.4 Asset Dispositions................................................................... 55 8.2.5 Subsidiaries, Investments............................................................ 56 8.2.6 Transactions with Affiliates......................................................... 57 8.2.7 Restricted Payments.................................................................. 57 8.2.8 ERISA................................................................................ 57 8.2.9 Restrictive Agreements............................................................... 57 8.2.10 Limitation on Lines of Business..................................................... 58 8.2.11 Regulation of Parties............................................................... 58 8.2.12 Limitation on Electricity Market Risk Exposure...................................... 58 ARTICLE IX EVENTS OF DEFAULT............................................................................. 59 9.1 Listing of Events of Default................................................................... 59 9.1.1 Non-Payment of Obligations........................................................... 59 9.1.2 Breach of Warranty................................................................... 59 9.1.3 Non-Performance of Certain Covenants and Obligations................................. 59 9.1.4 Non-Performance of Other Covenants and Obligations................................... 59 9.1.5 Default on Other Indebtedness........................................................ 59 9.1.6 Bankruptcy, Insolvency............................................................... 59 9.1.7 Pension Plans........................................................................ 60 9.1.8 Judgments............................................................................ 61 9.1.9 Control of the Borrower; Ownership of EME Homer City................................. 61 9.1.10 Edison Mission Energy............................................................... 61 9.2 Action if Bankruptcy........................................................................... 62 9.3 Action if Other Event of Default............................................................... 62 9.4 Rescission of Declaration...................................................................... 62 ARTICLE X THE AGENT..................................................................................... 63 10.1 Actions....................................................................................... 63 10.2 Funding Reliance.............................................................................. 64 10.3 Exculpation................................................................................... 64 10.4 Successor..................................................................................... 65 10.5 Loans by CUSA................................................................................. 65 10.6 Reliance by Administrative Agent.............................................................. 65 10.7 Notice of Default............................................................................. 66 10.8 Credit Decisions.............................................................................. 66 10.9 Copies........................................................................................ 66
-v- Page 10.10 Interest of Lenders in Collateral.............................................................. 67 ARTICLE XI MISCELLANEOUS PROVISIONS........................................................................ 67 11.1 Waivers, Amendments............................................................................. 67 11.2 Notices......................................................................................... 68 11.3 Payment of Costs and Expenses................................................................... 68 11.4 Indemnification................................................................................. 69 11.5 Survival........................................................................................ 70 11.6 Severability.................................................................................... 70 11.7 Headings........................................................................................ 70 11.8 Execution in Counterparts....................................................................... 71 11.9 Governing Law; Entire Agreement................................................................. 71 11.10 Successors and Assigns......................................................................... 71 11.11 Sale and Transfer of Loans and Notes; Participations in Loans.................................. 71 11.11.1 Assignments.......................................................................... 71 11.11.2 Participations....................................................................... 73 11.12 Other Transactions............................................................................. 74 11.13 Submission To Jurisdiction; Waivers............................................................ 74 11.14 WAIVERS OF JURY TRIAL.......................................................................... 75 11.15 Non-Recourse Persons........................................................................... 75 11.16 Acknowledgments................................................................................ 75 11.17 Releases of Guarantees and Liens............................................................... 75 11.18 Confidentiality................................................................................ 76
ANNEX Annex I - Pricing Grids SCHEDULES 1.1(a) - Commitments 1.1(b) - Addresses for Notices and Lending Offices 7.4 - Governmental Approvals 7.18 - Subsidiaries 8.1.5 - Insurance -vi- EXHIBITS A-1 - Form of Revolving Note A-2 - Form of 364-Day/Construction Term Loan Note B - Form of Borrowing Request C - Form of Continuation/Conversion Notice D - Form of Lender Assignment Agreement E - Form of EME Debt Service Reserve Guarantee -vii- CREDIT AGREEMENT, dated as of March 18, 1999, among EDISON MISSION HOLDINGS CO., a California corporation (the "Borrower"), the various financial -------- institutions as are or may become parties hereto (collectively, the "Lenders") ------- and CITICORP USA, INC. ("CUSA"), as administrative agent for the Lenders (in ---- such capacity, the "Administrative Agent"). -------------------- RECITALS -------- A. The Borrower has requested that the Lenders establish credit facilities to provide financing (i) for the acquisition of the Homer City Electric Generating Station and certain facilities and other assets associated therewith and ancillary thereto (collectively, the "Generating Station") ------------------ pursuant to the Asset Purchase Agreement, dated as of August 1, 1998 (the "Asset ----- Purchase Agreement"), among Pennsylvania Electric Company, NGE Generation, Inc. - ------------------ and New York State Electric & Gas Corporation, as sellers, and EME Homer City Generation L.P. (assignee of Mission Energy Westside, Inc.), as purchaser, (ii) for the installation of certain pollution control equipment at the Generating Station and (iii) for general working capital purposes. B. The Lenders are willing to make such credit facilities available upon and subject to the terms and conditions hereinafter set forth. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 Defined Terms. The following terms (whether or not ------------- underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Accounts" has the meaning specified in the Security Deposit -------- Agreement. "Acquisition" means the acquisition of the Generating Station by EME ----------- Homer City pursuant to the Asset Purchase Agreement. "Administrative Agent" means CUSA in its capacity as administrative -------------------- agent for the Lenders hereunder, and includes each other Person as may have subsequently been appointed as the successor Administrative Agent pursuant to Section 10.4. - ------------ "Affiliate" of any Person means any other Person which, directly or --------- indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Pension Plan or Welfare Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agent-Related Persons" means CUSA and any successor agent arising --------------------- under Section 10.4, together with their respective Affiliates, and the officers, ------------ directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Agreement" means, on any date, this Credit Agreement as originally in --------- effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date. "Alternate Base Rate" means, on any date and with respect to all Base ------------------- Rate Loans, a fluctuating rate of interest per annum equal to the higher of: (a) the rate of interest in effect for such day as publicly announced from time to time by the Administrative Agent at its principal office in New York, New York, as its "base rate" (or such other term used by any successor Administrative Agent). The "base rate" is a rate set by the Administrative Agent based upon various factors including the Administrative Agent's cost and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate; or (b) the Federal Funds Rate most recently determined by the Administrative Agent plus 1/2 of 1%. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by the Administrative Agent in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will give notice promptly to the Borrower and the Lenders of changes in the Alternate Base Rate. "Applicable Margin" means, for any day with respect to any Loan, the ----------------- rate per annum in effect for such day based on the Borrower's Debt Rating for such day determined as provided in the Pricing Grid. "Asset Purchase Agreement" has the meaning set forth in the recitals. ------------------------ -------- "Authorized Representative" means, relative to any Loan Party, those ------------------------- of its officers and employees whose signatures and incumbency shall have been certified to the Administrative Agent and the Lenders pursuant to Section ------- 6.1.11. - ------ -2- "Base Rate Loan" means a Loan bearing interest at a fluctuating rate -------------- determined by reference to the Alternate Base Rate plus the Applicable Margin from time to time in effect. "Borrower" has the meaning set forth in the preamble. -------- -------- "Borrowing" means Loans of the same type and, in the case of LIBO Rate --------- Loans having the same Interest Period, made by all Lenders on the same Business Day and pursuant to the same Borrowing Request in accordance with Sections 2.1.2 -------------- and 2.2.2. ----- "Borrowing Date" means any Business Day specified in a notice pursuant -------------- to Section 2.1.2 or 2.2.2 as a date which the Borrower requests the Lenders to ------------- ----- make Loans. "Borrowing Request" means a loan request and certificate duly executed ----------------- by an Authorized Representative of the Borrower, substantially in the form of Exhibit B. - --------- "Business Day" means: ------------ (a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York; and (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in Dollars are carried on in the London interbank market. "Capitalized Lease Liabilities" of any Person means all monetary ----------------------------- obligations of such Person under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of each Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "Cash Equivalent Investment" means, at any time: -------------------------- (a) any evidence of Indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States Government or an agency thereof; (b) other investments in securities or bank instruments rated at least "A" by S&P and "A2" by Moody's or "A-1" by S&P and "P-1" by Moody's and with maturities of less than 366 days; or (c) other securities as to which the Borrower has demonstrated, to the satisfaction of the Administrative Agent, adequate liquidity through secondary markets or deposit agreements. -3- "Cashflow Available for Debt Service" means, in respect of any period, ----------------------------------- the excess, if any, of Revenues (excluding proceeds of any payments under the EME Credit Support Guarantee or the EME Debt Service Reserve Guarantee or proceeds of any permitted asset sale) during such period over Operating Expenses ---- during such period. "CERCLIS" means the Comprehensive Environmental Response Compensation ------- Liability Information System List. "Change in Control" means the failure of Edison Mission Energy (a) to ----------------- own, directly or indirectly, at least 50% of the economic equity interests of any Loan Party on a fully diluted basis or to maintain direct or indirect voting control of any Loan Party or (b) through one or more Affiliates, to be in control of the operation of the Generating Station. "Code" means the Internal Revenue Code of 1986, as amended. ---- "Collateral" means all assets of the Loan Parties, now owned or ---------- hereinafter acquired, upon which a Lien is purported to be created by any Security Document. "Collateral Agency and Intercreditor Agreement" means the Collateral --------------------------------------------- Agency and Intercreditor Agreement, dated as of March 18, 1999, among the Loan Parties, the Administrative Agent, the Secured Parties' Representative and the Collateral Agent. "Collateral Agent" has the meaning set forth in the Collateral Agency ---------------- and Intercreditor Agreement. "Commitment Termination Date" means the 364-Day Term Loan Maturity --------------------------- Date, the Construction Term Loan Maturity Date or the Revolving Loan Commitment Termination Date, as applicable. "Commitment Termination Events" means: ----------------------------- (a) the occurrence of any Default described in clauses (a) through ----------- (e) of Section 9.1.6 with respect to the Borrower; or --- ------------- (b) the occurrence and continuance of any other Event of Default and the declaration of the Loans to be due and payable pursuant to Section 9.3. ----------- "Commitments" means the Term Loan Commitments and the Revolving Loan ----------- Commitments. "Construction Term Loans" has the meaning set forth in Section 2.1.1. ----------------------- ------------- -4- "Construction Term Loan Commitment" means, relative to any Lender, the --------------------------------- obligation of such Lender to make Construction Term Loans to the Borrower hereunder in an aggregate principal amount not to exceed the amount set forth under "Construction Term Loan Commitment" opposite such Lender's name on Schedule 1.1(a). - --------------- "Construction Term Loan Commitment Amount" means, on any date, ---------------------------------------- $250,000,000, as such amount may be reduced from time to time pursuant to Section 2.4. - ----------- "Construction Term Loan Maturity Date" means the fifth anniversary of ------------------------------------ the Effective Date. "Construction Term Loan Note" means a promissory note of the Borrower --------------------------- payable to any Lender, in the form of Exhibit A-2 hereto (as such promissory ----------- note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Construction Term Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Contingent Liability" means any agreement, undertaking or arrangement -------------------- by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount of the debt, obligation or other liability guaranteed thereby; provided, however, that if the maximum amount of the debt, obligation or other - -------- ------- liability guaranteed thereby has not been established, the amount of such Contingent Liability shall be the maximum reasonably anticipated amount of the debt, obligation or other liability; provided, further, however, that any -------- ------- agreement to limit the maximum amount of such Person's obligation under such Contingent Liability shall not, of and by itself, be deemed to establish the maximum reasonably anticipated amount of such debt, obligation or other liability. "Continuation/Conversion Notice" means a notice of continuation or ------------------------------ conversion and certificate duly executed by an Authorized Representative of the Borrower, substantially in the form of Exhibit C. --------- "Contractual Obligation" means, as to any Person, any provision of any ---------------------- security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. -5- "Controlled Group" means all members of a controlled group of ---------------- corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Loan Parties, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "CUSA" has the meaning set forth in the preamble. ---- -------- "Debt Rating" means a rating of the Borrower's secured long-term debt ----------- which is not supported by a guarantee, letter of credit or other form of credit enhancement other than the Guarantee and Collateral Agreement, the EME Credit Support Guarantee or any EME Debt Service Reserve Guarantee. If Moody's or S&P shall have changed its system of classifications after the date hereof, the Borrower's Debt Rating shall be considered to be at or above a specified level if it is at or above the new rating which most closely corresponds to the specified level under the old rating system. "Debt Service" means, in respect of any period, an amount equal to the ------------ aggregate of, without duplication, (i) all interest due and payable on the Loans plus or minus any net amount due and payable in respect of Interest Rate Hedging - ---- ----- Transactions during such period, (ii) amounts due and payable under Section ------- 3.3.1 during such period, (iii) amounts due and payable to the Lenders with - ----- respect to the deduction of withholding tax on such payments pursuant to Section ------- 4.7 during such period and (iv) all other amounts due and payable by the Loan - --- Parties with respect to Indebtedness permitted under Section 8.2.1 (excluding ------------- Indebtedness permitted under Sections 8.2.1(d)(i) and 8.2.1(f)) during such -------------------- -------- period. "Debt Service Coverage Ratio" means, for any period, the ratio of (a) --------------------------- Cashflow Available for Debt Service for such period to (b) Debt Service for such period. "Debt Service Reserve Account" has the meaning set forth in the ---------------------------- Security Deposit Agreement. "Debt Service Reserve Requirement" means, on each Quarterly Payment -------------------------------- Date, an amount equal to the Debt Service (excluding amounts thereof referred to in clause (iv) of the definition of the term "Debt Service") projected to be due ---------- and payable during the two Fiscal Quarters next succeeding such Quarterly Payment Date. "Default" means any Event of Default or any condition, occurrence or ------- event which, after notice or lapse of time or both, would constitute an Event of Default. "Dollar" and the sign "$" mean lawful money of the United States. ------ "Domestic Office" means, relative to any Lender, the office of such --------------- Lender designated on Schedule 1.1(b) or designated in the Lender Assignment --------------- Agreement or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be -6- designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. A Lender may have separate Domestic Offices for purposes of making, maintaining or continuing, as the case may be, Base Rate Loans. "Easement and Attachment Agreement" means the Easement, License and --------------------------------- Attachment Agreement, dated as of August 1, 1998, among NYSEG, Penelec and EME Homer City (assignee of Mission Energy Westside, Inc.). "Edison Mission Energy" means Edison Mission Energy, a California --------------------- corporation. "Effective Date" means the date this Agreement becomes effective -------------- pursuant to Section 6.1. ----------- "Eligible Assignee" means (a) a commercial bank organized or licensed ----------------- under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $250,000,000 and (b) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary or (iii) a Person of which a Lender is a Subsidiary. "EME Credit Support Guarantee" means a guarantee dated as of March 18, ---------------------------- 1999, made by Edison Mission Energy in favor of the Collateral Agent. "EME Debt Service Reserve Guarantee" means a guarantee by Edison ---------------------------------- Mission Energy, substantially in the form of Exhibit E. --------- "EME Homer City" means EME Homer City Generation L.P., a limited -------------- partnership organized under the laws of the State of Pennsylvania. "EMMT" means Edison Mission Marketing & Trading, Inc., a California ---- corporation. "Energy Sales Agreement" means the Energy Sales Agreement, dated March ---------------------- __, 1999, between EME Homer City and EMMT. "Environmental Capital Expenditure Program" means EME Homer City's ----------------------------------------- proposed schedule and budget for the installation of a flue gas desulfurization unit and three selective catalytic reduction units in the Generating Station, as included in the projections delivered by the Borrower pursuant to Section 6.1.6 ------------- and as amended from time to time. "Environmental Laws" means all statutes, laws (including common law), ------------------ ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders), and any other legally enforceable requirements of any Governmental Authority relating to, regulating, or imposing liability or standards of conduct concerning Hazardous Materials, -7- public health or protection of the environment, as have been, are now, or may at any time hereafter be in effect. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. "Event of Default" has the meaning set forth in Section 9.1. ---------------- ------------ "Facility Fee" has the meaning set forth in Section 3.3.1. ------------ -------------- "Federal Funds Rate" means, for any period, a fluctuating interest ------------------ rate per annum equal for each day during such period to: (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from not less than three of the Lead Arrangers (or if quotations are unavailable from any of them, up to three federal funds brokers of recognized standing selected by the Administrative Agent). "First Priority Lien" means a Lien covering the Collateral having a ------------------- priority higher than any other Lien covering the Collateral that on the Effective Date is on file or record in any relevant jurisdiction. "Fiscal Quarter" means any quarter of a Fiscal Year. -------------- "Fiscal Year" means any period of twelve consecutive calendar months ----------- ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "1999 Fiscal Year") referred to the Fiscal Year --- ending on December 31 occurring during such calendar year. "FPA" means the Federal Power Act, as amended. --- "F.R.S. Board" means the Board of Governors of the Federal Reserve ------------ System or any successor thereto." "GAAP" has the meaning set forth in Section 1.4. ---- ----------- -8- "Generating Station" has the meaning set forth in the recitals. ------------------ -------- "Governmental Approval" means any authorization, consent, approval, --------------------- license, permit, exemption, filing or registration with any Governmental Authority. "Governmental Authority" means any nation or government, any state, ---------------------- provincial or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee and Collateral Agreement" means the Guarantee and ---------------------------------- Collateral Agreement, dated as of March 18, 1999, among the Loan Parties and the Collateral Agent. "Hazardous Material" means: ------------------ (a) any "hazardous substance", as defined by any Environmental Law; (b) any "hazardous waste", as defined by any Environmental Law; (c) any petroleum product (including crude oil or any fraction thereof); or (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, force or substance (including polychlorinated biphenyls, urea-formaldehyde insulation, asbestos or radioactivity) that is regulated pursuant to or could give rise to liability under any Environmental Law. "herein", "hereof", "hereto", "hereunder" and similar terms contained ------ ------ ------ --------- in any Loan Document refer to such Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of such Loan Document. "including" means including without limiting the generality of any --------- description preceding such term, and, for purposes of each Loan Document, the parties thereto agree that the rule of ejusdem generis shall not be applicable ------- ------- to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. "Indebtedness" of any Person means, without duplication: ------------ (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services which purchase price is due more than six months from the date of incurrence of the obligation in respect thereof or is evidenced by a note or other instrument, except trade accounts arising in the ordinary course of business; -9- (c) all reimbursement obligations with respect to surety bonds, letters of credit (to the extent not collateralized with cash or Cash Equivalent Investments), bankers' acceptances and similar instruments (in each case, whether or not matured); (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all Capitalized Lease Liabilities; (g) all net obligations with respect to interest rate cap agreements, interest rate swap agreements, sales of foreign exchange options and other hedging agreements or arrangements; (h) all indebtedness referred to in clauses (a) through (g) above ---------- --- secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (i) all Contingent Liabilities. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. "Indenture Trustee" has the meaning set forth in the Collateral Agency ----------------- and Intercreditor Agreement. "Initial Lenders" means CUSA, Credit Suisse First Boston, Lehman --------------- Commercial Paper Inc. and Societe Generale. "Insolvency" means, with respect to any Multiemployer Plan, the ---------- condition that such plan is insolvent within the meaning of Section 4245 of ERISA. "Intercompany Loan Subordination Agreement" means the Intercompany ----------------------------------------- Loan Subordination Agreement, dated as of March 18, 1999, among the Loan Parties and the Collateral Agent. -10- "Interconnection Agreement" means the Interconnection Agreement, dated ------------------------- as of August 1, 1998, among NYSEG, Penelec and EME Homer City (assignee of Mission Energy Westside, Inc.). "Interest Period" means, relative to any LIBO Rate Loan, the period --------------- beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.1, 2.2, ------- --- --- 2.3 or 2.5 and ending on (but excluding) either (x) the day which numerically - --- --- corresponds to such date one, two, three or six months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month) as the Borrower may select in its relevant notice pursuant to Section ------- 2.1, 2.2, 2.3 or 2.5 or (y) such other day (resulting in a longer or shorter - --- --- --- --- period) as the Borrower may select in its relevant notice pursuant to Section ------- 2.1, 2.2, 2.3 or 2.5 and the Administrative Agent confirms is available from all - --- --- --- --- affected Lenders; provided, however, that: -------- ------- (a) the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than ten different dates or such other larger number of dates and on such terms as may be agreed to by the Borrower and the Administrative Agent; (b) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration; (c) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless, if such Interest Period applies to LIBO Rate Loans, such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and (d) no Interest Period may end later than the date set forth in clause (a) of the definition of "Revolving Loan Commitment Termination ---------- ------------------------------------- Date". ---- "Interest Rate Hedging Transactions" means, as to any Person, all ---------------------------------- interest rate swaps, caps or collar agreements or similar arrangements entered into by such Person in order to protect against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, and, in any event, not for speculative purposes. "Investment" means, relative to any Person: ---------- (a) any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business); (b) any Contingent Liability of such Person; and -11- (c) any ownership or similar interest held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property. "Lead Arrangers" means Credit Suisse First Boston, Lehman Brothers -------------- Inc., Salomon Smith Barney Inc. and Societe Generale. "Lender Assignment Agreement" means a Lender Assignment Agreement, --------------------------- substantially in the form of Exhibit D. --------- "Lenders" has the meaning set forth in the preamble. ------- -------- "LIBO Rate" has the meaning set forth in Section 3.2.1. --------- ------------- "LIBO Rate Loan" means a Loan bearing interest, at all times during an -------------- Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate. "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made, ---------------------------- continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest whole multiple of l/100 of 1%) determined pursuant to the following formula: LIBO Rate LIBO Rate (Reserve Adjusted) = ------------------------------- 1.00 - LIBOR Reserve Percentage The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Administrative Agent on the basis of the LIBOR Reserve Percentage in effect on, and the applicable rates furnished to and received by the Administrative Agent, two Business Days before the first day of such Interest Period. "LIBOR Office" means, relative to any Lender, the office of such ------------ Lender designated as such on Schedule 1.1(b) or designated in the Lender --------------- Assignment Agreement or such other office of a Lender as designated from time to time by notice from such Lender to the Borrower and the Administrative Agent pursuant to Section 4.4, whether or not outside the United States, which shall ----------- be making or maintaining LIBO Rate Loans of such Lender hereunder. "LIBOR Reserve Percentage" means, relative to any Interest Period for ------------------------ LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the aggregate reserve -12- requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period. "Lien" means any security interest, mortgage, pledge, hypothecation, ---- assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property, in each case of any kind, to secure payment of a debt or performance of an obligation. "Loan" means Loans made by the Lenders to the Borrower pursuant to ---- Section 2.1 and Section 2.2, including Revolving Loans and Term Loans. - ----------- ----------- "Loan Documents" means this Agreement, the Notes, the Security -------------- Documents and the other agreements, documents and instruments delivered in connection with this Agreement and the Notes including the fee letter referred to in Section 3.3.2, each Borrowing Request and each Continuation/Conversion ------------- Notice. "Loan Parties" means (i) the Borrower, (ii) Edison Mission Finance ------------ Co., a California corporation, (iii) Homer City Property Holdings, Inc., a California corporation, (iv) Chestnut Ridge Energy Co., a California corporation, (v) Mission Energy Westside, Inc., a California corporation, and (vi) EME Homer City. "Material Adverse Effect" means any event, development or circumstance ----------------------- that has had or could reasonably be expected to have a material adverse effect on (i) the business, assets, property, financial condition or operations of the Loan Parties, taken as a whole, since the Effective Date, or (ii) the ability of any Loan Party to perform its obligations under any of the Loan Documents. "Moody's" means Moody's Investors Service, a division of Dun & ------- Bradstreet Corporation, and its successors and assigns. "Mortgage and Security Agreement" means the Mortgage and Security ------------------------------- Agreement, dated as of March 18, 1999, made by EME Homer City to the Collateral Agent. "Multiemployer Plan" means a "multiemployer plan" as such term is ------------------ defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" means (a) in connection with any Recovery Event, ----------------- the proceeds thereof in the form of cash and cash equivalents of such Recovery Event, net of any expenses reasonably incurred in respect of such Recovery Event, including attorneys' fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly -13- permitted hereunder on any asset which is the subject of such Recovery Event (other than any Lien pursuant to a Security Document) and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), to the extent that, in the case of Recovery Events relating to property or casualty insurance claims, the amount of such proceeds exceeds $5,000,000 with respect to any asset of any Loan Party and (b) in connection with any issuance or sale of debt securities, the cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith. "Non-Recourse Persons" means The Mission Group, Edison Mission Energy -------------------- (except in respect of the EME Credit Support Guarantee and any EME Debt Service Reserve Guarantee) and Southern California Edison Company, and the officers, directors, employees, shareholders (except as aforesaid), agents, Authorized Representatives and other controlling persons (except as aforesaid) of the Borrower, provided that in no event shall any Loan Party be deemed to be a Non- -------- Recourse Person. "Note" means, as the context may require, a Revolving Note, 364-Day ---- Term Loan Note or a Construction Term Loan Note. "NY Pool" means the New York Power Pool or any successor thereto. ------- "NYSEG" means the New York State Electric & Gas Corporation. ----- "Obligations" means all obligations (monetary or otherwise) of the ----------- Loan Parties arising under or in connection with the Loan Documents. "Operating Expenses" means, in respect of any period, all cash amounts ------------------ paid by the Loan Parties in the conduct of their business during such period, including premiums for insurance policies, fuel supply and transportation costs, utilities, costs of maintaining, renewing and amending Governmental Approvals, franchise, licensing, property, real estate and income taxes, sales and excise taxes, general and administrative expenses, employee salaries, wages and other employment-related costs, business management and administrative services fees, fees for letters of credit, surety bonds and performance bonds described in Section 8.2.1(d)(i), necessary capital expenditures (other than capital - ------------------- expenditures made with the proceeds of (a) Construction Term Loans or (b) Indebtedness permitted under Section 8.2.7(b) and all other fees and expenses ---------------- necessary for the continued operation and maintenance of the Generating Station and the conduct of the business of the Loan Parties. "Organic Document" means, with respect to any Person that is a ---------------- corporation, its certificate of incorporation, its by-laws and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock, and, with respect to any -14- Person that is a limited partnership, its certificate of limited partnership and partnership agreement. "Participant" has the meaning set forth in Section 11.11.2. ----------- ---------------- "PBGC" means the Pension Benefit Guaranty Corporation and any entity ---- succeeding to any or all of its functions under ERISA. "Penelec" means the Pennsylvania Electric Company. ------- "Pension Plan" means a "pension plan", as such term is defined in ------------ Section 3(2) of ERISA (other than a Multiemployer Plan), and to which any Loan Party or any member of the Controlled Group, has any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA or having an obligation to contribute under Section 4212 of ERISA. "Percentage" means, with respect to the 364-Day Term Loan Commitment, ---------- the Construction Term Loan Commitment or the Revolving Loan Commitment of any Lender, the percentage set forth on Schedule 1.1(a) for such Commitment opposite --------------- its name or set forth in the Lender Assignment Agreement pursuant to which such Lender became a Lender hereunder, as such percentage may be adjusted from time to time pursuant to any Lender Assignment Agreement executed by such Lender and delivered pursuant to Section 11.11. ------------- "Person" means any natural person, corporation, partnership, limited ------ liability company, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "PJM" means PJM Interconnection, L.L.C, or any successor thereto. --- "Pricing Grid" means the pricing grid attached as Annex I. ------------ ------- "Prudent Industry Practice" means, at a particular time, (a) any of ------------------------- the practices, methods and acts engaged in or approved by a significant portion of the competitive electric generating industry at such time, or (b) with respect to any matter to which clause (a) does not apply, any of the practices, --------- methods and acts which, in the exercise of reasonable judgment at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. "Prudent Industry Practice" is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts having due regard for, among other things, manufacturers' warranties and the requirements of any Governmental Authority of competent jurisdiction. -15- "PUHCA" means the Public Utility Holding Company Act of 1935, as ----- amended. "Quarterly Payment Date" means the first Business Day of each January, ---------------------- April, July and October. "Recovery Event" means any settlement of or payment of $5,000,000 or -------------- more in respect of (a) any property or casualty insurance claim relating to any asset of any Loan Party or (b) any seizure, condemnation, confiscation or taking of, or requisition of title or use of, the Generating Station or any part thereof by any Governmental Authority. "Reinvestment Deferred Amount" means with respect to any Recovery ---------------------------- Event, the aggregate Net Cash Proceeds received by any Loan Party in connection therewith which are not applied to prepayments or reductions pursuant to Section ------- 3.1.2(b) as a result of the delivery of a Reinvestment Notice. - -------- "Reinvestment Notice" has the meaning set forth in Section 8.1.12. ------------------- -------------- "Reinvestment Prepayment Amount" means, with respect to any Recovery ------------------------------ Event, the Reinvestment Deferred Amount relating thereto less any amount which, ---- prior to the relevant Reinvestment Prepayment Date, the Loan Party has spent or has agreed, pursuant to a binding written contract (under which performance is in progress) to spend, to restore or replace the assets in respect of which a Recovery Event has occurred pursuant to Section 8.1.12. --------------- "Reinvestment Prepayment Date" means, with respect to any Recovery ---------------------------- Event, the earliest of (a) the first date occurring after such Recovery Event on which an Event of Default shall have occurred, (b) the date occurring twelve months after such Recovery Event and (c) the date on which the Loan Party shall have determined not to, or shall have otherwise ceased to, restore or replace the assets in respect of which a Recovery Event has occurred. "Reorganization" means, with respect to any Multiemployer Plan, the -------------- condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event" means any of the events set forth in Section ---------------- 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section 2615. "Required Deposit Rating" means a short-term certificate of deposit ----------------------- rating from Moody's of P-1 and from Standard & Poor's of A-1+, and a long-term unsecured debt rating of not less than Aa3 by Moody's and AA- by Standard & Poor's. "Required Lenders" means, at any time, Lenders holding a majority of ---------------- the Commitments. -16- "Requirement of Law" means, as to any Person, the Organic Documents of ------------------ such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Restricted Payment" has the meaning set forth in Section 8.2.7. ------------------ ------------- "Restricted Payment Date" means (i) in the case of any Restricted ----------------------- Payment being made exclusively with the proceeds of Indebtedness incurred pursuant to Section 8.2.1(e) remaining after repayment in full of the 364-Day ---------------- Term Loans, any Business Day specified by the Borrower, and (ii) in all other cases, any Quarterly Payment Date. "Revenue Account" has the meaning set forth in the Security Deposit --------------- Agreement. "Revenues" means, in respect of any period, all cash amounts received -------- by the Loan Parties during such period, including revenues from the sale of energy and capacity, proceeds of business interruption insurance and all interest and other income earned on amounts in the Accounts. "Revolving Loan" means Loans made by the Lenders to the Borrower -------------- pursuant to Section 2.2, including Base Rate Loans and LIBO Rate Loans. ----------- "Revolving Loan Commitment" means, relative to each Lender, the ------------------------- obligation of such Lender to make Revolving Loans to the Borrower hereunder in an aggregate principal amount set forth under "Revolving Loan Commitment" opposite such Lender's name on Schedule 1.1(a). --------------- "Revolving Loan Commitment Amount" means, on any date, $50,000,000, as -------------------------------- such amount may be reduced from time to time pursuant to Section 2.4. ----------- "Revolving Loan Commitment Termination Date" means the earliest of: ------------------------------------------ (a) the fifth anniversary of the Effective Date; (b) the date on which the Revolving Loan Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.4; or ----------- (c) the date on which any Commitment Termination Event occurs. "Revolving Note" means a promissory note of the Borrower payable to -------------- any Lender, in the form of Exhibit A-1 (as such promissory note may be amended, ----------- endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to -17- such Lender resulting from outstanding Revolving Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "S&P" means Standard & Poor's Ratings Services and its successors and --- assigns. "Same Day Funds" means immediately available funds. -------------- "Secured Parties" has the meaning set forth in the Collateral Agency --------------- and Intercreditor Agreement. "Secured Parties' Representative" has the meaning set forth in the ------------------------------- Security Deposit Agreement. "Security Deposit Agreement" means the Security Deposit Agreement, -------------------------- dated as of March 18, 1999, among the Loan Parties and the Collateral Agent. "Security Documents" means (i) the Guarantee and Collateral Agreement, ------------------ the Mortgage and Security Agreement, the Intercompany Loan Subordination Agreement, the Collateral Agency and Intercreditor Agreement, the Security Deposit Agreement and (ii) the EME Credit Support Guarantee and any other agreement or instrument hereafter entered into by the Borrower or any other Person which guarantees or secures payment of the indebtedness evidenced by the Notes or payment or performance of any other Obligation. "Senior Debt" means (i) the Obligations and (ii) any Indebtedness of ----------- the Borrower permitted under Section 8.2.1(b), 8.2.1(c), 8.2.1(d) or 8.2.1(e). ---------------- -------- -------- -------- "Subsidiary" means, with respect to any Person, any corporation, ---------- partnership, limited liability company or other entity of which more than 50% of the outstanding capital stock, partnership interests or other equity interests having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) or to control the management of such partnership, limited liability company or other entity is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. "Taxes" has the meaning set forth in Section 4.7. ----- ----------- "Term Loans" means the 364-Day Term Loans and the Construction Term ---------- Loans. "Term Loan Commitments" means, relative to any Lender, such Lender's --------------------- obligations to make 364-Day Term Loans pursuant to Section 2.1.1 and ------------- Construction Term Loans pursuant to Section 2.1.1. ------------- -18- "Term Loan Commitment Amount" means the aggregate of the 364-Day Term --------------------------- Loan Commitment Amount and the Construction Term Loan Commitment Amount. "364-Day Term Loan" has the meaning set forth in Section 2.1.1. ----------------- ------------- "364-Day Term Loan Commitment" means, relative to any Lender, the ---------------------------- obligation of such Lender to make a 364-Day Term Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth under "364-Day Term Loan Commitment" opposite such Lender's name on Schedule 1.1(a). --------------- "364-Day Term Loan Commitment Amount" means $800,000,000. ----------------------------------- "364-Day Term Loan Maturity Date" means the date which is 364 days ------------------------------- after the Effective Date. "364-Day Term Loan Note" means a promissory note of the Borrower ---------------------- payable to any Lender, in the form of Exhibit A-2 hereto (as such promissory ----------- note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding 364-Day Term Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Title Insurance Company" means the title insurance company issuing ----------------------- any policy referred to in Sections 6.1.15 and 6.1.16. --------------- ------ "Total Commitment Amount" means the Revolving Loan Commitment Amount ----------------------- and Term Loan Commitment Amount. "type" means, relative to any Loan, the portion thereof, if any, being ---- maintained as a Base Rate Loan or a LIBO Rate Loan. "United States" or "U.S." means the United States of America, its ------------- ---- fifty States and the District of Columbia. "Welfare Plan" means a "welfare plan", as such term is defined in ------------ Section 3(1) of ERISA. "Year 2000 Problem" means any significant risk that computer hardware, ----------------- software or equipment containing embedded microchips essential to the businesses or operations of the Loan Parties will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000. -19- SECTION 1.2 Use of Defined Terms. Unless otherwise defined or the -------------------- context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in each Note, Borrowing Request, Continuation/Conversion Notice, Loan Document, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document. SECTION 1.3 Cross-References. Unless otherwise specified, references ---------------- in this Agreement to any Article, Section, Annex, Exhibit or Schedule are references to such Article, Section, Annex, Exhibit or Schedule of or to this Agreement and, unless otherwise specified, references in any Article, Section or definition to any clause or paragraph are references to such clause or paragraph of such Article, Section or definition. SECTION 1.4 Accounting and Financial Determinations. Unless --------------------------------------- otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those generally accepted accounting principles in effect in the United States("GAAP") ---- applied in the preparation of the financial statements referred to in Section ------- 7.1, except that quarterly financial statements are not required to contain - --- footnotes. ARTICLE II COMMITMENTS AND BORROWING PROCEDURES SECTION 2.1 Term Loan Commitments. On the terms and subject to the --------------------- conditions of this Agreement, each Lender severally agrees to make Term Loans pursuant to such Lender's Term Loan Commitment as provided in this Section 2.1. ------------ SECTION 2.1.1 Term Loan Commitment. Each Lender severally agrees to -------------------- make a term loan (each, a "364-Day Term Loan") to the Borrower on the Effective ----------------- Date in a principal amount not to exceed the 364-Day Term Loan Commitment of such Lender and each Lender severally agrees to make term loans (each, a "Construction Term Loan") to the Borrower prior to the Construction Term Loan - ------------------------ Maturity Date in an aggregate principal amount not to exceed the Construction Term Loan Commitment of such Lender. Term Loans may from time to time be LIBO Rate Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.1.2 and 2.5. The 364-Day -------------- --- Term Loans shall be made in a single drawing on the Effective Date. Construction Term Loans shall be made in multiple drawings in accordance with the Environmental Capital Expenditure Program. SECTION 2.1.2 Procedure for Term Loan Borrowing. The Borrower may --------------------------------- irrevocably request to borrow under (a) the 364-Day Term Loan Commitments on the Effective Date or (b) the Construction Term Loan Commitments prior to the Construction Term Loan Maturity Date on any Business Day in accordance with this Section 2.1.2, by delivering a - ------------- -20- Borrowing Request to the Administrative Agent on a Business Day on or before 12:00 Noon, New York City time, (x) on not less than three Business Days' notice in the case of LIBO Rate Loans, or (y) on the same Business Day, in the case of Base Rate Loans, specifying (i) the amount and type of Term Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in the case of LIBO Rate Loans, the respective amounts of each such type of Loan and the respective lengths of the initial Interest Periods therefor. Each borrowing under the Term Loan Commitments shall be in an amount equal to $5,000,000 or an integral multiple of $1,000,000 in excess thereof or, in the case of Construction Term Loans, the unused amount of the Construction Term Loan Commitment Amount. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. On or before 2:00 P.M., New York City time, on the Business Day such Term Loans are to be made, each Lender shall deposit with the Administrative Agent Same Day Funds in an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Agent shall make such funds available to the Borrower by wire transfer to the accounts the Borrower shall have specified in its Borrowing Request. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. SECTION 2.2 Revolving Loan Commitment. On the terms and subject to ------------------------- the conditions of this Agreement, each Lender severally agrees to make Revolving Loans pursuant to such Lender's Revolving Loan Commitment as provided in this Section 2.2. - ----------- SECTION 2.2.1 Revolving Loan Commitment. From time to time on any ------------------------- Business Day occurring prior to the Revolving Loan Commitment Termination Date, each Lender severally agrees to make Revolving Loans (each, a "Revolving Loan") -------------- to the Borrower equal to such Lender's Percentage of the Borrowing of Revolving Loans requested or deemed to be requested by the Borrower to be made on such day. The Revolving Loans may from time to time be LIBO Rate Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Section 2.2.2 and 2.5. The Borrower may from time to time ------------- --- borrow, prepay, in whole or in part, and reborrow Revolving Loans. Revolving Loan Commitments shall terminate automatically on the Revolving Loan Commitment Termination Date. SECTION 2.2.2 Procedure for Revolving Loan Borrowing. By delivering -------------------------------------- a Borrowing Request to the Administrative Agent on or before 12:00 Noon, New York City time, on a Business Day, the Borrower may from time to time irrevocably request, (i) on not less than three Business Days' notice, in the case of LIBO Rate Loans, and (ii) on the same Business Day, in the case of Base Rate Loans, that a Borrowing of Revolving Loans be made in a minimum amount of $5,000,000 and an integral multiple of $1,000,000 in excess thereof, or in the unused amount of the Revolving Loan Commitment Amount. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the same type of Loans, and shall be made on the Business Day, specified in such Borrowing Request. On or before 2:00 P.M., New York City time, on the Business Day such Revolving Loans are to be made, each Lender shall -21- deposit with the Administrative Agent Same Day Funds in an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Administrative Agent shall make such funds available to the Borrower by wire transfer to the accounts the Borrower shall have specified in its Borrowing Request. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. SECTION 2.3 Lenders Not Required To Make Loans. No Lender shall be ---------------------------------- required to make: (a) any Revolving Loan if, after giving effect thereto, (i) the aggregate outstanding principal amount of all Revolving Loans would exceed the Revolving Loan Commitment Amount, or (ii) the aggregate outstanding principal amount of all Revolving Loans of such Lender would exceed such Lender's Revolving Loan Commitment; or (b) any Term Loan if, after giving effect thereto, (i) the aggregate outstanding principal amount of all 364-Day Term Loans would exceed the 364-Day Term Loan Commitment Amount, or (ii) the aggregate outstanding principal amount of all Construction Term Loans would exceed the Construction Term Loan Commitment Amount, or (iii) the outstanding principal amount of the 364-Day Term Loan of such Lender would exceed such Lender's 364-Day Term Loan Commitment, or (iv) the aggregate outstanding principal amount of all Construction Term Loans of such Lender would exceed such Lender's Construction Term Loan Commitment. SECTION 2.4 Reduction of the Commitments. The Borrower may, from ---------------------------- time to time on any Business Day occurring after the Effective Date, voluntarily reduce the Revolving Loan Commitment Amount or the Construction Term Loan Commitment Amount without premium or penalty (subject, however, to Section 4.5); ----------- provided, however, that all such reductions shall require at least three hours' - -------- ------- prior notice to the Administrative Agent and be permanent, and any partial reduction of the Revolving Loan Commitment Amount and the Construction Term Loan Commitment Amount shall be in a minimum amount of $10,000,000; and, provided, -------- further, that (i) the Revolving Loan Commitment Amount may not be reduced to an - ------- amount less than the aggregate amount of outstanding Revolving Loans and (ii) the -22- Construction Term Loan Commitment Amount may not be reduced to an amount less than the aggregate amount of outstanding Construction Term Loans. SECTION 2.5 Continuation and Conversion Elections. By delivering a ------------------------------------- Continuation/Conversion Notice to the Administrative Agent on or before 12:00 Noon, New York City time on a Business Day, the Borrower may from time to time irrevocably elect that all, or any portion in an aggregate minimum amount of $5,000,000 and an integral multiple of $1,000,000 in excess thereof, of any Loans be (i) on not less than three Business Days' notice, converted into, or continued as, LIBO Rate Loans, or (ii) on the same Business Day, be converted into, or continued as Base Rate Loans. In the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan, such LIBO Rate Loan shall automatically be continued as a LIBO Rate Loan with an Interest Period of the same duration as the then expiring Interest Period; provided, -------- however, that (x) each such conversion or continuation shall be pro rated among - ------- the applicable outstanding Loans of all Lenders, (y) a LIBO Rate Loan may not be converted at any time other than the last day of the Interest Period applicable thereto and (z) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Default or Event of Default under Section 9.1.1 has occurred and is continuing. Each delivery of ------------- a Continuation/Conversion Notice shall constitute a certification and warranty by the Borrower that on the date of delivery of such notice no Default has occurred and is continuing. If prior to the time of such continuation or conversion any matter certified to by the Borrower by reason of the immediately preceding sentence will not be true and correct at such time if then made, the Borrower will immediately so notify the Administrative Agent. Except to the extent, if any, that prior to the time of such continuation or conversion the Administrative Agent shall have received written notice to the contrary from the Borrower, such certification and warranty shall be deemed to be made at the date of such continuation or conversion as if then made. Upon the occurrence and during the continuance of any Event of Default under Section 9.1.1, each LIBO ------------- Rate Loan shall convert automatically to a Base Rate Loan at the end of the Interest Period then in effect for such LIBO Rate Loan. SECTION 2.6 Funding. Each Lender may, if it so elects, fulfill its ------- obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; provided, -------- however, that such LIBO Rate Loan shall nonetheless be deemed to have been made - ------- and to be held by such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility. In addition, the Borrower hereby consents and agrees that, for purposes of any determination to be made for purposes of Sections 4.1, 4.2, 4.3, 4.4 or 4.5, it shall be ------------ --- --- --- --- conclusively assumed that each Lender elected to fund all LIBO Rate Loans by purchasing deposits in its LIBOR Office's interbank eurodollar markets. -23- ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1 Repayments and Prepayments. (a) The 364-Day Term Loan of -------------------------- each Lender shall mature, and the Borrower unconditionally promises to pay in full the unpaid principal amount of such 364-Day Term Loan to the Administrative Agent, for the account of such Lender, on the 364-Day Term Loan Maturity Date. (b) The Construction Term Loan of each Lender shall mature, and the Borrower unconditionally promises to pay in full the unpaid principal amount of such Construction Term Loan to the Administrative Agent, for the account of such Lender, on the Construction Term Loan Maturity Date. (c) The Revolving Loans of each Lender shall mature, and the Borrower unconditionally promises to pay in full the unpaid principal amount of each Revolving Loan to the Administrative Agent, for the account of such Lender, on the Revolving Loan Commitment Termination Date. (d) The Borrower shall, immediately upon any acceleration of any Loans pursuant to Section 9.2 or Section 9.3, repay all Loans, unless, pursuant to ----------- ----------- Section 9.3, only a portion of all Loans is so accelerated. - ----------- SECTION 3.1.1 Optional Prepayments and Commitment Reductions. (a) ---------------------------------------------- At any time, and from time to time, the Borrower may, on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of the Loans; provided, however, that: -------- ------- (i) unless the Borrower notifies the Administrative Agent that such prepayment is to be applied to prepay Revolving Loans, any such prepayment made on or prior to the 364-Day Term Loan Maturity Date shall be applied first to the 364-Day Term Loans until such Loans are paid in full and, ----- second, to the Construction Term Loans until such Loans are paid in full; ------ (ii) unless the Borrower notifies the Administrative Agent that such prepayment is to be applied to prepay Revolving Loans, any such prepayment made after the 364-Day Term Loan Maturity Date shall be applied to the Construction Term Loans until such Loans are paid in full; (iii) any such prepayment shall be applied pro rata among Loans of --- ---- the same type and, if applicable, having the same Interest Period; -24- (iv) any such prepayment of any LIBO Rate Loan made on any day other than the last day of the Interest Period for such Loan shall be subject to the provisions of Section 4.5; ----------- (v) any such prepayment of LIBO Rate Loans shall require at least two Business Days' prior written notice to the Administrative Agent and any such prepayment of Base Rate Loans may be made on same day's written notice to the Administrative Agent; and (vi) any such partial prepayment of Loans shall be in an aggregate minimum amount of $10,000,000. (b) Each prepayment of Loans made pursuant to this Section 3.1.1 shall ------------- be accompanied by accrued interest to the date of such prepayment on the amount prepaid but shall be without premium or penalty, except as may be required by Section 4.5. Each voluntary prepayment of Term Loans shall automatically and - ----------- permanently reduce the related Term Loan Commitment Amount by a like amount. No voluntary prepayment of Revolving Loans shall cause a reduction in the Revolving Loan Commitment Amount. SECTION 3.1.2 Mandatory Prepayments and Commitment Reductions. (a) ----------------------------------------------- If any Indebtedness shall be issued or incurred by any Loan Party in accordance with Section 8.2.1(e), an amount equal to the lesser of (i) 100% of the Net Cash ---------------- Proceeds thereof and (ii) the aggregate principal amount of the 364-Day Term Loans outstanding shall be applied within one Business Day after the issuance or incurrence of such Indebtedness to the prepayment of the 364-Day Term Loans. (b) If any Loan Party shall receive Net Cash Proceeds from any Recovery Event, an amount equal to 100% of such Net Cash Proceeds shall be applied on such date to the prepayment of Senior Debt as set forth below, unless the Borrower delivers a Reinvestment Notice in respect of such Recovery Event pursuant to Section 8.1.12, in which case, an amount equal to the Reinvestment -------------- Prepayment Amount with respect to such Recovery Event shall be applied on each Reinvestment Prepayment Date to the prepayment of Senior Debt as set forth below. Any such prepayment shall be applied ratably to the prepayment of the Senior Debt in proportion to the outstanding principal amounts thereof on the date of such repayment. Any such prepayment of the Loans made on or prior to the 364-Day Term Loan Maturity Date shall be applied first to the 364-Day Term ----- Loans until such Loans are paid in full, second, to the Construction Term Loans ------ until such Loans are paid in full and, third, to the Revolving Loans. Any such ----- prepayment of Loans made after the 364-Day Term Loan Maturity Date shall be applied first to the Construction Term Loans until such Loans are paid in full ----- and second to the Revolving Loans. Any such prepayment shall be applied pro ------ --- rata among Loans of the same type and, if applicable, having the same Interest - ---- Period. (c) Each prepayment made pursuant to this Section 3.1.2 shall be ------------- accompanied by accrued interest to the date of such prepayment on the amount prepaid but shall be without -25- premium or penalty, except as may be required by Section 4.5. Each mandatory ----------- prepayment of Loans shall automatically and permanently reduce the 364-Day Term Loan Commitment Amount, the Construction Term Loan Commitment Amount or the Revolving Loan Commitment Amount, as the case may be, by a like amount. SECTION 3.2 Interest Provisions. Interest on the outstanding ------------------- principal amount of Loans shall accrue and be payable in accordance with this Section 3.2. - ----------- SECTION 3.2.1 Rates. (a) Pursuant to an appropriately delivered ----- Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue interest at a rate per annum: (i) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin from time to time in effect; and (ii) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate for such Interest Period plus the Applicable Margin from time to time in effect. "LIBO Rate" means, for each day during each Interest Period for each --------- LIBO Rate Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Telerate Service Page 3750 as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Telerate Service Page 3750, the "LIBO Rate" shall be determined by reference to such --------- other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein. Notwithstanding any other provision hereof, at such time as there shall exist for any Lender a LIBOR Reserve Percentage which is greater than zero, the LIBO Rate used in the determination of LIBO Rate Loans made by such Lender shall be the LIBO Rate (Reserve Adjusted). (b) All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan. SECTION 3.2.2 Post-Maturity Rates; Default Rates. (a) After the ---------------------------------- date any principal amount of any Loan is due and payable (whether on a Commitment Termination Date, upon acceleration or otherwise), or after any monetary Obligation of the Borrower shall become -26- due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such overdue amount at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin plus ---- 2% until such amount is paid in full. (b) Upon the occurrence and during the continuance of any Event of Default (other than an Event of Default under Section 9.1.1, for which provision ------------- is made in Section 3.2.2(a) above), the Borrower shall pay, but only to the ---------------- extent permitted by law, in addition to the interest then payable on the Loans, interest (after as well as before judgment) on the Loans at 2% per annum until such Event of Default is cured. SECTION 3.2.3 Payment Dates. Interest accrued on each Loan shall be ------------- payable, without duplication: (a) on the Commitment Termination Date; (b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan; (c) with respect to Base Rate Loans, on each Quarterly Payment Date occurring after the date of the initial Borrowing hereunder; (d) with respect to LIBO Rate Loans, the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on the day three months after such Loan is made or continued); and (e) on that portion of any Loans which is accelerated pursuant to Section 9.2 or Section 9.3, immediately upon such acceleration. ----------- ----------- Interest accrued on Loans or other monetary Obligations arising under any Loan Document after the date such amount is due and payable (whether on any Commitment Termination Date, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.2.4 Interest Rate Determination. The Administrative Agent --------------------------- shall determine the interest rate applicable to Loans and shall give prompt notice to the Borrower and the Lenders of such determination, and its determination thereof shall be conclusive in the absence of manifest error. SECTION 3.3 Fees. The Borrower agrees to pay the fees set forth in ---- this Section 3.3. ----------- SECTION 3.3.1 Facility Fee. The Borrower agrees to pay to the ------------ Administrative Agent, for the ratable account of each Lender, facility fees (the "Facility Fee") in respect of each of the amount of the Construction Term Loan ------------ Commitment Amount and the Revolving Loan -27- Commitment Amount (irrespective of usage) for each day from and after the Effective Date at the rate per annum based on the Borrower's Debt Rating for such day determined as provided in the Pricing Grid. Such fees shall be payable in arrears on each Quarterly Payment Date, commencing with the first such date following the Effective Date, and on each Commitment Termination Date. SECTION 3.3.2 Administrative Agent's Fee and Miscellaneous Fees. The ------------------------------------------------- Borrower agrees to pay to the Administrative Agent, for (i) its own account, (ii) the account of the Lenders and (iii) the account of the Lead Arrangers, the respective fees as agreed to in the letter dated February 19, 1999, between the Administrative Agent, the Lead Arrangers, the Initial Lenders, the Borrower and Edison Mission Energy. ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 4.1 LIBO Rate Lending Unlawful. If any Lender shall -------------------------- reasonably determine (which determination shall, upon notice thereof to the Borrower and the Administrative Agent, be conclusive and binding on the Borrower absent manifest error) that the introduction of or any change in or in the interpretation of any law, rule or regulation makes it unlawful, or any central bank or other governmental authority or comparable agency asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the obligations of such Lender to make, continue, maintain or convert any such Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and all LIBO Rate Loans of such Lender shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion. SECTION 4.2 Inability to Determine Rates. If prior to the first day ---------------------------- of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Interest Period; or (b) the Administrative Agent shall have received notice from the Required Lenders in respect of the relevant Borrowing that the LIBO Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period; -28- the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter. If such notice is given (x) any LIBO Rate Loans under the relevant Borrowing requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans under the relevant Borrowing that were to have been converted on the first day of such Interest Period to LIBO Rate Loans shall be continued as Base Rate Loans and (z) any outstanding LIBO Rate Loans under the relevant Borrowing shall be converted, on the last day of the then-current Interest Period, to Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further LIBO Rate Loans under the relevant Borrowing shall be made or continued as such, nor shall the Borrower have the right to convert Loans under the relevant Borrowing to LIBO Rate Loans. SECTION 4.3 Increased LIBO Rate Loan Costs. If after the date ------------------------------ hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its LIBOR Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall increase the cost to such Lender of, or result in any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans, then the Borrower agrees to pay to the Administrative Agent for the account of each Lender the amount of any such increase or reduction. Such Lender shall promptly notify the Administrative Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by the Borrower directly to such Lender within ten Business Days of its receipt of such notice, and such notice shall be binding on the Borrower absent clear and convincing evidence to the contrary. SECTION 4.4 Obligation to Mitigate. Each Lender agrees that as ---------------------- promptly as practicable after it becomes aware of the occurrence of an event that would entitle it to give notice pursuant to Section 4.l, 4.3 or 4.6, and in ------- --- --- --- any event if so requested by the Borrower, each Lender shall use reasonable efforts to make, fund or maintain its affected Loans through another lending office if as a result thereof the increased costs would be avoided or materially reduced or the illegality would thereby cease to exist and if, in the sole opinion of such Lender, the making, funding or maintaining of such Loans through such other lending office would not in any material respect be disadvantageous to such Lender, contrary to such Lender's normal banking practices or violate any applicable law or regulation. No change by a Lender in its Domestic Office or LIBOR Office made for such Lender's convenience shall result in any increased cost to the Borrower. The Borrower shall not be obligated to compensate any Lender for the amount of any additional amount pursuant to Section 4.1, 4.3 or ----------- --- 4.6 accruing prior to the date which is 90 days before the date on which such - --- Lender first notifies the Borrower that it intends to claim such compensation; it being understood that the calculation of the actual amounts may not be possible -29- within such period and that such Lender may provide such calculation as soon as reasonably practicable thereafter without affecting or limiting the Borrower's payment obligation thereunder. If any Lender demands compensation pursuant to Section 4.1, 4.3 or 4.6 with respect to any LIBO Rate Loan, the Borrower may, at - ----------- --- --- any time upon at least one Business Days prior notice to such Lender through the Administrative Agent, elect to convert such Loan into a Base Rate Loan. Thereafter, unless and until such Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, all such LIBO Rate Loans by such Lender shall bear interest as Base Rate Loans, notwithstanding any prior election by the Borrower to the contrary. If such Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, the Borrower may elect that the principal amount of each such Loan again bear interest as LIBO Rate Loans in accordance with this Agreement, on the first day of the next succeeding Interest Period applicable to the related LIBO Rate Loans of other Lenders. Additionally, the Borrower may, at its option, upon at least five Business Days' prior notice to such Lender, elect to prepay in full, without premium or penalty, such Lender's affected LIBO Rate Loans. If the Borrower elects to prepay any Loans pursuant to this Section 4.4, the Borrower ----------- shall pay within ten Business Days after written demand any additional increased costs of such Lender accruing for the period prior to such date of prepayment. If such conversion or prepayment is made on a day other than the last day of the current Interest Period for such affected LIBO Rate Loans, such Lender shall be entitled to make a request for, and the Borrower shall pay, compensation under Section 4.5. - ----------- SECTION 4.5 Funding Losses. In the event any Lender shall incur any -------------- loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of: (a) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or ----------- otherwise; (b) Borrower's failure to borrow any LIBO Rate Loans in accordance with the Borrowing Request therefor; or (c) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/Conversion Notice therefor; then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within ten Business Days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall be binding on the Borrower absent manifest error. -30- SECTION 4.6 Increased Capital Costs. If after the date hereof any ----------------------- change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any applicable law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority affects the amount of capital required to be maintained by any Lender, and such Lender reasonably determines that the rate of return on its capital as a consequence of its Revolving Loan Commitment, the Term Loan Commitments or the Loans made by such Lender is reduced in a material amount to a level below that which such Lender could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender to the Borrower, the Borrower shall pay within ten Business Days after such demand directly to such Lender additional amounts sufficient to compensate such Lender for such reduction in rate of return. A statement of such Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall be binding on the Borrower absent manifest error. SECTION 4.7 Taxes. (a) All payments by the Borrower of principal ----- of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by any Lender's net income, in each case, imposed as result of a connection between the Lender and the jurisdiction imposing the tax (other than a connection arising solely from the Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement) (such non-excluded items being called "Taxes"). In the event that any withholding or deduction from any payment ----- to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will: (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; (ii) within 30 days after such payment forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority; and (iii) pay to the Administrative Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required. Moreover, if any Taxes are directly asserted against the Administrative Agent or any Lender with respect to any payment received by the Administrative Agent or such Lender hereunder, the Administrative Agent or such Lender may pay such Taxes and, upon receipt of notice from the Administrative Agent or such Lender within 30 days after such payment, the Borrower will -31- promptly pay such additional amounts including any penalties, interest or expenses) as is necessary in order that the net amount received by such person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such person would have received had no such Taxes been asserted. (b) If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent, for the account of the respective Lenders, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lenders for any incremental Taxes, interest or penalties that may become payable by any Lender as a result of any such failure. For purposes of this Section 4.7, a ----------- distribution hereunder by the Administrative Agent or any Lender to or for the account of any Lender shall be deemed a payment by the Borrower. (c) Each Lender that is not a United States person as defined in Section 7701(a)(3) of the Code (a "Non-U.S. Lender") shall deliver to the --------------- Borrower and the Administrative Agent two copies of either U.S. Internal Revenue Service Form 1001 or Form 4224, or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement. In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). The Borrower shall not be required to increase any such amounts payable to any Non-U.S. Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Non-U.S. Lender's failure to comply with the requirements of this Section 4.7(c) or (ii) that are United States withholding -------------- taxes imposed on amounts payable to such Lender at the time the Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to Section 4.7(a). -------------- Notwithstanding any other provision of this Section 4.7(c), a Non-U.S. Lender -------------- shall not be required to deliver any form pursuant to this Section 4.7(c) that -------------- such Non-U.S. Lender is not legally able to deliver. SECTION 4.8 Payments, Computations. Unless otherwise expressly ---------------------- provided, all payments by the Borrower pursuant to any Loan Document shall be made by the Borrower to the Administrative Agent for the pro rata account of the --- ---- Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 12:00 Noon, New York City time, on the date due, in Same Day Funds, to such account as the Administrative Agent shall specify from time to time by notice to the Borrower; provided that such payment shall be -------- deemed made timely if made by wire transfer and by such time as an Authorized Representative of the Borrower has advised the -32- Administrative Agent of the applicable Federal Reserve System wire transfer confirmation number. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly remit in Same Day Funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base Rate Loan, 365 days or, if appropriate, 366 days). Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (c) of the definition of the term ---------- "Interest Period" with respect to LIBO Rate Loans) be made on the next --------------- succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. SECTION 4.9 Sharing of Payments. If any Lender shall obtain any ------------------- payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Obligation under the Loan Documents, the EME Credit Support Guarantee or the EME Debt Service Reserve Guarantee (other than pursuant to the terms of Sections 4.3, 4.4, 4.5, 4.6, and 4.7) in excess of ------------ --- --- --- --- its pro rata share of payments then or therewith obtained by all Lenders holding --- ---- Loans of such type, such Lender shall purchase from the other Lenders such participations in Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess -------- ------- payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to the proportion of (a) the amount of such selling Lender's required repayment to the purchasing Lender to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 4.9 may, to the fullest extent ----------- permitted by law, exercise all its rights of payment (including pursuant to Section 4.10) with respect to such participation as fully as if such Lender were - ------------ the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section ------- 4.9 applies, such Lender shall, to the extent practicable, exercise its rights - --- in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 4.9 to share in the benefits of any recovery ----------- on such secured claim. SECTION 4.10 Set-off. Each Lender shall, upon the occurrence of any ------- Event of Default described in clauses (a) or (b) of Section 9.1.6 and, upon the ----------- --- ------------- occurrence of any Default described in clauses (c) through (d) of Section 9.1.6 ----------- --- ------------- with respect to the Borrower or, with the -33- consent of the Required Lenders, upon the occurrence and continuance beyond the expiration of the applicable grace period, if any, of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) the Borrower hereby grants to each Lender a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with such Lender or any bank controlling such Lender; provided, however, that any such appropriation and application -------- ------- shall be subject to the provisions of Section 4.9. ----------- Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the - -------- ------- validity of such set-off and application. The rights of each Lender under this Section 4.10 are in addition to ------------ other rights and remedies (including other rights of set-off under applicable law or otherwise) which such Lender may have. SECTION 4.11 Replacement of Lender. The Borrower shall be permitted --------------------- to replace (with one or more replacement Lenders) any Lender which requests reimbursement for amounts owing pursuant to Section 4.1, 4.3, 4.6 or 4.7; --------------------- --- provided that (i) such replacement does not conflict with any law, treaty, rule - -------- or regulation or determination of an arbitrator or a court or other governmental authority, in each case applicable to the Borrower or such Lender or to which the Borrower or such Lender or any of their respective property is subject, (ii) no Default or Event of Default shall have occurred and be continuing at the time of such replacement, (iii) the Borrower shall repay (or the replacement bank or institution shall purchase, at par) all Loans and other amounts owing to such replaced Lender prior to the date of replacement, (iv) the Borrower shall be liable to such replaced Lender under Section 4.5 if any LIBO Rate Loan owing to ----------- such replaced Lender shall be prepaid (or purchased) other than on the last day of the Interest Period relating thereto, (v) the replacement bank or institution, if not already a Lender, shall be reasonably satisfactory to the Administrative Agent, (vi) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 11.11.1 (provided that --------------- -------- the Borrower or replacement Lender shall be obligated to pay the registration and processing fee), (vii) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Section 4.1, 4.3, 4.6 or 4.7, as the case may be, (viii) any such --------------------- --- replacement shall not be deemed to be a waiver of any rights which the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender, and (ix) if such replacement bank or institution is not already a Lender, the Borrower shall pay to the Administrative Agent an administrative fee of $3,500. -34- ARTICLE V DEBT SERVICE RESERVE ACCOUNT SECTION 5.1 Debt Service Reserve Account. The Borrower shall ---------------------------- establish, for the benefit of the Lenders, in the name of the Collateral Agent, the Debt Service Reserve Account, to be held and maintained by the Collateral Agent in accordance with the Security Deposit Agreement. SECTION 5.2 Debt Service Reserve Requirement. The Debt Service -------------------------------- Reserve Requirement may be satisfied by the Borrower by one or a combination of the following: (i) cash; (ii) a letter of credit issued by a commercial bank or other financial institution whose long-term unsecured debt securities are rated A or better by S&P's and A2 or better by Moody's; and (iii) an EME Debt Service Reserve Guarantee. ARTICLE VI CONDITIONS TO LOANS SECTION 6.1 Conditions to Effectiveness. This Agreement shall become --------------------------- effective upon the satisfaction of each of the conditions precedent set forth in this Section 6.1. ----------- SECTION 6.1.1 Loan Documents. The Administrative Agent shall have -------------- received: (i) this Agreement, executed and delivered by an Authorized Representative of the Borrower, with a counterpart for each Lender; (ii) the Guarantee and Collateral Agreement, executed and delivered by an Authorized Representative of each Loan Party (together with an updated copy of the stock register or other register of ownership interests of such Loan Party other than the Borrower), with a counterpart or a copy for each Lender; (iii) the Mortgage and Security Agreement, executed and delivered by an Authorized Representative of each Loan Party which is a party to such agreement, with a counterpart or a copy for each Lender; (iv) the Collateral Agency and Intercreditor Agreement, executed and delivered by an Authorized Representative of each Loan Party, with a counterpart or a copy for each Lender; (v) the Security Deposit Agreement, executed and delivered by an Authorized Representative of each Loan Party, with a counterpart or a copy for each Lender; (vi) the Intercompany Loan Subordination Agreement, executed and delivered by an Authorized Representative of each Loan Party, with a counterpart or a copy for each Lender; and (vii) for the account of each Lender who so requests, its Notes, executed and delivered by an Authorized Representative of the Borrower. SECTION 6.1.2 Acquisition. The Acquisition shall have been ----------- consummated on substantially the terms and conditions of the Asset Purchase Agreement; and the Lenders have received copies of the Asset Purchase Agreement and all related material documents reasonably requested by the Administrative Agent, certified by an Authorized Representative of the Borrower, and the Lenders shall be satisfied with the terms and conditions thereof (which shall include a cash equity investment in the Borrower of at least $1,000,000,000). -35- SECTION 6.1.3 EME Credit Support. The Administrative Agent shall ------------------ have received from Edison Mission Energy the EME Credit Support Guarantee. SECTION 6.1.4 Debt Ratings. The Borrower shall have received written ------------ preliminary Debt Ratings of its senior secured long-term debt of BBB- or better from S&P's and Baa3 or better from Moody's, in each case in form and substance reasonably satisfactory to the Initial Lenders. SECTION 6.1.5 Financial Statements. The Administrative Agent shall -------------------- have received, with a copy for each Lender, the audited consolidated financial statements of Edison Mission Energy for the 1997 Fiscal Year and the unaudited consolidated financial statements of Edison Mission Energy for the 1998 Fiscal Year. SECTION 6.1.6 Projections; Rating Agency Presentations. The ---------------------------------------- Administrative Agent shall have received, with a copy for each Lender, (a) satisfactory financial projections for the Borrower for the 1999-2019 Fiscal Years, including pro forma consolidated financial statements, calculations of --- ----- the projected Debt Service Coverage Ratios and the Environmental Capital Expenditure Program and (b) the financial projections and other material information provided to the rating agencies in connection with the issuance of the Debt Ratings referred to in Section 6.1.4. ------------- SECTION 6.1.7 Closing Fees, Expenses. The Administrative Agent shall ---------------------- have received for its own account, or for the account of each Lender or Lead Arranger, as the case may be, all fees due and payable pursuant to Sections 3.3 --- and 11.3 and all costs and expenses for which invoices have been presented. SECTION 6.1.8 Approvals. (a) All Governmental Approvals required in --------- connection with the transactions contemplated by the Loan Documents, the Acquisition and the conduct of the business of each of the Loan Parties are listed on Schedule 7.4 and shall have been obtained or made, be in full force ------------ and effect and be final and any period for the filing of notice of rehearing or application for judicial review of the issuance of each such Governmental Approval shall have expired without any such notice or application having been given or made, except as noted in Part B of Schedule 7.4. No such Governmental ------ ------------ Approval is the subject of any pending or, except as indicated in Part C of ------ Schedule 7.4, threatened judicial or administrative proceeding. - ------------ (b) All consents and approvals required to be obtained from Persons other than Governmental Authorities in connection with the transactions contemplated by the Loan Documents and the Acquisition shall have been obtained and shall be in full force and effect, other than such consents or approvals, the failure of which to obtain, would not, individually or in the aggregate, cause a Material Adverse Effect. -36- SECTION 6.1.9 Consultants' Reports. The Administrative Agent shall -------------------- have received, with a copy for each Lender, (i) an engineering report prepared by Stone & Webster and (ii) a market report prepared by Hagler Bailly, in each case in form and substance reasonably satisfactory to the Lenders. SECTION 6.1.10 Lien Search; Recordings and Filings. (a) The ----------------------------------- Administrative Agent shall have received results of a recent search by a Person satisfactory to it that there are no Uniform Commercial Code, judgment or tax lien filings on any of the assets of any Loan Party in each relevant jurisdiction except for (i) Liens pursuant to the Loan Documents and (ii) Liens to be discharged on or prior to the Effective Date pursuant to documentation reasonably satisfactory to the Administrative Agent. (b) All financing statements and other documents required to be filed, registered or recorded in order to create, in favor of the Collateral Agent for the benefit of the Secured Parties, a perfected, First Priority Lien shall have been properly filed, registered or recorded in each office in each jurisdiction in which such filings, registrations and recordations are required to perfect the security interests created by the Security Documents, and any other action required in the judgment of the Administrative Agent to perfect such security interests as such First Priority Liens shall have been effected, the Administrative Agent shall have received acknowledgment copies or other evidence satisfactory to it of such filing, registration or recording, and the Administrative Agent shall have received evidence satisfactory to it that all necessary filing, recording and other fees and all taxes and expenses related to such filings, registrations and recordings have been paid in full. SECTION 6.1.11 Resolutions. The Administrative Agent shall have ----------- received from each Loan Party a certificate, in form and substance reasonably satisfactory to the Administrative Agent, dated the Effective Date, of its Secretary, Assistant Secretary or other Authorized Representative of such Loan Party as to: (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of each Loan Document to be executed by it; (b) the incumbency and signatures of those of its officers and representatives authorized to act with respect to each Loan Document executed by it; and (c) such Loan Party's Organic Documents. The Administrative Agent and each Lender may conclusively rely upon such certificate until it shall have received a further certificate of the Secretary, Assistant Secretary or other Authorized Representative of such Loan Party canceling or amending such prior certificate. -37- SECTION 6.1.12 Officer's Certificate. The Administrative Agent shall --------------------- have received, with a copy for each Lender, a certificate of an Authorized Representative of the Borrower, dated the Effective Date, in form and substance reasonably satisfactory to the Administration Agent. SECTION 6.1.13 Opinions of Counsel. The Administrative Agent shall ------------------- have received opinions, dated the Effective Date and addressed to the Administrative Agent and the Lenders, from (i) the general counsel to the Loan Parties, (ii) the special New York and Federal Energy Regulatory Commission counsel to the Loan Parties, (iii) the special Pennsylvania counsel to the Loan Parties, (iv) the special New York counsel to the Lenders, and (v) the special Pennsylvania counsel to the Lenders. Each such opinion shall be in form and substance reasonably satisfactory to the Administrative Agent. SECTION 6.1.14 Establishment of Accounts. The Administrative Agent ------------------------- shall have received evidence satisfactory to it that the Borrower has established the Revenue Account pursuant to Section 2.2(a) of the Security -------------- Deposit Agreement. SECTION 6.1.15 Surveys. The Administrative Agent and the Title ------- Insurance Company each shall have received maps or plats of an as-built survey of the sites of the real property covered by the Mortgage and Security Agreement certified to the Administrative Agent and the Title Insurance Company in a manner reasonably satisfactory to each of them, dated a date reasonably satisfactory to the Administrative Agent and the Title Insurance Company, prepared by an independent professional licensed land surveyor reasonably satisfactory to the Administrative Agent and the Title Insurance Company, which maps or plats and the surveys on which they are based shall (except as such survey may fail to demonstrate a closed traverse within 35 feet at the reservoir site) be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (i) the locations on such sites of all the buildings, structures and other improvements and evidence reasonably satisfactory to the Administrative Agent delineating the established building setback lines; (ii) the lines of streets abutting the sites and width thereof; (iii) all access and other easements appurtenant to the sites necessary to use the sites; (iv) whether recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor, all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the sites and any encroachments on any adjoining property by the building structures and improvements on the sites; and (v) if the site is described as being on a filed map, a legend relating the survey to said map. SECTION 6.1.16 Title Insurance; Flood Insurance. (a) The -------------------------------- Administrative Agent shall have received in respect of each parcel of owned real property covered by the Mortgage and Security Agreement, a mortgagee's title policy (or policies) or marked up unconditional binder for such insurance dated the date of the recording of the Mortgage and Security Agreement. Each -38- such policy shall (i) be in an amount reasonably satisfactory to the Administrative Agent; (ii) insure that the Mortgage and Security Agreement creates a valid first Lien on such parcel free and clear of all defects and encumbrances, except those as may be approved by the Administrative Agent; (iii) name the Collateral Agent for the benefit of the Secured Parties as the insured thereunder; (iv) be in the form of an ALTA Loan Policy; (v) contain such endorsements and affirmative coverage as the Administrative Agent may reasonably request; and (vi) be issued by title companies reasonably satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsurers, at the option of the Administrative Agent). The Administrative Agent shall have received evidence reasonably satisfactory to it that all premiums in respect of each such policy, and all charges for Mortgage and Security Agreement recording tax, if any, have been paid. The Administrative Agent shall have also received a copy of all recorded documents referred to, or listed as exceptions to title in, the title policy or policies referred to in this subsection and a copy certified by such parties as the Administrative Agent may deem reasonably appropriate, of all other documents affecting the property covered by the Mortgage and Security Agreement as shall have been reasonably requested by the Administrative Agent. (b) If requested by the Administrative Agent, the Administrative Agent shall have received (i) a policy of flood insurance which (A) covers any parcel of improved real property which is encumbered by the Mortgage and Security Agreement, (B) is written in an amount not less than the outstanding principal amount of the indebtedness secured by the Mortgage and Security Agreement which is reasonably allocable to such real property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less, and (C) has a term ending not later than the maturity of the Indebtedness secured by the Mortgage and Security Agreement and (ii) confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H of the F.R.S. Board. SECTION 6.1.17 Insurance. The Administrative Agent shall have --------- received a letter from J&H Marsh & McLennan relating to insurance matters and copies of certificates from the Borrower's insurers or insurance agents evidencing that the insurance policies in place satisfy the requirements of Section 8.1.5. - ------------- SECTION 6.2 All Loans. The obligation of each Lender to make any --------- Loan (including its initial Loan) shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 6.2. ----------- SECTION 6.2.1 Representations and Warranties; No Default. Both ------------------------------------------ before and after giving effect to any Borrowing (but, if any Default of the nature referred to in Section 9.1.5 shall have occurred with respect to any ------------- other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds of such Borrowing), the following statements shall be true and correct: -39- (a) the representations and warranties set forth in Article VII shall ----------- be true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date); and (b) no Default or Event of Default has occurred and is continuing or would result from such Borrowing. SECTION 6.2.2 Borrowing Request. The Administrative Agent shall have ----------------- received a Borrowing Request for such Borrowing. Each of the delivery of a Borrowing Request and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing (both immediately before and after giving effect to such Borrowing and the application of the proceeds thereof) the statements made in Section 6.2.1 are true and correct. ------------- SECTION 6.2.3 Satisfactory Legal Form. All documents executed or ----------------------- submitted pursuant hereto by or on behalf of the Borrower shall be satisfactory in form and substance to the Administrative Agent and its counsel. ARTICLE VII REPRESENTATIONS AND WARRANTIES In order to induce the Administrative Agent and each Lender to enter into this Agreement and to make Loans hereunder, the Borrower represents and warrants unto the Administrative Agent and each Lender as set forth in this Article VII. - ----------- SECTION 7.1 Financial Information. (a) The consolidated balance --------------------- sheet of the Borrower as at December 31, 1998, and the related consolidated statements of income and cash flows of the Borrower, copies of which have been furnished to the Administrative Agent, have been prepared in accordance with GAAP consistently applied, and present fairly the consolidated financial condition of the Borrower and its Subsidiaries as at the dates thereof and the results of their operations for the periods then ended. (b) The financial projections and other pro forma financial --------- information provided to the Lenders have been prepared in good faith and are based upon reasonable assumptions. SECTION 7.2 Organization; Power. Each Loan Party (a) is a ------------------- corporation or limited partnership validly organized and existing and in good standing under the laws of the state of its incorporation, (b) is duly qualified to do business and is in good standing as a foreign corporation or limited partnership in each jurisdiction where the nature of its business requires such qualification and (c) has all requisite corporate or partnership power and authority and holds all material requisite Governmental Approvals to enter into and perform its Obligations under this -40- Agreement, the Notes and each other Loan Document and to conduct the business of owning and operating the Generating Station and the sale and marketing of wholesale electric power and other products and services related thereto, except, with respect to clauses (b) and (c) above, where the failure to be so ----------- --- qualified or be in good standing or the failure to obtain such Governmental Approvals would not, individually or in the aggregate, cause a Material Adverse Effect. SECTION 7.3 Due Authorization; Non-Contravention. The execution, ------------------------------------ delivery and performance by each Loan Party of each Loan Document to which it is a party are within such Loan Party's corporate or partnership powers, have been duly authorized by all necessary corporate or partnership action, and do not: (a) contravene the Organic Documents of such Loan Party; (b) contravene any material Requirement of Law or Contractual Obligation, binding on or affecting such Loan Party; or (c) result in, or require the creation or imposition of, any Lien (other than pursuant to the Loan Documents) on any of the properties of such Loan Party. SECTION 7.4 Approvals. (a) All Governmental Approvals required in --------- connection with the transactions contemplated by the Loan Documents, the Acquisition and the conduct of the business of each of the Loan Parties are listed on Schedule 7.4 and have been duly obtained or made and are in full force ------------ and effect. All such Governmental Approvals are final and any period for the filing of notice of rehearing or application for judicial review of the issuance of each such Governmental Approval has expired without any such notice or application having been made, except as noted in Part B of Schedule 7.4. No ------ ------------ such Governmental Approval is the subject of any pending or, except as indicated in Part C of Schedule 7.4, threatened judicial or administrative proceeding. ------ ------------ (b) All consents and approvals required to be obtained from Persons other than Governmental Authorities in connection with the transactions contemplated by the Loan Documents and the Acquisition have been obtained and are in full force and effect, other than such consents or approvals, the failure of which to obtain, would not, individually or in the aggregate, cause a Material Adverse Effect. SECTION 7.5 No Material Adverse Change. Since January 24, 1999, -------------------------- there has not occurred any event or condition having a Material Adverse Effect. SECTION 7.6 Accuracy of Information. (a) All factual information ----------------------- heretofore or contemporaneously furnished by the Loan Parties and their Affiliates in writing to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby (other than projections and other "forward-looking" information) is, and all other such written factual information hereafter furnished by the Borrower in writing to -41- the Administrative Agent or any Lender will be, true and materially accurate in every material respect on the date as of which such information is dated or certified, and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading. The information contained in the Information Memorandum, dated at February 22, 1999, other than any opinions expressed in the reports referred to in Section 6.1.9, was true and materially accurate in every ------------- material respect on February 22, 1999, and on the Effective Date. (b) All projections and other "forward-looking" information heretofore or contemporaneously furnished by the Loan Parties and their Affiliates in writing to the Administrative Agent or any Lender for the purposes of or in connection with this Agreement or any transaction contemplated hereby were prepared in good faith and are based on reasonable assumptions. SECTION 7.7 Validity. Each Loan Document to which any Loan Party is -------- a party constitutes, or, upon the due execution and delivery thereof by such Loan Party, will constitute, the legal, valid and binding obligation of such Loan Party enforceable in accordance with its terms (except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and general principles of equity). SECTION 7.8 Compliance with Law and Contractual Obligations. Each ----------------------------------------------- Loan Party is in compliance with all Requirements of Law and Contractual Obligations applicable to it, except to the extent that the failure to comply therewith would not have a Material Adverse Effect. SECTION 7.9 Regulations T, U and X. No Loan Party is engaged in the ---------------------- business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation T, U or X. Terms for which meanings are provided in F.R.S. Board Regulation T, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. SECTION 7.10 Litigation. There is no pending or, to the knowledge of ---------- the Borrower, threatened litigation, action, proceeding, investigation or labor controversy affecting any Loan Party or any of its properties, businesses, assets or revenues or affecting any Governmental Approval described by Section ------- 7.4, which, if adversely determined (taking into account any insurance proceeds - --- payable under a policy where the insurer has accepted coverage without any reservations), would have a Material Adverse Effect or which purports to adversely affect the legality, validity or enforceability of any Loan Document. SECTION 7.11 Ownership of Properties. Each Loan Party owns good and ----------------------- marketable title to, or a valid leasehold in or other enforceable interest in, all properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, -42- trademarks, trade names, service marks and copyrights) purported to be owned, leased or held by it, free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 8.2.2. ------------- SECTION 7.12 Taxes. Each Loan Party has filed all tax returns and ----- reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 7.13 Investment Company Act; Public Utility Holding Company ------------------------------------------------------ Act; Other Regulations. (a) The Borrower is not subject to any regulation as - ---------------------- an "investment company" subject to the Investment Company Act of 1940, as amended, and no Loan Party is a "holding company" or a "subsidiary company" or an "affiliate" of a "holding company" under PUHCA, except that the Loan Parties each are a "subsidiary company" of Edison International, which is a "holding company" that is exempt from all regulation under PUHCA (except for Section 9(a)(2) thereof) pursuant to Section 3(a) thereof. No Loan Party is or will be subject to regulation as a "public utility", "public utility company", "public utility holding company", "electric corporation" or a subsidiary or affiliate of any of the foregoing under the laws of the State of Pennsylvania or the State of New York. (b) EME Homer City (i) is an "exempt wholesale generator" under PUHCA, (ii) is a member of, or otherwise has the right and authority to sell electric power and related products and services into, the NY Pool and PJM and (iii) has the authority to sell wholesale electric power at market-based rates (not subject to any price cap or other market power mitigation measure). SECTION 7.14 Environmental Warranties. Except as could not, ------------------------ individually or in the aggregate, be reasonably expected to have a Material Adverse Effect: (a) (i) All facilities and property owned, leased or operated by any Loan Party have been, and continue to be, owned, leased or operated by such Loan Party in compliance with all applicable Environmental Laws and (ii) the Loan Parties are, and within the period of all applicable statutes of limitation have been within the period of all applicable statutes of limitations, in compliance with all applicable Environmental Laws. (b) There are no pending or, to the knowledge of the Borrower, threatened (i) claims, complaints, notices or requests for information received by any Loan Party with respect to any alleged violation by such Loan Party of any applicable Environmental Law, or (ii) complaints, notices or inquiries to any Loan Party regarding potential liability under any applicable Environmental Law. -43- (c) Hazardous Materials are not present at, on, under or about any property now or to the knowledge of the Borrower previously owned, leased or operated by any Loan Party. (d) Each Loan Party has obtained and is in compliance with all Governmental Approvals required under any Environmental Law necessary for such Loan Party's business. (e) No property now or previously owned, leased or operated by any Loan Party is listed or, to the knowledge of the Borrower, is proposed for listing on the National Priorities List pursuant to any Environmental Law, on the CERCLIS or on any similar state or local list of sites requiring investigation or clean-up. (f) To the knowledge of the Borrower, no conditions exist at, on, under or about any property now or previously owned or leased by any Loan Party or at any other location (including, without limitation, any location to which Hazardous Materials have been sent for re-use or for recycling or for treatment, storage or disposal) which, with the passage of time, or the giving of notice or both, would give rise to liability under any applicable Environmental Law. (g) Other than as provided in the Asset Purchase Agreement, no Loan Party has assumed or retained, by contract or operation of law, any liabilities of any kind, fixed or contingent, known or unknown, under any applicable Environmental Law. SECTION 7.15 The Obligations. The Obligations are senior secured --------------- Indebtedness of the Loan Parties ranking at least pari passu with all other ---------- senior secured Indebtedness of the Loan Parties. SECTION 7.16 Year 2000 Matters. The Borrower has reviewed its ----------------- operations and those of the other Loan Parties with a view to assessing whether its businesses or the businesses of any of such other Loan Parties will, in the receipt, transmission, processing, manipulation, storage, retrieval, retransmission or other utilization of data, be vulnerable to a Year 2000 Problem or will be vulnerable to the effects of a Year 2000 Problem suffered by any of the Loan Parties' major commercial counter-parties. Based on such review the Borrower has no reason to believe that a Material Adverse Effect will occur with respect to its businesses or operations or the businesses or operations of any of the other Loan Parties resulting from a Year 2000 Problem. SECTION 7.17 Pension and Welfare Plans. During the consecutive ------------------------- twelve-month period prior to each date as of which the following representations are made or deemed made, and prior to the date of any Borrowing hereunder, no steps have been taken to terminate any Pension Plan; no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA or Section 412 of the Code; no condition exists or event or transaction has occurred with respect to any Pension Plan which could reasonably be expected to result in the incurrence by any Loan Party or any member of the Controlled Group of any -44- material liability (other than liabilities incurred in the ordinary course of maintaining the Pension Plan), fine or penalty and none of the following events or conditions, either individually or in the aggregate, has resulted or is reasonably likely to result in a material liability to any Loan Party or any member of the Controlled Group: (i) a Reportable Event; (ii) a complete or partial withdrawal from any Multiemployer Plan by any Loan Party or any member of the Controlled Group; (iii) any liability of the Loan Parties or any member of the Controlled Group under ERISA if the any Loan Party or any member of the Controlled Group were to withdraw completely from all Multiemployer Plans as of the annual valuation date most closely preceding the date on which this representation is made or deemed made; or (iv) the Reorganization or Insolvency of any Multiemployer Plan. Neither any Loan Party nor any member of the Controlled Group has any contingent liability with respect to any post- retirement benefit under a Welfare Plan which could reasonably be expected to have a Material Adverse Effect, other than liability for continuation coverage described in Part 6 of Title I of ERISA. SECTION 7.18 Subsidiaries. Except as otherwise disclosed on Schedule ------------ -------- 7.18, the Borrower has no Subsidiaries or Investments in other Persons. - ---- ARTICLE VIII COVENANTS SECTION 8.1 Affirmative Covenants. The Borrower agrees with the --------------------- Administrative Agent and each Lender that, until the Commitments have terminated and all Obligations have been paid and performed in full, the Borrower shall, and shall cause each of the other Loan Parties to, perform the obligations set forth in this Section 8.1. ----------- SECTION 8.1.1 Financial Information, Reports, Notices. The Borrower --------------------------------------- shall furnish, or shall cause to be furnished, to the Administrative Agent copies of the following financial statements, reports, notices and information: (a) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, consolidated balance sheets of the Borrower (which will include results for its consolidated subsidiaries) as of the end of such Fiscal Quarter and consolidated statements of income and cash flows of the Borrower (which will include results for its consolidated subsidiaries) for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, certified by an Authorized Representative of the Borrower with responsibility for financial matters; (b) as soon as available and in any event within 120 days after the end of each Fiscal Year of the Borrower, commencing with the 1999 Fiscal Year, a copy of the annual audit report for such Fiscal Year for the Borrower (which will include results for its consolidated subsidiaries), including therein consolidated balance sheets of the Borrower -45- (which will include results for its consolidated subsidiaries) as of the end of such Fiscal Year and consolidated statements of income and cash flows of the Borrower (which will include results for its consolidated subsidiaries) for such Fiscal Year, and accompanied by the opinion of Arthur Andersen & Co. or other internationally recognized independent auditors selected by the Borrower, which report shall state that such consolidated financial statements present fairly in all material respects the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior periods; (c) concurrently with the delivery of the financial statements referred to in Section 8.1.1(b), either: (i) the annual report provided to ---------------- senior management and shareholders of the Borrower for the preceding calendar year with respect to the Generating Station, or (ii) a report for the preceding calendar year with respect to the Generating Station covering the following matters: (A) production, including availability, output, planned outages and unplanned outages (and the reason for such unplanned outages); (B) environmental matters; (C) health and safety matters, to the extent the same shall have given rise to material claims against any Loan Party; (D) implementation of the Environmental Capital Expenditure Program; (E) significant plant activities, such as major plant overhauls, alterations, modifications and other capital expenditures, significant changes in plant operations and major operating incidents; and (F) market activities, including quantum and average price of energy and capacity delivered by the Generating Station to the NY Pool and PJM; (d) concurrently with the delivery of the financial statements referred to in Section 8.1.1(b), an operating budget for the Generating -------- Station for the current calendar year, together with, in the case of each calendar year beginning with the year 2000, an "income statement variance report" showing the actual experience for the preceding calendar year (or portion thereof) against the income statement projections for the preceding calendar year (or portion thereof); (e) on each Quarterly Payment Date on which the Borrower intends to make any Investment pursuant to Section 8.2.5(b) or any Restricted Payment ---------------- pursuant to clause (b) of the proviso contained in Section 8.2.7 and, ------------- commencing July 1, 1999, within 60 days after each other Quarterly Payment Date, a certificate, executed by an Authorized Representative of the Borrower with responsibility for financial matters, showing (i) the actual Debt Service Coverage Ratio for the 12-month period ended on the last day of the immediately preceding Fiscal Quarter, (ii) the projected Debt Service Coverage Ratio for the 12-month period commencing on the first day of the then current Fiscal Quarter and (iii) the projected Debt Service Coverage Ratio for the 12-month period commencing on the first anniversary of the first day of the then current Fiscal Quarter, in each case, in reasonable detail with appropriate calculations and computations and, in the case of projections, calculated on the basis of stated assumptions reasonably acceptable to the Administrative Agent; -46- (f) as soon as possible and in any event within five Business Days after any Authorized Representative of the Borrower obtains knowledge of the occurrence of (i) each Default under this Agreement and (ii) any default under any other material agreement to which the any Loan Party is a party or any termination thereof, a statement of such Authorized Representative setting forth details of such Default, default or termination and the action which such Loan Party has taken and proposes to take with respect thereto; (g) as soon as possible and in any event within five Business Days after (i) the commencement of, or the occurrence of any material adverse development with respect to, any litigation, action, proceeding, or labor controversy of the type described in Section 7.10 or (ii) the commencement ------------ of any labor controversy, litigation, action, proceeding of the type described in Section 7.10, notice thereof and, upon request of the ------------ Administrative Agent, copies of all documentation relating thereto (other than documentation subject to the attorney-client privilege); (h) promptly after the sending or filing thereof, copies of all reports and registration statements which the Borrower files with the Securities and Exchange Commission or any national securities exchange; (i) immediately upon becoming aware of the institution of any steps by the Borrower or any other Person to terminate any Pension Plan (other than a standard termination under ERISA Section 4041(b)), or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA or Section 412 of the Code, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Borrower or any member of the Controlled Group of any material liability (other than liabilities incurred in the ordinary course of maintaining the Pension Plan), fine or penalty, or any increase in the contingent liability of the Borrower with respect to any post-retirement Welfare Plan benefit the occurrence or expected occurrence of any Reportable Event or the termination, Reorganization or Insolvency of any Multiemployer Plan or the complete or partial withdrawal by any Loan Party or any member of the Controlled Group from a Multiemployer Plan, notice thereof and copies of all documentation relating thereto; (j) as soon as possible and in any event within five Business Days after any Authorized Representative of the Borrower obtains knowledge of the occurrence or notice of any changes in Borrower's Debt Rating by Moody's or S&P or any other rating agency which maintains a Debt Rating on the Borrower which is used in determining the Applicable Margin; -47- (k) within ten Business Days after each anniversary of the Effective Date, a certificate from EME Homer City's insurers or insurance agents evidencing that the insurance policies in place satisfy the requirements of Section 8.1.5; ------------- (l) as soon as possible and in any event within five Business Days after any Authorized Representative of the Borrower obtains (i) knowledge of the occurrence, notice of any casualty, damage or loss to the Generating Station, whether or not insured, through fire, theft, other hazard or casualty, involving a probable loss of $3,000,000 or more or (ii) knowledge of the occurrence, notice of any cancellation, notice of threatened or potential cancellation or material change in the terms, coverage or amounts of any policy of insurance required to be maintained pursuant to Section ------- 8.1.5; ----- (m) as soon as possible and in any event within five Business Days after any Authorized Representative of the Borrower obtains knowledge of the occurrence, notice of any material modification of the Environmental Capital Expenditure Program; and (n) as soon as possible and in any event within five Business Days after any Authorized Representative of the Borrower obtains knowledge of the occurrence, notice that any Governmental Authority may revoke, or refuse to grant or renew, or materially modify, any material Governmental Approval held or sought by any Loan Party. SECTION 8.1.2 Continuation of Business and Maintenance of Existence. ----------------------------------------------------- The Borrower shall, and shall cause each of the other Loan Parties to, continue to engage in business of owning and operating the Generating Station and the sale and marketing of wholesale electric power and other products and services related thereto, and preserve, renew and keep in full force and effect its corporate or partnership existence and take all reasonable action to maintain all material rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 8.2.3. - ------------- SECTION 8.1.3 Compliance with Requirements of Law and Contractual --------------------------------------------------- Obligations and Laws. The Borrower shall, and shall cause each of the other - -------------------- Loan Parties to, comply with all Requirements of Law and Contractual Obligations, such compliance to include the payment, before the same become delinquent, of all taxes, assessments and governmental charges or levies, except to the extent non-compliance would not have a Material Adverse Effect. SECTION 8.1.4 Maintenance of Generating Station. The Borrower shall, --------------------------------- and shall cause EME Homer City to, (a) maintain the Generating Station in all material respects (i) in good condition, repair and working order (ordinary wear and tear excepted), except where the failure so to do would not have a Material Adverse Effect, (ii) in accordance with Prudent Industry Practice, (iii) in compliance with all material Requirements of Law and (iv) in accordance with the terms of all insurance policies required to be maintained pursuant to Section ------- 8.1.5, and (b) make such repairs, renewals, replacements, betterments and - ----- improvements to the Generating -48- Station as in the reasonable judgment of the Borrower and EME Homer City are necessary so that the Generating Station may be operated in accordance with its intended purpose. SECTION 8.1.5 Insurance. (a) The Borrower shall cause EME Homer City --------- to maintain or cause to be maintained with financially sound and reputable insurance companies, insurance for such amounts against such risks, loss, damage and liability as are customarily insured against by other enterprises of like size and type as that of the Generating Station, subject to the availability of such coverage on commercially reasonable terms, all on terms and conditions which are in accordance with good industry practice and, in any event, including the insurance described on Schedule 8.1.5, provided that where deviations -------------- -------- therefrom are based upon commercial unavailability, the same shall be satisfactory to the Administrative Agent (with such substitute insurance coverage being the most equivalent to the required coverage that is available on commercially reasonable terms): (b) All such policies of insurance shall: (i) provide that, except in the case of third party liability insurance, the Collateral Agent shall be named as loss payee and the insurer shall waive any rights of subrogation against the Secured Parties; (ii) with respect to third party liability insurance, the Secured Parties shall be named as additional insureds; (iii) provide that (A) no cancellation or termination of such insurance, (B) no reduction in the scope of coverage or the limits of liability of such insurance and (C) no change in the applicable provisions required by this subsection shall be effective for 30 days after notice is given by the insurers to the Administrative Agent and the Collateral Agent of such cancellation, termination, reduction or change; (iv) waive all claims for insurance premiums or commissions or additional premiums or assessments against the Secured Parties; (v) provide that such insurance shall be primary insurance and that the insurers under such insurance policies shall be liable under such policies without right of contribution from any other insurance coverage effected by the Secured Parties under any other insurance policies with any other insurance companies covering a loss which is also covered under the insurance policies maintained by EME Homer City pursuant to this subsection; and (vi) waive any right of the insurers to setoff or counterclaim or to make any other deductions, whether by way of attachment or otherwise, as against the Secured Parties, and provide that, in respect of the interest of the Secured Parties, the insurance afforded by the policies shall not be invalidated by any action or inaction of an insured and -49- shall insure the Secured Parties' interest, as it appears, regardless of any breach or violation by the insured of any warranties, declarations or conditions contained in such policies. SECTION 8.1.6 Books and Records. The Borrower shall, and shall cause ----------------- each of the other Loan Parties to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Administrative Agent and each Lender or any of their respective representatives (at the Administrative Agent's or such Lender's expense), at reasonable times and intervals upon reasonable prior notice, to visit all of its offices and sites, to discuss its financial matters with its officers and independent public accountant. The Borrower shall, at any reasonable time and from time to time upon reasonable prior notice, permit the Administrative Agent and the Lenders or any of their respective agents or representatives to examine and make copies of and abstracts from the records and books of account of the Loan Parties; provided that by virtue of this Section 8.1.6 the Borrower shall not be deemed - -------- ------------- to have waived any right to confidential treatment of the informational obtained, subject to the provisions of applicable law or court order. SECTION 8.1.7 Year 2000 Matters. The Borrower shall, and shall cause ----------------- each of the other Loan Parties to, ensure that its computer based systems are able to effectively process data including dates on and after January 1, 2000. SECTION 8.1.8 Environmental Covenant. The Borrower shall, and shall ---------------------- cause each of the other Loan Parties to, and shall take all reasonable efforts to, ensure that all of its or such other Loan Parties' tenants, subtenants, contractors, subcontractors and invitees shall: (a) comply with all applicable Environmental Laws, obtain, comply with and maintain all necessary Governmental Approvals required under any applicable Environmental Law, except where noncompliance, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; (b) promptly upon the Administrative Agent's request if there has been an Event of Default which has not been fully and timely cured, permit an environmental consultant whom the Administrative Agent in its discretion designates to perform an environmental assessment (including, reviewing documents; interviewing knowledgeable employees and representatives of the Borrower; and sampling and analyzing soil, air, surface water, groundwater, and/or other media in or about property owned or leased by the Borrower, or on which operations of the Borrower otherwise take place). Such environmental assessment shall be in form, scope and substance reasonably satisfactory to the Administrative Agent. The Borrower shall cooperate fully in the conduct of such environmental assessment upon written demand by the Administrative Agent. The Administrative Agent shall perform, or cause its agents and representatives to perform, the environmental assessment in such a manner as to minimize to the extent practicable any disruption with the conduct of operations of the involved property. Pursuant to this -50- Section 8.1.8(b), the Administrative Agent shall have the right, but ---------------- shall not have any duty, to request and/or obtain such environmental assessment; and (c) provide copies of such information to evidence compliance with this Section 8.1.8 as the Administrative Agent may reasonably request from ------------- time to time. SECTION 8.1.9 Further Assurances. Upon the request of the ------------------ Administrative Agent, the Borrower shall, and shall cause each of the other Loan Parties to, promptly perform or cause to be performed any and all acts and execute or cause to be executed any and all documents (including, financing statements and continuation statements) for filing under the provisions of the Uniform Commercial Code or any other Requirement of Law which are necessary or advisable to maintain in favor of the Collateral Agent, for the benefit of the Secured Parties, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law. SECTION 8.1.10 Additional Collateral. With respect to any assets --------------------- acquired after the Effective Date by any Loan Party that are intended to be subject to the Lien created by any of the Security Documents but which are not so subject, promptly (and in any event within 30 days after the acquisition thereof): (a) execute and deliver to the Collateral Agent such amendments to the relevant Security Documents or such other documents as the Administrative Agent shall deem necessary or advisable to grant to the Collateral Agent, for the benefit of the Secured Parties, a Lien on such assets; and (b) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including the filing of financing statements in such jurisdictions as may be requested by the Administrative Agent. SECTION 8.1.11 Use of Proceeds. (a) The Borrower shall use the --------------- proceeds of the 364-Day Term Loans to finance a portion of the Acquisition. (b) The Borrower shall use the proceeds of the Construction Term Loans to finance costs associated with certain pollution control equipment to be installed in the Generating Station pursuant to the Environmental Capital Expenditure Program. (c) The Borrower shall use the proceeds of the Revolving Loans for general working capital purposes. SECTION 8.1.12 Recovery Events. Not more than 30 days after the --------------- occurrence of any Recovery Event, the Borrower shall give notice thereof to the Administrative Agent and the Collateral Agent and follow the procedures indicated below as applicable: (a) if the settlement or payment related to such Recovery Event is under $50,000,000, the Borrower shall, or shall cause EME Homer City to, apply the Net Cash Proceeds of such Recovery Event to the payment of the cost of restoration or replacement of the asset or assets in respect of which such Recovery Event occurred within 12 months from the date of receipt of such proceeds, provided that the Administrative Agent and the -------- -51- Collateral Agent receive from the Borrower, within 45 days of the Recovery Event, a notice (a "Reinvestment Notice") executed by an Authorized ------------------- Representative of the Borrower (i) setting forth in reasonable detail the nature of such restoration or replacement and the estimated cost and time to complete such restoration or replacement and (ii) stating that (A) no Default or Event of Default has occurred and is continuing, (B) such restoration or replacement is technologically and economically feasible, (C) the Net Cash Proceeds of such Recovery Event, together with other resources available to the Borrower or EME Homer City, are sufficient to pay the estimated cost of completing such restoration or replacement and (D) the Borrower has sufficient resources (through business interruption insurance or otherwise) to pay all Debt Service projected to become due and payable prior to the completion of such restoration or replacement; or (b) if the settlement or payment related to such Recovery Event is $50,000,000 or more, then no later than six months following such occurrence, the Borrower shall either: (i) make a prepayment of all Net Cash Proceeds of such Recovery Event pursuant to Section 3.1.2(b); or --------------- (ii) deliver to the Administrative Agent and the Collateral Agent: (A) a Reinvestment Notice confirming the Borrower's decision to apply the Net Cash Proceeds of such Recovery Event to the payment of the cost of restoration or replacement of the asset or assets in respect of which such Recovery Event occurred; and (B) a report of an independent engineer, such engineer and such report to be satisfactory to the Administrative Agent, confirming the information set forth in clauses (i) and (ii)(B) of the Borrower's Reinvestment Notice relating thereto. SECTION 8.2 Negative Covenants. The Borrower agrees with the ------------------ Administrative Agent and each Lender that, until the Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will, and will cause each of the other Loan Parties to, perform the obligations set forth in this Section 8.2. ----------- SECTION 8.2.1 Restrictions on Indebtedness. The Borrower shall not, ---------------------------- and shall not permit any other Loan Party to, create, incur, assume or suffer to exist any Indebtedness other than: (a) Capitalized Lease Liabilities entered into by EME Homer City in the ordinary course of business not to exceed at any time an aggregate principal amount equal to $10,000,000; (b) Indebtedness of the Borrower under Interest Rate Hedging Transactions entered into with respect to the Loans with any Lender; -52- (c) Indebtedness of the Borrower incurred after repayment of the 364- Day Term Loans and the termination of the 364-Day Term Loan Commitments, provided that(i) the Borrower shall have delivered to the Lenders a pro -------- --- forma calculation of the Debt Service Coverage Ratio for the preceding 12- ----- month period (or, if such calculation is being delivered prior to the first anniversary of the Effective Date, for such shorter period of not less than six months) indicating that, had such Indebtedness been outstanding and had the maximum amount of Indebtedness available to be drawn under the Commitments been outstanding during such period, the Debt Service Coverage Ratio for such period would have been greater than 2.75 to 1.00 and (ii) the Borrower shall have received written confirmation that the incurrence of such Indebtedness would not result in a downgrade of the Borrower's senior secured Debt Rating below BBB- or Baa3 from S&P and Moody's, respectively; (d) Indebtedness consisting of reimbursement obligations of any Loan Party with respect of (i) letters of credit, surety bonds and performance bonds used by such Loan Party in the ordinary course of business in an aggregate amount not to exceed $15,000,000 at any time, or (ii) letters of credit used by the Borrower to meet the Debt Service Reserve Requirement or analogous requirements in connection with the incurrence of any Indebtedness described in clause (e) below; provided that the aggregate --------- -------- amount of outstanding reimbursement obligations of all Loan Parties under this clause (d) shall not be in excess of $65,000,000 at any time; ---------- (e) Indebtedness of the Borrower incurred to refinance the 364-Day Term Loans or any other existing Indebtedness of the Borrower, provided -------- that either: (i) (A) the average life of such Indebtedness shall not be less than, in the case of Indebtedness incurred to refinance the 364-Day Term Loans, 5 years, or, in the case of Indebtedness incurred to refinance other Indebtedness of the Borrower, the average life of the Indebtedness so refinanced and (B) the principal amount of such Indebtedness shall not exceed the amount of the Indebtedness so refinanced, plus an amount for fees and expenses of issuance, provided, further, in the case of -------- ------- Indebtedness incurred to refinance the 364-Day Term Loans, the principal amount of such Indebtedness may exceed the aggregate principal amount of the 364-Day Term Loan by an amount up to $75,000,000, inclusive of an amount for fees and expenses of issuance, so long as (i) (A) the amount available to be drawn under the EME Credit Support Guarantee is increased by an amount equal to the amount by which the Borrower's projected Cashflow Available for Debt Service for the period from the anticipated date of incurrence of such Indebtedness through December 31, 2001, would need to be increased in order for the projected Debt Service Coverage Ratio for such period to equal 2.00 to 1.00 and (B) the Borrower shall have received written confirmation that such Indebtedness is rated at BBB- or Baa3 or better from S&P and Moody's, respectively; or (ii) (A) the Borrower shall have delivered to the Lenders a pro forma calculation of the Debt Service --- ----- Coverage Ratio for the preceding 12-month period (or, if such calculation is being delivered prior to the first anniversary of the Effective Date, for such shorter period of not less than six months) -53- indicating that, had such Indebtedness been outstanding and had the maximum amount of Indebtedness available to be drawn under the Commitments been outstanding during such period, the Debt Service Coverage Ratio for such period would have been greater than2.75 to 1.00 and (B) the Borrower shall have received written confirmation that such Indebtedness is rated BBB- or Baa3 or better from S&P and Moody's, respectively; (f) Indebtedness in the form of subordinated, unsecured intercompany loans between the Loan Parties that is subject to the Intercompany Loan Subordination Agreement; (g) Indebtedness in the form of guarantees made by the Borrower in the ordinary course of business related to the Generating Station in connection with (i) fuel procurement or sales, (ii) purchases, sales or exchanges made by Affiliates of the Borrower related to physical capacity and energy from the Generating Station and financial instruments related thereto and (iii) purchases, sales or exchanges of energy or emissions credits, so long as, in the case of each of clauses (i), (ii) and (iii) above, such activities ---------------- --- are not entered into for speculative purposes; and (h) other unsecured Indebtedness of the Loan Parties not to exceed $20,000,000 in the aggregate outstanding at any time. SECTION 8.2.2 Liens. The Borrower shall not, and shall not permit ----- any other Loan Party to, create, incur, assume or suffer to exist any Lien upon any of such Loan Party's respective property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (b) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (c) Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits; (d) Liens granted as security for the performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; -54- (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of such Loan Party; (f) judgment Liens in existence less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies; (g) extensions or renewals of any Lien otherwise permitted to be incurred under this Section 8.2.2 securing Indebtedness in an amount not ------------- exceeding the principal amount of, and accrued interest on, the Indebtedness secured by such Lien as so extended or renewed at the time of such extension or renewal; provided that such Lien shall apply only to the -------- same property theretofore previously securing such Indebtedness; (h) Liens, title defects and adverse claims that neither individually nor in the aggregate materially diminish the use or value of the Loan Party's property affected thereby; (i) Liens created pursuant to the Loan Documents; and (j) Liens securing Indebtedness permitted by Section 8.2.1(b), (c) or --------------------- (e). --- SECTION 8.2.3 Consolidation, Merger. The Borrower shall not, and --------------------- shall not permit any other Loan Party to, liquidate or dissolve, consolidate with, or merge into or with, any other Person, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof), except, provided that no Default or Event of Default is then -------- continuing or would occur after giving effect thereto (including, without limitation, a Change in Control), the Borrower may consolidate with or merge into any other Person if the Borrower is the surviving corporation. SECTION 8.2.4 Asset Dispositions. The Borrower shall not, and shall ------------------ not permit any other Loan Party to, sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to, all or any substantial part of its assets (including accounts receivable and capital stock of or other ownership interests in Subsidiaries) to any Person, unless: (a) such sale, transfer, lease, contribution or conveyance is in the ordinary course of its business, including sales of worn-out or obsolete equipment; or (b) the net book value of all such assets, together with the net book value of all other assets sold, transferred, leased, contributed or conveyed otherwise than in the -55- ordinary course of business by any Loan Party pursuant to this Section ------- 8.2.4(b) during the most recent consecutive four quarter period since the -------- Effective Date, does not exceed $10,000,000 in the aggregate; provided, however, that notwithstanding anything to the contrary contained - -------- ------- herein, any Loan Party may sell or otherwise dispose of (i) assets as and to the extent necessary to comply with Requirements of Law and (ii) Cash Equivalent Investments and provided, further, that any sale or disposition of assets -------- ------- pursuant to clause (ii) of this proviso shall not be included in the calculation ----------- of the aggregate net book value of assets sold pursuant to this Section 8.2.4. -------------- SECTION 8.2.5 Subsidiaries, Investments. The Borrower shall not ------------------------- create or acquire any Subsidiaries other than those identified on Schedule 7.18. -------------- The Borrower shall not, and shall not permit any other Loan Party to, create or acquire or, make, incur, assume or suffer to exist any Investment in any other Person, except: (a) Investments in EME Homer City for purposes of enabling it to implement the Environmental Capital Expenditure Program; (b) Investments in EME Homer City on any Quarterly Payment Date for purposes of enabling it to make other capital expenditures for improvements to the Generating Station, provided that (i) no Default or Event of Default -------- shall be in existence or shall occur after giving effect to the making of such Investment, (ii) the actual Debt Service Coverage Ratio for the 12- month period (or, in the case of Investments proposed to be made prior to April 1, 2000, such shorter period commencing April 1, 1999, and) ended on the last day of the immediately preceding Fiscal Quarter, (iii) the projected Debt Service Coverage Ratio for the 12-month period commencing on the first day of the then current Fiscal Quarter, (iv) the projected Debt Service Coverage Ratio for the 12-month period commencing on the first anniversary of the first day of the then current Fiscal Quarter, in each case shall be no less than 1.50 to 1.00 through December 31, 2001, and 1.70 to 1.00 thereafter, (v) the Debt Service Reserve Requirement is satisfied and (vi) any debt service reserve requirement then applicable to Senior Debt other than the Loans is satisfied; and (c) Cash Equivalent Investments, provided that any Investment which -------- when made complies with the requirements of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that -------------------------- such Investment if made thereafter would not comply with such requirements. SECTION 8.2.6 Transactions with Affiliates. The Borrower shall not, ---------------------------- and shall not permit any other Loan Party to, enter into, or cause, suffer or permit to exist, any arrangement or contract with any of their respective Affiliates unless such arrangement or contract is (i) fair and reasonable to the Borrower or such other Loan Party and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrower or such -56- other Loan Party with a Person which is not one of its Affiliates and (ii) transactions otherwise permitted under Section 8.2. The Borrower shall not ----------- permit EME Homer City to amend, supplement or otherwise modify the Energy Sales Agreement without the written consent of the Required Lenders, which consent shall not be unreasonably withheld. SECTION 8.2.7 Restricted Payments. The Borrower shall not, and shall ------------------- not permit any other Loan Party to, declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of capital stock of or other ownership interest in any Loan Party or any warrants or options to purchase any such stock or ownership interest, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of any Loan Party (such declarations, payments, setting apart, purchases, redemptions, defeasances, retirements, acquisitions and distributions being herein called "Restricted Payments"); provided, ------------------- -------- however, that: (a) any Subsidiary of the Borrower may make Restricted Payments - ------- to the Borrower or any wholly owned Subsidiary of the Borrower; and (b) the Borrower may make Restricted Payments in respect of its capital stock on any Restricted Payment Date if: (i) the Borrower has paid all amounts then due and payable in respect of the Senior Debt; (ii) no Default or Event of Default shall have occurred and be continuing or will occur after giving effect to the making of such payment; (iii) (A) the actual Debt Service Coverage Ratio for the 12- month period (or, in the case of Restricted Payments proposed to be made prior to April 1, 2000, such shorter period commencing April 1, 1999, and) ended on the last day of the immediately preceding Fiscal Quarter, (B) the projected Debt Service Coverage Ratio for the 12-month period commencing on the first day of the then current Fiscal Quarter and (C) the projected Debt Service Coverage Ratio for the 12-month period commencing on the first anniversary of the first day of the then current Fiscal Quarter, in each case shall be no less than 1.50 to 1.00 through December 31, 2001, and 1.70 to 1.00 thereafter; (iv) the Debt Service Reserve Requirement is satisfied; and (v) any debt service reserve requirement then applicable to Senior Debt other than the Loans is satisfied. SECTION 8.2.8 ERISA. The Borrower shall not, and shall not permit ----- any other Loan Party to, engage in any prohibited transactions under Section 406 of ERISA or under Section 4975 of the Code, which would subject the Borrower or such other Loan Party to any tax, penalty or other liabilities that, in each case, would have a Material Adverse Effect. SECTION 8.2.9 Restrictive Agreements. The Borrower shall not, and ---------------------- shall not permit any other Loan Party to, enter into any agreement (excluding any Loan Document and any agreement governing any Indebtedness permitted by clause (b) of Section 8.2.1 as to the assets financed with the proceeds of such - ---------- ------------- Indebtedness) prohibiting: (a) the ability of the Borrower to amend or otherwise modify any Loan Document; or -57- (b) the ability of any Loan Party other than the Borrower to make any payments, directly or indirectly, to the Borrower by way of dividend, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Loan Party to make any payment, directly or indirectly, to the Borrower where such prohibition or restriction has a Material Adverse Effect. SECTION 8.2.10 Limitation on Lines of Business. The Borrower shall ------------------------------- not, and shall not allow any other Loan Party to, change its legal form or Organic Documents, change its Fiscal Year or engage in any business other than the ownership, maintenance and operation of Generating Station, the sale of wholesale electric power therefrom and related products and services and such other business as may be reasonably incidental thereto. SECTION 8.2.11 Regulation of Parties. The Borrower shall not, and --------------------- shall not permit any other Loan Party to, take any action which could reasonably be expected to result in (a) any Loan Party (i) being subject to regulation as a "public utility", "public utility company", "public utility holding company", "electric corporation" or a subsidiary or affiliate of any of the foregoing under the laws of the State of Pennsylvania or the State New York or (ii) being a "holding company" or a "subsidiary company" or an "affiliate" of a "holding company" under PUHCA (except to the extent that each Loan Party is a "subsidiary company" of Edison International, which is a "holding company" that is exempt from all regulation under PUHCA (except for Section 9(a)(2) thereof) pursuant to Section 3(a) thereof), (b) the failure of EME Homer City to (i) be an "exempt wholesale generator" under PUHCA, (ii) be a member of, or otherwise have the right and authority to sell electric power and related products and services into, the NY Pool and PJM or (iii) have the authority to sell wholesale electric power at market- based rates (not subject to any price cap or other market power mitigation measure). SECTION 8.2.12 Limitation on Electricity Market Risk Exposure. The ---------------------------------------------- Borrower shall not, and shall not permit any other Loan Party to, engage in transactions for any speculative purpose, including speculative transactions relating to (i) fuel procurement or sales, (ii) purchases, sales or exchanges related to capacity and energy from the Generating Station or financial instruments related thereto or (iii) purchases, sales or exchanges of energy or emissions credits. ARTICLE IX EVENTS OF DEFAULT SECTION 9.1 Listing of Events of Default. Each of the following ---------------------------- events or occurrences described in this Section 9.1 shall constitute an "Event ----------- ----- of Default". - ---------- SECTION 9.1.1 Non-Payment of Obligations. The Borrower shall default -------------------------- in (i) the payment or mandatory prepayment when due of any principal of any Loan or (ii) the payment -58- of interest on any Loan or any facility fee or of any other Obligation, within five Business Days after any such interest or other amount becomes due in accordance with the terms thereof or hereof. SECTION 9.1.2 Breach of Warranty. (a) Any representation or warranty ------------------ of any Loan Party made or deemed to be restated or remade in any Loan Document or any other writing or certificate furnished by or on behalf of such Loan Party to the Administrative Agent or any Lender for the purposes of or in connection with any such Loan Document (including any certificates delivered pursuant to Article VI) is or shall be incorrect when made or deemed made in any material - ---------- respect or (b) any representation or warranty of Edison Mission Energy made in the EME Credit Support Guarantee is or shall be incorrect when made in any material respect. SECTION 9.1.3 Non-Performance of Certain Covenants and Obligations. ---------------------------------------------------- The Borrower shall default in the due performance and observance of any of its obligations under Section 8.1.1(f) or 8.2. ---------------- --- SECTION 9.1.4 Non-Performance of Other Covenants and Obligations. -------------------------------------------------- Any Loan Party shall default in the due performance and observance of any other covenant or agreement contained in any Loan Document, and such default shall continue unremedied for a period of 30 days after written notice thereof shall have been given to such Loan Party by the Administrative Agent. SECTION 9.1.5 Default on Other Indebtedness. A default shall occur ----------------------------- in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness (other than Indebtedness ---------- described in Section 9.1.1) of any Loan Party having a principal amount, ------------- individually or in the aggregate, at least $15,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity. SECTION 9.1.6 Bankruptcy, Insolvency. Any Loan Party shall: ---------------------- (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestration or other custodian for any Loan Party or a substantial portion of a Loan Party's property, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestration or other custodian for a -59- Loan Party or for a substantial part of its property, and such trustee, receiver, sequestration or other custodian shall not be discharged within 60 days, provided that nothing in the Loan Documents shall prohibit or -------- restrict any right the Administrative Agent, the Collateral Agent or any Lender may have under applicable law to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend its rights under the Loan Documents (and the Loan Party shall not object to any such appearance); (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of a Loan Party, and, if any such case or proceeding is not commenced by the Loan Party such case or proceeding shall be consented to or acquiesced in by the Loan Party or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that nothing in the Loan Documents shall prohibit or restrict any -------- right the Administrative Agent, Collateral Agent or any Lender may have under applicable law to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend its rights under the Loan Documents (and the Borrower shall not object to any such appearance); or (e)take any corporate action authorizing, or in furtherance of, any of the foregoing. SECTION 9.1.7 Pension Plans. Any of the following events shall occur ------------- with respect to any Pension Plan: (a)the institution of any steps by the Borrower, any member of the Controlled Group or any other Person to terminate a Pension Plan or the occurrence of any other event or condition with respect to any Pension Plan, Welfare Plan or Multiemployer Plan if, as a result of such termination or such other event or condition, together with all other such terminations, events or conditions, if any, any Loan Party or any Controlled Group member could reasonably expect to incur, individually or in the aggregate, a liability or obligation in excess of $15,000,000; or (b)a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA or Section 412 of the Code. SECTION 9.1.8 Judgments. Any judgment or order for the payment of --------- money in excess of $15,000,000 (taking into account any Insurance proceeds payable under a policy where the insurer has accepted coverage without reservation) shall be rendered against any Loan Party and such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof. -60- SECTION 9.1.9 Control of the Borrower; Ownership of EME Homer City. ---------------------------------------------------- Any Change in Control shall occur or the Borrower shall cease to own, directly or indirectly, 100% of the general and limited partnership interests of EME Homer City. SECTION 9.1.10 Edison Mission Energy. Until the termination of the --------------------- EME Credit Support Guarantee or while any guarantee by Edison Mission Energy is in effect pursuant to Section 5.2: ----------- (a) Edison Mission Energy shall: (i) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due; (ii) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for Edison Mission Energy or a substantial portion of its property, or make a general assignment for the benefit of creditors; (iii) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestration or other custodian for Edison Mission Energy or for a substantial part of its property, and such trustee, receiver, sequestration or other custodian shall not be discharged within 60 days, provided that nothing in the Loan Documents shall prohibit or -------- restrict any right the Administrative Agent or any Lender may have under applicable law to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend its rights under the Loan Documents (and Edison Mission Energy shall not object to any such appearance); (iv) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of Edison Mission Energy, and, if any such case or proceeding is not commenced by Edison Mission Energy, such case or proceeding shall be consented to or acquiesced in by it or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that nothing -------- in the Loan Documents shall prohibit or restrict any right the Administrative Agent or any Lender may have under applicable law to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend its rights under the Loan Documents (and Edison Mission Energy shall not object to any such appearance); or (v) take any corporate action authorizing, or in furtherance of, any of the foregoing; or -61- (b) a default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness of Edison Mission Energy having a principal amount, individually or in the aggregate, in excess of $20,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity. SECTION 9.2 Action if Bankruptcy. If any Event of Default described -------------------- in clauses (a) through (e) of Section 9.1.6 shall occur with respect to the ---------- --- ------------- Borrower, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 9.3 Action if Other Event of Default. If any Event of -------------------------------- Default (other than any Event of Default described in clauses (a) through (e) of ----------- --- Section 9.1.6) shall occur for any reason, whether voluntary or involuntary, and - -------------- be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by written notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitments shall terminate. The rights provided for in the Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. SECTION 9.4 Rescission of Declaration. Any declaration made pursuant ------------------------- to Section 9.3 may, should the Required Lenders in their sole and absolute ----------- discretion so elect, be rescinded by written notice to the Borrower at any time after the principal of the Loans and the Notes shall have become due and payable, but before any judgment or decree for the payment of the monies so due, or any part thereof, shall have been entered; provided that the Borrower shall -------- have paid all arrears of interest upon the Loans and all other amounts then owed to the Administrative Agent and the Lenders including all costs, expenses and liabilities incurred by the Administrative Agent and the Lenders in respect of such declaration and all consequences thereof (except that principal of the Loans which by such declaration shall have become payable) and every other Event of Default shall have been made good, waived or cured; provided that no such -------- rescission or annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon. -62- ARTICLE X THE AGENT SECTION 10.1 Actions. (a) Each Lender hereby appoints CUSA as its ------- Administrative Agent under and for purposes of each Loan Document. Each Lender authorizes the Administrative Agent to act on behalf of such Lender under each Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Without limiting the generality of the foregoing, each Lender hereby authorizes the Administrative Agent to designate and appoint United States Trust Company of New York as Collateral Agent for the Lenders and the other Secured Parties under the Security Documents and to designate and appoint any successor thereto. Notwithstanding any provision to the contrary contained elsewhere in any Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into any Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) Each Lender hereby agrees to indemnify (which indemnity shall survive any termination of this Agreement) the Agent-Related Persons and the Collateral Agent pro rata according to such Lender's Commitment's percentage of -------- the Total Commitment Amount, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Agent-Related Persons or the Collateral Agent in any way relating to or arising out of any Loan Document, including reasonable attorneys' fees, and as to which the Administrative Agent or the Collateral Agent, as the case may be, is not reimbursed by the Borrower; provided, however, that no Lender -------- ------- shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted from the Agent- Related Person's or Collateral Agent's, as the case may be, gross negligence or willful misconduct. Neither any Agent-Related Person nor the Collateral Agent shall be required to take any action under any Loan Document, or to prosecute or defend any suit in respect of any Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Administrative Agent or the Collateral Agent shall be or become, in its determination, inadequate, the Agent-Related -63- Person or the Collateral Agent, as the case may be, may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. SECTION 10.2 Funding Reliance. Unless the Administrative Agent shall ---------------- have been notified by telephone, confirmed in writing, by any Lender, (i) with respect to LIBO Rate Loans, by 12:00 Noon, New York City time, on the Business Day prior to a Borrowing or (ii) with respect to Base Rate Loans, by 2:00 p.m., New York City time, on the same day of a Borrowing, or that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, may, but shall not be required to, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and the Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing; provided, that if such Lender makes available the -------- amount which is its Percentage of such Borrowing on or before the next Business Day following the day when due, the interest rate payable on such amount shall be the Federal Funds Rate. SECTION 10.3 Exculpation. No Agent-Related Person shall be liable to ----------- any Lender for any action taken or omitted to be taken by it under any Loan Document, or in connection therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of any Loan Document, nor to make any inquiry respecting the performance by the Borrower of its obligations under any Loan Document. Any such inquiry which may be made by the Administrative Agent shall not obligate it to make any further inquiry or to take any action. Each Agent-Related Person shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Administrative Agent believes to be genuine and to have been presented by a proper Person. SECTION 10.4 Successor. The Administrative Agent may resign as such --------- at any time upon at least 30 days' prior notice to the Borrower and all Lenders. If the Administrative Agent at any time shall resign, the Required Lenders may, within ten days after such notice and with the consent of the Borrower (not to be unreasonably withheld), appoint another Lender as a successor Administrative Agent which shall thereupon become the Administrative Agent hereunder. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, after notice to and consultation with the Borrower, appoint a successor Administrative Agent, which shall be one of the Lenders or an Eligible Assignee, and shall have a -64- combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the retiring Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After the effective date of any retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of (a) this Article X shall inure to --------- its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement; and (b) Section 11.3 and Section ------------ -------- 11.4 shall continue to inure to its benefit. - ---- SECTION 10.5 Loans by CUSA. CUSA shall have the same rights and ------------- powers with respect to the Loans made by it or any of its Affiliates as any other Lender and may exercise the same as if it were not the Administrative Agent. CUSA and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if CUSA were not the Administrative Agent hereunder. SECTION 10.6 Reliance by Administrative Agent. (a) The -------------------------------- Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under any Loan Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 6.1, each Lender that has executed this Agreement shall be ----------- deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender. SECTION 10.7 Notice of Default. The Administrative Agent shall not ----------------- be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the -65- Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Article IX; provided, however, that ---------- -------- ------- unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders. SECTION 10.8 Credit Decisions. Each Lender acknowledges that it has, ---------------- independently of the Agent-Related Person and each other Lender, and based on such Lender's review of the financial information of the Borrower, the Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of the Administrative Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under any Loan Document. SECTION 10.9 Copies. The Administrative Agent shall give prompt ------ notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by the Borrower). The Administrative Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Administrative Agent from the Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of this Agreement. SECTION 10.10 Interest of Lenders in Collateral. Each Lender hereby --------------------------------- acknowledges and consents that such Lender's right or interest in the Collateral (or any portion thereof) shall be subject to the terms of the Collateral Agency and Intercreditor Agreement and the other Security Documents, including the requisite level of consent by holders of Senior Debt to enforce upon the Collateral. ARTICLE XI MISCELLANEOUS PROVISIONS SECTION 11.1 Waivers, Amendments. (a) The provisions of each ------------------- Security Document may from time to time be amended, modified or waived as necessary or advisable in connection with any incurrence of Senior Debt if such amendment, modification or waiver is in writing and consented to by each Loan Party party thereto and the Administrative Agent; provided, however, that no such amendment, modification or waiver shall release all or any -66- material portion of the Collateral from the Liens of the Security Documents or release any Loan Party from its obligations under the Guarantee and Collateral Agreement or release Edison Mission Energy from its obligations under the EME Credit Support Guarantee or amend, modify or waive any provision of the Security Deposit Agreement or the Collateral Agency and Intercreditor Agreement relating to the order of priority or amounts of transfers of cash and other property to be made thereunder or, except as contemplated by Section 8.6 of the Collateral Agency and Intercreditor Agreement, amend or modify the definition of "Required Secured Parties" thereunder or the percentages required for any action to be taken thereunder, in each case without the written consent of all of the Lenders. The provisions of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by each Loan Party party thereto and the Required Lenders; provided, however, that no such amendment, modification or waiver -------- ------- shall: (A) forgive the principal amount or extend the final scheduled date of maturity of any Loan, reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Revolving Loan Commitment or Term Loan Commitment, in each case without the consent of each Lender directly affected thereby; (B) amend, modify or waive any provision of this Section 11.1 or amend or modify the definition of Required Lenders or consent to - ------------ the assignment or transfer by any Loan Party of any of its rights and obligations under the Loan Documents without the written consent of the Lenders; (C) amend, modify or waive any provision of Section 4.9, or any provision in ----------- such Loan Documents which provides for amounts paid in respect of the Obligations to be shared among the Lenders ratably, without the consent of all of the Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Administrative Agent and all future holders of the Loans and Commitments. In the case of any waiver, the Loan Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights under the Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. (b) No failure or delay on the part of the Administrative Agent or any Lender in exercising any power or right under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Administrative Agent or any Lender under any Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 11.2 Notices. All notices and other communications provided ------- to any party hereto under any Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth on Schedule 1.1(b) or set --------------- -67- forth in the Lender Assignment Agreement or at such other address or facsimile number as may be designated by such party in a written notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid shall be effective five Business Days after being sent or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted (if confirmed). SECTION 11.3 Payment of Costs and Expenses. (a) The Borrower agrees ----------------------------- to pay promptly on demand all reasonable out-of-pocket costs and expenses of the Lead Arrangers and the Administrative Agent (including the reasonable fees and out-of-pocket costs and expense of counsel to the Administrative Agent) in connection with: (i) the negotiation, preparation, execution and delivery of each Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to any Loan Document as may from time to time hereafter be required; and (ii) the preparation and review of the form of any document or instrument relevant to any Loan Document; provided, however, that the -------- ------- Borrower shall have no obligation to pay for the cost of the documentation of assignments or participations as provided in Section ------- 11.11 (unless such assignment is made pursuant to Section 4.11); ----- ------------ in each case, upon presentation of a statement of account, whether or not the transactions contemplated hereby are consummated. (b) The Borrower further agrees to pay upon demand, and to save the Administrative Agent and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution, delivery or enforcement of any Loan Documents or with the Borrowings hereunder. The Borrower also agrees to reimburse the Administrative Agent and each Lender, as applicable, promptly upon demand for (x) all reasonable out-of-pocket costs and expenses (including fees and out-of-pocket costs and expenses of counsel) incurred by the Administrative Agent and each Lender in connection with the negotiation of any restructuring or work-out, whether or not consummated, of any Obligations and (y) all out-of-pocket costs and expenses (including fees and out-of-pocket costs and expenses of counsel) incurred by the Administrative Agent and each Lender in connection with the enforcement of any Obligations after an Event of Default; provided that, in either case, the Borrower shall not -------- be obligated to reimburse such costs and expenses that are found in a final judgment by a court of competent jurisdiction to have been incurred in an attempt to enforce such rights and remedies that were pursued by such Administrative Agent or Lender in bad faith and without any reasonable basis in fact or law. SECTION 11.4 Indemnification. (a) In consideration of the execution --------------- and delivery of this Agreement by each Lender and the extension of the Commitments, the Borrower -68- hereby indemnifies, exonerates and holds the Administrative Agent, the Lead Arrangers and each Lender and each of their respective affiliates, officers, directors and employees (collectively, the "Indemnified Parties") free and ------------------- harmless from and against any and all losses, costs, actions, causes of action, suits, liabilities, damages and out-of-pocket costs and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including any amounts paid to any Agent-Related Person pursuant to Section 10.1(b) and --------------- reasonable attorneys' fees and disbursements but excluding claims for lost profits (collectively, the "Indemnified Liabilities"), joint or several, that ----------------------- may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or relating to: (i) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan; (ii) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to Article VI not to ---------- fund any Borrowing); (iii)any investigation, litigation, proceeding, or obligation related to any Environmental Law or other matter in any case arising out of the relationship of the parties under this Agreement; or (iv)the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission or release from, any real property owned, leased or operated by any Loan Party thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), or at any other locations regardless of whether caused by, or within the control of, such Loan Party, where such claim or liability arises out of the relationship of the parties under this Agreement; whether or not such investigation, litigation or proceeding is brought by the Borrower or its Affiliates, any of their respective shareholders or creditors, an Indemnified Party or any other person, or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated, except for (A) any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's (i) gross negligence or willful misconduct or (ii) breach of such Indemnified Party's obligations under this Agreement; (B) any such Indemnified Liabilities that result solely from action or the failure to act by any Indemnified Party more than 90 days after Lenders acquire title to the Generating Station through foreclosure or otherwise which action or failure to act violates applicable Environmental Law; and (C) the increase in any Indemnified Liabilities if, and only to the extent that, such increase results from action or the failure to act by any Indemnified Party more than 90 days after Lenders acquire title to the Generating Station through foreclosure or -69- otherwise, which action or failure to act violates applicable Environmental Law and thereby causes an increase in any Indemnified Liabilities. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. (b) To the extent permitted by applicable law, no Indemnified Party shall have any liability to the Borrower or its Affiliates or any of their respective shareholders or creditors under any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, any Loan or the use of the proceeds thereof. SECTION 11.5 Survival. The obligations of the Borrower under -------- Sections 4.3, 4.4, 4.5, 4.6, 4.7, 11.3 and 11.4, and the obligations of the - ------------ --- --- --- --- ---- ---- Lenders under Section 10.1, shall in each case survive any termination of this ------------ Agreement, the payment in full of all Obligations and the termination of all Term Loan Commitments and Revolving Loan Commitments. The representations and warranties made by the Borrower in each Loan Document shall survive the execution and delivery of such Loan Document. SECTION 11.6 Severability. Any provision of any Loan Document which ------------ is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 11.7 Headings. The various headings of each Loan Document -------- are inserted for convenience only and shall not affect the meaning or interpretation of such Loan Document or any provisions thereof. SECTION 11.8 Execution in Counterparts. This Agreement may be ------------------------- executed by the parties hereto in several counterparts, each of which shall be executed by the Borrower and the Administrative Agent and be deemed to be an original and all of which shall constitute together but one and the same agreement. SECTION 11.9 Governing Law; Entire Agreement. This Agreement, the ------------------------------- Notes and the rights and obligations of the parties under this Agreement shall be governed by, and construed and interpreted in accordance with, the law of the state of New York. The Loan Documents, together with the fee letter referred to in Section 3.3.2 and the commitment letter of even date therewith, represent the ------------- agreement of the Borrower, the Administrative Agent and the Lenders and supersede any and all prior agreements and understandings, oral or written, relative or with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. -70- SECTION 11.10 Successors and Assigns. This Agreement shall be ---------------------- binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that: -------- ------- (a) the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent and all Lenders; and (b) the rights of sale, assignment and transfer of the Lenders are subject to Section 11.11. ------------- SECTION 11.11 Sale and Transfer of Loans and Notes; Participations in ------------------------------------------------------- Loans and Notes. Each Lender may assign, or sell participations in, its Loans - --------------- and Term Loan Commitments or Revolving Loan Commitments to one or more other Persons in accordance with this Section 11.11. ------------- SECTION 11.11.1 Assignments. (a) Any Lender (an "Assignor") may, in ----------- -------- accordance with applicable law, at any time and from time to time assign to any Eligible Assignee, with the consent of the Administrative Agent and, except at any time a Default or Event of Default shall have occurred and be continuing, the Borrower (which, in each case, shall not be unreasonably withheld or delayed), all or any part of its rights and obligations under this Agreement pursuant to a Lender Assignment Agreement, executed by such Eligible Assignee, such Assignor and any other Person whose consent is required pursuant to this paragraph, and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that no such assignment to an Eligible -------- Assignee (other than any Lender or any affiliate thereof) shall be in an aggregate principal amount of less than $10,000,000 (other than in the case of an assignment of all of a Lender's interests under this Agreement), unless otherwise agreed by the Borrower and the Administrative Agent and; provided, -------- further, that after giving effect to any such assignment the assigning Lender - ------- shall have Commitments remaining of at least $10,000,000 in the aggregate amount (other than in the case of an assignment of all of a Lender's interests under this Agreement). Any such assignment need not be ratable as among the 364-Day Term Loans, the Construction Term Loans and the Revolving Loans. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Lender Assignment Agreement, (x) the Eligible Assignee thereunder shall be a party hereto and, to the extent provided in such Lender Assignment Agreement, have the rights and obligations of a Lender hereunder with a Term Loan Commitment or Revolving Loan Commitment, as the case may be, and/or Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent provided in such Lender Assignment Agreement, be released from its obligations under this Agreement (and, in the case of a Lender Assignment Agreement covering all of an Assignor's rights and obligations under this Agreement, such Assignor shall cease to be a party hereto). Notwithstanding any provision of this Section 11.11.1 the consent of the --------------- Borrower shall not be required for any assignment that occurs when a Default or an Event of Default pursuant to Section 9.1.6 shall have occurred and be ------------- continuing with respect to the Borrower. -71- (b) The Administrative Agent shall, on behalf of the Borrower, maintain at its address referred to on Schedule 1.1(b) a copy of each Lender --------------- Assignment Agreement delivered to it and a register (the "Register") for the -------- recordation of the names and addresses of the Lenders and the 364-Day Term Loan Commitment, Construction Term Loan Commitment or Revolving Loan Commitment of, and the principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, each other Loan Party, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans and any Notes evidencing the Loans recorded therein for all purposes of this Agreement. Any assignment of any Loan, whether or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Loan, accompanied by a duly executed Lender Assignment Agreement, and thereupon one or more new Notes shall be issued to the designated Eligible Assignee. (c) Upon its receipt of a Lender Assignment Agreement executed by an Assignor, an Eligible Assignee and any other Person whose consent is required by Section 11.11.1(a), together with payment to the Administrative Agent of a - ------------------ registration and processing fee of $3,000, the Administrative Agent shall (i) promptly accept such Lender Assignment Agreement and (ii) record the information contained therein in the Register on the effective date determined pursuant thereto. (d) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section 11.11.1 concerning assignments of Loans --------------- relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. (e) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) of this Section 11.11.1. ------------- --------------- SECTION 11.11.2 Participations. Any Lender may at any time sell to -------------- one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "Participant") participating interests in ----------- any of the Loans, Commitments, or other interests of such Lender hereunder; provided, however, that: - -------- ------- (a) no participation contemplated in this Section 11.11.2 shall --------------- relieve such Lender from its Commitments or its other obligations under any Loan Document; (b) such Lender shall remain solely responsible for the performance of its Commitments and such other obligations; -72- (c) the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under each of the Loan Documents; (d) no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except as provided in clause (f) of this Section 11.11.2; ---------- ---------------- (e) the Borrower shall not be required to pay any amount under Sections 4.3, 4.4, 4.5, 4.6, 4.7, 11.3 and 11.4, that is greater than the ------------ --- --- --- --- ---- ---- amount which it would have been required to pay had no participating interest been sold; (f) in no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Loans or any fees payable hereunder, extend the due date of such principal, interest or fee payments, or increase the amount or extend the Commitment Termination Date of such Loans, in each case to the extent subject to such participation; (g) the Borrower agrees that if amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such -------- participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 4.10 as ------------ fully as if it were a Lender hereunder; and (h) the Borrower also agrees that each Participant shall be entitled to the benefits of Sections 4.3, 4.4, 4.5, 4.6 and 4.7 with respect to its ------------ --- --- --- --- participation in the Term Loan Commitments or the Revolving Loan Commitments, and the Loans outstanding from time to time as if it was a Lender; provided that, in the case of Section 4.7, such Participant shall -------- ----------- have complied with the requirements of said Section and provided, further, -------- ------- that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. SECTION 11.12 Other Transactions. Nothing contained herein shall ------------------ preclude the Administrative Agent or any other Lender from engaging in any transaction, in addition to those -73- contemplated by any Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 11.13 Submission To Jurisdiction; Waivers. Each of the ----------------------------------- Borrower, the Administrative Agent and the Lenders hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to the Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non- exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Person at its address set forth on Schedule 1.1(b) or at such other address --------------- of which the Administrative Agent shall have been notified pursuant to Section 11.2; ------------ (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. SECTION 11.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE --------------------- ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. SECTION 11.15 Non-Recourse Persons. The Lenders acknowledge that no -------------------- Non- Recourse Person shall have any responsibility or liability for the Obligations. SECTION 11.16 Acknowledgments. The Borrower hereby acknowledges --------------- that: -74- (a) it has been advised by counsel in the negotiation, execution and delivery of the Loan Documents; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with the Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created by any of the Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. SECTION 11.17 Releases of Guarantees and Liens. (a) Notwithstanding -------------------------------- anything to the contrary contained in any Loan Document, the Collateral Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by Section 11.1) to take ------------ any action requested by the Borrower having the effect of releasing any Collateral or guarantee obligations (i) to the extent necessary to permit consummation of any transaction not prohibited by any Loan Document or that has been consented to in accordance with Section 11.1 or (ii) under the ------------ circumstances described in paragraph (b) below. ------------ (b) At such time as the Loans and the other obligations under the Loan Documents shall have been paid in full and the Commitments have been terminated, the Administrative Agent shall instruct the Collateral Agent (i) to return to the Borrower any Collateral then held in fulfillment of the Debt Service Reserve Requirement, (ii) to release the Lien on the capital stock of the Borrower granted pursuant to Section 3(b) of the Guarantee and Collateral Agreement and to return to the Borrower all stock certificates pledged in connection therewith and (iii) to release Edison Mission Energy from its obligations under the Guarantee and Collateral Agreement. SECTION 11.18 Confidentiality. Each of the Administrative Agent and --------------- each Lender agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement; provided that nothing herein -------- shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or any affiliate of any Lender, (b) to any transferee or prospective transferee that agrees to comply with the provisions of this Section 11.18, (c) to its employees, ------------- directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to -75- information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (i) in connection with the exercise of any remedy under any Loan Document. -76- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers as of the day and year first above written. EDISON MISSION HOLDINGS CO. By: -------------------------------------- Name: Kevin M. Smith Title: Vice President and Treasurer CITICORP USA, INC., as Administrative Agent and Initial Lender By: -------------------------------------- Title: Managing Director CREDIT SUISSE FIRST BOSTON, as Initial Lender By: -------------------------------------- Title: By: -------------------------------------- Title: LEHMAN COMMERCIAL PAPER INC., as Initial Lender By: -------------------------------------- Title: -77- SOCIETE GENERALE, as Initial Lender By:_____________________ Title: -78- ANNEX I Pricing Grid 364-Day Term Loans
BASIS FOR LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 PRICING Applicable Margin 87.50 bps 100.00 bps 112.50 bps 200.00 bps 250.00 bps (LIBO Rate Loans) Applicable Margin 0.00 bps 0.00 bps 0.00 bps 0.00 bps 0.00 bps (Base Rate Loans)
bps = basis points per annum Pricing Grid Construction Term Loans
BASIS FOR LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 PRICING Applicable Margin 85.00 bps 92.50 bps 100.00 bps 175.00 bps 225.00 bps (LIBO Rate Loans) Applicable Margin 0.00 bps 0.00 bps 0.00 bps 0.00 bps 0.00 bps (Base Rate Loans) Facility Fee (1) 15.00 bps 20.00 bps 25.00 bps 50.00 bps 50.00 bps
(1) Paid quarterly in arrears on each bank's commitment irrespective of usage. bps = basis points per annum Pricing Grid Revolving Loans
BASIS FOR LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 PRICING Applicable Margin 85.00 bps 92.50 bps 100.00 bps 175.00 bps 225.00 bps (LIBO Rate Loans) Applicable Margin 0.00 bps 0.00 bps 0.00 bps 0.00 bps 0.00 bps (Base Rate Loans) Facility Fee (1) 15.00 bps 20.00 bps 25.00 bps 50.00 bps 50.00 bps
(1) Paid quarterly in arrears on each bank's commitment irrespective of usage. bps = basis points per annum The following applies to each of the three Pricing Grids above. The Applicable Margin shall be determined at Level 1 so long as the Borrower's ------- Debt Rating is Baa1 or better by Moody's and BBB+ or better by S&P. The Applicable Margin shall be determined at Level 2 so long as the Borrower's ------- Debt Rating is Baa2 by Moody's and BBB by S&P. The Applicable Margin shall be determined at Level 3 so long as the Borrower's ------- Debt Rating is Baa3 by Moody's and BBB- by S&P. The Applicable Margin shall be determined at Level 4 so long as the Borrower's ------- Debt Rating is Ba1 by Moody's and BB+ by S&P. The Applicable Margin shall be determined at Level 5 so long as the Borrower's ------- Debt Rating is lower than Ba1 by Moody's and BB+ by S&P, or if the Borrower has not received a final Debt Rating before June 1, 1999. In the event that the Debt Rating established by Moody's is at a different Level than the Debt Rating established by S&P, the lower Debt Rating shall apply and the Level associated with such lower rating shall be the Applicable Margin, except that, in the event that the difference is greater than one rating Level, the average of the two Debt Ratings by Moody's and by S&P shall apply to determine the Applicable Margin. Changes in the Level for determining the Applicable Margin resulting from a change in rating(s) shall become effective on the day such change in the ratings is announced by the relevant rating agency. In the event that the Borrower does not maintain a Debt Rating with both Moody's and S&P, the Borrower may, with the reasonable consent of Required Lenders, select Duff & Phelps, Fitch Investor Services Inc. or another nationally recognized rating agency to replace Moody's or S&P, and such replacement agency and the Debt Rating established by such agency shall be used thereafter in the calculation of Applicable Margin in the same fashion as the agency which no longer maintains such Debt Rating. From the date which the Debt Rating of Moody's or S&P ceases to be current until the date which is 120 days thereafter, the Applicable Margin shall be determined by reference to the Debt Ratings of Moody's and S&P most recently in effect. In the event that such replacement agency has not established a Debt Rating within 120 days after the Debt Rating of Moody's or S&P ceases to be current, then, until such time as such Debt Rating is established, the Applicable Margin shall be determined at one Level lower than the Level otherwise established based on the remaining Debt Rating. EX-10.56 3 GUARANTEE & COLLATERAL AGREEMENT Exhibit 10.56 EXECUTION COPY GUARANTEE AND COLLATERAL AGREEMENT made by EDISON MISSION HOLDINGS CO., EDISON MISSION FINANCE CO., HOMER CITY PROPERTY HOLDINGS, INC., CHESTNUT RIDGE ENERGY CO., MISSION ENERGY WESTSIDE, INC., EME HOMER CITY GENERATION L.P. and EDISON MISSION ENERGY in favor of UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent Dated as of March 18, 1999 TABLE OF CONTENTS Page SECTION 1. DEFINED TERMS.............................................................................. 2 1.1 Definitions.................................................................................... 2 1.2 Other Definitional Provisions.................................................................. 7 SECTION 2. GUARANTEE.......................................................................... 8 2.1 Guarantee...................................................................................... 8 2.2 Right of Contribution.......................................................................... 9 2.3 No Subrogation................................................................................. 9 2.4 Amendments, etc. with respect to the Borrower Obligations...................................... 9 2.5 Guarantee Absolute and Unconditional........................................................... 10 2.6 Reinstatement.................................................................................. 11 2.7 Payments....................................................................................... 11 SECTION 3. GRANT OF SECURITY INTEREST................................................................. 11 SECTION 4. REPRESENTATIONS AND WARRANTIES............................................................. 12 4.1 Title; No Other Liens.......................................................................... 12 4.2 Perfected First Priority Liens................................................................. 12 4.3 Chief Executive Office......................................................................... 12 4.4 Inventory and Equipment........................................................................ 13 4.5 Investment Property............................................................................ 13 4.6 Receivables.................................................................................... 13 4.7 Contracts...................................................................................... 13 SECTION 5. COVENANTS.................................................................................. 14 5.1 Delivery of Instruments, Certificated Securities and Chattel Paper............................. 14 5.2 Maintenance of Perfected Security Interest; Further Documentation.............................. 14 5.3 Changes in Locations, Name, etc................................................................ 15 5.4 Notices........................................................................................ 15 5.5 Investment Property............................................................................ 15 SECTION 6. REMEDIAL PROVISIONS........................................................................ 16 6.1 Certain Matters Relating to Receivables........................................................ 16 6.2 Communications with Obligors; Grantors Remain Liable........................................... 17 6.3 Investment Property............................................................................ 17 6.4 Proceeds to be Turned Over To Collateral Agent................................................. 18 6.5 Application of Proceeds........................................................................ 19 6.6 Code and Other Remedies........................................................................ 19 6.7 Pledged Stock and Pledged Interests............................................................ 20 6.8 Waiver; Deficiency............................................................................. 20 SECTION 7. THE COLLATERAL AGENT....................................................................... 20
i
Page 7.1 Collateral Agent's Appointment as Attorney-in-Fact, etc......................................... 20 7.2 Duty of Collateral Agent........................................................................ 22 7.3 Execution of Financing Statements............................................................... 23 7.4 Authority of Collateral Agent................................................................... 23 SECTION 8. MISCELLANEOUS............................................................................... 23 8.1 Amendments in Writing........................................................................... 23 8.2 Notices......................................................................................... 23 8.3 No Waiver by Course of Conduct; Cumulative Remedies............................................. 23 8.4 Enforcement Expenses; Indemnification........................................................... 24 8.5 Successors and Assigns.......................................................................... 24 8.6 Set-Off......................................................................................... 24 8.7 Counterparts.................................................................................... 25 8.8 Severability.................................................................................... 25 8.9 Section Headings................................................................................ 25 8.10 Integration.................................................................................... 25 8.11 GOVERNING LAW.................................................................................. 25 8.12 Submission To Jurisdiction; Waivers............................................................ 26 8.13 Acknowledgements............................................................................... 26 8.14 Releases....................................................................................... 27 8.15 WAIVER OF JURY TRIAL........................................................................... 27
SCHEDULES Schedule 1 Notice Addresses Schedule 2 Investment Property Schedule 3 Perfection Matters Schedule 4 Jurisdictions of Organization and Chief Executive Offices Schedule 5 Inventory and Equipment Locations Schedule 6 Certain Contracts
ii GUARANTEE AND COLLATERAL AGREEMENT, dated as of March 18, 1999, made by (i) EDISON MISSION HOLDINGS CO., a California corporation (the "Borrower"), -------- (ii) EDISON MISSION FINANCE CO., a California corporation ("Edison Mission -------------- Finance"), (iii) HOMER CITY PROPERTY HOLDINGS, INC., a California corporation - ------- ("Homer City Holdings"), (iv) CHESTNUT RIDGE ENERGY CO., a California ------------------- corporation ("Chestnut Ridge"), (v) MISSION ENERGY WESTSIDE, INC., a California -------------- corporation ("MEW"), (vi) EME HOMER CITY GENERATION L.P., a Pennsylvania limited --- partnership ("EME Homer City") and (vii) EDISON MISSION ENERGY, a California -------------- corporation ("Edison Mission Energy"; and, together with the Borrower, Edison --------------------- Mission Finance, Homer City Holdings, Chestnut Ridge, MEW and EME Homer City, the "Grantors") in favor of UNITED STATES TRUST COMPANY OF NEW YORK, as -------- collateral agent for the Secured Parties (as defined below) (in such capacity, the "Collateral Agent"). ---------------- RECITALS -------- A. The Borrower has entered into a Credit Agreement, dated as of March 18, 1999 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), with certain financial institutions ---------------- (collectively, the "Lenders") and Citicorp USA, Inc., as administrative agent ------- for the Lenders (in such capacity, the "Administrative Agent"). -------------------- B. Pursuant to the Credit Agreement, the Lenders have severally agreed to make Loans (as defined below) to the Borrower upon the terms and subject to the conditions set forth therein. C. The Borrower will use the proceeds of the Loans under the Credit Agreement to make valuable transfers to one or more of the other Grantors in connection with the acquisition of the Homer City Electric Generating Station and certain facilities and other assets associated therewith and ancillary thereto (the "Generating Station"), certain capital expenditures related to the ------------------ Generating Station and general working capital purposes. D. Under Section 8.2.1(e) of the Credit Agreement, the Borrower is permitted to incur certain indebtedness for the purpose of refinancing the Loans and other indebtedness of the Borrower ("Refinancing Indebtedness"); under ------------------------ Section 8.2.1(d)(i) of the Credit Agreement, the Loan Parties are permitted to incur certain indebtedness in the form of reimbursement obligations relating to letters of credit, surety bonds and performance bonds used by the Loan Parties in the ordinary course of their business ("Ordinary Course Letter of Credit -------------------------------- Indebtedness"); under Section 8.2.1(d)(ii) of the Credit Agreement, the - ------------ Borrower is permitted to incur certain indebtedness in the form of reimbursement obligations relating to Debt Service Reserve Letters of Credit (as defined below) ("DSR Letter of Credit Indebtedness"); under Section 8.2.1(c) of the --------------------------------- Credit Agreement, the Borrower is permitted to incur certain additional indebtedness ("Additional Indebtedness"); and, under Section 8.2.1(b) of the ----------------------- Credit Agreement, the Borrower is permitted to incur certain indebtedness under Interest Rate Hedging Transactions entered into with respect to the Loans ("Swap ---- Indebtedness"). - ------------ 2 E. In satisfaction of the requirements of the Lenders and the Persons providing any Refinancing Indebtedness, Ordinary Course Letter of Credit Indebtedness, DSR Letter of Credit Indebtedness, Additional Indebtedness or Swap Indebtedness, the Grantors desire by this Agreement and the other Security Documents (as defined below) to provide a common pool of collateral as security for their obligations under the Credit Agreement and the other Financing Documents (as defined below). F. In order to simplify administration of such collateral and to provide for the orderly enforcement of their respective rights, the Administrative Agent, the Lenders and the other Secured Parties (as defined below) have appointed the Collateral Agent to serve as their common representative, to be the beneficiary under any guarantee intended to benefit the Secured Parties, and to hold the liens created, or to be created, under the Financing Documents. G. Pursuant to the Collateral Agency and Intercreditor Agreement, dated as of March 18, 1999 (as amended, supplemented or otherwise modified from time to time, the "Collateral Agency and Intercreditor Agreement"), among the --------------------------------------------- Borrower, the Administrative Agent, the Collateral Agent and certain other parties, the Collateral Agent has agreed to serve as a common collateral agent for all Secured Parties. H. The Borrower is a member of an affiliated group of companies that includes each other Grantor. The Borrower and the other Grantors are engaged in related businesses, and each Grantor will derive substantial direct and indirect benefit from the making of the Loans and the incurrence of any Refinancing Indebtedness, Ordinary Course Letter of Credit Indebtedness, DSR Letter of Credit Indebtedness, Additional Indebtedness or Swap Indebtedness. I. It is a condition precedent to the obligation of the Lenders to make their respective Loans to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Collateral Agent for the benefit of the Secured Parties. NOW, THEREFORE, in consideration of the premises, each Grantor hereby agrees with the Collateral Agent, for the benefit of the Secured Parties, as follows: SECTION 1. DEFINED TERMS 1.1 Definitions. (a) Unless otherwise defined herein, terms defined ----------- in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms are used herein as defined in the New York UCC: Accounts, Chattel Paper, Documents, Equipment, Instruments and Inventory. (b) The following terms shall have the following meanings: "Additional Indebtedness": as defined in the recitals. ----------------------- -------- 3 "Administrative Agent": as defined in the recitals. -------------------- -------- "Agreement": this Guarantee and Collateral Agreement, as the same may --------- be amended, supplemented or otherwise modified from time to time. "Borrower": as defined in the preamble. -------- -------- "Borrower Obligations": the collective reference to (a) the unpaid -------------------- principal of and interest on the Loans, (b) the unpaid principal of and interest on the Refinancing Indebtedness, if any, (c) the unpaid principal of and interest on the Ordinary Letter of Credit Indebtedness, if any, (d) the unpaid principal of and interest on the DSR Letter of Credit Indebtedness, if any, (e) the unpaid principal of and interest on the Additional Indebtedness, if any, (f) the unpaid amount of the Swap Indebtedness, if any, and (g) all other obligations and liabilities of the Borrower (including interest accruing at the then applicable rate or rates provided in the Financing Documents after the maturity of the Loans, Refinancing Indebtedness, Ordinary Course Letter of Credit Indebtedness, DSR Letter of Credit Indebtedness, Additional Indebtedness and/or Swap Indebtedness, as applicable, and interest accruing at the then applicable rate or rates provided in the Financing Documents after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to the Secured Parties, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, any Financing Document or any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, guarantee obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by the Borrower pursuant to the terms of any Financing Document). "Capital Stock": any and all shares, interests, participations or ------------- other equivalents(however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. "Certificated Security": the collective reference to (i) any --------------------- "certificated security" as defined in Section 8-102 of the New York UCC and (ii) all limited liability company certificates, partnership interest certificates and certificated options therefor that may be issued or granted by any Issuer. "Chestnut Ridge": as defined in the preamble. -------------- -------- "Collateral": as defined in Section 3. ---------- --------- 4 "Collateral Account": any collateral account established by the ------------------ Collateral Agent as provided in Section 6.1 or 6.4. ----------- --- "Collateral Agency and Intercreditor Agreement": as defined in the --------------------------------------------- recitals. - -------- "Collateral Agent": as defined in the preamble. ---------------- -------- "Commitments": as defined in the Credit Agreement. ----------- "Contracts": the contracts and agreements listed in Schedule 6, as --------- ---------- the same may be amended, supplemented or otherwise modified from time to time, including (i) all rights of any Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of any Grantor to damages arising thereunder and (iii) all rights of any Grantor to perform and to exercise all remedies thereunder. "Credit Agreement": as defined in the preamble. ---------------- -------- "Debt Service Reserve Letter of Credit": as defined in the Security ------------------------------------- Deposit Agreement. "DSR Letter of Credit Indebtedness": as defined in the recitals. --------------------------------- -------- "Deposit Account": as defined in the Uniform Commercial Code of any --------------- applicable jurisdiction and, in any event, including any demand, time, savings, passbook or like account maintained with a depositary institution. "Edison Mission Energy": as defined in the preamble. --------------------- -------- "Edison Mission Finance": as defined in the preamble. ---------------------- -------- "EME Homer City": as defined in the preamble. -------------- -------- "Event of Default": as defined in the Credit Agreement and any other ---------------- Financing Document. "Financing Documents": the Loan Documents and each indenture, loan ------------------- agreement, underwriting agreement, security purchase agreement or other document entered into in connection with any Senior Debt. "General Intangibles": all "general intangibles" as such term is ------------------- defined in Section 9-106 of the New York UCC and, in any event, including with respect to any Grantor, all contracts, agreements, instruments and indentures in any form, and portions thereof, to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same may 5 from time to time be amended, supplemented or otherwise modified, including (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of such Grantor to damages arising thereunder and (iii) all rights of such Grantor to perform and to exercise all remedies thereunder, in each case to the extent the grant by such Grantor of a security interest pursuant to this Agreement in its right, title and interest in such contract, agreement, instrument or indenture is not prohibited by such contract, agreement, instrument or indenture without the consent of any other party thereto, would not give any other party to such contract, agreement, instrument or indenture the right to terminate its obligations thereunder, or is permitted with consent if all necessary consents to such grant of a security interest have been obtained from the other parties thereto (it being understood that the foregoing shall not be deemed to obligate such Grantor to obtain such consents); provided, that the foregoing limitation shall not affect, limit, -------- restrict or impair the grant by such Grantor of a security interest pursuant to this Agreement in any Receivable or any money or other amounts due or to become due under any such contract, agreement, instrument or indenture to the extent provided in Section 9-318(4) of the New York UCC. "Grantors": as defined in the preamble. -------- -------- "Guarantor Obligations": with respect to any Guarantor, all --------------------- obligations and liabilities of such Guarantor which may arise under or in connection with this Agreement or any other Financing Document to which such Guarantor is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent and to the Secured Parties that are required to be paid by such Guarantor pursuant to the terms of any Financing Document). "Guarantors": the collective reference to each Grantor other than the ---------- Borrower and Edison Mission Energy. "Homer City Holdings": as defined in the preamble. ------------------- --------- "Intercompany Loan Subordination Agreement": the Intercompany Loan ----------------------------------------- Subordination Agreement, dated as of March 18, 1999, among the Loan Parties and the Collateral Agent. "Intercompany Note": any promissory note or other evidence of loans ----------------- made by any Grantor to the Borrower or any of its Subsidiaries. "Investment Property": the collective reference to (i) all ------------------- "investment property" as such term is defined in Section 9-115 of the New York UCC and (ii) whether or not constituting "investment property" as so defined, all Pledged Stock, all Pledged Interests and all Pledged Notes. 6 "Issuers": the collective reference to each issuer of any Investment ------- Property. "Loans": as defined in the Credit Agreement. ----- "MEW": as defined in the preamble. --- "Mortgage and Security Agreement": the Open-End Mortgage, Security ------------------------------- Agreement and Assignment of Rents, dated as of March 18, 1999, among the Grantors and the Collateral Agent, as the same may be amended, supplemented or otherwise modified from time to time. "New York UCC": the Uniform Commercial Code as from time to time in ------------ effect in the State of New York. "Obligations": (i) in the case of the Borrower, the Borrower ----------- Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations. "Ordinary Course Letter of Credit Indebtedness": as defined in the --------------------------------------------- recitals. "Person": any natural person, corporation, partnership, limited ------ liability company, firm, association, trust, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity. "Pledged Interests": the partnership interests listed on Schedule 2, ----------------- ---------- together with all certificates, options or rights of any nature whatsoever that may be issued or granted to any Grantor in respect of such partnership interests. "Pledged Notes": all promissory notes listed on Schedule 2, all ------------- ---------- Intercompany Notes at any time issued to any Grantor and all other promissory notes issued to or held by any Grantor (other than promissory notes issued in connection with extensions of trade credit by any Grantor in the ordinary course of business). "Pledged Stock": the shares of Capital Stock listed on Schedule 2, ------------- ---------- together with any other shares, stock certificates, options or rights of any nature whatsoever in respect of the Capital Stock of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect. "Proceeds": all "proceeds" as such term is defined in Section 9- -------- 306(1) of the New York UCC and, in any event, shall include all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto. "Receivable": any right to payment for goods sold or leased or for ---------- services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including any Account). 7 "Refinancing Indebtedness": as defined in the recitals. ------------------------ -------- "Required Secured Parties": as defined in the Collateral Agency and ------------------------ Intercreditor Agreement. "Secured Parties": the Collateral Agent, the Administrative Agent, --------------- the Lenders, each Person that provides any Refinancing Indebtedness, Ordinary Course Letter of Credit Indebtedness, DSR Letter of Credit Indebtedness, Additional Indebtedness or Swap Indebtedness and each Person that serves as indenture trustee, collateral agent, lenders' representative or in any similar capacity for Persons that provide any Senior Debt. "Securities Act": the Securities Act of 1933, as amended. -------------- "Security Deposit Agreement": the Security Deposit Agreement, dated -------------------------- as of March 18, 1999, among the Loan Parties and the Collateral Agent. "Security Documents": (a) this Agreement, the Mortgage and ------------------ Security Agreement, the Security Deposit Agreement, the Intercompany Loan Subordination Agreement and the Collateral Agency and Intercreditor Agreement and (b) the EME Credit Support Guarantee and any other agreement or instrument hereafter entered into by the Borrower or any other Person which guarantees or secures payment of any Senior Debt. "Senior Debt": the Loans, any Refinancing Indebtedness, any Ordinary ----------- Course Letter of Credit Indebtedness, any DSR Letter of Credit Indebtedness, any Additional Indebtedness and any Swap Indebtedness. "Swap Indebtedness": as defined in the recitals. ----------------- -------- 1.2 Other Definitional Provisions. (a) The words "hereof", "herein" ----------------------------- and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, schedule, appendix and exhibit references are to this Agreement unless otherwise specified. (b) Each reference in this Agreement to a Financing Document or other agreement shall be deemed to refer to such Financing Document or other agreement as the same may be amended, supplemented or otherwise modified from time to time. (c) Any term defined by reference to an agreement, instrument or other document shall have the meaning so assigned to it whether or not such agreement, instrument or document is in effect. (d) Each reference in this Agreement to a Person shall be deemed to include such Person's successors and assigns. 8 (e) Each reference in this Agreement to a Requirement of Law shall be deemed to refer to such Requirement of Law as the same may be amended, supplemented or otherwise modified from time to time. (f) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. GUARANTEE 2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and --------- severally, unconditionally and irrevocably, guarantees to the Collateral Agent, for the benefit of the Secured Parties, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations. (b) Anything in any Financing Document to the contrary notwithstanding, the maximum liability of each Guarantor under the Financing Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section ------- 2.2). - --- (c) Each Guarantor agrees that the Borrower Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or --------- affecting the rights and remedies of the Collateral Agent or any Secured Party hereunder. (d) The guarantee contained in this Section 2 shall remain in full --------- force and effect until all the Borrower Obligations and the obligations of each Guarantor under the guarantee contained in this Section 2 shall have been --------- satisfied by payment in full and the Commitments shall have been terminated. (e) No payment made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Collateral Agent or any Secured Party from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set- off or appropriation or application at any time or from time to time in reduction of or in payment of the Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or any payment received or collected from such Guarantor in respect of the Borrower Obligations), remain liable for the Borrower Obligations up to the maximum liability of such Guarantor hereunder until the Borrower Obligations are paid in full and the Commitments are terminated. 9 2.2 Right of Contribution. Each Guarantor hereby agrees that to the --------------------- extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 2.3. The provisions of ----------- this Section 2.2 shall in no respect limit the obligations and liabilities of ----------- any Guarantor to the Collateral Agent and the Secured Parties, and each Guarantor shall remain liable to the Collateral Agent and the Secured Parties for the full amount guaranteed by such Guarantor hereunder. 2.3 No Subrogation. Notwithstanding any payment made by any -------------- Guarantor hereunder or any set-off or application of funds of any Guarantor by the Collateral Agent or any Secured Party, no Guarantor shall be entitled to be subrogated to any of the rights of the Collateral Agent or any Secured Party against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by the Collateral Agent or any Secured Party for the payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Collateral Agent and the Secured Parties by the Borrower on account of the Borrower Obligations are paid in full and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Borrower Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Collateral Agent and the Secured Parties, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Collateral Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Collateral Agent, if required), to be applied against the Borrower Obligations, whether matured or unmatured, in such order as the Collateral Agent may determine. 2.4 Amendments, etc. with respect to the Borrower Obligations. Each --------------------------------------------------------- Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Borrower Obligations made by the Collateral Agent or any Secured Party may be rescinded by the Collateral Agent or such Secured Party and any of the Borrower Obligations continued, and the Borrower Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Collateral Agent or any Secured Party, and the Financing Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Collateral Agent may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Collateral Agent or any Secured Party for the payment of the Borrower Obligations may be sold, exchanged, waived, surrendered or released. Neither the Collateral Agent nor any Secured Party shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Borrower Obligations or for the guarantee contained in this Section 2 or --------- any property subject thereto. 10 2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any ------------------------------------ and all notice of the creation, renewal, extension or accrual of any of the Borrower Obligations and notice of or proof of reliance by the Collateral Agent or any Secured Party upon the guarantee contained in this Section 2 or --------- acceptance of the guarantee contained in this Section 2; the Borrower --------- Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between the --------- Borrower and any of the Guarantors, on the one hand, and the Collateral Agent and the Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives diligence, presentment, --------- protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Borrower Obligations. Each Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional - --------- guarantee of payment without regard to (a) the validity or enforceability of any Financing Document, any of the Borrower Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Collateral Agent or any Secured Party, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower or any other Person against the Collateral Agent or any Secured Party, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Borrower Obligations, or of such Guarantor under the guarantee contained in this Section ------- 2, in bankruptcy or in any other instance. When making any demand hereunder or - - otherwise pursuing its rights and remedies hereunder against any Guarantor, the Collateral Agent or any Secured Party may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Borrower, any other Guarantor or any other Person or against any collateral security or guarantee for the Borrower Obligations or any right of offset with respect thereto, and any failure by the Collateral Agent or any Secured Party to make any such demand, to pursue such other rights or remedies or to collect any payments from the Borrower, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Collateral Agent or any Secured Party against any Guarantor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 2.6 Reinstatement. The guarantee contained in this Section 2 shall ------------- --------- continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Borrower Obligations is rescinded or must otherwise be restored or returned by the Collateral Agent or any Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any 11 Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. 2.7 Payments. Each Guarantor hereby guarantees that payments -------- hereunder will be paid to the Collateral Agent without set-off or counterclaim in Dollars at the office of the Collateral Agent for deposit in the "Homer City Revenue Account", account no. 09039700, or to such other place as the Collateral Agent may specify in writing. SECTION 3. GRANT OF SECURITY INTEREST (a) Each Grantor (other than Edison Mission Energy) hereby pledges and grants to the Collateral Agent, for the benefit of the Secured Parties, a security interest in all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the "Collateral"), as collateral security for the prompt and complete payment and ---------- performance when due (whether at the stated maturity, by acceleration or otherwise) of such Grantor's Obligations: (i) all Accounts; (ii) all Chattel Paper; (iii) all Contracts; (iv) all Deposit Accounts; (v) all Documents; (vi) all Equipment; (vii) all General Intangibles; (viii) all Instruments; (ix) all Inventory; (x) all Investment Property; (xi) all other property not otherwise described above; (xii) all books and records pertaining to the Collateral; and 12 (xiii) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing. (b) Edison Mission Energy hereby pledges and grants to the Collateral Agent, for the benefit of the Secured Parties, a security interest in all shares of Capital Stock of the Borrower, as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) by the Borrower of all Borrower Obligations. SECTION 4. REPRESENTATIONS AND WARRANTIES Each Grantor hereby represents and warrants, with respect to itself and its Collateral, to the Collateral Agent and each Secured Party that: 4.1 Title; No Other Liens. Except for the security interest granted --------------------- to the Collateral Agent pursuant to this Agreement and the other Liens permitted to exist on the Collateral by the Financing Documents, such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Collateral Agent pursuant to this Agreement or as are permitted by the Financing Documents. 4.2 Perfected First Priority Liens. The security interests granted ------------------------------ pursuant to this Agreement upon completion of the filings and other actions specified on Schedule 3 (which, in the case of all filings and other documents ---------- referred to on said Schedule, have been delivered to the Collateral Agent in -------- completed and duly executed form) will (a) constitute valid and enforceable perfected security interests in all of the Collateral in favor of the Collateral Agent as collateral security for such Grantor's Obligations to the extent that a security interest may be perfected by filing and/or the other actions specified on Schedule 3, and (b) are prior to all other Liens on the Collateral in ---------- existence on the date hereof except for Liens permitted by the Financing Documents and which have priority over the Liens on the Collateral by operation of law. 4.3 Chief Executive Office. On the date hereof, such Grantor's ---------------------- jurisdiction of organization and the location of such Grantor's chief executive office or sole place of business are specified on Schedule 4. ---------- 4.4 Inventory and Equipment. On the date hereof, the Inventory and ----------------------- the Equipment (other than mobile goods) are kept at the locations listed on Schedule 5. - ---------- 4.5 Investment Property. (a) The shares of Pledged Stock pledged by ------------------- such Grantor hereunder constitute all the issued and outstanding shares of all classes of the Capital Stock of each Issuer owned by such Grantor. 13 (b) All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable. (c) The Pledged Interests pledged by such Grantor hereunder constitute all the issued and outstanding partnership or other equity interests owned by such Grantor. (d) All the Pledged Interests pledged by such Grantor have been duly and validly issued. (e) Such Grantor is the record and beneficial owner of, and has good and marketable title to, the Investment Property pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by this Agreement. 4.6 Receivables. (a) No amount payable to such Grantor under or in ----------- connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not been delivered to the Collateral Agent. (b) Except as otherwise disclosed on Schedule 6, none of the obligors ---------- on any Receivables is a Governmental Authority. 4.7 Contracts. (a) No consent of any party (other than such --------- Grantor) to any Contract is required, or purports to be required, in connection with the execution, delivery and performance of this Agreement. (b) Neither such Grantor nor (to the best of such Grantor's knowledge) any of the other parties to the Contracts to which such Grantor is a party is in default in the performance or observance of any of the terms thereof in any manner that, in the aggregate, could reasonably be expected to have a Material Adverse Effect. (c) The right, title and interest of such Grantor in, to and under the Contracts are not subject to any defenses, offsets, counterclaims or claims that, in the aggregate, could reasonably be expected to have a Material Adverse Effect. (d) No amount payable to such Grantor under or in connection with any Contract is evidenced by any Instrument or Chattel Paper which has not been delivered to the Collateral Agent. (e) Except as otherwise disclosed on Schedule 6, none of the parties ---------- to any Contract is a Governmental Authority. 14 SECTION 5. COVENANTS Each Grantor covenants and agrees with the Collateral Agent and the Secured Parties that, from and after the date of this Agreement until the Obligations shall have been paid in full and the Commitments shall have terminated: 5.1 Delivery of Instruments, Certificated Securities and Chattel ------------------------------------------------------------ Paper. If any amount payable under or in connection with any of the Collateral - ----- shall be or become evidenced by any Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall be immediately delivered to the Collateral Agent, duly indorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Agreement. 5.2 Maintenance of Perfected Security Interest; Further --------------------------------------------------- Documentation. (a) Such Grantor shall take any and all actions that may be - ------------- necessary or, in the reasonable discretion of the Collateral Agent, prudent to maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 4.2 and shall defend ----------- such security interest against the claims and demands of all Persons whomsoever. (b) Such Grantor will furnish to the Collateral Agent and the Secured Parties from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection therewith as the Collateral Agent may reasonably request, all in reasonable detail. (c) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including (i) filing any financing or continuation statements under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and (ii) in the case of Investment Property, Deposit Accounts and any other relevant Collateral, taking any actions necessary to enable the Collateral Agent to obtain "control" (within the meaning of the applicable Uniform Commercial Code) with respect thereto. 5.3 Changes in Locations, Name, etc. Such Grantor will not, except ------------------------------- upon 30 days' prior written notice to the Collateral Agent and delivery to the Collateral Agent of (a) all additional executed financing statements and other documents reasonably requested by the Collateral Agent to maintain the validity, perfection and priority of the security interests provided for herein and (b) if applicable, a written supplement to Schedule 5 showing any additional location ---------- at which Inventory or Equipment shall be kept: (i) permit any of the Inventory or Equipment to be kept at a location other than those listed on Schedule 5 (other than temporary transfers of ---------- immaterial amounts of 15 Inventory and Equipment for periods not exceeding three months for the limited purpose of repair in the ordinary course of business); (ii) change its jurisdiction of organization or the location of its chief executive office or sole place of business from that referred to in Section 4.3; or ----------- (iii) change its name, identity or corporate structure to such an extent that any financing statement filed by the Collateral Agent in connection with this Agreement would become misleading. 5.4 Notices. Such Grantor will advise the Collateral Agent promptly, ------- in reasonable detail, of: (a) any Lien (other than security interests created hereby or Liens permitted under the Financing Documents) on any of the Collateral which could reasonably be expected to have a material adverse effect on the ability of the Collateral Agent to exercise any of its remedies hereunder; and (b) of the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby. 5.5 Investment Property. (a) If such Grantor shall become entitled ------------------- to receive or shall receive any certificate (including any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Capital Stock in any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock or Pledged Interests, as the case may be, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Collateral Agent and the Secured Parties, hold the same in trust for the Collateral Agent and the Secured Parties and deliver the same forthwith to the Collateral Agent in the exact form received, duly indorsed by such Grantor to the Collateral Agent, if required, together with an undated stock power or power of transfer, as the case may be, covering such certificate duly executed in blank by such Grantor and with, if the Collateral Agent so requests, signature guaranteed, to be held by the Collateral Agent, subject to the terms hereof, as additional collateral security for the Obligations. Any sums paid upon or in respect of the Investment Property upon the liquidation or dissolution of any Issuer shall be paid over to the Collateral Agent to be held by it hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Investment Property or any property shall be distributed upon or with respect to the Investment Property pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Collateral Agent, be delivered to the Collateral Agent to be held by it hereunder as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Investment Property shall 16 be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Collateral Agent, hold such money or property in trust for the Secured Parties, segregated from other funds of such Grantor, as additional collateral security for the Obligations. (b) Without the prior written consent of the Collateral Agent, such Grantor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock, partnership interests or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Investment Property or Proceeds thereof, except pursuant to a transaction expressly permitted by the Credit Agreement, (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Investment Property or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement or (iv) enter into any agreement or undertaking restricting the right or ability of such Grantor or the Collateral Agent to sell, assign or transfer any of the Investment Property or Proceeds thereof. (c) In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Investment Property issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Collateral Agent promptly in writing of the occurrence of any of the events described in Section 5.7(a) with -------------- respect to the Investment Property issued by it and (iii) the terms of Sections -------- 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions - ------ --- ------- -------- that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the -------------- --- Investment Property issued by it. SECTION 6. REMEDIAL PROVISIONS 6.1 Certain Matters Relating to Receivables. (a) The Collateral --------------------------------------- Agent hereby authorizes each Grantor to collect such Grantor's Receivables and the Collateral Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. If required by the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Collateral Agent if required, in a Collateral Account maintained under the sole dominion and control of the Collateral Agent, subject to withdrawal by the Collateral Agent only as provided in Section 6.5, and (ii) until so turned over, shall be held by such Grantor in trust for the Collateral Agent, segregated from other funds of such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit. (b) At the Collateral Agent's request, at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall deliver to the Collateral Agent all 17 original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables. 6.2 Communications with Obligors; Grantors Remain Liable. (a) The ---------------------------------------------------- Collateral Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with obligors under the Receivables and parties to the Contracts to verify with them to the Collateral Agent's satisfaction the existence, amount and terms of any Receivables or Contracts. (b) Upon the request of the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables and parties to the Contracts that the Receivables and the Contracts have been assigned to the Collateral Agent for the ratable benefit of the Secured Parties and that payments in respect thereof shall be made directly to the Collateral Agent. (c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of the Receivables and Contracts to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Neither the Collateral Agent nor any Secured Party shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) or Contract by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any Secured Party of any payment relating thereto, nor shall the Collateral Agent or any Secured Party be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise thereto) or Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. 6.3 Investment Property. (a) Unless an Event of Default shall have ------------------- occurred and be continuing and the Collateral Agent shall have given notice to the relevant Grantor of the Collateral Agent's intent to exercise its corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted -------------- to receive all cash dividends paid in respect of the Pledged Stock, all cash distributions paid in respect of the Pledged Interests and all payments made in respect of the Pledged Notes, in each case paid in the normal course of business of the relevant Issuer and consistent with past practice, to the extent permitted in the Credit Agreement (and the Indenture, if any Securities have been issued), and to exercise all voting and corporate rights with respect to the Investment Property; provided, however, that no vote shall be cast or -------- ------- corporate right exercised or other action taken which, in the Collateral Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in any violation of any provision of any Financing Document. (b) If an Event of Default shall occur and be continuing and the Collateral Agent shall give notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) the 18 Collateral Agent shall have the right to receive any and all cash dividends, distributions, payments or other Proceeds paid in respect of the Investment Property and make application thereof to the Obligations in such order as the Collateral Agent may determine, and (ii) any or all of the Investment Property shall be registered in the name of the Collateral Agent or its nominee, and the Collateral Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Investment Property at any meeting of shareholders or partners of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Investment Property as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate or partnership structure of any Issuer, or upon the exercise by any Grantor or the Collateral Agent of any right, privilege or option pertaining to such Investment Property, and in connection therewith, the right to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may determine), all without liability except to account for property actually received by it, but the Collateral Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. 6.4 Proceeds to be Turned Over To Collateral Agent. In addition to ---------------------------------------------- the rights of the Collateral Agent specified in Section 6.1 with respect to ----------- payments of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any Grantor consisting of cash, checks and other near- cash items shall be held by such Grantor in trust for the Collateral Agent, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Collateral Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Collateral Agent, if required). All Proceeds received by the Collateral Agent hereunder shall be held by the Collateral Agent in a Collateral Account maintained under its sole dominion and control. All Proceeds while held by the Collateral Agent in a Collateral Account (or by such Grantor in trust for the Collateral Agent and the Secured Parties) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 6.5. ----------- 6.5 Application of Proceeds. If an Event of Default shall have ----------------------- occurred and be continuing, at any time thereafter at the Collateral Agent's election, the Collateral Agent may apply all or any part of Proceeds held in any Collateral Account in payment of the Obligations in accordance with the Collateral Agency and Intercreditor Agreement, and any part of such funds which the Collateral Agent elects not so to apply and deems not required as collateral security for the Obligations shall be paid over from time to time by the Collateral Agent to the Borrower or to whomsoever may be lawfully entitled to receive the same. Any balance of such Proceeds remaining after the Obligations shall have been paid in full and the Commitments shall have terminated shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive the same. 19 6.6 Code and Other Remedies. If an Event of Default shall occur and ----------------------- be continuing, the Collateral Agent, on behalf of the Secured Parties, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the New York UCC or any other applicable law. Without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of the Collateral Agent or any Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Collateral Agent or any Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released. Each Grantor further agrees, at the Collateral Agent's request, to assemble the Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at such Grantor's premises or elsewhere. The Collateral Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.6, after deducting all reasonable costs ----------- and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Collateral Agent and the Secured Parties hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Collateral Agent may elect, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(1)(c) of the New York UCC, need the Collateral Agent account for the surplus, if any, to any Grantor. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Collateral Agent or any Secured Party arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. 6.7 Pledged Stock and Pledged Interests. (a) Each Grantor ----------------------------------- recognizes that the Collateral Agent may be compelled to resort to one or more private sales of the Pledged Stock or Pledged Interest to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Collateral Agent shall be under no 20 obligation to delay a sale of any of the Pledged Stock or Pledged Interest, as the case may be, for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so. (b) Each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Stock or Pledged Interest, as the case may be, pursuant to this Section 6.7 valid and binding and in compliance with any and ----------- all other applicable Requirements of Law. Each Grantor further agrees that a breach of any of the covenants contained in this Section 6.7 will cause ----------- irreparable injury to the Collateral Agent and the Secured Parties, that the Collateral Agent and the Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 6.7 shall be specifically enforceable against such ----------- Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Financing Documents. 6.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert ------------------ any rights or privileges which it may acquire under Section 9-112 of the New York UCC. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the reasonable fees and disbursements of any attorneys employed by the Collateral Agent or any Secured Party to collect such deficiency. SECTION 7. THE COLLATERAL AGENT 7.1 Collateral Agent's Appointment as Attorney-in-Fact, etc. (a) -------------------------------------------------------- Each Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Collateral Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following: (i) in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or Contract or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Collateral Agent for the purpose of collecting any and all such moneys due under any Receivable or Contract or with respect to any other Collateral whenever payable; 21 (ii) pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof; (iii) execute, in connection with any sale provided for in Section ------- 6.6 or 6.7, any indorsements, assignments or other instruments of --- --- conveyance or transfer with respect to the Collateral; and (iv) (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct; (2) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Collateral Agent may deem appropriate; and (7) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and do, at the Collateral Agent's option and such Grantor's expense, at any time, or from time to time, all acts and things which the Collateral Agent deems necessary to protect, preserve or realize upon the Collateral and the Collateral Agent's and the Secured Parties' security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do. Anything in this Section 7.1(a) to the contrary notwithstanding, the -------------- Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.1(a) unless an Event of Default shall -------------- have occurred and be continuing. (b) If an Event of Default shall have occurred and be continuing, if any Grantor fails to perform or comply with any of its agreements contained herein, the Collateral Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement. (c) The expenses of the Collateral Agent incurred in connection with actions undertaken as provided in this Section 7.1, together with interest ----------- thereon at a rate per annum equal to the highest rate per annum at which interest would then be payable on any category of past due Base Rate Loans under the Credit Agreement, from the date of payment by the Collateral Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Collateral Agent on demand. 22 (d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released. 7.2 Duty of Collateral Agent. The Collateral Agent's sole duty with ------------------------ respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the New York UCC or otherwise, shall be to deal with it with the same degree of care as the Collateral Agent deals with similar property for its own account. Neither the Collateral Agent, any Secured Party nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Collateral Agent and the Secured Parties hereunder are solely to protect the Collateral Agent's and the Secured Parties' interests in the Collateral and shall not impose any duty upon the Collateral Agent or any Secured Party to exercise any such powers. The Collateral Agent and the Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for (i) their own gross negligence or willful misconduct or (ii) breach of their obligations under this Agreement. 7.3 Execution of Financing Statements. Pursuant to Section 9-402 of --------------------------------- the New York UCC and any other applicable law, each Grantor authorizes the Collateral Agent to file or record financing statements and other filing or recording documents or instruments with respect to the Collateral without the signature of such Grantor in such form and in such offices as the Collateral Agent determines appropriate to perfect the security interests of the Collateral Agent under this Agreement. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction. 7.4 Authority of Collateral Agent. Each Grantor and each Secured ----------------------------- Party by accepting the benefits of this Agreement acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Collateral Agent and the Secured Parties, be governed by the Financing Documents and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Grantors, the Collateral Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 23 SECTION 8. MISCELLANEOUS 8.1 Amendments in Writing. None of the terms or provisions of this --------------------- Agreement may be waived, amended, supplemented or otherwise modified except in writing and in accordance with the Collateral Agency and Intercreditor Agreement. 8.2 Notices. All notices and other communications to any party ------- hereto shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth on Schedule 1 or at such other address or facsimile number as may be designated by such party in a notice to the other parties. 8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the --------------------------------------------------- Collateral Agent nor any Secured Party shall by any act (except by a written instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be ----------- deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor ------------------------------------- agrees to pay or reimburse each Secured Party and the Collateral Agent for all its costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights --------- under the Loan Documents to which such Guarantor is a party, including, without limitation, the fees and disbursements of counsel to each Secured Party and of counsel to the Collateral Agent. (b) Each Guarantor agrees to pay, and to save the Collateral Agent and the Secured Parties harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. (c) Each Guarantor agrees to pay, and to save the Collateral Agent and the Secured Parties harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement to the extent the Borrower would be required to do so pursuant to Section 11.4 of the Credit Agreement. 24 (d) The agreements in this Section 8.4 shall survive repayment of the ----------- Obligations and all other amounts payable under the Loan Documents. 8.5 Successors and Assigns. This Agreement shall be binding upon the ---------------------- successors and assigns of each Grantor and shall inure to the benefit of the Collateral Agent and the Secured Parties and their successors and assigns; provided that no Grantor may assign, transfer or delegate any of its rights or - -------- obligations under this Agreement without the prior written consent of the Collateral Agent. 8.6 Set-Off. Each Grantor hereby irrevocably authorizes the ------- Collateral Agent and each Secured Party at any time and from time to time (i) upon the occurrence of an Event of Default of the kind described in clauses (a) or (b) of Section 9.1.6 of the Credit Agreement, (ii) upon the occurrence of any Default of the kind described in clauses (c) or (d) of Section 9.1.6 of the Credit Agreement with respect to the Borrower, or (iii) upon the occurrence and continuance beyond the applicable grace period, if any, of any other Event of Default and with the consent of the Required Secured Parties, without notice to such Grantor or any other Grantor, any such notice being expressly waived by each Grantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Collateral Agent or such Secured Party to or for the credit or the account of such Grantor, or any part thereof in such amounts as the Collateral Agent or such Secured Party may elect, against and on account of the obligations and liabilities of such Grantor to the Collateral Agent or such Secured Party hereunder and claims of every nature and description of the Collateral Agent or such Secured Party against such Grantor, in any currency, whether arising hereunder, under the Credit Agreement, any other Financing Document or otherwise, as the Collateral Agent or such Secured Party may elect, whether or not the Collateral Agent or any Secured Party has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Collateral Agent and each Secured Party shall notify such Grantor promptly of any such set-off and the application made by the Collateral Agent or such Secured Party of the proceeds thereof, provided that the failure -------- to give such notice shall not affect the validity of such set-off and application. The rights of the Collateral Agent and each Secured Party under this Section 8.6 are in addition to other rights and remedies (including, ----------- without limitation, other rights of set-off) which the Collateral Agent or such Secured Party may have. 8.7 Counterparts. This Agreement may be executed by one or more of ------------ the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 8.8 Severability. Any provision of this Agreement which is ------------ prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 25 8.9 Section Headings. The Section headings used in this Agreement ---------------- are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 8.10 Integration. The Security Documents represent the agreement of ----------- the Grantors, the Collateral Agent and the Secured Parties with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Collateral Agent or any Secured Party relative to subject matter hereof and thereof not expressly set forth or referred to in the Security Documents. The Security Documents supersede any and all prior agreements and understandings, oral or written, relative or with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Collateral Agent or any Secured Party relative to the subject matter hereof not expressly set forth or referred to herein or in the other Security Documents. 8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 8.12 Submission To Jurisdiction; Waivers. Each Grantor (and, with ----------------------------------- respect to paragraph (e) below only, the Collateral Agent and each of the Secured Parties) hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to the Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non- exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Grantor at its address referred to in Section 8.2 or at such other address ----------- of which the Collateral Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and 26 (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 8.13 Acknowledgements. Each Grantor hereby acknowledges that: ---------------- (a) it has been advised by counsel in the negotiation, execution and delivery of the Security Documents to which it is a party; (b) neither the Collateral Agent nor any Secured Party has any fiduciary relationship with or duty to any Grantor arising out of or in connection with any Security Documents, and the relationship between the Grantors, on the one hand, and the Collateral Agent and Secured Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created by any Security Document or otherwise exists by virtue of the transactions contemplated hereby among the Secured Parties or among the Grantors and the Secured Parties. 8.14 Releases. (a) At such time as the Obligations shall have been -------- paid in full and the Commitments shall have been terminated, the Collateral shall automatically be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Collateral Agent shall deliver to such Grantor any Collateral held by the Collateral Agent hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination. (b) If any of the Collateral shall be sold, transferred or otherwise disposed of by any Grantor in a transaction permitted by the Credit Agreement (and the Indenture, if any Securities have been issued), then the Collateral Agent, at the request and reasonable and sole expense of such Grantor, shall execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral. At the request and reasonable and sole expense of the Borrower, a Guarantor shall be released from its obligations hereunder in the event that all the Capital Stock of such Guarantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the Credit Agreement (and the Indenture, if any Securities have been issued); provided that the Borrower shall -------- have delivered to the Collateral Agent, at least ten Business Days prior to the date of the proposed release, a written request for release identifying the relevant Guarantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Borrower stating that such transaction is in compliance with the Loan Documents. 27 8.15 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND -------------------- UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. EDISON MISSION HOLDINGS CO., Borrower By: ----------------------------------- Name: Title: EDISON MISSION FINANCE CO., Guarantor By: ----------------------------------- Name: Title: HOMER CITY PROPERTY HOLDINGS, INC., Guarantor By: ----------------------------------- Name: Title: CHESTNUT RIDGE ENERGY CO., Guarantor By: ----------------------------------- Name: Title: MISSION ENERGY WESTSIDE, INC., Guarantor By: ____________________________________ Name: Title: EME HOMER CITY GENERATION L.P., Guarantor By: Mission Energy Westside, Inc., its General Partner By:_____________________________________ Name: Title: EDISON MISSION ENERGY, Grantor By: ____________________________________ Name: Title: Acknowledged and Agreed as of the date hereof: UNITES STATES TRUST COMPANY OF NEW YORK, as Collateral Agent By: _____________________________ Name: Title Schedule 1 ---------- NOTICE ADDRESSES Schedule 2 ---------- DESCRIPTION OF INVESTMENT PROPERTY Pledged Stock: Issuer Class of Stock Stock Certificate No. No. of Shares Pledged Interests: Issuer Class of Stock Certificate No. Amount of Interest Pledged Notes: Issuer Payee Date Principal Amount Schedule 3 ---------- FILINGS AND OTHER ACTIONS REQUIRED TO PERFECT SECURITY INTERESTS Uniform Commercial Code Filings ------------------------------- [List each office where a financing statement is to be filed] Actions with respect to Pledged Stock* ------------------------------------- *If the interest of a Grantor in Pledged Stock appears on the books of a financial intermediary, a control agreement as described in Section 8-106 of the New York UCC will be required. Schedule 4 ---------- LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE Grantor Location ------- -------- Schedule 5 ---------- LOCATION OF INVENTORY AND EQUIPMENT Grantor Locations ------- --------- Schedule 6 ---------- CERTAIN CONTRACTS EX-10.57 4 COLLATERAL AGENCY & INTERCREDITOR AGREEMENT EXHIBIT 10.57 EXECUTION COPY COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT among EDISON MISSION HOLDINGS CO., EDISON MISSION FINANCE CO., HOMER CITY PROPERTY HOLDINGS, INC., CHESTNUT RIDGE ENERGY CO., MISSION ENERGY WESTSIDE, INC., EME HOMER CITY GENERATION L.P. The SECURED PARTIES' REPRESENTATIVES From Time to Time Parties Hereto CITICORP USA, INC, as Administrative Agent and UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent Dated as of March 18, 1999 TABLE OF CONTENTS Page SECTION 1.DEFINITIONS..................................................................................... 2 1.1 Defined Terms................................................................................... 2 1.2 Other Definitional Provisions................................................................... 6 SECTION 2.THE COLLATERAL AGENT............................................................................ 6 2.1 Appointment..................................................................................... 6 2.2 Exculpatory Provisions.......................................................................... 7 2.3 Delegation of Duties............................................................................ 7 2.4 Reliance by Collateral Agent.................................................................... 8 2.5 Limitations on Duties of Collateral Agent....................................................... 8 2.6 Resignation and Removal of the Collateral Agent................................................. 9 2.7 Treatment of Secured Parties' Representative by Collateral Agent................................ 10 2.8 Appointment of Separate or Co-Collateral Agent.................................................. 10 2.9 Successor Collateral Agent by Merger, Consolidation, Etc........................................ 11 2.10 Eligibility of Collateral Agent................................................................ 11 2.11 Notices, Etc., Under Collateral, Etc........................................................... 12 SECTION 3.SENIOR DEBT..................................................................................... 12 3.1 Obligations Pari Passu.......................................................................... 12 3.2 Senior Debt..................................................................................... 12 SECTION 4.DEFAULT PERIOD.................................................................................. 13 4.1 Default and Acceleration Notices................................................................ 13 4.2 General Authority of the Collateral Agent over the Collateral................................... 13 4.3 Right to Initiate Judicial Proceedings; Appointment of Receiver................................. 14 4.4 Exercise of Powers; Instructions of Required Secured Parties.................................... 14 4.5 Remedies Not Exclusive.......................................................................... 15 4.6 Waiver and Estoppel............................................................................. 15 4.7 Limitation on Collateral Agent's Duty in Respect of Collateral.................................. 16 4.8 Limitation by Law............................................................................... 16 4.9 Consent to Relief from Automatic Stay........................................................... 16 SECTION 5.PAYMENTS........................................................................................ 17 5.1 Pro Rata Sharing................................................................................ 17 5.2 Disbursement of Monies Collected after Acceleration 17 SECTION 6.AGREEMENTS WITH COLLATERAL AGENT................................................................ 17 6.1 Delivery of Financing Documents................................................................. 17 6.2 Information as to Secured Parties' Representatives.............................................. 18 6.3 Certificate of Secured Parties' Representative.................................................. 18 6.4 Compensation and Expenses....................................................................... 18
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Page 6.5 Stamp and Other Similar Taxes................................................................... 18 6.6 Filing Fees, Excise Taxes, Etc.................................................................. 18 6.7 Indemnification................................................................................. 19 6.8 Further Assurances.............................................................................. 19 6.9 Payment by Collateral Agent, Etc................................................................ 19 7.1 Representations and Warranties.................................................................. 20 SECTION 8.CERTAIN AGREEMENTS OF THE SECURED PARTIES....................................................... 20 8.1 Turnover of Collateral.......................................................................... 20 8.2 No Bankruptcy Filings........................................................................... 21 8.3 No Loans; No Liens.............................................................................. 21 8.4 Security Interests.............................................................................. 21 8.5 Set-offs........................................................................................ 21 8.6 Intercreditor Agreement Regarding Amendment of Financing Documents.............................. 21 8.7 Beneficiaries................................................................................... 22 8.8 Additional Collateral........................................................................... 22 8.9 Purchase of Collateral.......................................................................... 22 SECTION 9.MISCELLANEOUS................................................................................... 23 9.1 No Individual Action............................................................................ 23 9.2 Notices......................................................................................... 23 9.3 No Waivers...................................................................................... 23 9.4 Amendments, Supplements and Waivers............................................................. 23 9.5 Headings........................................................................................ 24 9.6 Severability.................................................................................... 24 9.7 Successors and Assigns.......................................................................... 24 9.8 GOVERNING LAW................................................................................... 24 9.9 Counterparts.................................................................................... 24 9.10 SUBMISSION TO JURISDICTION; WAIVERS............................................................ 24 9.11 Termination.................................................................................... 25 9.12 Acknowledgments................................................................................ 26
Schedule 1 - Addresses for Notices Exhibit A - Form of Senior Debt Supplement ii- COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT, dated as of March 18, 1999, among EDISON MISSION HOLDINGS CO., a California corporation (the "Borrower"), EDISON MISSION FINANCE CO., a California corporation ("Edison -------- ------ Mission Finance"), HOMER CITY PROPERTY HOLDINGS, INC., a California corporation - --------------- ("Homer City Holdings"), CHESTNUT RIDGE ENERGY CO., a California corporation ------------------- ("Chestnut Ridge"), MISSION ENERGY WESTSIDE, INC., a California corporation -------------- ("MEW"), EME HOMER CITY GENERATION L.P., a Pennsylvania limited partnership --- ("EME Homer City"; and, together with the Borrower, Edison Mission Finance, -------------- Homer City Holdings, Chestnut Ridge and MEW, the "Loan Parties"), the SECURED ------------ PARTIES' REPRESENTATIVES (as defined below) from time to time parties hereto, CITICORP USA, INC., as Administrative Agent (as defined below), and UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent (as defined below). RECITALS A. The Borrower has entered into a Credit Agreement, dated as of March 18, 1999 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), with certain financial institutions ---------------- (collectively, the "Lenders") and Citicorp USA, Inc., as administrative agent ------- for the Lenders (in such capacity, the "Administrative Agent"). -------------------- B. Pursuant to the Credit Agreement, the Lenders have severally agreed to make Loans (as defined below) to the Borrower upon the terms and subject to the conditions set forth therein. C. The Borrower will use the proceeds of the Loans under the Credit Agreement to make valuable transfers to one or more of the other Loan Parties in connection with the acquisition of the Homer City Electric Generating Station and certain facilities and other assets associated therewith and ancillary thereto (the "Generating Station"), certain capital expenditures related to the ------------------ Generating Station and general working capital purposes. D. Under Section 8.2.1(e) of the Credit Agreement, the Borrower is permitted to incur certain indebtedness for the purpose of refinancing the Loans and other indebtedness of the Borrower ("Refinancing Indebtedness"); under ------------------------ Section 8.2.1(d)(i) of the Credit Agreement, the Loan Parties are permitted to incur certain indebtedness in the form of reimbursement obligations relating to letters of credit, surety bonds and performance bonds used by the Loan Parties in the ordinary course of their business ("Ordinary Course Letter of Credit -------------------------------- Indebtedness"); under Section 8.2.1(d)(ii) of the Credit Agreement, the Borrower - ------------ is permitted to incur certain indebtedness in the form of reimbursement obligations relating to Debt Service Reserve Letters of Credit (as defined below) ("DSR Letter of Credit Indebtedness"); under Section 8.2.1 of the --------------------------------- Credit Agreement, the Borrower is permitted to incur certain additional indebtedness ("Additional Indebtedness"); and, under Section 8.2.1(b) of the ----------------------- Credit Agreement, the Borrower is permitted to incur certain indebtedness under Interest Rate Hedging Transactions (as defined below) entered into with respect to the Loans ("Swap Indebtedness"). ----------------- E. In order to simplify administration of the common collateral securing the Borrower's indebtedness and to provide for the orderly enforcement of their respective rights, the 2 Administrative Agent and the other Secured Parties' Representatives desire to appoint the Collateral Agent to serve as their common representative, to be the beneficiary under any guarantee intended to benefit the Secured Parties (as defined below) and to hold the liens created, or to be created, under the Financing Documents (as defined below). F. The Collateral Agent is willing to serve as a common collateral agent for all Secured Parties pursuant to this Agreement. G. The Borrower is a member of an affiliated group of companies that includes each other Loan Party. The Borrower and the other Loan Parties are engaged in related businesses, and each Loan Party will derive substantial direct and indirect benefit from the making of the Loans and the incurrence of any Refinancing Indebtedness, Ordinary Course Letter of Credit Indebtedness, DSR Letter of Credit Indebtedness, Additional Indebtedness or Swap Indebtedness. H. It is a condition precedent to the obligation of the Lenders to make their respective Loans to the Borrower under the Credit Agreement that the Loan Parties shall have executed and delivered this Agreement to the Collateral Agent for the benefit of the Secured Parties. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, each of the parties hereto hereby agrees as follows: SECTION 1. DEFINITIONS SECTION 1.1 Defined Terms. (a) Unless otherwise defined herein, ------------- terms defined in the Security Deposit Agreement (as defined below) and used herein shall have the meanings given to them in the Security Deposit Agreement. (b) The following terms shall have the meanings indicated: "Acceleration Notice" means a written notice delivered to the ------------------- Collateral Agent during a Default Period (a) in the event such Default Period arises out of an Event of Default under Article IX of the Credit Agreement, by the Administrative Agent, which notice states that the aggregate principal amount of the Loans thereunder has become due and payable prior to the stated maturity thereof, or (b) in the event such Default Period arises out of an Event of Default under the Financing Documents relating to any other Senior Debt, by the Secured Parties' Representative for such Senior Debt, which notice states that the principal amount of such Senior Debt has become due and payable prior to the stated maturity thereof. 3 "Additional Indebtedness" has the meaning specified in the recitals. ----------------------- -------- "Administrative Agent" has the meaning specified in the recitals. -------------------- -------- "Agreement" means this Collateral Agency and Intercreditor Agreement, --------- dated as of March 18, 1999, among the Loan Parties, the Administrative Agent, the other Secured Parties' Representatives from time to time parties hereto and the Collateral Agent. "Borrower" has the meaning specified in the recitals. -------- "Chestnut Ridge" has the meaning specified in the preamble. -------------- "Collateral" means, collectively, (i) the Security Deposit Agreement ---------- Collateral, (ii) the Guarantee and Collateral Agreement Collateral and (iii) the Mortgaged Property. "Collateral Agent" means United States Trust Company of New York, as ---------------- collateral agent for the Secured Parties, together with its successors and assigns, and any successor collateral agent appointed under Section 2 hereof to act on behalf of the Secured Parties with respect to the Collateral. "Commitments" has the meaning specified in the Credit Agreement. ----------- "Credit Agreement" has the meaning specified in the recitals. ---------------- -------- "Cure Notice" means a written notification delivered to the Borrower ----------- and the Collateral Agent by one or more Secured Parties' Representatives acting on behalf of the Required Secured Parties stating that an Event of Default that was the subject of a Default Notice is no longer continuing. "Default" means any Event of Default or any condition, occurrence or ------- event which, after notice of lapse or time or both, would constitute an Event of Default. "Default Notice" means a written notification delivered to the -------------- Collateral Agent by the Borrower or any Secured Parties' Representative stating that an Event of Default has occurred and is continuing. A Default Notice shall be deemed to have been delivered if a voluntary petition of bankruptcy has been filed under Title 11 of the United States Code (or any similar action has been taken under the laws of any other jurisdiction) with respect to the Borrower. "Default Period" means the period commencing on the date the -------------- Collateral Agent receives a Default Notice and ending on the date the Collateral Agent receives a Cure Notice or a notice of cancellation pursuant to Section 4.1(b). 4 "DSR Letter of Credit Indebtedness" has the meaning specified in the --------------------------------- recitals. -------- "Edison Mission Finance" has the meaning specified in the preamble. ---------------------- -------- "EME Homer City" has the meaning specified in the preamble. -------------- -------- "Event of Default" means an "Event of Default" under the Credit ---------------- Agreement or any other Financing Document. "Financing Documents" means the Loan Documents and each indenture, ------------------- loan agreement, underwriting agreement, security purchase agreement or other document entered into in connection with any Senior Debt. "Generating Station" has the meaning specified in the recitals. ------------------ -------- "Guarantee and Collateral Agreement" means the Guarantee and ---------------------------------- Collateral Agreement, dated as of March 18, 1999, made by the Loan Parties in favor of the Collateral Agent. "Guarantee and Collateral Agreement Collateral" means "Collateral" as --------------------------------------------- defined in the Guarantee and Collateral Agreement. "Homer City Holdings" has the meaning specified in the preamble. ------------------- -------- "Intercompany Loan Subordination Agreement" means the Intercompany ----------------------------------------- Loan Subordination Agreement, dated as of March 18, 1999, among the Loan Parties and the Collateral Agent. "Interest Rate Hedging Transactions" has the meaning specified in the ---------------------------------- Credit Agreement. "Lenders" has the meaning specified in the recitals. ------- -------- "Loan Documents" has the meaning specified in the Credit Agreement. -------------- "Loan Parties" has the meaning specified in the preamble. ------------ -------- "Loans" has the meaning specified in the Credit Agreement. ----- "MEW" has the meaning specified in the preamble. --- -------- 5 "Mortgage and Security Agreement" means the Open-End Mortgage, ------------------------------- Security Agreement and Assignment of Leases and Rents, dated as of March 18, 1999, made by EME Homer City in favor of the Collateral Agent. "Mortgaged Property" has the meaning specified in the Mortgage and ------------------ Security Agreement. "Notice of Action" has the meaning specified in Section 4.4(b) of this ---------------- -------------- Agreement. "Obligations" means, collectively, (i) the Borrower Obligations ----------- and (ii) the Guarantor Obligations. "Ordinary Course Letter of Credit Indebtedness" has the meaning --------------------------------------------- specified in the recitals. "Required Lenders" has the meaning specified in the Credit Agreement. ---------------- "Required Secured Parties" means, at any time, holders of Senior Debt ------------------------ that at such time hold greater than 50% of the sum of (u) in the case of the Loans, the Commitments at such time, (v) in the case of Refinancing Indebtedness, the aggregate principal amount of Refinancing Indebtedness outstanding at such time, (w) in the case of Additional Indebtedness, the aggregate principal amount of Additional Indebtedness outstanding at such time, (x) in the case of DSR Letter of Credit Indebtedness, the commitments with respect thereto at such time, (y) in the case of Ordinary Course Letter of Credit Indebtedness, the commitments with respect thereto at such time and (z) in the case of Swap Indebtedness, (i) prior to the occurrence of an Event of Default, zero, and (ii) after the occurrence of an Event of Default, the termination value of the Interest Rate Hedging Transaction underlying such Swap Indebtedness. "Secured Parties" has the meaning specified in the Guarantee and --------------- Collateral Agreement. "Secured Parties' Representative" means the Administrative Agent and ------------------------------- each Person that serves as indenture trustee, collateral agent, lender's representative or in any similar capacity for Persons that provide any Senior Debt. "Security Deposit Agreement" means the Security Deposit Agreement, -------------------------- dated as of March 18, 1999, among the Loan Parties and the Collateral Agent. "Security Deposit Agreement Collateral" means all Accounts and all ------------------------------------- cash, cash equivalents, instruments, investments and other securities on deposit therein. 6 "Security Documents" means (a) this Agreement, the Guarantee and ------------------ Collateral Agreement, the Mortgage and Security Agreement, the Intercompany Loan Subordination Agreement, the Security Deposit Agreement and (b) the EME Credit Support Guarantee and any other agreement or instrument hereafter entered into by the Borrower or any other Person which guarantees or secures payment of any Senior Debt. "Senior Debt" means the Loans, any Refinancing Indebtedness, any ----------- Ordinary Course Letter of Credit Indebtedness, any DSR Letter of Credit Indebtedness, any Additional Indebtedness and any Swap Indebtedness. "Senior Debt Supplement" means a Senior Debt Supplement, substantially ---------------------- in the form of Exhibit A. --------- "Swap Indebtedness" has the meaning specified in the recitals. ----------------- SECTION 1.2 Other Definitional Provisions. (a) The words "hereof", ----------------------------- "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, schedule, appendix and exhibit references are to this Agreement unless otherwise specified. (b) Each reference in this Agreement to a Financing Document or other agreement shall be deemed to refer to such Financing Document or other agreement as the same may be amended, supplemented or otherwise modified from time to time. (c) Any term defined by reference to an agreement, instrument or other document shall have the meaning so assigned to it whether or not such agreement, instrument or document is in effect. (d) Each reference in this Agreement to a Person shall be deemed to include such Person's successors and assigns. (e) Each reference in this Agreement to a Requirement of Law shall be deemed to refer to such Requirement of Law as the same may be amended, supplemented or otherwise modified from time to time. (f) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. THE COLLATERAL AGENT SECTION 2.1 Appointment. Each of the Secured Parties' ----------- Representatives hereby designates and appoints United States Trust Company of New York as the collateral agent 7 for such Secured Parties' Representative under the Security Documents, and authorizes United States Trust Company of New York in such capacity to take such action on its behalf under the provisions of the Security Documents and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement, together with such other powers as are incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Collateral Agent shall not have any duties or responsibilities, except those expressly set forth herein and in the other Security Documents, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Collateral Agent. SECTION 2.2 Exculpatory Provisions. (a) The Collateral Agent makes ---------------------- no representations as to the value or condition of the Collateral or any part thereof, or as to the title of the Loan Parties thereto or as to the security afforded by any Security Document, or as to the validity, execution, enforceability, legality or sufficiency of any Financing Document or the Obligations, and the Collateral Agent shall incur no liability or responsibility in respect of any such matters. The Collateral Agent shall not be responsible for insuring the Collateral or for the payment of taxes, charges or assessments or discharging of liens upon the Collateral or otherwise as to the maintenance of the Collateral. (b) The Collateral Agent shall not be required to ascertain or inquire as to performance by the Loan Parties of any of the covenants or agreements contained in any Financing Document. (c) The Collateral Agent shall be under no obligation or duty to take any action under any Security Document if taking such action (i) would subject the Collateral Agent to a tax in any jurisdiction (other than the Commonwealth of Pennsylvania) where it is not then subject to a tax or (ii) would require the Collateral Agent to qualify to do business in any jurisdiction (other than the Commonwealth of Pennsylvania) where it is not then so qualified, unless the Collateral Agent receives security or indemnification satisfactory to it against such tax (or equivalent liability), or any liability resulting from such qualification, in each case as results from the taking of such action under any Security Document. (d) The Collateral Agent may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any of its subsidiaries or affiliates as if it were not the Collateral Agent. (e) The Collateral Agent shall have no duty to inquire as to the application by any Secured Parties' Representative or any holders of Senior Debt of any amounts distributed to them. SECTION 2.3 Delegation of Duties. The Collateral Agent may execute -------------------- any of the powers hereof and perform any duty hereunder either directly or by or through agents or attorneys-in-fact who may include officers or employees of the Loan Parties. The Collateral 8 Agent shall be entitled to advice of counsel concerning all matters pertaining to such powers and duties. The Collateral Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it; provided that such selection occurs without gross negligence or willful - -------- misconduct or bad faith. SECTION 2.4 Reliance by Collateral Agent. (a) Whenever in the ---------------------------- administration of the Security Documents the Collateral Agent shall deem it necessary or desirable that a factual matter be proved or established in connection with the Collateral Agent taking, suffering or omitting any action hereunder or thereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may be deemed to be conclusively proved or established by a Request Letter or certificate of an Authorized Representative of any Loan Party delivered to the Collateral Agent, and such certificate shall be full authorization to the Collateral Agent for any action taken, suffered or omitted in reliance thereon, subject, however, to the provisions of Section 2.5. (b) The Collateral Agent may consult with counsel, and any advice or statements of legal counsel (including counsel to the Loan Parties) shall be full and complete authorization and protection in respect of any action taken or suffered by it under any Security Document in good faith reliance thereon. (c) The Collateral Agent may rely, and shall be fully protected in acting, upon any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order, bond or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties or, in the case of cables, telecopies and telexes, to have been sent by the proper party or parties. In the absence of its negligence or willful misconduct or bad faith, the Collateral Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any Request Letter, certificate or opinion furnished to the Collateral Agent and conforming to the requirements of this Agreement or the Security Deposit Agreement. (d) The Collateral Agent shall not be under any obligation to exercise any of the rights or powers vested in it by the Security Documents unless the Collateral Agent shall have been provided adequate security and indemnity by the Secured Parties against the costs, expenses (including its customary fees) and liabilities which may be incurred by it in compliance with such request or direction, including such reasonable advances as may be requested by the Collateral Agent. SECTION 2.5 Limitations on Duties of Collateral Agent. (a) The ----------------------------------------- Collateral Agent shall not be obligated to take any action, or refrain from taking any action, under or in respect of any Security Document except for the performance of such duties as are specifically required hereby and except as may be requested from time to time in writing by one or more Secured Parties' Representatives acting on behalf of the Required Secured Parties or such other combination of Secured Parties as may be specified in any applicable provision of this Agreement. 9 If an Event of Default exists and if the Collateral Agent shall have actual knowledge thereof, the Collateral Agent will exercise such rights, powers and remedies (whether vested by any Security Document or by statute or by law or otherwise) for the protection and enforcement of the Collateral Agent's rights under and in respect of the Security Documents as, in the absence of a Notice of Action, it may determine to be in the best interest of the Secured Parties, or as may be directed in writing pursuant to a Notice of Action, and shall use the same degree of care and skill in such exercise as a prudent man would use under the circumstances in the conduct of his own affairs. (b) In the event that the Collateral Agent shall have received incomplete or insufficient information to perform its duties hereunder or requires clarification of any matter, the Collateral Agent shall be entitled to request direction from, and to act, or refrain from acting, on the written direction of one or more Secured Parties' Representatives acting on behalf of the Required Secured Parties, and the Collateral Agent shall be fully protected in relying on such direction or in failing to act until the receipt of such information or clarification. (c) No provision of any Security Document shall be deemed to impose any duty or obligation on the Collateral Agent to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Collateral Agent shall be unqualified or incompetent, to perform any such act or acts or to exercise any such right, power, duty or obligation or if such performance or exercise would constitute doing business by the Collateral Agent in such jurisdiction or impose a tax on the Collateral Agent by reason thereof. SECTION 2.6 Resignation and Removal of the Collateral Agent. (a) ----------------------------------------------- The Collateral Agent may at any time, by giving not less than 30 days' prior written notice to the Borrower and each Secured Parties' Representative, resign and be discharged of the responsibilities hereby created, such resignation and discharge to be effective upon the appointment of a successor Collateral Agent. As promptly as practicable after the giving of any such notice, one or more Secured Parties' Representatives acting on behalf of the Required Secured Parties shall appoint a successor Collateral Agent. One or more Secured Parties' Representatives acting on behalf of the Required Secured Parties may, at any time upon giving 10 days' prior written notice thereof to the Borrower and the Collateral Agent, remove the Collateral Agent and appoint a successor Collateral Agent, such removal to be effective upon the acceptance of such appointment by the successor. The Collateral Agent who has resigned or been removed shall be entitled to fees, reasonable costs and expenses to the extent incurred or arising, or relating to events occurring, before its resignation or removal. (b) If at any time the Collateral Agent shall resign or be removed or otherwise become incapable of acting, or if at any time a vacancy shall occur in the office of the Collateral Agent for any other cause, a successor Collateral Agent may be appointed by one or more Secured Parties' Representatives acting on behalf of the Required Secured Parties. The powers, duties, authority and title of the predecessor Collateral Agent shall be terminated and canceled 10 without procuring the resignation of such predecessor and without any other formality (except as may be required by applicable law) than appointment and designation of a successor in writing duly acknowledged and delivered to the predecessor and the Borrower. Such appointment and designation shall be full evidence of the right and authority to make the same and of all the facts therein recited, and the Security Documents shall vest in such successor, without any further act, deed or conveyance, all the estates, properties, rights, powers, trust, duties, authority and title of its predecessor; provided, -------- however, that such predecessor shall, nevertheless, on the written request of - ------- one or more Secured Parties' Representatives acting on behalf of the Required Secured Parties, the Borrower or the successor execute and deliver an instrument transferring to such successor all the estates, properties, rights, powers, trusts, duties, authority and title of such predecessor under the Security Documents and shall deliver all Collateral held by it or its agents to such successor. Should any deed, conveyance or other instrument in writing from the any Loan Party be reasonably required or requested by any successor Collateral Agent for more fully and certainly vesting in such successor the estates, properties, rights, powers, trusts, duties, authority and title vested or intended to be vested in the predecessor Collateral Agent, then any and all such deeds, conveyances and other instruments shall, on request of such successor, be executed, acknowledged and delivered by such Loan Party. If the Borrower shall not have executed and delivered any such deed, conveyance or other instrument within 10 days after it receives a written request from the successor Collateral Agent to do so, or if an Event of Default is in effect, the predecessor Collateral Agent may execute the same on behalf of such Loan Party. Each Loan Party hereby appoints any successor Collateral Agent as its agent and attorney- in-fact to act for it as provided in the next preceding sentence. SECTION 2.7 Treatment of Secured Parties' Representative by ----------------------------------------------- Collateral Agent. Unless and until the Collateral Agent receives notice to the - ---------------- contrary, the Collateral Agent shall be entitled to treat the Administrative Agent and each Person who becomes a party hereto through the execution and delivery of a Senior Debt Supplement as the duly authorized Secured Parties' Representative of the Secured Parties it purports to represent and, as such, authorized to receive all payments, to give all notices, cast all votes and exercise all other rights under this Agreement and the other Security Documents on behalf of such Secured Parties. SECTION 2.8 Appointment of Separate or Co-Collateral Agent. (a) ---------------------------------------------- The Collateral Agent may, and, upon the request of one or more Secured Parties' Representative acting on behalf of the Required Secured Parties, the Collateral Agent shall, by an instrument in writing delivered to the Borrower and to each of the Secured Parties' Representatives, appoint a national bank or trust company or an individual to act as separate collateral agent or co-collateral agent for any purpose deemed by the Collateral Agent or such Secured Parties' Representatives to be advantageous to their respective interests, such separate collateral agent or co-collateral agent to exercise only such rights and to have only such duties as shall be specified in the instrument of appointment. The Borrower agrees to pay the reasonable compensation and expenses of any such separate collateral agent or co-collateral agent and, if requested by the Collateral Agent, such separate collateral agent or co-collateral agent or one or more Secured Parties' Representatives acting on behalf of the Required Secured Parties, the Loan Parties will enter into an amendment 11 to this Agreement, satisfactory in substance and form to the Collateral Agent, such separate collateral agent or co-collateral agent and one or more Secured Parties' Representatives' acting on behalf of the Required Secured Parties, confirming the rights and duties of such separate collateral agent or co- collateral agent. No co-collateral agent hereunder shall be required to meet the terms of eligibility of a Collateral Agent under Section 2.10. The Collateral Agent may at any time accept the resignation of or remove any separate collateral agent or co-collateral agent. (b) Any separate collateral agent or co-collateral agent hereunder shall, to the extent permitted by law, be appointed and act and the Collateral Agent shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Collateral Agent in respect of the receipt, custody, investment and payment of monies, or the investment of monies, shall be exercised solely by the Collateral Agent; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Collateral Agent shall be conferred or imposed upon and exercised or performed by the Collateral Agent and such separate collateral agent or co-collateral agent jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Collateral Agent shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate collateral agent or co-collateral agent; (iii) no power hereby given to any such separate collateral agent or co-collateral agent shall be exercised hereunder by such separate collateral agent or co-collateral agent except jointly with, or with the consent of, the Collateral Agent; and (iv) no collateral agent shall be liable for any act or failure to act on the part of any other collateral agent hereunder. SECTION 2.9 Successor Collateral Agent by Merger, Consolidation, --------------------------------------------------- Etc. Any corporation into which the Collateral Agent may be merged or with - --- which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Collateral Agent is a party, if eligible as provided in Section 2.10, shall automatically succeed to all of the rights and obligations of the Collateral Agent hereunder and with respect to the Collateral without further action on the part of any of the parties hereto. SECTION 2.10 Eligibility of Collateral Agent. The Collateral Agent ------------------------------- shall always be a state or national bank or trust company in good standing, organized under the laws of the United States of America or one of the States thereof, having (or having a parent which has) a capital, surplus and undivided profits (as shown by its latest financial statement published to its shareholders) aggregating at least $100,000,000 if there be such a national bank or trust company willing and able to accept such trust upon reasonable and customary terms, provided that if such -------- 12 national bank or trust company's eligibility depends upon its parent having such requisite capitalization, such parent shall provide a guarantee satisfactory in form and substance to one or more Secured Parties' Representatives acting on behalf of the Required Secured Parties of the obligations of such national bank or trust company as Collateral Agent under the Financing Documents. In case at any time the Collateral Agent shall cease to be eligible in accordance with the provisions of this Section 2.10, the Collateral Agent shall resign immediately in the manner and with the effect specified in Section 2.6. SECTION 2.11 Notices, Etc., Under Collateral, Etc. The Collateral ------------------------------------ Agent shall deliver to each Secured Parties' Representative, promptly upon receipt thereof, duplicates or copies of all notices, requests and other instruments given or received by the Collateral Agent under or pursuant to the Security Documents. SECTION 3. SENIOR DEBT SECTION 3.1 Obligations Pari Passu. Subject, in the case of Senior ---------------------- Debt other than the Loans, to the requirements of Section 3.2, all Obligations shall be entitled to the benefits of this Agreement and the other Security Documents and rank pari passu without any preference among Obligations by reason ---------- of date of incurrence or otherwise. SECTION 3.2 Senior Debt. The Secured Parties' Representative for ----------- any Senior Debt permitted by the Financing Documents shall become entitled to the benefits of this Agreement (and such Senior Debt shall rank pari passu) upon receipt by the Collateral Agent and each other Secured Parties' Representative of (a) a certificate executed by an Authorized Representative of the Borrower (i) identifying such Secured Parties' Representative and the maximum principal amount of such Senior Debt and (ii) identifying the provisions of the Financing Documents pursuant to which such Senior Debt is permitted and demonstrating compliance with such provisions, (b) a certified copy of each agreement relating to such Senior Debt, (c) a certified copy of a Senior Debt Supplement executed by such holder and (d) an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, or other counsel satisfactory to the Collateral Agent, in form and substance satisfactory to the Collateral Agent, that, subject to customary assumptions and qualifications, the incurrence of such Senior Debt will not result in any violation of or conflict with or constitute a default under any term of any Financing Document. The requirements of this Section 3.2 shall not apply to the Loans, which are Senior Debt for all purposes of this Agreement and the other Security Documents. 13 SECTION 4. DEFAULT PERIOD SECTION 4.1 Default and Acceleration Notices. (a) A Default Notice -------------------------------- or Acceleration Notice shall be effective upon receipt thereof by the Collateral Agent. A Default Notice or Acceleration Notice, once effective, shall remain in effect unless and until it is canceled as provided in Section 4.1(b). (b) Any Secured Parties' Representative that has given a Default Notice or Acceleration Notice shall be entitled to cancel it by delivering a written notice of cancellation to the Collateral Agent (i) prior to the commencement of the exercise of remedies by the Collateral Agent pursuant to the Security Documents or (ii) thereafter, if the Collateral Agent reasonably believes that any such exercise of remedies may be reversed without undue difficulty. (c) Promptly upon receipt by the Collateral Agent of a Default Notice or Acceleration Notice or any notice of cancellation thereof, the Collateral Agent shall deliver a copy thereof to the Borrower and each Secured Parties' Representative. SECTION 4.2 General Authority of the Collateral Agent over the -------------------------------------------------- Collateral. Each Loan Party hereby irrevocably constitutes and appoints, - ---------- effective after the occurrence and during the continuance of an Event of Default, the Collateral Agent and any officer or agent thereof, with full power of substitution as among such officers and agents, as its true and lawful attorney-in-fact with full power and authority in the name of such Loan Party or in its own name, from time to time in the Collateral Agent's reasonable discretion to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to carry out the terms of the Security Documents (but subject to the terms hereof and thereof) and to accomplish the purposes hereof and thereof; and, without limiting the generality of the foregoing, each Loan Party hereby gives the Collateral Agent, during any Default Period, the power and right on behalf of such Loan Party, without notice to or further assent by such Loan Party, to: (i) ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due upon, or in connection with, the Collateral; (ii) receive, take, endorse, assign and deliver any and all checks, notes, drafts, acceptances, documents and other negotiable and non-negotiable instruments taken or received by the Collateral Agent as, or in connection with, the Collateral; (iii) commence, prosecute, defend, settle, compromise or adjust any claim, suit, action or proceeding with respect to, or in connection with, the Collateral; (iv) sell, transfer, assign or otherwise deal in or with the Collateral or any part thereof as fully and effectively as if the Collateral Agent were the absolute owner thereof; (v) exercise all remedies provided for by the Security Documents; and (vi) do, at its option and at the expense and for the account of such Loan Party, at any time or from time to time, all acts and things which the Collateral Agent reasonably deems necessary to perfect the liens and security interests of the Collateral Agent in the Collateral, to protect or preserve the Collateral and to realize upon the Collateral. Each Loan Party hereby ratifies all that said attorneys-in-fact shall lawfully do or cause 14 to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable. SECTION 4.3 Right to Initiate Judicial Proceedings; Appointment of ------------------------------------------------------ Receiver. (a) During any Default Period, the Collateral Agent, subject to the - -------- provisions of Section 4.4(b), shall have the right to protect and enforce the rights vested in it by each Security Document and may enforce such rights in accordance with the provisions of the relevant Security Document. (b) During any Default Period, upon the filing of a bill in equity or other commencement of judicial proceedings or non-judicial proceedings to enforce the rights of the Secured Parties or the Collateral Agent under any Security Document, the Collateral Agent shall, without notice to the Loan Parties or any party claiming through the Loan Parties, without regard to the solvency or insolvency at the time of any Person then liable for the payment of any of the Obligations, without regard to the then value of the Collateral and without requiring any bond from any complainant in such proceedings, be entitled as a matter of right to the appointment of a receiver or receivers, for all or any part thereof, and of the rents, issues, tolls, profits, royalties, revenues and other income thereof, pending such proceedings, with such powers as the court making such appointment shall confer, and to the entry of an order directing that the rents, issues, tolls, profits, royalties, revenues and other income of the property relating to the Collateral be segregated, sequestered and impounded for the benefit of the Collateral Agent and the Secured Parties, and each Loan Party irrevocably consents to the appointments of such receiver or receivers and to the entry of such order; provided that notwithstanding the appointment of any receiver, the Collateral Agent shall be entitled to retain possession and control of all cash held by or deposited with it pursuant to any Security Document. SECTION 4.4 Exercise of Powers; Instructions of Required Secured ---------------------------------------------------- Parties. (a) All of the powers, remedies and rights of the Collateral Agent set - ------- forth in or contemplated by this Agreement may be exercised by the Collateral Agent in respect of each Security Document as though set forth in full therein, and all of the powers, remedies and rights of the Collateral Agent and the Secured Parties as set forth in each Security Document may be exercised from time to time as herein and therein provided. In the event of any inconsistency between this Agreement and any other Security Document, the provisions of this Agreement shall be controlling. (b) Following the delivery of an Acceleration Notice to the Collateral Agent, during any Default Period, the Required Secured Parties may deliver a notice (any such notice, a "Notice of Action") to the Collateral Agent directing ---------------- the Collateral Agent to exercise one or more of the rights and remedies available to the Collateral Agent under this Agreement and the other Security Documents. The Collateral Agent shall deliver to each Secured Party a copy of such Notice of Action promptly after receipt thereof. The Collateral Agent shall exercise the rights and remedies and take the other actions described in such Notice of Action at the time or times specified in such Notice of Action. 15 (c) All Proceeds of Collateral received by the Collateral Agent from the exercise of its rights and remedies under this Agreement and the other Security Documents shall be applied as set forth in Section 4.14 of the Security Deposit Agreement. SECTION 4.5 Remedies Not Exclusive. (a) No remedy conferred upon ---------------------- or reserved to the Collateral Agent in the Security Documents is intended to be exclusive of any other remedy or remedies, but every such remedy shall be cumulative and shall be in addition to every other remedy conferred in any Security Document or now or hereafter existing at law or in equity or by statute. (b) No delay or omission by the Collateral Agent to exercise any right, remedy or power under any Security Document shall impair any such right, remedy or power or shall be construed to be a waiver thereof, and every right, power and remedy given by any Security Document to the Collateral Agent may be exercised from time to time and as often as may be deemed expedient by the Collateral Agent. (c) If the Collateral Agent shall have proceeded to enforce any right, remedy or power under any Security Document and the proceeding for the enforcement thereof shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then the Loan Parties, the Collateral Agent and the Secured Parties shall, subject to any effect of or determination in such proceeding, severally and respectively be restored to their former positions and rights hereunder or thereunder and in all other respects, and thereafter all rights, remedies and powers of the Collateral Agent shall continue as though no such proceeding had been taken. (d) All rights of action and of asserting claims upon or under the Security Documents may be enforced by the Collateral Agent without the possession of any document or instrument evidencing or relating to any Obligation or the production thereof at any trial or other proceeding relative thereto; any suit or proceeding instituted by the Collateral Agent shall be, subject to the provisions of Section 2.5(c), brought in its name as Collateral Agent; and any recovery of judgment shall be held as part of the Collateral. SECTION 4.6 Waiver and Estoppel. (a) To the extent it may lawfully ------------------- do so, each Loan Party agrees that, during any Default Period, it will not at any time in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension, moratorium, turnover or redemption law, or any law permitting it to direct the order in which the Collateral shall be sold, now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance or enforcement of any Security Document and hereby waives all benefit or advantage of all such laws and covenants, to the extent that it may lawfully do so, that it will not hinder, delay or impede the execution of any power granted to the Collateral Agent in any Security Document but will suffer and permit the execution of every such power as though no such law were in force. 16 (b) To the extent it may lawfully do so, each Loan Party, on behalf of itself and all who claim through or under it (including, without limitation, any and all subsequent creditors, vendees, assignees and lienors), hereby waives and releases all rights to demand or to have any marshaling of the Collateral upon any sale during any Default Period whether made under any power of sale granted in any Security Document or pursuant to judicial proceedings or upon any foreclosure or any enforcement of any Security Document and consents and agrees that all the Collateral may at any such sale be offered and sold in a commercially reasonable manner as an entirety or in lots as the Collateral Agent and the Secured Parties may determine. (c) To the extent it may lawfully do so, each Loan Party hereby waives presentment, demand, protest and any notice of any kind (including, without limitation, notice of intent to accelerate maturity or notice of acceleration of maturity, except notices explicitly required hereunder or under the Financing Documents) in connection with the Security Documents and any action taken by the Collateral Agent with respect to the Collateral during any Default Period. SECTION 4.7 Limitation on Collateral Agent's Duty in Respect of --------------------------------------------------- Collateral. Beyond its duties as to the custody thereof expressly provided in - ---------- any Security Document, the Collateral Agent shall not have any duty to the Loan Parties or to the Secured Parties as to any Collateral in its possession or control or in the possession or control of any of its agents or nominees, or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. SECTION 4.8 Limitation by Law. All rights, remedies and powers ----------------- provided herein may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions hereof are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement invalid, unenforceable in whole or in part or not entitled to be recorded, registered or filed under the provisions of any applicable law. SECTION 4.9 Consent to Relief from Automatic Stay. Each Loan Party ------------------------------------- hereby agrees that if (A) it shall (i) file with any bankruptcy court of competent jurisdiction or be the subject of any petition under Title 11 of the U.S. Code, as amended, (ii) be the subject of any order for relief issued under such Title 11 of the U.S. Code, as amended, (iii) file or be the subject of any petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or other relief for debtors, (iv) seek, consent to or acquiesce in the appointment of any trustee, receiver, conservator or liquidator, (v) a trustee, receiver, conservator or liquidator is appointed for such Loan Party or any substantial part of its assets, (vi) be the subject of any order, judgment or decree entered by any court of competent jurisdiction approving a petition filed against such Loan Party for any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency or relief for debtors, then (B) the Collateral Agent 17 and the Secured Parties shall thereupon be entitled to relief from any automatic stay imposed by Section 362 of Title 11 of the U.S. Code, as amended, or from any other stay or suspension of remedies resulting from any of the events listed in clauses (i) through (vi) above in this sentence, solely with respect to the exercise of the rights and remedies described in the preceding sentence (and not with respect to any other right or remedy). Each Loan Party acknowledges that the Collateral Agent and the Secured Parties are entitled to such relief as a result of good faith bargaining and as part of the consideration for the Secured Parties providing the Senior Debt. SECTION 5. PAYMENTS SECTION 5.1 Pro Rata Sharing. If, through the operation of any ---------------- bankruptcy, reorganization, insolvency or other laws or otherwise, the Collateral Agent's security interest under the Security Documents is enforced with respect to some, but not all, of the Obligations then outstanding, the Collateral Agent shall nonetheless apply all Proceeds for the benefit of the holders of all Obligations in the proportions and subject to the priorities specified herein and in the Security Deposit Agreement. To the extent that the Collateral Agent applies Proceeds as set forth in the preceding sentence collected with respect to Obligations held by one holder to or on behalf of Obligations held by a second holder, the first holder shall be deemed to have purchased a participation in the Obligations held by the second holder, or shall be subrogated to the rights of the second holder to receive any subsequent payments and distributions made with respect to the portion thereof paid or to be paid by the application of such Proceeds. SECTION 5.2 Disbursement of Monies Collected after Acceleration. Any --------------------------------------------------- monies held by the Collateral Agent at the date, or collected by the Collateral Agent after, all Obligations have been declared to be or have otherwise become due and payable shall be applied in the following order of priority specified in the Section 4.14 of the Security Deposit Agreement. SECTION 6. AGREEMENTS WITH COLLATERAL AGENT SECTION 6.1 Delivery of Financing Documents. The Collateral Agent ------------------------------- acknowledges receipt from the Borrower of copies of all Financing Documents as in effect on the date hereof, certified by the Borrower to be true and correct. The Borrower shall deliver to the Collateral Agent, promptly upon the execution thereof, a true and complete copy of each additional Financing Document and all amendments, supplements or other modifications to any Financing Document entered into after the date hereof. SECTION 6.2 Information as to Secured Parties' Representatives. The -------------------------------------------------- Borrower shall deliver to the Collateral Agent, upon the initial incurrence of each class of Senior Debt (other than the Loans) and thereafter from time to time upon request of the Collateral 18 Agent, a list setting forth the aggregate unpaid principal amount of Senior Debt outstanding, the name and address of each Secured Parties' Representative and the unpaid principal amount of Obligations relating to the Senior Debt represented by such Secured Parties' Representative. In addition, the Borrower will promptly notify the Collateral Agent of any change in the identity of any Secured Parties' Representative. SECTION 6.3 Certificate of Secured Parties' Representative. Any ---------------------------------------------- action or direction taken by the Secured Parties hereunder shall be pursuant to a certificate or certificates executed by Secured Parties' Representatives representing the required combination of Secured Parties and certifying as to the amounts of Obligations held by such Secured Parties and that such Secured Parties constitute the required combination of Secured Parties for purposes of the action or direction taken by such Secured Parties. SECTION 6.4 Compensation and Expenses. The Loan Parties shall pay ------------------------- to the Collateral Agent, from time to time upon demand, (i) reasonable compensation (which shall not be limited by any provision of law in regard to compensation of fiduciaries or of a trustee of an express trust) for its services hereunder and under the Security Documents and for administering the Collateral, as set forth in the separate fee letter dated the date hereof and (ii) all of the fees, reasonable costs and expenses of the Collateral Agent (including, without limitation, the fees and disbursements of its counsel and such special counsel as the Collateral Agent reasonably elects to retain) (A) arising in connection with the preparation, execution, delivery, modification, administration and termination of each Security Document or the enforcement of any of the provisions hereof or thereof, (B) incurred or required to be advanced in connection with the administration of the Collateral, the sale or other disposition of Collateral pursuant to this Agreement or any other Security Document and the preservation, protection or defense of the Collateral Agent's rights under the Security Documents and in and to the Collateral or (c) incurred - by the Collateral Agent in connection with the resignation of the Collateral Agent pursuant to Section 2.6(a). The obligations of the Loan Parties under this Section 6.4 shall survive the termination of the other provisions of this Agreement. SECTION 6.5 Stamp and Other Similar Taxes. The Loan Parties shall ----------------------------- indemnify and hold harmless the Collateral Agent and each Secured Party from any present or future claim for liability for any stamp or any other similar tax and any penalties or interest with respect thereto, which may be assessed, levied or collected by any jurisdiction in connection with any Security Document or any Collateral pertaining to the period that such agreements were in effect. The obligations of the Loan Parties under this Section 6.5 shall survive the termination of the other provisions of this Agreement. SECTION 6.6 Filing Fees, Excise Taxes, Etc. The Loan Parties shall ------------------------------ pay or reimburse the Collateral Agent for any and all payments made by the Collateral Agent in respect of all search, filing, recording and registration fees, taxes, excise taxes and other similar imposts which may be payable or determined to be payable in respect of the execution and delivery of each 19 Security Document. The obligations of the Loan Parties under this Section 6.6 shall survive the termination of the other provisions of this Agreement. SECTION 6.7 Indemnification. The Loan Parties shall pay, indemnify, --------------- and hold the Collateral Agent and the Secured Parties harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, reasonable costs, reasonable expenses (including, without limitation, the fees of counsel) or disbursements of any kind or nature with respect to the execution, delivery, enforcement, performance and administration of the Security Documents (collectively, the "Indemnified Liabilities"), unless ----------------------- arising solely from the gross negligence, willful misconduct or bad faith of the indemnified party. In any suit, proceeding or action brought, in accordance with the provisions of this Agreement, by the Collateral Agent under or with respect to any contract, agreement, interest or obligation constituting part of the Collateral for any sum owing thereunder, or to enforce any provisions thereof, the Loan Parties will save, indemnify and keep the Collateral Agent and the Secured Parties harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the obligor thereunder, arising out of a breach by the any Loan Party of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such obligor or its successors from any Loan Party and all such obligations of the Loan Parties shall be and remain enforceable against and only against the Loan Parties and shall not be enforceable against the Collateral Agent, any Secured Parties' Representative or any Secured Party. The agreements in this Section 6.7 shall survive the termination of the other provisions of this Agreement. SECTION 6.8 Further Assurances. At any time and from time to time, ------------------ upon the written request of the Collateral Agent, and at the expense of the relevant Loan Party, such Loan Party will promptly execute and deliver any and all such further instruments and documents and take such further action (including, without limitation, the delivery to the Collateral Agent or its agent of chattel paper (as defined in the Uniform Commercial Code) which constitutes Collateral) as is necessary or reasonably requested further to perfect, or to protect the perfection of, the liens and security interests granted under the Security Documents, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any such jurisdiction. Each Loan Party also hereby authorizes the Collateral Agent to sign and to file any such financing or continuation statements without the signature of such Loan Party to the extent permitted by applicable law, and to file a carbon, photostatic, photographic or other reproduction of any Security Document or a Uniform Commercial Code financing statement. SECTION 6.9 Payment by Collateral Agent, Etc. All payments by the -------------------------------- Collateral Agent hereunder to the Secured Parties shall be made by wire transfer to such Secured Party at such address as shall have been specified by such Secured Party to the Collateral Agent. Any Secured Party may at any time and from time to time specify an alternative method of payment for such Secured Party by giving written notice thereof to the Collateral Agent. 20 SECTION 7. REPRESENTATIONS AND WARRANTIES SECTION 7.1 Representations and Warranties. The Collateral Agent ------------------------------ and each Secured Parties' Representative represents and warrants to the other parties hereto that (a) the execution, delivery and performance of this Agreement (i) has been duly authorized by all requisite corporate (or other equivalent) action on its part and (ii) will not contravene any provision of its charter or by-laws (or other equivalent organizational documents) or any order of any court or other Governmental Authority having applicability to it or any applicable law, and (b) this Agreement has been duly executed and delivered by it and constitutes its legal, valid, enforceable and binding obligation. SECTION 8. CERTAIN AGREEMENTS OF THE SECURED PARTIES SECTION 8.1 Turnover of Collateral. (a) If any Secured Party ---------------------- (other than the Collateral Agent) acquires custody, control or possession of any Collateral or proceeds thereof, other than amounts from or through the Collateral Agent (whether (i) by way of voluntary or involuntary payment, (ii) by virtue of an exercise of any right of set-off, banker's lien or counterclaim, (iii) as proceeds of any insurance policy covering any properties or assets of the Loan Parties, (iv) from proceeds of liquidation or dissolution of any Loan Party or distribution of its assets among its creditors (however such liquidation, dissolution or distribution may occur), (v) as payment of any Obligations following the acceleration of any Senior Debt, (vi) as consideration for the agreement of such Secured Party, or as part of any transaction or series of related transactions in which such Secured Party shall have agreed, to waive or amend any provision of any Financing Document, (vii) from realization on Collateral, (viii) by virtue of the application of any provision of any of the Security Documents (other than this Agreement) or (ix) in any other manner) such Secured Party shall promptly cause such Collateral or proceeds to be delivered to or put in the custody, possession or control of the Collateral Agent for disposition or distribution in accordance with the provisions of this Agreement. Until such time as the provisions of the immediately preceding sentence have been complied with, such Secured Party shall be deemed to hold such Collateral and proceeds in trust for the parties entitled thereto hereunder. (b) If an Event of Default shall have occurred and be continuing, unless all of the Secured Parties' Representatives shall have otherwise agreed in writing, each Secured Party shall turn over to the Collateral Agent, for application pursuant to Section 5, any payment (whether voluntary or involuntary, through the exercise of any right of setoff or otherwise) on account of the Obligations received by such Secured Party during the period commencing on a date which is ninety days prior to the date of such Event of Default. 21 SECTION 8.2 No Bankruptcy Filings. Each of the Secured Parties' --------------------- Representatives hereby agrees on behalf of the Secured Parties that: (a) it will not attempt to foreclose on or assert rights against the Collateral except as provided in this Agreement; and (b) except with the prior written consent of the Required Secured Parties, it shall not commence any bankruptcy or insolvency proceeding with respect to any Loan Party. SECTION 8.3 No Loans; No Liens. Except as contemplated by the ------------------ Financing Documents, none of the Secured Parties shall (a) extend credit or make any loans or advances to any Loan Party which shall be in addition to those provided for in the Financing Documents as in effect on the date hereof and which shall be secured by any security interest, lien, pledge or mortgage covering any assets of the Loan Parties whatsoever, or (b) accept any further grant from any Loan Party of any mortgage lien on, security interest in, or pledge of any collateral which is not granted equally and ratably to all of the Secured Parties. SECTION 8.4 Security Interests. The Collateral Agent and each of ------------------ the Secured Parties' Representatives hereby agrees that the liens and security interests granted to the Collateral Agent under the Security Documents shall be treated, as among the Secured Parties, as having equal priority and shall at all times be shared by the Secured Parties as provided herein. SECTION 8.5 Set-offs. If any Secured Party exercises any right of -------- setoff or similar right with respect to any assets (whether or not such assets shall constitute Collateral) of any Loan Party for payment of any outstanding Obligations at any time during a Default Period, the amounts so set-off shall constitute Collateral for the purposes of this Agreement and such Secured Party shall promptly cause such amounts to be delivered or put in the custody, possession or control of the Collateral Agent for disposition or distribution in accordance with the provisions of Sections 5.1 and 5.2. Until such time as the provisions of the immediately preceding sentence have been complied with, such Secured Party shall be deemed to hold such Collateral in trust for the parties hereto entitled thereto hereunder. The foregoing provisions shall not be deemed to apply to amounts set off or deducted by the Collateral Agent in accordance with the provisions of the Security Documents in respect of costs and expenses, instruments returned because of insufficient funds or other amounts which the Collateral Agent is permitted so to deduct or set-off under such subsection or the Security Documents. SECTION 8.6 Intercreditor Agreement Regarding Amendment of Financing -------------------------------------------------------- Documents. In addition to any consent requirement contained in any Financing - --------- Document, the consent of each Secured Parties' Representative shall be required (i) in connection with any amendment, supplement or other modification of any Financing Document that would increase the amount of or change the scheduled date of maturity of any Senior Debt or the scheduled date of any installment of principal payable on any such Senior Debt, or increase the stated rate of any interest, premium, fee or other amount payable in respect thereof or change the scheduled date of any payment thereof, or provide for any additional mandatory prepayment of any such Senior Debt (it being agreed that this clause shall not be construed to limit the rights of the Loan Parties to incur Refinancing Indebtedness, Additional Indebtedness or other Senior Debt as permitted 22 under the Financing Documents), (ii) to release all or any material portion of the Collateral from the Liens of the Security Documents (except that the consent of the Administrative Agent alone shall be required for the release of the Lien on the capital stock of the Borrower granted pursuant to Section 3(b) of the Guarantee and Collateral Agreement), (iii) to release any Loan Party from its obligations under the Security Documents (except that the consent of the Administrative Agent alone shall be required for the release of Edison Mission Energy from its obligations under the Guarantee and Collateral Agreement), (iv) to release Edison Mission Energy from its obligations under the EME Credit Support Guarantee, (v) to amend, modify or waive any provision of this Agreement, the Security Deposit Agreement or the other Security Documents relating to the order of priority or amounts of transfers of cash and other property to be made hereunder or thereunder or to amend or modify the definitions of Obligations" or "Senior Debt" hereunder or thereunder or (vi) to amend or modify the definition of "Required Secured Parties" under this Agreement, the Security Deposit Agreement or any other Security Document or the percentages required for any action to be taken under this Agreement, the Security Deposit Agreement or any other Security Document, provided that the -------- consent of the Administrative Agent and any Secured Parties' Representative with respect to any DSR Letter of Credit Indebtedness, Ordinary Course Letter of Credit Indebtedness or Swap Indebtedness shall not be required in connection with any amendment of the definition of "Required Secured Parties" to reduce the percentage specified therein solely as relates to the delivery of a Notice of Action pursuant to Section 4.4(b). SECTION 8.7 Beneficiaries. The agreements contained in this Section ------------- 8 are intended only for the benefit of the Secured Parties, and no Person (including, without limitation, any Loan Party) other than the Secured Parties shall have any rights under this Section 8. Each Loan Party hereby consents to the agreements contained in this Section 8 and consents to any exercise of rights by the Collateral Agent, any Secured Parties' Representative and the other Secured Parties pursuant to this Section 8. SECTION 8.8 Additional Collateral. Each of the Secured Parties --------------------- hereby covenants and agrees that it will not take any security interest in or Lien on any assets of the Borrower or any subsidiary thereof to secure any of the Obligations unless such security interest or Lien secures the payment of all the outstanding Obligations on a pari passu basis pursuant to the Security Documents. SECTION 8.9 Purchase of Collateral. Any Secured Party may purchase ---------------------- Collateral at any public sale of such Collateral pursuant to any of the Security Documents and may make payment on account thereof by using any outstanding Obligation then due and payable to such Secured Party from the person which granted a security interest in such Collateral as a credit against the purchase price to the extent, but only to the extent, approved by the Required Secured Parties. The Collateral Agent shall give prior notice of any such sale to each Secured Party (to the extent that the Collateral Agent has received notice of such sale). 23 SECTION 9. MISCELLANEOUS SECTION 9.1 No Individual Action. No Secured Party may require the -------------------- Collateral Agent to take or refrain from taking any action hereunder or under any of the Security Documents or with respect to any of the Collateral except as and to the extent expressly set forth in this Agreement. SECTION 9.2 Notices. Unless otherwise specified herein, all ------- notices, requests, demands or other communications given to any Loan Party, the Collateral Agent or any Secured Party shall be given in writing (including telex or facsimile transmission) and shall be deemed to have been duly given when personally delivered or when duly deposited in the mails, registered or certified mail postage prepaid, or when transmitted by telex or facsimile transmission, addressed (i) if to any Loan Party or the Collateral Agent, to such party at its address specified on Schedule 1 hereto or any other address which such party shall have specified as its address for the purpose of communications hereunder, by notice given in accordance with this Section 9.1 to the party sending such communication or (ii) if to any Secured Party, to it at its address specified from time to time in the list provided by the Borrower to the Collateral Agent pursuant to Section 6.2 or as provided by such Secured Party, including, without limitation, the addresses specified in the Credit Agreement, as the case may be; provided that any notice, request or demand to -------- the Collateral Agent shall not be effective until received by the Collateral Agent at the office designated by it pursuant to this Section 9.1. Each of the Secured Parties agrees to issue promptly any notice given or required to be given by such Secured Party under this Agreement. SECTION 9.3 No Waivers. No failure on the part of the Collateral ---------- Agent or any Secured Party to exercise, no course of dealing with respect to, and no delay in exercising, any right, power or privilege under any Security Document shall operate as a waiver thereof nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. SECTION 9.4 Amendments, Supplements and Waivers. (a) This ----------------------------------- Agreement may not be amended or modified except in accordance with the provisions of this Section 9.4. With the written consent of the Required Secured Parties, the Collateral Agent and the Loan Parties may, from time to time, enter into an amendment, supplement, waiver or other modification of this Agreement or change in any manner the rights of the Collateral Agent, the Secured Parties or the Borrower hereunder; provided that any amendment, -------- supplement, waiver or other modification of Section 8 shall require the consent of each Secured Parties' Representative and the Collateral Agent; provided, -------- further, that any amendment, supplement, waiver or other modification of this - ------- Section 9.4 shall require the consent of each Secured Parties' Representative, the Collateral Agent and the Loan Parties. Any such amendment, supplement, waiver other modification shall be binding upon the Loan Parties, the Secured Parties' Representatives and the Collateral Agent and their respective successors. 24 (b) Notwithstanding clause (a) above, without the consent of any Secured Party, the Collateral Agent, the Borrower and, as long as any Obligations are outstanding under the Credit Agreement, the Administrative Agent, at any time and from time to time, may enter into one or more agreements supplemental hereto, in form satisfactory to the Collateral Agent (i) to add to the covenants of the Loan Parties for the benefit of the Secured Parties or to surrender any right or power herein conferred upon any Loan Party, (ii) to mortgage or pledge to the Collateral Agent, or grant a security interest in favor of the Collateral Agent in, any property or assets as security or additional security for the Obligations or (iii) to cure any ambiguity, defect or inconsistency or to make any other change that would provide any additional rights or benefits to the Secured Parties or that does not adversely affect the legal rights under the Financing Documents of any Secured Party. SECTION 9.5 Headings. The table of contents and the headings of -------- Sections and Sections have been included in the Security Documents for convenience only and should not be considered in interpreting the Security Documents. SECTION 9.6 Severability. Any provision of this Agreement which is ------------ prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 9.7 Successors and Assigns. This Agreement shall be binding ---------------------- upon and inure to the benefit of each of the parties hereto and shall inure to the benefit of each of the Secured Parties and their respective successors and assigns, and nothing herein is intended or shall be construed to give any other Person any right, remedy or claim under, to or in respect of this Agreement or any Collateral. SECTION 9.8 GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE ------------- GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. SECTION 9.9 Counterparts. This Agreement may be signed in any ------------ number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 9.10 SUBMISSION TO JURISDICTION; WAIVERS. ----------------------------------- (A) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY: (I) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY SECURITY DOCUMENTS OR ANY OTHER DOCUMENTS EXECUTED IN RELATION TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE 25 EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (II) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (III) AGREES THAT SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING OF A COPY THEREOF (BY REGISTERED OR CERTIFIED MAIL OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL) POSTAGE PREPAID, TO THE COMPANY, AT ITS ADDRESS SET FORTH IN SCHEDULE I OR AT SUCH OTHER ADDRESS OF WHICH THE COLLATERAL AGENT AND THE SECURED PARTIES SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; (IV) AGREES THAT NOTHING HEREIN SHALL AFFECT ANY PARTY'S RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND (V) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SUBSECTION ANY SPECIAL EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. (B) EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW IN ANY ACTION OR PROCEEDING REFERRED TO IN SUBSECTION 9.10(A) HEREOF, AND FOR ANY COUNTERCLAIM THEREIN. SECTION 9.11 Termination. (a) Upon (i) the earlier of (A) receipt ----------- by the Collateral Agent from each Secured Parties' Representative of a written direction to cause the liens created by the Security Documents to be released and discharged or (B) payment in full of all Obligations and the termination of all Commitments, and (ii) payment in full of all fees and expenses owing to the Collateral Agent hereunder, the security interests created by the Security Documents shall terminate forthwith and all right, title and interest of the Collateral Agent in and to the Collateral shall revert to the Borrower and its successors and assigns. 26 (b) Upon the termination of the Collateral Agent's security interest and the release of the Collateral in accordance with this Section 9.11, the Collateral Agent will promptly, at the written request and expense of the Borrower, (i) execute and deliver to the Borrower such documents as the Borrower shall reasonably request to evidence the termination of such security interest or the release of the Collateral and (ii) deliver or cause to be delivered to the Borrower all property of the Loan Parties then held by the Collateral Agent or any agent or nominee thereof. (c) This Agreement shall terminate when the security interest granted under the Security Documents has terminated and the Collateral has been released; provided that the provisions of Sections, 6.7, 6.8 and 6.9 shall not be affected by any such termination. SECTION 9.12 Acknowledgments. Each Loan Party hereby acknowledges --------------- that it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Financing Documents to which such Loan Party is a party; neither the Collateral Agent, any Secured Parties' Representative, nor any Secured Party has any fiduciary relationship to any Loan Party and the relationship between the Collateral Agent, any Secured Parties' Representative and the Secured Parties, on one hand, and the Loan Parties, on the other hand, is solely that of debtor and creditor; and no joint venture exists among the Secured Parties or among any Loan Party and the Secured Parties. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above. UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent By: _________________________________ Name: Title: EDISON MISSION HOLDINGS CO. By: _________________________________ Name: Title: EDISON MISSION FINANCE CO. By: _________________________________ Name: Title: HOMER CITY PROPERTY HOLDINGS, INC. By: _________________________________ Name: Title: CHESTNUT RIDGE ENERGY CO. By: _________________________________ Name: Title: 28 MISSION ENERGY WESTSIDE, INC. By:________________________________________ Name: Title: EME HOMER CITY GENERATION L.P. By: Mission Energy Westside, Inc., its General Partner By:________________________________________ Name: Title: CITICORP USA, INC., as Administrative Agent By:________________________________________ Name: Title: SCHEDULE 1 ---------- Addresses for Notices --------------------- Edison Mission Holding Co. 18101 Von Karman Avenue Edison Mission Finance Co. Suite 1700 Homer City Property Holdings, Inc. Irvine, California 92612-1046 Chestnut Ridge Energy Co. Mission Energy Westside, Inc. Fax: (949) 752-5624 EME Homer City Generation L.P. United States Trust Company of New York 114 West 47th Street 25th floor New York, New York 10036-1532 Fax: (212) 852-1625 EXHIBIT A --------- [FORM OF SENIOR DEBT SUPPLEMENT] [Date] United States Trust Company of New York 114 West 47th Street 25th Floor New York, New York 10036-1532 Re: Edison Mission Holdings Co. -------------------------- Ladies and Gentlemen: Reference is made to the Collateral Agency and Intercreditor Agreement, dated as of March 18, 1999 (as the same may be amended, supplemented or otherwise modified from time to time, the "Collateral Agency and --------------------- Intercreditor Agreement"), among Edison Mission Holdings Co. (the "Borrower"), - ----------------------- -------- the other Loan Parties, Citicorp USA, Inc., as Administrative Agent, the Secured Parties' Representatives parties thereto and United States Trust Company of New York, as Collateral Agent. Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Collateral Agency and Intercreditor Agreement. The undersigned is the duly appointed [specify capacity, e.g., indenture trustee] for the holders of the [specify class of Senior Debt] who intend to extend credit to the Borrower on substantially the terms and conditions set forth in the agreements and other instruments attached hereto as Annex A. The undersigned hereby requests (i) that the undersigned be recognized as a "Secured Parties' representative" acting on behalf of the holders of such Senior Debt for all purposes of the Collateral Agency and Intercreditor Agreement and (ii) that the attached agreements and instruments be designated as Financing Documents under the Collateral Agency and Intercreditor Agreement. By its execution and delivery of this letter, the undersigned agrees on its own behalf and on behalf of all holders of such Senior Debt to be 2 bound by all of the terms of the Collateral Agency and Intercreditor Agreement and the other Security Documents. [NAME OF SECURED PARTIES' REPRESENTATIVE] By: Name: Title: By: Name: Title: ACCEPTED AND AGREED: EDISON MISSION HOLDINGS CO. By: Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent By: Name: Title: EX-10.58 5 SECURITY DEPOSIT AGREEMENT EXHIBIT 10.58 EXECUTION COPY SECURITY DEPOSIT AGREEMENT Among EDISON MISSION HOLDINGS CO., EDISON MISSION FINANCE CO., HOMER CITY PROPERTY HOLDINGS, INC., CHESTNUT RIDGE ENERGY CO., MISSION ENERGY WESTSIDE, INC., EME HOMER CITY GENERATION L.P. and UNITED STATES TRUST COMPANY OF NEW YORK as Collateral Agent Dated as of March 18, 1999 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions........................................................................ 3 SECTION 1.1. Defined Terms......................................................... 3 SECTION 1.2. Other Definitional Provisions......................................... 16 ARTICLE II Agreement of Collateral Agent; Creation of Accounts; Grant of Security Interests............................................................ 16 SECTION 2.1. Agreement of Collateral Agent........................................ 16 SECTION 2.2. Creation of Accounts................................................. 17 SECTION 2.3. Delivery of Revenues, etc. to Collateral Agent....................... 19 SECTION 2.4. Security Interests................................................... 20 ARTICLE III Deposits into Accounts............................................................. 22 SECTION 3.1. Revenue Account...................................................... 22 SECTION 3.2. Environmental Capital Expenditure Account............................ 22 SECTION 3.3. Recovery Event Proceeds Account...................................... 22 SECTION 3.4. Loan Principal Account............................................... 22 SECTION 3.5. Debt Service Reserve Accounts........................................ 23 SECTION 3.6. Deposits Irrevocable................................................. 23 ARTICLE IV Transfers from Accounts............................................................ 23 SECTION 4.1. Revenue Account...................................................... 23 SECTION 4.2. [Reserved]........................................................... 24 SECTION 4.3. Environmental Capital Expenditure Account............................ 24 SECTION 4.4. Recovery Event Proceeds Account...................................... 25 SECTION 4.5. Loan Principal and Accrued Interest Accounts......................... 25 SECTION 4.6. Refinancing Indebtedness Principal and Accrued Interest Accounts..... 26 SECTION 4.7. Ordinary Course Letter of Credit Indebtedness Principal and Accrued Interest Accounts............................................................. 26 SECTION 4.8. DSR Letter of Credit Indebtedness Principal and Accrued Interest Accounts...................................................................... 26 SECTION 4.9. Additional Indebtedness Principal and Accrued Interest Accounts...... 27
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Page ---- SECTION 4.10. Swap Indebtedness Termination Payment and Accrued Fixed Payment Accounts................................................................... 27 SECTION 4.11. Equity Account................................................... 28 SECTION 4.12. Delivery of Request Letters...................................... 28 SECTION 4.13. Shortfall Notices................................................ 28 SECTION 4.14. Transfers from Accounts During a Default Period.................. 28 SECTION 4.15. Collateral Agent's Calculations.................................. 29 SECTION 4.16. Insufficient Amounts............................................. 29 ARTICLE V Investment...................................................................... 30 ARTICLE VI Collateral Agent................................................................ 31 SECTION 6.1. Rights, Duties, etc............................................... 31 SECTION 6.2. Resignation or Removal............................................ 32 ARTICLE VII Determinations.................................................................. 32 ARTICLE VIII Miscellaneous................................................................... 32 SECTION 8.1. Indemnification of Collateral Agent............................... 32 SECTION 8.2. Waiver of Right of Set-Off........................................ 33 SECTION 8.3. Termination....................................................... 33 SECTION 8.4. Severability...................................................... 33 SECTION 8.5. Counterparts...................................................... 33 SECTION 8.6. Amendments........................................................ 33 SECTION 8.7. APPLICABLE LAW.................................................... 33 SECTION 8.8. Notices........................................................... 34 SECTION 8.9. Benefit of Security Deposit Agreement............................. 34
-ii- RECITALS -------- A. The Borrower has entered into a Credit Agreement, dated as of March 18, 1999 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), with certain financial institutions ---------------- (collectively, the "Lenders") and Citicorp USA, Inc., as administrative agent ------- for the Lenders (in such capacity, the "Administrative Agent"). -------------------- B. Pursuant to the Credit Agreement, the Lenders have severally agreed to make Loans (as defined below) to the Borrower upon the terms and subject to the conditions set forth therein. C. The Borrower will use the proceeds of the Loans under the Credit Agreement to make valuable transfers to one or more of the other Loan Parties in connection with the acquisition by EME Homer City of the Homer City Electric Generating Station and certain facilities and other assets associated therewith and ancillary thereto (the "Generating Station"), certain capital expenditures ------------------ related to the Generating Station and general working capital purposes. D. Under Section 8.2.1(e) of the Credit Agreement, the Borrower is permitted to incur certain indebtedness for the purpose of refinancing the Loans and other indebtedness of the Borrower ("Refinancing Indebtedness"); under ------------------------ Section 8.2.1(d)(i) of the Credit Agreement, the Loan Parties are permitted to incur certain indebtedness in the form of reimbursement obligations relating to letters of credit, surety bonds and performance bonds used by the Loan Parties in the ordinary course of their business ("Ordinary Course Letter of Credit -------------------------------- Indebtedness"); under Section 8.2.1(d)(ii) of the Credit Agreement, the Borrower - ------------ is permitted to incur certain indebtedness in the form of reimbursement obligations relating to Debt Service Reserve Letters of Credit (as defined below) ("DSR Letter of Credit Indebtedness"); under Section 8.2.1 of the --------------------------------- Credit Agreement, the Borrower is permitted to incur certain additional indebtedness ("Additional Indebtedness"); and, under Section 8.2.1(b) of the ----------------------- Credit Agreement, the Borrower is permitted to incur certain indebtedness under Interest Rate Hedging Transactions (as defined below) entered into with respect to the Loans ("Swap Indebtedness"). ----------------- E. In satisfaction of the requirements of the Lenders and the Secured Parties providing any Refinancing Indebtedness or Additional Indebtedness, the Loan Parties desire by this Agreement (as defined below) to provide for the receipt of Revenues (as defined below) and the application thereof to the payment of Operating Expenses (as defined below), Debt Service (as defined below) and other purposes as described herein. F. In order to simplify administration of the common collateral and to provide for the orderly enforcement of their respective rights, the Administrative Agent, the Lenders and the other Secured Parties have appointed the Collateral Agent to serve as their common representative, to be the beneficiary under any guarantee intended to benefit the Secured Parties and to hold the liens created, or to be created, under the Financing Documents. 2 G. Pursuant to the Collateral Agency and Intercreditor Agreement, dated as of March 18, 1999 (as amended, supplemented or otherwise modified from time to time, the "Collateral Agency and Intercreditor Agreement", among the --------------------------------------------- Loan Parties, the Administrative Agent, the Collateral Agent and certain other parties, the Collateral Agent has agreed to serve as a common collateral agent for all Secured Parties. H. The Borrower is a member of an affiliated group of companies that includes each other Loan Party. The Borrower and the other Loan Parties are engaged in related businesses, and each Loan Party will derive substantial direct and indirect benefit from the making of the Loans and the incurrence of any Refinancing Indebtedness or Additional Indebtedness. I. It is a condition precedent to the obligations of the Lenders to make their respective Loans to the Borrower under the Credit Agreement that the Loan Parties shall have executed and delivered this Agreement to the Collateral Agent for the benefit of the Secured Parties. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, each of the parties hereto hereby agrees as follows: ARTICLE I Definitions ----------- SECTION 1.1. Defined Terms. The following terms shall have the ------------- meanings indicated: "Accounts" means all accounts established pursuant to Section 2.2 of -------- ----------- this Agreement. "Accrued Interest Accounts" means, collectively, the Loan Accrued ------------------------- Interest Account, the Refinancing Indebtedness Accrued Interest Accounts, the Ordinary Course Letter of Credit Indebtedness Accrued Interest Accounts, the DSR Letter of Credit Accrued Interest Accounts, the Additional Indebtedness Accrued Interest Accounts and the Swap Indebtedness Accrued Fixed Payment Accounts. "Accrued Interest Amount" means, as of any date of calculation, (i) ----------------------- with respect to the Loan Accrued Interest Account, the Loan Accrued Interest Amount calculated on such date, (ii) with respect to each Refinancing Indebtedness Accrued Interest Account, the Refinancing Indebtedness Accrued Interest Amount calculated for such Refinancing Indebtedness Accrued Interest Account on such date, (iii) with respect to each Ordinary Course Letter of Credit Indebtedness Accrued Interest Account, the Ordinary Course Letter of Credit Indebtedness Accrued Interest Amount calculated for such Ordinary Course Letter of Credit Indebtedness Accrued Interest Account on such date, (iv) with respect to each DSR Letter of Credit Indebtedness Accrued Interest Account, the DSR 3 Letter of Credit Indebtedness Accrued Interest Amount calculated for such DSR Letter of Credit Indebtedness Accrued Interest Account on such date, (v) with respect to each Additional Indebtedness Accrued Interest Account, the Additional Indebtedness Accrued Interest Amount calculated for such Additional Indebtedness Accrued Interest Account on such date, and (vi) with respect to each Swap Indebtedness Accrued Fixed Payment Account, the Swap Indebtedness Accrued Fixed Payment Amount calculated for such Swap Indebtedness Accrued Fixed Payment Account on such date. "Additional Indebtedness" has the meaning specified in the recitals. ----------------------- "Additional Indebtedness Accrued Interest Accounts" has the meaning ------------------------------------------------- specified in Section 2.2. "Additional Indebtedness Accrued Interest Amount" means, with respect ----------------------------------------------- to any Additional Indebtedness Accrued Interest Account, as of any date of calculation, an amount sufficient to cause the balance of such Additional Indebtedness Accrued Interest Account to equal the sum of (i) all accrued and unpaid interest and fees in respect of the related Additional Indebtedness on such date, (ii) all amounts in respect of funding losses, increased capital costs, taxes, indemnities, costs and expenses associated with such Additional Indebtedness due and payable on such date and (iii) if the next succeeding Additional Indebtedness Interest Payment Date with respect to such Additional Indebtedness will occur prior to the next succeeding Monthly Transfer Date, all interest and fees projected to accrue in respect of such Additional Indebtedness from the date of calculation to but excluding such Additional Indebtedness Interest Payment Date and all amounts in respect of funding losses, increased capital costs, taxes, indemnities, costs and expenses associated with such Additional Indebtedness projected to be due and payable on such Additional Indebtedness Interest Payment Date. "Additional Indebtedness Debt Service Reserve Accounts" has the ----------------------------------------------------- meaning specified in Section 2.2. ----------- "Additional Indebtedness Debt Service Reserve Requirement", with -------------------------------------------------------- respect to any Additional Indebtedness, has the meaning ascribed to the term "Debt Service Reserve Requirement" in the Financing Documents relating to such Additional Indebtedness. "Additional Indebtedness Interest Payment Date" means, with respect to --------------------------------------------- any Additional Indebtedness, any date on which regularly scheduled installments of interest are payable on such Additional Indebtedness. "Additional Indebtedness Principal Accounts" has the meaning specified ------------------------------------------ in Section 2.2. ----------- "Administrative Agent" has the meaning specified in the recitals. -------------------- -------- "Affiliate" has the meaning specified in the Credit Agreement. --------- 4 "Agreement" means this Security Deposit Agreement, dated as of March --------- 18, 1999, among the Loan Parties and the Collateral Agent. "Authorized Representative" means, relative to any Loan Party, those ------------------------- of its officers and employees whose signatures and incumbency shall have been certified by such Loan Party to the Collateral Agent and each Secured Parties' Representative. "Borrower" has the meaning specified in the preamble. -------- -------- "Borrower Obligations" means (a) the unpaid principal of and interest -------------------- on the Loans, (b) the unpaid principal of and interest on the Refinancing Indebtedness, if any, (C) the unpaid principal of and interest on the Ordinary Course Letter of Credit Indebtedness, if any, (d) the unpaid principal of and interest on the DSR Letter of Credit Indebtedness, if any, (e) the unpaid principal of and interest on the Additional Indebtedness, if any, (f) the unpaid amount of the Swap Indebtedness, if any, and (g) all other obligations and liabilities of the Borrower (including interest accruing at the then applicable rate or rates provided in the Financing Documents after the maturity of the Loans, Refinancing Indebtedness, Ordinary Course Letter of Credit Indebtedness, DSR Letter of Credit Indebtedness, Additional Indebtedness and/or Swap Indebtedness, as applicable, and interest accruing at the then applicable rate or rates provided in the Financing Documents after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post- filing or post-petition interest is allowed in such proceeding) to the Secured Parties, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, any Financing Document or any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, guarantee obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by the Borrower pursuant to the terms of any Financing Document). "Business Day" means any day which is neither a Saturday or Sunday nor ------------ a legal holiday on which banks are authorized or required to be closed in New York, New York. "Business Interruption Insurance Proceeds" means any and all proceeds ---------------------------------------- of any insurance, indemnity, warranty or guaranty payable to or received by any Loan Party with respect to the partial or complete interruption of the operation of the Generating Station. "Chestnut Ridge" has the meaning specified in the preamble. -------------- -------- "Collateral Agent" has the meaning specified in the preamble. ---------------- -------- "Collateral Agency and Intercreditor Agreement" has the meaning --------------------------------------------- specified in the recitals. -------- 5 "Construction Term Loans" has the meaning specified in the Credit ----------------------- Agreement. "Credit Agreement" has the meaning specified in the recitals. ---------------- -------- "Debt" Service" means, with respect to any Senior Debt, principal (or, in the case of Swap Indebtedness, amounts payable on early termination of the related Interest Rate Hedging Transaction), interest (or, in the case of any Swap Indebtedness, fixed payments in respect of the related Interest Rate Hedging Transaction), fees and amounts in respect of funding losses, increased capital costs, taxes, indemnities, costs and expenses, in each case payable in respect of such Senior Debt. "Debt Service Reserve Accounts" means, collectively, the Loan Debt ----------------------------- Service Reserve Account, the Refinancing Indebtedness Debt Service Reserve Accounts and the Additional Indebtedness Debt Service Reserve Accounts. "Debt Service Reserve Requirements" means the Loan Debt Service --------------------------------- Reserve Requirement, any Refinancing Indebtedness Debt Service Reserve Requirement and any Additional Indebtedness Debt Service Reserve Requirement. "Default Period" has the meaning specified in the Collateral -------------- Agency and Intercreditor Agreement. "Depositary" means Bank of America NT&SA. ---------- "DSR Credit Instrument" means, with respect to any Senior Debt, a --------------------- letter of credit, guarantee or other instrument that under the Financing Documents relating to such Senior Debt may be delivered to the Collateral Agent in total or partial satisfaction of the Debt Service Reserve Requirement relating to such Senior Debt. "DSR Letter of Credit Indebtedness" has the meaning specified in the --------------------------------- recitals. "DSR Letter of Credit Indebtedness Accrued Interest Accounts" has ----------------------------------------------------------- the meaning specified in Section 2.2. ----------- "DSR Letter of Credit Indebtedness Accrued Interest Amount" means, --------------------------------------------------------- with respect to any DSR Letter of Credit Indebtedness Accrued Interest Account, as of any date of calculation, an amount sufficient to cause the balance of such DSR Letter of Credit Indebtedness Accrued Interest Account to equal the sum of (i) all accrued and unpaid interest and fees in respect of the related DSR Letter of Credit Indebtedness on such date, (ii) all amounts in respect of funding losses, increased capital costs, taxes, indemnities, costs and expenses associated with such DSR Letter of Credit Indebtedness due and payable on such date and (iii) if the next succeeding DSR Letter of Credit Indebtedness Interest Payment Date with respect to such DSR Letter of Credit Indebtedness will occur prior to the next succeeding Monthly Transfer Date, all interest and fees projected to 6 accrue in respect of such DSR Letter of Credit Indebtedness from the date of calculation to but excluding such DSR Letter of Credit Indebtedness Interest Payment Date and all amounts in respect of funding losses, increased capital costs, taxes, indemnities, costs and expenses associated with such DSR Letter of Credit Indebtedness projected to be due and payable on such DSR Letter of Credit Indebtedness Interest Payment Date. "DSR Letter of Credit Indebtedness Interest Payment Date" means, with ------------------------------------------------------- respect to any DSR Letter of Credit Indebtedness, any date on which regularly scheduled installments of interest are payable on such DSR Letter of Credit Indebtedness. "DSR Letter of Credit Indebtedness Principal Accounts" has the meaning ---------------------------------------------------- specified in Section 2.2. ----------- "DSR Letter of Credit Provider" means (i) with respect to the Loans, a ----------------------------- commercial bank or other financial institution the long-term debt securities of which are rated "A" or better by S&P and "A2" or better by Moody's and (ii) with respect to any other Senior Debt, a commercial bank or other financial institution the long-term unsecured debt securities of which have at least the ratings specified in the Financing Documents relating to such Senior Debt. "Edison Mission Finance" has the meaning specified in the preamble. ---------------------- -------- "Effective Date" has the meaning ascribed thereto in the Credit -------------- Agreement. "EME Credit Support Amount" means, on any Senior Debt Payment Date, ------------------------- the lesser of (a) the aggregate amount available to be drawn on such date under the EME Credit Support Guarantee and (b) the product of (i) the amount of Debt Service payable on such date with respect to such Senior Debt less the funds on deposit in the Accrued Interest Account for such Senior Debt times (ii) a fraction, the numerator of which is the aggregate Principal Amounts of all Senior Debt on such date and the denominator of which is the Principal Amount of such Senior Debt. "EME Credit Support Guarantee" means the Credit Support Guarantee, ---------------------------- dated as of March 18, 1999, made by Edison Mission Energy in favor of the Collateral Agent. "EME Debt Service Reserve Guarantee" means, with respect to the Loans, ---------------------------------- the Debt Service Reserve Guarantee, dated as of March 18, 1999, made by Edison Mission Energy in favor of the Collateral Agent and, with respect to any other Senior Debt, has the meaning ascribed to the term "EME Debt Service Reserve Guarantee" in the Financing Documents relating to such Senior Debt. "EME Homer City" has the meaning specified in the preamble. -------------- -------- "Environmental Capital Expenditure Account" has the meaning specified ----------------------------------------- in Section 2.2. ----------- 7 "Environmental Capital Expenditure Program" means EME Homer City's ----------------------------------------- proposed schedule and budget for the installation of a flue gas desulfurization unit and three selective catalytic reduction units in the Generating Station, as included in the projections delivered by the Borrower pursuant to Section 6.1.6 of the Credit Agreement and as amended ------------- from time to time. "Environmental Capital Expenditures" means capital expenditures in ---------------------------------- furtherance of the Environmental Capital Expenditure Program. "Equity Account" has the meaning specified in Section 2.2. -------------- ----------- "Event of Default" means an "Event of Default" under the Credit ---------------- Agreement or any other Financing Document. "Excess Net Cash Proceeds" means the Net Cash Proceeds of the ------------------------ Refinancing Indebtedness incurred to refinance the 364-Day Term Loans remaining after repayment of the 364-Day Term Loans. "Financing Documents" means the Loan Documents and each indenture, ------------------- loan agreement, underwriting agreement, security purchase agreement or other document entered into in connection with any Senior Debt. "Generating Station" has the meaning specified in the recitals. ------------------ -------- "Governmental Authority" means any nation or government, any state, ---------------------- provincial or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee and Collateral Agreement" means the Guarantee and ---------------------------------- Collateral Agreement, dated as of March 18, 1999, made by the Loan Parties in favor of the Collateral Agent. "Guarantor" means each Loan Party other than the Borrower. --------- "Guarantor Obligations" means, with respect to any Guarantor, all --------------------- obligations and liabilities of such Guarantor which may arise under or in connection with the Guarantee and Collateral Agreement or any other Financing Document to which such Guarantor is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent and to the Secured Parties that are required to be paid by such Guarantor pursuant to the terms of any Financing Document). "Homer City Holdings" has the meaning specified in the preamble. ------------------- -------- 8 "including" means including without limiting the generality of any --------- description preceding such term, and, for purposes of each Loan Document, the parties thereto agree that the rule of ejusdem generis shall not be ------- ------- applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. "Intercompany Loan Subordination Agreement" means the Intercompany ----------------------------------------- Loan Subordination Agreement, dated as of March 18, 1999, among the Loan Parties and the Collateral Agent. "Interest Payment Dates" means Loan Interest Payment Dates, ---------------------- Refinancing Indebtedness Interest Payment Dates, Ordinary Course Letter of Credit Indebtedness Interest Payment Dates, DSR Letter of Credit Indebtedness Interest Payment Dates, Additional Indebtedness Interest Payment Dates and Swap Indebtedness Accrued Fixed Payment Dates. "Interest Rate Hedging Transactions" means, as to any Person, all ---------------------------------- interest rate swaps, caps or collar agreements or similar arrangements entered into by such Person in order to protect against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, and, in any event, not for speculative purposes. "Lenders" has the meaning specified in the recitals. ------- -------- "Lien" has the meaning specified in the Credit Agreement. ---- "Loan Accrued Interest Account" has the meaning specified in Section ----------------------------- ------- 2.2. --- "Loan Accrued Interest Amount" means, as of any date of calculation, ---------------------------- an amount sufficient to cause the balance of the Loan Accrued Interest Account to equal the sum of (i) all accrued and unpaid interest and fees in respect of the Loans on the related date, (ii) all amounts in respect of funding losses, increased capital costs, taxes, indemnities, costs and expenses associated with the Loans due and payable on such date and (iii) if the next succeeding Loan Interest Payment Date will occur prior to the next succeeding Monthly Transfer Date, all interest and fees projected to accrue on the Loans from the date of calculation to but excluding such Loan Interest Payment Date and all amounts in respect of funding losses, increased capital costs, taxes, indemnities, costs and expenses associated with the Loans projected to be due and payable on such Loan Interest Payment Date. "Loan Debt Service Reserve Account" has the meaning specified in --------------------------------- Section 2.2. ------------ "Loan Debt Service Reserve Requirement" has the meaning ascribed to ------------------------------------- the term of "Debt Service Reserve Requirement" in the Credit Agreement. "Loan Documents" has the meaning specified in the Credit Agreement. -------------- 9 "Loan Interest Payment Date" means any date on which interest or other -------------------------- amounts referred to in the definition of the term "Loan Accrued Interest Amount" are scheduled to be payable in accordance with the Credit Agreement. "Loan Principal Account" has the meaning specified in Section 2.2. ---------------------- ----------- "Loan Party" has the meaning specified in the preamble. ---------- -------- "Loans" has the meaning specified in the Credit Agreement. ----- "MEW" has the meaning specified in the preamble. --- -------- "Minimum Ratings" means, with respect to any DSR Letter of Credit --------------- Provider for any Senior Debt, the long-term senior unsecured debt ratings specified or referred to in the definition of the term "DSR Letter of Credit Provider" applicable to such Senior Debt. "Monthly Transfer Date" means the Effective Date and the last Business --------------------- Day of each month. "Moody's" means Moody's Investors Service, Inc. ------- "Net Cash Proceeds" means (a) in connection with any Recovery Event, ----------------- the proceeds thereof in the form of cash and cash equivalents of such Recovery Event, net of any expenses reasonably incurred in respect of such Recovery Event, including attorneys' fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted under the Credit Agreement and the other Financing Documents on any asset which is the subject of such Recovery Event (other than any Lien pursuant to a Security Document) and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), to the extent that, in the case of Recovery Events relating to property or casualty insurance claims, the amount of such proceeds exceeds $5,000,000 with respect to any asset of any Loan Party and (b) in connection with any issuance or sale of debt securities, the cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith. "New York UCC" means the Uniform Commercial Code as from time to time ------------ in effect in the State of New York. "Notice of Action" has the meaning specified in the Collateral Agency ---------------- and Intercreditor Agreement. "Obligations" means (a) in the case of the Borrower, the Borrower ----------- Obligations, and (b) in the case of any Guarantor, the Guarantor Obligations. 10 "Operating Account" has the meaning specified in Section 2.2. ----------------- ----------- "Operating Expenses" has the meaning ascribed to the term "Operating ------------------ Expenses" in the Credit Agreement and, if applicable, the meaning ascribed to the term "Operating Expenses" in the Financing Documents relating to any other Senior Debt. "Ordinary Course Letter of Credit Indebtedness" has the meaning --------------------------------------------- specified in the recitals. -------- "Ordinary Course Letter of Credit Indebtedness Interest Payment Date" ------------------------------------------------------------------- means, with respect to any Ordinary Course Letter of Credit Indebtedness, any date on which regularly scheduled installments of interest are payable on such Ordinary Course Letter of Credit Indebtedness. "Ordinary Course Letter of Credit Indebtedness Accrued Interest -------------------------------------------------------------- Accounts" has the meaning specified in Section 2.2. -------- ----------- "Ordinary Course Letter of Credit Indebtedness Accrued Interest -------------------------------------------------------------- Amount" means, with respect to any Ordinary Course Letter of Credit ------ Indebtedness Accrued Interest Account, as of any date of calculation, an amount sufficient to cause the balance of such Ordinary Course Letter of Credit Indebtedness Accrued Interest Account to equal the sum of (i) all accrued and unpaid interest and fees in respect of the related Ordinary Course Letter of Credit Indebtedness on such date, (ii) all amounts in respect of funding losses, increased capital costs, taxes, indemnities, costs and expenses associated with such Ordinary Course Letter of Credit Indebtedness due and payable on such date and (iii) if the next succeeding Ordinary Course Letter of Credit Indebtedness Interest Payment Date with respect to such Ordinary Course Letter of Credit Indebtedness will occur prior to the next succeeding Monthly Transfer Date, all interest and fees projected to accrue in respect of such Ordinary Course Letter of Credit Indebtedness from the date of calculation to but excluding such Ordinary Course Letter of Credit Indebtedness Interest Payment Date and all amounts in respect of funding losses, increased capital costs, taxes, indemnities, costs and expenses associated with such Ordinary Course Letter of Credit Indebtedness projected to be due and payable on such Ordinary Course Letter of Credit Indebtedness Interest Payment Date. "Ordinary Course Letter of Credit Indebtedness Principal Accounts" has ---------------------------------------------------------------- the meaning specified in Section 2.2. ----------- "Organic Document" means, with respect to any Person that is a ---------------- corporation, its certificate of incorporation, its by-laws and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock, and, with respect to any Person that is a limited partnership, its certificate of limited partnership and partnership agreement. 11 "Permitted Investments" means investments in securities with --------------------- maturities of one year or less that are: (i) direct obligations of the United States, or any agency thereof; (ii) obligations fully guaranteed by the United States or any agency thereof; (iii) certificates of deposit, bankers acceptances or other "money market instruments" issued by commercial banks or trust companies (including the Collateral Agent, the Depositary or any of their respective affiliates) organized under the laws of the United States or any political subdivision thereof or under the laws of Canada, Japan, Switzerland or any country that is a member of the European Economic Community having a combined capital and surplus of at least $250 million and having long-term unsecured debt securities then rated "A" or better by S&P or "A2" or better by Moody's (but at the time of investment not more than $25,000,000 may be invested in such certificates of deposit from any one bank or trust company and its affiliates); (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (i) and (ii) above, entered into with any financial institution meeting the qualifications specified in clause (iii) above; (v) open market commercial paper of any corporation incorporated or doing business under the laws of the United States or of any political subdivision thereof having a rating of at least "A-1" from S&P and "P-1" from Moody's (but at the time of investment not more than $25,000,000 may be invested in such commercial paper from any one corporation); (vi) auction rate securities or money market preferred stock having one of the two highest ratings obtainable from either S&P or Moody's (or, if at any time neither S&P nor Moody's may be rating such obligations, then from another nationally recognized rating service acceptable to the Collateral Agent); or (vii) investments in money market funds or money market mutual funds sponsored by any securities broker-dealer of recognized national standing (or an Affiliate thereof), having an investment policy that requires substantially all the invested assets of such fund to be invested in investments described in any one or more of the foregoing clauses having a rating of "A" or better by S&P or "A2" or better by Moody's (including money market funds for which the Collateral Agent or the Depositary in their respective individual capacities or any of their respective affiliates is investment manager or adviser). "Person" means any natural person, corporation, partnership, limited ------ liability company, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "Principal Accounts" means the Loan Principal Account, the Refinancing ------------------ Indebtedness Principal Accounts, the Ordinary Course Letter of Credit Indebtedness Principal Accounts, the DSR Letter of Credit Indebtedness Principal Accounts, the Additional Indebtedness Principal Accounts and the Swap Indebtedness Termination Payment Accounts. "Principal Amount" means, at any time, (u) in the case of the Loans, ---------------- the Commitments at such time, (v) in the case of any class of Refinancing Indebtedness, the aggregate principal amount of such class of Refinancing Indebtedness outstanding at such time, (w) in the case of any class of Additional Indebtedness, the aggregate principal amount of such class of Additional Indebtedness outstanding at such time, (x) in the case 12 of any class of DSR Letter of Credit Indebtedness, the commitments with respect thereto at such time, (y) in the case of any class of Ordinary Course Letter of Credit Indebtedness, the commitments with respect thereto at such time and (z) in the case of any class of Swap Indebtedness, (i) prior to the occurrence of an Event of Default, zero, and (ii) after the occurrence of an Event of Default, the termination value of the related Interest Rate Hedging Transaction. "Proceeds" has the meaning specified in the New York UCC, and, in any -------- event, includes Recovery Event Proceeds and Business Interruption Insurance Proceeds. "Prudent Industry Practice" means, at a particular time, (a) any of ------------------------- the practices, methods and acts engaged in or approved by a significant portion of the competitive electric generating industry at such time, or (b) with respect to any matter to which clause (a) does not apply, any of the practices, methods and acts which, in the exercise of reasonable judgment at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. "Prudent Industry Practice" is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts having due regard for, among other things, manufacturers' warranties and the requirements of any Governmental Authority of competent jurisdiction. "Quarterly Payment Date" means the first Business Day of each January, ---------------------- April, July and October. "Recovery Event" means any settlement of or payment of $5,000,000 or -------------- more in respect of (a) any property or casualty insurance claim relating to any asset of any Loan Party or (b) any seizure, condemnation, confiscation or taking of, or requisition of title or use of, the Generating Station or any part thereof by any Governmental Authority. "Recovery Event Proceeds" means proceeds received in respect of a ----------------------- Recovery Event. "Recovery Event Proceeds Account" has the meaning specified in Section ------------------------------- ------- 2.2. --- "Refinancing Indebtedness" has the meaning specified in the recitals. ------------------------ -------- "Refinancing Indebtedness Accrued Interest Accounts" has the meaning specified in Section 2.2. ----------- "Refinancing Indebtedness Accrued Interest Amount" means, with respect ------------------------------------------------ to any Refinancing Indebtedness Accrued Interest Account, as of any date of calculation, an amount sufficient to cause the balance of such Refinancing Indebtedness Accrued Interest Account to equal the sum of (i) all accrued and unpaid interest and fees in respect of the related Refinancing Indebtedness on such date, (ii) all amounts in respect of funding 13 losses, increased capital costs, taxes, indemnities, costs and expenses associated with such Refinancing Indebtedness due and payable on such date and (iii) if the next succeeding Refinancing Indebtedness Interest Payment Date with respect to such Refinancing Indebtedness will occur prior to the next succeeding Monthly Transfer Date, all interest and fees projected to accrue in respect of such Refinancing Indebtedness from the date of calculation to but excluding such Refinancing Indebtedness Interest Payment Date and all amounts in respect of funding losses, increased capital costs, taxes, indemnities, costs and expenses associated with such Refinancing Indebtedness projected to be due and payable on such Refinancing Indebtedness Interest Payment Date. "Refinancing Indebtedness Debt Service Reserve Accounts" has the ------------------------------------------------------ meaning specified in Section 2.2. ----------- "Refinancing Indebtedness Debt Service Reserve Requirement", with --------------------------------------------------------- respect to any Refinancing Indebtedness, has the meaning ascribed to the term "Debt Service Reserve Requirement" in the Financing Documents relating to such Refinancing Indebtedness. "Refinancing Indebtedness Interest Payment Date" means, with respect ---------------------------------------------- to any Refinancing Indebtedness, any date on which regularly scheduled installments of interest are payable on such Refinancing Indebtedness. "Refinancing Indebtedness Principal Accounts" has the meaning ------------------------------------------- specified in Section 2.2. ----------- "Request Letter" means each letter from time to time delivered by an -------------- Authorized Representative of any Loan Party to the Collateral Agent requesting the transfer and/or release of funds from one or more Accounts to or on behalf of any Loan Party in accordance with the terms of this Security Deposit Agreement, each such letter to be in such form acceptable to the Borrower, the Collateral Agent and the Secured Parties' Representatives. "Required Secured Parties" has the meaning specified in the Collateral ------------------------ Agency and Intercreditor Agreement. "Restoration" means the replacement or restoration of any asset or ----------- assets in respect of which any Loan Party has received Recovery Event Proceeds. "Restricted Payment Date" means (i) in the case of any Restricted ----------------------- Payment being made exclusively with the proceeds of Indebtedness incurred pursuant to Section 8.2.1(e) of the Credit Agreement remaining after ---------------- repayment in full of the 364-Day Term Loans, any Business Day specified by the Borrower in a Request Letter, and (ii) in the case of any other Restricted Payment, any Quarterly Payment Date. 14 "Restricted Payments" has the meaning ascribed to the term "Restricted ------------------- Payments" in the Credit Agreement and, if applicable, the meaning ascribed to the term "Restricted Payments" in the Financing Documents relating to any other Senior Debt. "Revenue Account" has the meaning specified in Section 2.2. --------------- ----------- "Revenues" means, in respect of any period, all cash amounts received -------- by the Loan Parties during such period, including revenues from the sale of energy and capacity, Business Interruption Insurance Proceeds, Excess Net Cash Proceeds and all interest and other income earned on amounts in the Accounts but excluding Recovery Event Proceeds. "Revolving Loans" has the meaning specified in the Credit Agreement. --------------- "S&P" means Standard & Poor's Rating Group. --- "Secured Parties" has the meaning specified in the Collateral Agency --------------- and Intercreditor Agreement. "Secured Parties' Representative" means the Administrative Agent and ------------------------------- each Person that serves as indenture trustee, collateral agent, lenders' representative or in any similar capacity for Persons that provide any Senior Debt. "Securities Intermediary" has the meaning specified in Section 2.5. ----------------------- ----------- "Security Documents" means (a) the Guarantee and Collateral Agreement, ------------------ the Mortgage and Security Agreement, the Intercompany Loan Subordination Agreement, the Collateral Agency and Intercreditor Agreement, the Security Deposit Agreement, (b) the Consent to Assignment, if delivered, and (c) the EME Credit Support Guarantee and any other agreement or instrument hereafter entered into by the Borrower or any other Person which guarantees or secures payment of any Senior Debt. "Senior Debt" means the Loans, any Refinancing Indebtedness, any ----------- Ordinary Course Letter of Credit Indebtedness, any DSR Letter of Credit Indebtedness, any Additional Indebtedness and any Swap Indebtedness. "Senior Debt Payment Date" means each date on which any Debt Service ------------------------ in respect of any Senior Debt is due and payable. "Swap Indebtedness" has the meaning specified in the recitals. ----------------- -------- "Swap Indebtedness Accrued Fixed Payment Accounts" has the meaning ------------------------------------------------ specified in Section 2.2. ----------- "Swap Indebtedness Accrued Fixed Payment Amount" means, with respect ---------------------------------------------- to any Swap Indebtedness Accrued Fixed Payment Account, as of any date of calculation, an 15 amount sufficient to cause the balance of such Swap Indebtedness Accrued Fixed Payment Account to equal the sum of (i) all accrued and unpaid amounts in respect of the related Swap Indebtedness on such date and (ii) if the next succeeding Swap Indebtedness Accrued Fixed Payment Date with respect to such Swap Indebtedness will occur prior to the next succeeding Monthly Transfer Date, all amounts projected to accrue in respect of such Swap Indebtedness from the date of calculation to but excluding such Swap Indebtedness Accrued Fixed Payment Date. "Swap Indebtedness Accrued Fixed Payment Date" means, with respect to -------------------------------------------- any Swap Indebtedness, any date on which regularly scheduled amounts are payable on such Swap Indebtedness. "Swap Indebtedness Termination Payment Accounts" has the meaning ---------------------------------------------- specified in Section 2.2. ----------- " 364-Day Term Loans " has the meaning ascribed thereto in the Credit ------------------ Agreement. SECTION 1.2. Other Definitional Provisions. (a) The words "hereof", ----------------------------- "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, schedule, appendix and exhibit references are to this Agreement unless otherwise specified. (b) Each reference in this Agreement to a Financing Document or other agreement shall be deemed to refer to such Financing Document or other agreement as the same may be amended, supplemented or otherwise modified from time to time. (c) Any term defined by reference to an agreement, instrument or other document shall have the meaning so assigned to it whether or not such agreement, instrument or document is in effect. (d) Each reference in this Agreement to a Person shall be deemed to include such Person's successors and assigns. (e) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. ARTICLE II Agreement of Collateral Agent; ------------------------------ Creation of Accounts; --------------------- Grant of Security Interests ---------------------------- SECTION 2.1. Agreement of Collateral Agent. The Collateral Agent ----------------------------- agrees to accept all cash, cash equivalents, instruments, investments and other securities to be delivered to or held by the Collateral Agent pursuant to the terms of this Agreement, and, from such cash, 16 cash equivalents, instruments, investments and other securities, to make the releases and transfers contemplated by this Agreement as and when required in accordance with the terms hereof. The Collateral Agent shall hold and safeguard the Accounts (other than the Operating Account) (and the cash, cash equivalents, instruments, investments and other securities on deposit therein) during the term of this Agreement and shall treat the cash, cash equivalents, instruments, investments and other securities in such Accounts as pledged by the Loan Parties to the Secured Parties, to be held by the Collateral Agent, as agent of the Secured Parties, in trust in accordance with the provisions hereof and of the Collateral Agency and Intercreditor Agreement. SECTION 2.2. Creation of Accounts. (a) On or prior to the Effective -------------------- Date, (i) the Collateral Agent shall establish in its corporate trust department a special, segregated and irrevocable trust account designated the "Homer City Revenue Account" (the "Revenue Account") and (ii) the Borrower shall establish --------------- with the Depositary a special and segregated account designated the "EME Homer City Generation L.P. Operating Account" (the "Operating Account"). ----------------- (b) Within 10 Business Days after the Effective Date, the Collateral Agent shall establish in its corporate trust department special, segregated and irrevocable trust accounts as follows: (i) one designated the "Homer City Environmental Capital Expenditure Account" (the "Environmental Capital Expenditure Account"); ----------------------------------------- (ii) one designated the "Homer City Recovery Event Proceeds Account" (the "Recovery Event Proceeds Account"); ------------------------------- (iii) one designated the "Homer City Loan Accrued Interest Account" (the "Loan Accrued Interest Account"); ----------------------------- (iv) one designated the "Homer City Loan Principal Account" (the "Loan Principal Account"); ---------------------- (v) one designated the "Homer City Loan Debt Service Reserve Account" (the "Loan Debt Service Reserve Account"); and --------------------------------- (vi) one designated the "Homer City Equity Account" (the "Equity ------ Account"). ------- (c) On or prior to the date of incurrence of each class of Refinancing Indebtedness, the Collateral Agent shall establish in its corporate trust department special, segregated and irrevocable trust accounts as follows: (i) one designated the "Homer City Refinancing Indebtedness (Class ) -- Accrued Interest Account" (such account, together with each other such account established in connection with the incurrence of each other class of Refinancing Indebtedness, collectively, the "Refinancing Indebtedness ------------------------ Accrued Interest Accounts"); ------------------------- 17 (ii) one designated the "Homer City Refinancing Indebtedness (Class ) -- Principal Account" (such account, together with each other such account established in connection with the incurrence of each other class of Refinancing Indebtedness, collectively, the "Refinancing Indebtedness ------------------------ Principal Accounts"); and ------------------ (iii) one designated the "Homer City Refinancing Indebtedness (Class ) Debt Service Reserve Account" (such account, together with each other -- such account established in connection with the incurrence of each other class of Refinancing Indebtedness, collectively, the "Refinancing ----------- Indebtedness Debt Service Reserve Accounts"). ------------------------------------------ (d) On or prior to the date of incurrence of each class of Ordinary Course Letter of Credit Indebtedness, the Collateral Agent shall establish in its corporate trust department special, segregated and irrevocable trust accounts as follows: (i) one designated the "Homer City Ordinary Course Letter of Credit Indebtedness (Class ) Accrued Interest Account" (such account, together -- with each other such account established in connection with the incurrence of each other class of Ordinary Course Letter of Credit Indebtedness, collectively, the "Ordinary Course Letter of Credit Indebtedness Accrued ----------------------------------------------------- Interest Accounts"); and ----------------- (ii) one designated the "Homer City Ordinary Course Letter of Credit Indebtedness (Class ) Principal Account" (such account, together with -- each other such account established in connection with the incurrence of each other class of Ordinary Course Letter of Credit Indebtedness, collectively, the "Ordinary Course Letter of Credit Indebtedness Principal ------------------------------------------------------- Accounts"). -------- (e) On or prior to the date of incurrence of each class of DSR Letter of Credit Indebtedness, the Collateral Agent shall establish in its corporate trust department special, segregated and irrevocable trust accounts as follows: (i) one designated the "Homer City Debt Service Reserve Letter of Credit Indebtedness (Class ) Accrued Interest Account") (such account, -- together with each other such account established in connection with the incurrence of each other class of DSR Letter of Credit Indebtedness, collectively, the "DSR Letter of Credit Indebtedness Accrued Interest -------------------------------------------------- Accounts"); and -------- (ii) one designated the "Homer City DSR Letter of Credit Indebtedness (Class ) Principal Account" (such account, together with each other such -- account established in connection with the incurrence of each other class of DSR Letter of Credit Indebtedness, collectively, the "DSR Letter of ------------- Credit Indebtedness Principal Accounts"). -------------------------------------- (f) On or prior to the date of incurrence of each class of Additional Indebtedness, the Collateral Agent shall establish in its corporate trust department special, segregated and irrevocable trust accounts as follows: 18 (i) one designated the "Homer City Additional Indebtedness (Class ) -- Accrued Interest Account" (such account, together with each other account established in connection with the incurrence of each other class of Additional Indebtedness, collectively, the "Additional Indebtedness Accrued ------------------------------- Interest Accounts"); ----------------- (ii) one designated the "Homer City Additional Indebtedness (Class ) -- Principal Account" (such account, together with each other such account established in connection with the incurrence of each other class of Additional Indebtedness, collectively, the "Additional Indebtedness ----------------------- Principal Accounts"); and ------------------ (iii) if applicable, one designated the "Homer City Additional Indebtedness (Class ) Debt Service Reserve Account" (such account, -- together with each other account established in connection with the incurrence of each other class of Additional Indebtedness, collectively, the "Additional Indebtedness Debt Service Reserve Accounts"). ----------------------------------------------------- (g) On or prior to the date of incurrence of each class of Swap Indebtedness, the Collateral Agent shall establish in its corporate trust department special, segregated and irrevocable trust accounts as follows: (i) one designated the "Homer City Swap Indebtedness (Class ) -- Accrued Fixed Payment Amount Account" (such account, together with each other such account established in connection with the incurrence of each other class of Swap Indebtedness, collectively, the "Swap Indebtedness ----------------- Accrued Fixed Payment Accounts"); and ------------------------------ (ii) one designated the "Homer City Swap Indebtedness (Class ) -- Termination Payment Account" (such account, together with each other account established in connection with the incurrence of each other class of Swap Indebtedness, collectively, the "Swap Indebtedness Termination ----------------------------- Payment Accounts"). ---------------- SECTION 2.3. Delivery of Revenues, etc. to Collateral Agent. Each ---------------------------------------------- Loan Party shall cause all Revenues and all cash, cash equivalents, instruments, investments and other securities in its possession (excluding amounts received by such Loan Party as transfers from the Operating Account, the Environmental Capital Expenditures Account or the Equity Account in accordance with this Agreement) to be delivered immediately to the Collateral Agent for deposit into the Accounts pursuant to Article III. All such Revenues, cash, cash equivalents, instruments, investments and other securities at any time on deposit in the Accounts shall be held in the exclusive custody of the Collateral Agent for the purposes and on the terms set forth in this Agreement. SECTION 2.4. Security Interests. In order to secure the payment of ------------------ the Obligations, and the performance and observance by the Loan Parties of all of their respective covenants, agreements and obligations to the Secured Parties under the Financing Documents, each Loan Party hereby pledges and assigns to the Collateral Agent, and creates in favor of the Collateral Agent: (a) for the benefit of the Secured Parties, a security interest in all of such Loan 19 Party's right, title and interest, whether now owned or hereafter acquired and whether now existing or hereafter coming into existence, in, to and under this Agreement and in and to all Revenues and each of the Accounts (except as otherwise provided in clauses (b), (c), (d), (e), (f) and (g) of this Section 2.4) and all cash, cash equivalents, instruments, investments and other securities on deposit therein and all Proceeds of the foregoing; (b) for the exclusive benefit of the Lenders, a security interest in all of such Loan Party's right, title and interest, whether now owned or hereafter acquired and whether now existing or hereafter coming into existence, in and to the Loan Accrued Interest Account, the Loan Principal Account, the Loan Debt Service Reserve Account and the Environmental Capital Expenditures Account and all cash, cash equivalents, instruments, investments and other securities on deposit therein and all Proceeds of the foregoing; (c) for the exclusive benefit of the Persons that provide each class of Refinancing Indebtedness, a security interest in all of such Loan Party's right, title and interest, whether now owned or hereafter acquired and whether now existing or hereafter coming into existence, in and to the Refinancing Indebtedness Accrued Interest Account, the Refinancing Indebtedness Principal Account and the Refinancing Indebtedness Debt Service Reserve Account related to such class of Refinancing Indebtedness, and all cash, cash equivalents, instruments, investments and other securities on deposit therein and all Proceeds of the foregoing; (d) for the exclusive benefit of the Persons that provide each class of Ordinary Course Letter of Credit Indebtedness, a security interest in all of such Loan Party's right, title and interest, whether now owned or hereafter acquired and whether now existing or hereafter coming into existence, in and to the Ordinary Course Letter of Credit Indebtedness Accrued Interest Account and the Ordinary Course Letter of Credit Indebtedness Principal Account related to such class of Ordinary Course Letter of Credit Indebtedness and all cash, cash equivalents, instruments, investments and other securities on deposit therein and all Proceeds of the foregoing; (e) for the exclusive benefit of the Persons that provide each class of DSR Letter of Credit Indebtedness, a security interest in all of such Loan Party's right, title and interest, whether now owned or hereafter acquired and whether now existing or hereafter coming into existence, in and to the DSR Letter of Credit Indebtedness Accrued Interest Account and the DSR Letter of Credit Indebtedness Principal Account related to such class of DSR Letter of Credit Indebtedness and all cash, cash equivalents, instruments, investments and other securities on deposit therein and all Proceeds of the foregoing; (f) for the exclusive benefit of the Persons that provide each class of Additional Indebtedness, a security interest in all of such Loan Party's right, title and interest, whether now owned or hereafter acquired and whether now existing or hereafter coming into existence, in and to the Additional Indebtedness Accrued Interest Account, the Additional Indebtedness Principal Account and the Additional Indebtedness Debt Service Reserve Account related to such class of Additional Indebtedness and all cash, cash equivalents, instruments, investments and other securities on deposit therein and all Proceeds of the foregoing; and (g) for the exclusive benefit of the Persons that provide each class of Swap Indebtedness, a security interest in all of such Loan Party's right, title and interest, whether now owned or hereafter acquired and whether now existing or hereafter coming into existence, in and to the Swap Indebtedness Accrued Fixed Payment Account and the Swap Indebtedness Termination Payment Account related to such class of Swap Indebtedness and all cash, cash equivalents, instruments, investments and other securities on deposit therein and all Proceeds of the foregoing. The Accounts (other than the Operating Account) and all cash, cash equivalents, instruments, investments and other securities on deposit therein shall, subject to the provisions of this Agreement and the Security Documents, be subject to the exclusive dominion 20 and control of the Collateral Agent, and the Collateral Agent shall have the sole and exclusive right to withdraw or order a transfer of funds from such Accounts, and each Loan Party hereby appoints the Collateral Agent as its true and lawful attorney, with full power of substitution, for the purpose of making any such withdrawal or ordering any such transfer of funds from any such Account, which appointment is coupled with an interest and is irrevocable. The Loan Parties shall not have any rights or powers with respect to any amounts in the Accounts (other than the Operating Account) or any part thereof except (i) as provided in Article V and (ii) the right to have such amounts applied in accordance with the provisions of this Agreement. Section 2.5. Securities Accounts. The parties hereto hereby agree ------------------- that: (a) the Accounts (other than the Operating Account) shall be treated as "securities accounts" as such term is defined in Section 8-501 of the New York UCC; (b) United States Trust Company of New York, in its capacity as "securities intermediary" as such term is defined in Section 8-102(a)(14) of the New York UCC (the "Securities Intermediary"), shall, subject to the terms of ----------------------- this Agreement, treat the Loan Parties as the persons entitled to exercise the rights that comprise any financial assets credited to the Accounts; (c) all property delivered to the Securities Intermediary, pursuant to the terms of this Agreement, will be promptly credited to the appropriate Account; (d) all securities or other property underlying any financial assets credited to such Accounts shall be registered in the name of the Securities Intermediary, indorsed to the Securities Intermediary or in blank and in no case will any financial asset credited to any Account be registered in the name of any Loan Party, payable to the order of any Loan Party or specially indorsed to any Loan Party except to the extent the forgoing have been specially indorsed to the Securities Intermediary or in blank; (e) each item of property (whether investment property, financial asset, security, instrument or cash) credited to such Accounts shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the New York UCC; and (f) at any time the Securities Intermediary shall receive an "entitlement order" (within the meaning of Section 8-102(a)(8) of the New York UCC) issued by the Collateral Agent and relating to such Accounts, the Securities Intermediary shall comply with such entitlement order without further consent by any Loan Party or any other person. 21 ARTICLE III Deposits into Accounts ---------------------- SECTION 3.1. Revenue Account. The Loan Parties agree that there --------------- shall be deposited into the Revenue Account all Revenues received by or on behalf of any Loan Party. If, notwithstanding the foregoing, any Loan Party receives any Revenues, it shall immediately deliver such Revenues in the exact form received (duly indorsed, if appropriate, in a manner satisfactory to the Collateral Agent) to the Collateral Agent for deposit into the Revenue Account. The Collateral Agent shall have the right to receive all Revenues directly from the Persons owing the same. All Revenues received by the Collateral Agent shall be deposited into the Revenue Account. SECTION 3.2. Environmental Capital Expenditure Account. The Loan ----------------------------------------- Parties agree that there shall be deposited into the Environmental Capital Expenditure Account all proceeds of Construction Term Loans. If, notwithstanding the foregoing, any Loan Party receives any proceeds of Construction Term Loans, it shall immediately deliver such proceeds in the exact form received (duly indorsed, if appropriate, in a manner satisfactory to the Collateral Agent) to the Collateral Agent, and the Collateral Agent shall deposit such proceeds into the Environmental Capital Expenditure Account. The Collateral Agent shall have the right to receive all proceeds of Construction Term Loans directly from the Lenders making the same. All proceeds of Construction Term Loans received by the Collateral Agent shall be deposited into the Environmental Capital Expenditure Account. SECTION 3.3. Recovery Event Proceeds Account. The Loan Parties agree ------------------------------- that there shall be deposited into the Recovery Event Proceeds Account all Recovery Event Proceeds. If, notwithstanding the foregoing, any Loan Party shall receive any such proceeds, it shall immediately deliver such proceeds in the exact form received (duly indorsed, if appropriate, in a manner satisfactory to the Collateral Agent) to the Collateral Agent for deposit into the Recovery Event Proceeds Account. The Collateral Agent shall have the right to receive all such proceeds directly from the Persons owing the same. All such proceeds received by or on behalf of the Collateral Agent shall be deposited into the Recovery Event Proceeds Account. SECTION 3.4. Loan Principal Account. The Loan Parties agree that, ---------------------- until the 364-Day Term Loans have been repaid in full, all Net Cash Proceeds of any Refinancing Indebtedness shall be deposited into the Loan Principal Account. If, notwithstanding the foregoing, any Loan Party shall receive any such proceeds, it shall immediately deliver such proceeds in the exact form received (duly indorsed, if appropriate, in a manner satisfactory to the Collateral Agent) to the Collateral Agent for deposit into the Loan Principal Account. The Collateral Agent shall have the right to receive all such Net Cash Proceeds directly from the Persons owing the same. All such Net Cash Proceeds received by the Collateral Agent shall be deposited into the Loan Principal Account. SECTION 3.5. Debt Service Reserve Accounts. The Loan Parties agree ----------------------------- that any DSR Credit Instrument delivered to the Collateral Agent in total or partial satisfaction of any 22 Debt Service Reserve Requirement for any Senior Debt and all proceeds thereof shall be deposited in the Debt Service Reserve Account established for such Senior Debt. SECTION 3.6. Deposits Irrevocable. Any deposit made into the -------------------- Accounts hereunder shall be irrevocable and all cash, cash equivalents, instruments, investments and other securities on deposit shall be held in trust by the Collateral Agent, and applied solely as provided herein. ARTICLE IV Transfers from Accounts ----------------------- SECTION 4.1. Revenue Account. (a) Subject to Section 4.14, on each --------------- Monthly Transfer Date the Collateral Agent shall transfer, from the funds on deposit in the Revenue Account, the following amounts in the following order of priority: first, to the Operating Account, the amount certified in such ----- Request Letter to be the excess, if any, of the aggregate amount of Operating Expenses then due and payable or projected to become due and payable in the next succeeding month over the balance then on deposit in the Operating Account; second, to the Collateral Agent and each Secured Parties' ------ Representative, the amount certified in the Request Letter delivered in connection with such Monthly Transfer Date to be the sum of the unpaid fees, indemnities, costs and expenses then due and payable to the Collateral Agent and such Secured Parties' Representative in respect of their respective services in such capacities; third, (i) into each Accrued Interest Account, the Accrued ----- Interest Amount calculated for such Accrued Interest Account, together with the amount of all deficiencies, if any, with respect to deposits of Accrued Interest Amounts required in all prior months, as certified in such Request Letter, (ii) into each Principal Account (other than (A) the Loan Principal Account and any other Principal Account established in respect of non- amortizing Senior Debt, (B) any DSR Letter of Credit Indebtedness Principal Account, (C) any Ordinary Course Letter of Credit Indebtedness Principal Account and (D) any Swap Indebtedness Termination Payment Account), an amount equal to 1/6th of the principal amount, if any, which is payable on or within six months following such Monthly Transfer Date on account of the Senior Debt with respect to which such Principal Account was established, together with the amount of all deficiencies, if any, with respect to deposits of principal required in all prior months, as certified in such Request Letter, (iii) into each Ordinary Course Letter of Credit Indebtedness Principal Account, the amount certified in such Request Letter to be sufficient to repay in full the related Ordinary Course Letter of Credit Indebtedness then outstanding, and (iv) to the Administrative Agent, the amount specified in the Request Letter to be applied to the repayment of Revolving Loans; 23 fourth, into each DSR Letter of Credit Indebtedness Principal ------ Account, the amount certified in such Request Letter to be sufficient to repay in full the related DSR Letter of Credit Indebtedness then outstanding; fifth, into each Debt Service Reserve Account, the amounts ----- certified in the Request Letter to be necessary to cause the amount on deposit (in the form of one or more DSR Credit Instruments, cash, Permitted Investments or a combination thereof) in such Debt Service Reserve Account to be equal to the related Debt Service Reserve Requirements; sixth, into the Equity Account, the balance remaining in the ----- Revenue Account. (b) If, on any Monthly Transfer Date, the funds on deposit in the Revenue Account are insufficient to make in full any transfer required pursuant to clause first, second, third, or fourth of Section 4.1(a), the Collateral ----- ------ ----- ------ Agent shall make such transfer with funds then on deposit in the Equity Account. (c) If on any Senior Debt Payment Date, after giving effect to any transfer to be made on such date pursuant to Sections 4.1(a) and 4.1(b), the funds on deposit in the Accrued Interest Account for any Senior Debt for which Debt Service is payable on such date are less than such Debt Service, the Collateral Agent shall demand payment under the EME Credit Support Guarantee of the EME Credit Support Amount. The Collateral Agent shall allocate the proceeds of such payment received under the EME Credit Support Guarantee among all Accrued Interest Accounts (without regard to whether there is any shortfall therein) pro rata based on the Principal Amounts of all Senior Debt outstanding --- ---- on such date. (d) If on any Senior Debt Payment Date, after giving effect to any transfer to be made on such date pursuant to Sections 4.1(a), 4.1(b) and 4.1(c), the funds on deposit in the Accrued Interest Account or Principal Account for any Senior Debt for which Debt Service is payable on such date are less than such Debt Service, the Collateral Agent shall obtain the funds necessary to pay such Debt Service: first, from funds in the Debt Service Reserve Account with ----- respect to such Senior Debt, if any, including funds obtained from drawings under any DSR Credit Instrument (other than any EME Debt Service Reserve Guarantee) held by the Collateral Agent in respect of such Senior Debt; and, second, from the proceeds of any EME Debt Service Reserve Guarantee held by the - ------ Collateral Agent in respect of such Senior Debt. SECTION 4.2. [Reserved]. -------- SECTION 4.3. Environmental Capital Expenditure Account. Subject to ----------------------------------------- Section 4.14, on each Business Day specified in a Request Letter, the Collateral Agent shall transfer to any Loan Party, from the funds on deposit in the Environmental Capital Expenditure Account, the amount certified in such Request Letter to be the aggregate amount then due and payable in respect of Environmental Capital Expenditures. 24 SECTION 4.4. Recovery Event Proceeds Account. (a) Except as otherwise ------------------------------- provided in Section 4.4(b) and subject to Section 4.14, on each Monthly Transfer Date occurring after a Recovery Event and until Restoration with respect thereto is completed, the Collateral Agent shall transfer to the Borrower, from the funds on deposit in the Recovery Event Proceeds Account, the amount certified in the Request Letter delivered in connection with such Monthly Transfer Date to be the aggregate amount then due and payable in respect of such Restoration. (b) Subject to Section 4.14, on any Senior Debt Payment Date on which any Senior Debt is required to be prepaid with any Recovery Event Proceeds, the Collateral Agent shall transfer, from the funds on deposit in the Recovery Event Proceeds Account, the following amounts in the following order of priority: first, to each Secured Parties' Representative for Senior Debt ----- required to be so prepaid, the amount certified in the Request Letter delivered in connection with such Senior Debt Payment Date to be the aggregate amount of principal, premium and interest then due and payable in respect of such Senior Debt; and second, to each such Secured Parties' Representative, the amount ------ certified in such Request Letter to be the aggregate amount of all Debt Service (other than principal, premium and interest) then due and payable in respect of such Senior Debt. SECTION 4.5. Loan Principal and Accrued Interest Accounts. (a) On -------------------------------------------- any Senior Debt Payment Date on which any amount of principal is due and payable in respect of the Loans, after giving effect to any transfers to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the Administrative Agent, from the funds on deposit in the Loan Principal Account, the aggregate amount of such principal then due and payable to the Lenders, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. (b) On any Senior Debt Payment Date on which any Debt Service (other than principal) in respect of the Loans is due and payable in respect of the Loans, after giving effect to any transfers to be made pursuant to Section 4.1, the Collateral Agent shall transfer to the Administrative Agent, from the funds on deposit in the Loan Accrued Interest Account, the aggregate amount of such Debt Service then due and payable to the Lenders, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. (c) On the Senior Debt Payment Date on which any Net Cash Proceeds were applied to repay the 364-Day Term Loans, the Collateral Agent shall transfer to the Equity Account, from the funds on deposit in the Loan Principal Account, the aggregate amount of the Excess Net Cash Proceeds. SECTION 4.6. Refinancing Indebtedness Principal and Accrued Interest ------------------------------------------------------- Accounts. (a) On any Senior Debt Payment Date on which any amount of principal - -------- or premium is due and payable in respect of any class of Refinancing Indebtedness, after giving effect to any transfers to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the Secured Parties' Representative for such class of Refinancing Indebtedness, from the funds on 25 deposit in the Refinancing Indebtedness Principal Account established for the benefit of such class of Refinancing Indebtedness, the aggregate amount of such principal and premium then due and payable to the holders of such Refinancing Indebtedness, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. (b) On any Senior Debt Payment Date on which any Debt Service (other than principal) is due and payable in respect of any class of Refinancing Indebtedness, after giving effect to any transfers to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the Secured Parties' Representative for such class of Refinancing Indebtedness, from the funds on deposit in the Refinancing Indebtedness Accrued Interest Account established for the benefit of such class of Refinancing Indebtedness, the aggregate amount of such Debt Service then due and payable to the holders of such Refinancing Indebtedness, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. SECTION 4.7. Ordinary Course Letter of Credit Indebtedness Principal ------------------------------------------------------- and Accrued Interest Accounts. (a) On any Senior Debt Payment Date on which - ----------------------------- any amount of principal is due and payable in respect of any class of Ordinary Course Letter of Credit Indebtedness, after giving effect to any transfers to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the Secured Parties' Representative for such class of Ordinary Course Letter of Credit Indebtedness, from the funds on deposit in the Ordinary Course Letter of Credit Indebtedness Principal Account established for the benefit of such class of Ordinary Course Letter of Credit Indebtedness, the aggregate amount of principal then due and payable to the holders of such class of Ordinary Course Letter of Credit Indebtedness, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. (b) On any Senior Debt Payment Date on which any Debt Service (other than principal) is due and payable in respect of any class of Ordinary Course Letter of Credit Indebtedness, after giving effect to any transfers to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the Secured Parties' Representative for such class of Ordinary Course Letter of Credit Indebtedness, from the funds on deposit in the Ordinary Course Letter of Credit Indebtedness Accrued Interest Account established for the benefit of such class of Ordinary Course Letter of Credit Indebtedness, the aggregate amount of such Debt Service then due and payable to the holders of such class of Ordinary Course Letter of Credit Indebtedness, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. SECTION 4.8. DSR Letter of Credit Indebtedness Principal and Accrued ------------------------------------------------------- Interest Accounts. (a) On any Senior Debt Payment Date on which any amount of - ----------------- principal is due and payable in respect of any class of DSR Letter of Credit Indebtedness, after giving effect to any transfers to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the Secured Parties' Representative for such class of DSR Letter of Credit Indebtedness, from the funds on deposit in the DSR Letter of Credit Indebtedness Principal Account established for the benefit of such class of DSR Letter of Credit Indebtedness, the aggregate amount of principal then due and payable to the holders of such class of DSR Letter of Credit Indebtedness, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. 26 (b) On any Senior Debt Payment Date on which any Debt Service (other than principal) is due and payable in respect of any class of DSR Letter of Credit Indebtedness, after giving effect to any transfers to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the Secured Parties' Representative for such class of DSR Letter of Credit Indebtedness, from the funds on deposit in the DSR Letter of Credit Indebtedness Accrued Interest Account established for the benefit of such class of DSR Letter of Credit Indebtedness, the aggregate amount of such Debt Service then due and payable to the holders of such class of DSR Letter of Credit Indebtedness, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. SECTION 4.9. Additional Indebtedness Principal and Accrued Interest ------------------------------------------------------ Accounts. (a) On any Senior Debt Payment Date on which any amount of principal - -------- or premium is due and payable in respect of any class of Additional Indebtedness, after giving effect to any transfers to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the Secured Parties' Representative for such class of Additional Indebtedness, from the funds on deposit in the Additional Indebtedness Principal Account established for the benefit of such class of Additional Indebtedness, the aggregate amount of principal and premium then due and payable to the holders of such class of Additional Indebtedness, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. (b) On any Senior Debt Payment Date on which any Debt Service (other than principal) is due and payable in respect of any class of Additional Indebtedness, after giving effect to any transfers to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the Secured Parties' Representative for such class of Additional Indebtedness, from the funds on deposit in the Additional Indebtedness Accrued Interest Account established for the benefit of such class of Additional Indebtedness, the aggregate amount of such Debt Service then due and payable to the holders of such class of Additional Indebtedness, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. SECTION 4.10. Swap Indebtedness Termination Payment and Accrued Fixed ------------------------------------------------------- Payment Accounts. (a) On any Senior Debt Payment Date on which any termination - ---------------- payment is due and payable in respect of any class of Swap Indebtedness, after giving effect to any transfers to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the Secured Parties' Representative for such class of Swap Indebtedness, from the funds on deposit in the Swap Indebtedness Termination Payment Account established for the benefit of such class of Swap Indebtedness, the aggregate termination payments then due and payable to the holders of such class of Swap Indebtedness, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. (b) On any Senior Debt Payment Date on which any Debt Service (other than termination payments) is due and payable in respect of any class of Swap Indebtedness, after giving effect to any transfers to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the Secured Parties' Representative for such class of Swap Indebtedness, from the funds on deposit in the Swap Indebtedness Accrued Fixed Payment Account established for the benefit of such class of Swap Indebtedness, the aggregate amount of such Debt Service 27 then due and payable to the holders of such class of Swap Indebtedness, as certified in the Request Letter delivered in connection with such Senior Debt Payment Date. SECTION 4.11. Equity Account. Except during a Default Period, on -------------- each Restricted Payment Date, the Collateral Agent shall transfer, from the funds on deposit in the Equity Account, the amount certified by the Borrower in the Request Letter delivered in connection with such Restricted Payment Date to be then available for use in making Restricted Payments in accordance with the terms of the Financing Documents. In addition, the Collateral Agent shall make transfers from the funds on deposit in the Equity Account in accordance with Sections 4.1(b) and 4.14(b). SECTION 4.12. Delivery of Request Letters. Each Request Letter to be --------------------------- delivered by any Loan Party pursuant to this Article IV shall be delivered to the Collateral Agent not later than one day prior to the date that the Collateral Agent is required to make any transfer specified therein. At the time any Loan Party delivers to the Collateral Agent any Request Letter or other written communication relating to the Accounts, such Loan Party shall deliver a copy thereof to each Secured Parties' Representative. SECTION 4.13. Shortfall Notices. Not later than the Business Day ----------------- preceding each date on which any transfer is to be made pursuant to this Article IV, the Collateral Agent shall notify the Borrower and each Secured Parties' Representative if the amounts requested to be transferred on such date in the Request Letter delivered in connection therewith exceed the funds available in the relevant Accounts. SECTION 4.14. Transfers from Accounts During a Default Period. (a) ----------------------------------------------- During a Default Period, the Borrower shall be entitled to issue Request Letters and otherwise direct the transfer of funds from the Accounts until the Collateral Agent receives a Notice of Action directing that action be taken pursuant to Section 4.14(b). (b) At any time after the Collateral Agent receives a Notice of Action specifying that action be taken pursuant to this Section 4.14(b), the Collateral Agent shall: (i) transfer all amounts in the Environmental Capital Expenditure Account to the Administrative Agent (and such transfer shall be deemed to be a payment made on account of the Debt Service then due and payable in respect of the Construction Term Loans); (ii) with respect to any Senior Debt, transfer all amounts in the Debt Service Reserve Account with respect to such Senior Debt, including amounts obtained from drawings under any DSR Credit Instrument held by the Collateral Agent in respect of such Senior Debt, to the Secured Parties' Representative for such Senior Debt (and such transfer shall be deemed to be a payment made on account of the Debt Service then due and payable in respect of such Senior Debt); and (iii) with respect to any Senior Debt, transfer all amounts in the Accrued Interest Account and the Principal Account with respect to such Senior Debt to the Secured Parties' Representative for such Senior Debt (and such transfer shall be deemed to be a payment made on account of the Debt Service then due and payable in respect of such Senior Debt). After making the transfers specified by the immediately preceding clauses (i), (ii) and (iii), the Collateral Agent shall take or discontinue to take all actions specified in such 28 Notice of Action and/or shall transfer all amounts remaining in the Accounts in the following order of priority: first, to the Collateral Agent and each Secured Parties' ----- Representative, the amount certified by such Person to be the sum of the unpaid fees, indemnities, costs and expenses then due and payable to such Person for its services in such capacity; second, to each Secured Parties' Representative for Senior Debt, the ------ amount certified by such Secured Parties' Representative to be the aggregate amount of principal, premium and interest then due and payable in respect of such Senior Debt under the related Financing Documents; third, to each Secured Parties' Representative for Senior Debt, the ----- amount certified by such Secured Parties' Representative to be the aggregate amount of all Debt Service (other than principal, premium and interest) then due and payable in respect of such Senior Debt under the related Financing Documents; fourth, any surplus then remaining shall be paid to the Borrower or ------ its successors or assigns or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. SECTION 4.15. Collateral Agent's Calculations. In making the ------------------------------- determinations and allocations required by Section 4.14, the Collateral Agent may rely upon information specified in Sections 6.2 and 6.3 of the Collateral Agency and Intercreditor Agreement, as applicable, and the Collateral Agent shall have no liability to any of the Secured Parties for actions taken in reliance on such information. All transfers and releases made by the Collateral Agent pursuant to Section 4.14 shall be (subject to any decree of any court of competent jurisdiction) final, and the Collateral Agent shall have no duty to inquire as to the application by any Secured Party of any amounts distributed to them. SECTION 4.16. Insufficient Amounts. To the extent the amounts on -------------------- deposit in any Account are insufficient to fully satisfy any transfer requirement from such Account under this Article IV, such transfer shall be made to the extent of the amounts on deposit in such Account. In addition, if (i) any transfer requirements from any Account in this Article IV share the same level of priority and (ii) there are insufficient funds in such Account to satisfy in full all such transfer requirements which share such level of priority, such transfers shall be made on a pro rata basis to the extent of the --- ---- amounts on deposit in such Account, provided that if payments on account of -------- principal, interest and other Debt Service due on the Senior Debt share the same level of priority, the funds released on account of such payment of Senior Debt shall be applied, first, to the payment of accrued interest (or, in the case of ----- Swap Indebtedness, accrued amounts) on such Senior Debt to the date of such payment, second, to the payment of the principal amount (or, in the case of Swap ------ Indebtedness, termination payments) of such Senior Debt then due and payable, and third, to the payment of any other Debt Service then due and payable with ----- respect to such Senior Debt. 29 SECTION 4.17. DSR Credit Instruments. (a) Except during a Default ---------------------- Period, the Collateral Agent may release funds from the Debt Service Reserve Account for any Senior Debt in exchange for one or more DSR Credit Instruments certified by the Borrower to meet the requirements of the Financing Documents related to such Senior Debt. Any amounts so released shall forthwith be transferred to the Equity Account. (b) The Collateral Agent shall draw upon any DSR Credit Instrument: (i) during a Default Period, at the direction of the Required Secured Parties; (ii) at any time the cash on deposit in any Debt Service Reserve Account in which it is held is insufficient for making any transfer in accordance with terms of this Agreement; and (iii) if the related DSR Letter of Credit Provider shall cease to have the Minimum Ratings and such DSR Credit Instrument is not replaced within 30 days. ARTICLE V Investment ---------- Cash held by the Collateral Agent in the Accounts shall not be invested or reinvested except as provided below: (a) cash held in the Accounts shall be invested and reinvested in Permitted Investments by the Collateral Agent who shall make such Permitted Investments (i) except during a Default Period, at the written direction of the Borrower and (ii) during a Default Period, in Permitted Investments selected by the Collateral Agent unless specific investment instructions are given to the Collateral Agent by the Required Secured Parties; (b) the Collateral Agent shall sell or liquidate all or any designated part of the Permitted Investments held in any Account at any time the proceeds thereof are required to make a release from any Account or any transfer between Accounts pursuant to Article IV hereof; and (c) all such Permitted Investments, the interest thereon, and the net proceeds of the sale, liquidation or payment thereof, shall be held in the appropriate Account for the same purposes as the cash used to purchase such Permitted Investments. The Collateral Agent shall take such action as may be necessary to perfect the security interest created by this Agreement in all Permitted Investments. 30 ARTICLE VI Collateral Agent ---------------- SECTION 6.1. Rights, Duties, etc. The acceptance by the Collateral ------------------- Agent of its respective duties hereunder is subject to the following terms and conditions which the parties to this Agreement hereby agree shall govern and control with respect to the rights, duties, liabilities and immunities of the Collateral Agent: (a) it shall not be responsible or liable in any manner whatever for soliciting any funds or for the sufficiency, correctness, genuineness or validity of any funds or securities deposited with or held by it; (b) it shall be protected in acting or refraining from acting upon any written notice, certificate, instruction, request or other paper or document, as to the due execution thereof and the validity and effectiveness of the provisions thereof and as to the truth of any information therein contained, which it in good faith believes to be genuine; (c) it shall not be liable for any error of judgment or for any act done or step taken or omitted except in the case of its gross negligence, willful misconduct or bad faith; (d) it may consult with and obtain advice from counsel of its own choice in the event of any dispute or question as to the construction of any provision hereof; (e) it shall have no duties hereunder, except those which are expressly set forth herein and in any modification or amendment hereof; provided, however, that no such modification or amendment hereof shall -------- ------- affect its duties unless it shall have given its prior written consent thereto; (f) it may execute or perform any duties hereunder either directly or through administrative agents or attorneys selected with reasonable care; (g) it may engage or be interested in any financial or other transactions with any party hereto and may act on, or as depositary, collateral agent or administrative agent for, any committee or body of holders of obligations of such Persons as freely as if it were not Collateral Agent hereunder; and (h) it shall not be obligated to take any action which in its reasonable judgment would involve it in expense or liability unless it has been furnished with reasonable indemnity. SECTION 6.2. Resignation or Removal. The Collateral Agent may resign ---------------------- or be removed as set forth in Section 2.6 of the Collateral Agency and Intercreditor Agreement. 31 ARTICLE VII Determinations -------------- In the event of any dispute as to any amount to be distributed or paid by the Collateral Agent from the Accounts, the Collateral Agent is authorized and directed to retain in its possession without liability to anyone all or any part of the amounts then on deposit in the Accounts, until such dispute shall have been settled by mutual agreement of the Borrower and the Secured Parties or by a final order, decree or judgment of a Federal or State court of competent jurisdiction located in the State of New York (with respect to disputes in connection with amounts on deposit in the Accounts), and time for an appeal has expired and no appeal has been perfected, but the Collateral Agent shall be under no duty whatsoever to institute or defend any such proceedings. ARTICLE VIII Miscellaneous ------------- SECTION 8.1. Indemnification of Collateral Agent. Each Loan Party ----------------------------------- assumes liability for, and agrees to indemnify, protect, save and keep harmless the Secured Parties and the Collateral Agent and their respective successors, assigns, agents and servants from and against, any and all claims, liabilities, obligations, losses, damages, penalties, costs and expenses (including reasonable attorneys' fees) that may be imposed on, incurred by, or asserted against, at any time, the Secured Parties or the Collateral Agent and in any way relating to or arising out of the execution and delivery of this Agreement, the establishment of the Accounts, the acceptance of deposits, the purchase or sale of Permitted Investments, the retention of cash and Permitted Investments or the proceeds thereof, draws on the DSR Credit Instruments and any payment, transfer or other application of cash, Permitted Investments or the proceeds of draws of DSR Credit Instruments by the Collateral Agent in accordance with the provisions of this Agreement, or as may arise by reason of any act, omission or error of the Collateral Agent made in good faith in the conduct of its duties; except that the Borrower shall not be required to indemnify, protect, save and keep harmless the Collateral Agent or any Secured Party, against its own gross negligence or willful misconduct. The indemnities contained in this Section 8.1 shall survive the termination of this Agreement. SECTION 8.2. Waiver of Right of Set-Off. The Collateral Agent -------------------------- waives, with respect to all of its existing and future claims against the Borrower, all existing and future rights of set-off and banker's liens against the Accounts and all items (and proceeds thereof) that come into its possession in connection with the Accounts. SECTION 8.3. Termination. The provisions of Articles III and IV with ----------- respect to the Accounts shall terminate on the date on which the Obligations under Financing Documents shall have been paid in full. Promptly after such termination, the Secured Parties shall notify the Collateral Agent of such termination and the Collateral Agent hereby agrees that at the time of 32 such termination (x) any Permitted Investments in the Accounts shall be liquidated as soon as commercially prudent, (y) a reconciliation shall be made of the distributions made from the Accounts and any necessary adjustments to the balances of such Accounts as a result of such reconciliation shall be made and (z) the moneys in the Accounts (after giving effect to such liquidation and such adjustments) shall be distributed to the Borrower or as it may direct. SECTION 8.4. Severability. If any one or more of the covenants or ------------ agreements provided in this Agreement on the part of the parties hereto to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenant or agreement shall be deemed and construed to be severable from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. SECTION 8.5. Counterparts. This Agreement may be executed in several ------------ counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. SECTION 8.6. Amendments. The provisions of this Agreement may be ---------- amended, modified or waived if such amendment, modification or waiver is in writing and is entered into in accordance with the provisions of the Collateral Agency and Intercreditor Agreement. SECTION 8.7. APPLICABLE LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE -------------- GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK REGARDLESS OF ANY OTHER PROVISION IN ANY OTHER AGREEMENT, FOR PURPOSES OF THE NEW YORK UCC, NEW YORK SHALL BE DEEMED TO BE THE SECURITIES INTERMEDIARY'S JURISDICTION AND THE ACCOUNTS (AS WELL AS THE SECURITIES ENTITLEMENTS RELATED THERETO) SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 8.8. Notices. Except as otherwise specifically provided ------- herein, all notices, consents, directions, approvals, instructions, requests and other communications required or permitted by the terms hereof to be given to any Person shall be in writing and shall be deemed to have been duly given or made when delivered if delivered by hand or courier or when received if sent by mail or telecopy, in each case addressed to the party to which such notice is required or permitted to be given or made hereunder set forth below its signature hereto, or such other address as may be specified from time to time by such party in a notice to the other parties hereto. SECTION 8.9. Benefit of Security Deposit Agreement. This Security ------------------------------------- Deposit Agreement shall inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns, and no other Person shall be entitled to any of the benefits of this Security Deposit Agreement. IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. EDISON MISSION HOLDINGS CO. By:________________________ Name: Title: Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, California 92612-1046 EDISON MISSION FINANCE CO. By:________________________ Name: Title: Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, California 92612-1046 HOMER CITY PROPERTY HOLDINGS, INC. By:________________________ Name: Title: Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, California 92612-1046 CHESTNUT RIDGE ENERGY CO. By: ------------------------- Name: Title: Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, California 92612-1046 MISSION ENERGY WESTSIDE, INC. By: --------------------------- Name: Title: Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, California 92612-1046 EME HOMER CITY GENERATION L.P. By: Mission Energy Westside, Inc., its General Partner By: ----------------------------- Name: Title: Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, California 92612-1046 UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent By: ----------------------------- Name: Title: Address for Notices: 114 West 47th Street 25th Floor New York, New York 10036 EX-10.59 6 CREDIT SUPPORT GUARANTEE, DATED 3/18/1999 Exhibit 10.59 CREDIT SUPPORT GUARANTEE, dated as of March 18, 1999, made by EDISON MISSION ENERGY, a California corporation (the "Guarantor"), in favor of UNITED --------- STATES TRUST COMPANY OF NEW YORK, as Collateral Agent for the Secured Parties (as defined below) (in such capacity, the "Collateral Agent"). ---------------- RECITALS -------- A. The Borrower has entered into a Credit Agreement, dated as of March 18, 1999 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), with certain financial institutions ---------------- (collectively, the "Lenders") and Citicorp USA, Inc., as administrative agent ------- for the Lenders (in such capacity, the "Administrative Agent"). -------------------- B. Pursuant to the Credit Agreement, the Lenders have severally agreed to make loans (the "Loans") to the Borrower upon the terms and subject ----- to the conditions set forth therein. C. The Borrower will use the proceeds of the Loans under the Credit Agreement to make valuable transfers to one or more indirect subsidiaries of the Guarantor in connection with the acquisition of the Homer City Electric Generating Station (the "Generating Station"), certain capital expenditures ------------------ related to the Generating Station and general working capital purposes. D. Under Section 8.2.1(e) of the Credit Agreement, the Borrower is permitted to incur certain indebtedness for the purpose of refinancing the Loans and other indebtedness of the Borrower ("Refinancing Indebtedness"); under ------------------------ Section 8.2.1(d)(i) of the Credit Agreement, the Loan Parties are permitted to incur certain indebtedness in the form of reimbursement obligations relating to letters of credit, surety bonds and performance bonds used by the Loan Parties in the ordinary course of their business ("Ordinary Course Letter of Credit -------------------------------- Indebtedness"); under Section 8.2.1(d)(ii) of the Credit Agreement, the Borrower - ------------ is permitted to incur certain indebtedness in the form of reimbursement obligations relating to Debt Service Reserve Letters of Credit (as defined below) ("DSR Letter of Credit Indebtedness"); under Section 8.2.1(c) of the --------------------------------- Credit Agreement, the Borrower is permitted to incur certain additional indebtedness ("Additional Indebtedness"); and, under Section 8.2.1(b) of the ----------------------- Credit Agreement, the Borrower is permitted to incur certain indebtedness under Interest Rate Hedging Transactions entered into with respect to the Loans ("Swap ---- Indebtedness"). - ------------ E. In satisfaction of the requirements of the Lenders and the Persons providing any Refinancing Indebtedness, Ordinary Course Letter of Credit Indebtedness, DSR Letter of Credit Indebtedness, Additional Indebtedness or Swap Indebtedness, the Guarantor desires by this Guarantee (as defined below) to provide a guarantee for the Borrower's obligations under the Credit Agreement and the other Financing Documents (as defined below). F. In order to simplify administration of the Financing Documents and to provide for the orderly enforcement of their respective rights, the Administrative Agent, the Lenders and 2 the other Secured Parties have appointed the Collateral Agent to serve as their common representative, to be the beneficiary under any guarantee intended to benefit the Secured Parties and to hold the liens created, or to be created, under the Financing Documents. G. Pursuant to the Collateral Agency and Intercreditor Agreement, dated as of March 18, 1999 (as amended, supplemented or otherwise modified from time to time, the "Collateral Agency and Intercreditor Agreement"), among the --------------------------------------------- Borrower, the Administrative Agent, the Collateral Agent and certain other parties, the Collateral Agent has agreed to serve as a common collateral agent for all Secured Parties. H. The Borrower is a direct wholly-owned Subsidiary of the Guarantor. The Borrower and the Guarantor are engaged in related businesses, and Guarantor will derive substantial direct and indirect benefit from the making of the Loans and the incurrence of any Refinancing Indebtedness, Ordinary Course Letter of Credit Indebtedness, DSR Letter of Credit Indebtedness, Additional Indebtedness or Swap Indebtedness. I. It is a condition precedent to the obligation of the Lenders to make their respective Loans to the Borrower under the Credit Agreement that the Guarantor shall have executed and delivered this Guarantee to the Collateral Agent for the benefit of the Secured Parties. NOW, THEREFORE, in consideration of the premises, the Guarantor hereby agrees with the Collateral Agent, for the benefit of the Secured Parties, as follows: 1. Defined Terms. (a) Unless otherwise defined herein, terms defined ------------- in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. (b) The following terms shall have the following meanings: "Additional Indebtedness" has the meaning set forth in the recitals. ----------------------- "Debt Service Reserve Letter of Credit" has the meaning set forth in the ------------------------------------- Security Deposit Agreement. "DSR Letter of Credit Indebtedness" has the meaning set forth in the --------------------------------- recitals. "Financing Documents" means the Loan Documents and each indenture, loan ------------------- agreement, underwriting agreement, security purchase agreement or other document entered into in connection with any Senior Debt. "Guarantee" means this Credit Support Guarantee. --------- "Guarantee Cap" means thirty-five million U.S. Dollars (U.S.$35,000,000). ------------- 3 "Guarantee Termination Date" means the earlier of (i) the date when all -------------------------- amounts owing to the Collateral Agent and the Secured Parties by the Borrower on account of the Obligations are paid in full and the Commitments are terminated, (ii) December 31, 2001 and (iii) the date that the aggregate amount paid by or collected from the Guarantor under this Guarantee equals the Guarantee Cap. "Guarantor" has the meaning set forth in the preamble. --------- -------- "Obligations" means the collective reference to (a) the unpaid principal of ----------- and interest on the Loans, (b) the unpaid principal of and interest on the Refinancing Indebtedness, if any, (c) the unpaid principal of and interest on the Ordinary Letter of Credit Indebtedness, if any, (d) the unpaid principal of and interest on the DSR Letter of Credit Indebtedness, if any, (e) the unpaid principal of and interest on the Additional Indebtedness, if any, (f) the unpaid amount of the Swap Indebtedness, if any, and (g) all other obligations and liabilities of the Borrower (including interest accruing at the then applicable rate or rates provided in the Financing Documents after the maturity of the Loans, Refinancing Indebtedness, Ordinary Course Letter of Credit Indebtedness, DSR Letter of Credit Indebtedness, Additional Indebtedness and/or Swap Indebtedness, as applicable, and interest accruing at the then applicable rate or rates provided in the Financing Documents after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to the Secured Parties, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, any Financing Document or any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, guarantee obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by the Borrower pursuant to the terms of any Financing Document). "Ordinary Course Letter of Credit Indebtedness" has the meaning set forth --------------------------------------------- in the recitals. -------- "Refinancing Indebtedness" has the meaning set forth in the recitals. ------------------------ -------- "Required Secured Parties" has the meaning set forth in the Collateral ------------------------ Agency and Intercreditor Agreement. "Secured Parties" means the Collateral Agent, the Administrative Agent, the --------------- Lenders, each Person that provides any Senior Debt and each Person that serves as indenture trustee, collateral agent, lenders' representative or in any similar capacity for Persons that provide any Senior Debt. "Security Deposit Agreement" means the Security Deposit Agreement, dated as -------------------------- of March 18, 1999, among the Borrower, the Collateral Agent and certain other parties. 4 "Senior Debt" means the Loans, any Refinancing Indebtedness, any Ordinary ----------- Course Letter of Credit Indebtedness, any DSR Letter of Credit Indebtedness, any Additional Indebtedness and any Swap Indebtedness. "Swap Indebtedness" has the meaning set forth in the recitals. ----------------- -------- (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section and paragraph references are to this Guarantee unless otherwise specified. (d) Each reference in this Guarantee to a Financing Document or other agreement shall be deemed to refer to such Financing Document or other agreement as the same may be amended, supplemented or otherwise modified from time to time. (e) Any term defined by reference to an agreement, instrument or other document shall have the meaning so assigned to it whether or not such agreement, instrument or document is in effect. (f) Each reference in this Guarantee to a Person shall refer to such Person and its successors and assigns. (g) Each reference in this Guarantee to a Requirement of Law shall be deemed to refer to such Requirement of Law as the same may be amended, supplemented or otherwise modified from time to time. (h) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Guarantee. (a) The Guarantor hereby unconditionally and --------- irrevocably guarantees to the Collateral Agent, for the benefit of the Secured Parties, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. Notwithstanding the aggregate amount of the Obligations at any time or from time to time payable or to be payable by the Borrower to the Collateral Agent or to any Secured Party, the aggregate maximum liability of the Guarantor to the Collateral Agent and the Secured Parties hereunder shall in no event exceed the Guarantee Cap. (b) Notwithstanding the Guarantee Cap, the Guarantor further agrees to pay or reimburse each Secured Party and the Collateral Agent for all its costs and expenses incurred in collecting against the Guarantor under this Guarantee or otherwise enforcing or preserving any rights under this Guarantee, including, without limitation, the fees and disbursements of counsel to each Secured Party and of counsel to the Collateral Agent. This Guarantee shall remain in full force and effect until the Guarantee Termination Date. 5 (c) No payment made by the Borrower or any other Person or received or collected by the Collateral Agent or any Secured Party from the Borrower or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by or collected from the Guarantor in respect of the Obligations), remain liable for the Obligations up to the Guarantee Cap until the Guarantee Termination Date. (d) The Guarantor agrees that, upon the occurrence of any event specified in Section 4.1(c) of the Security Deposit Agreement, the Collateral Agent shall be entitled to demand payment, and the Guarantor shall promptly pay, an amount or amounts which in the aggregate do not exceed the Guarantee Cap, for application as specified therein. 3. Right of Set-off . The Guarantor hereby irrevocably authorizes the ---------------- Collateral Agent and each Secured Party at any time and from time to time (i) upon the occurrence of an Event of Default of the kind described in clauses (a) or (b) of Section 9.1.6 of the Credit Agreement, (ii) upon the occurrence of any Default of the kind described in clauses (c) or (d) of Section 9.1.6 of the Credit Agreement with respect to the Borrower, or (iii) upon the occurrence and continuance beyond the applicable grace period, if any, of any other Event of Default and with the consent of the Required Secured Parties, without notice to the Guarantor, any such notice being expressly waived by the Guarantor, to set- off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Collateral Agent or such Secured Party to or for the credit or the account of the Guarantor, or any part thereof in such amounts as the Collateral Agent or such Secured Party may elect, against and on account of the obligations and liabilities of the Guarantor to the Collateral Agent or such Secured Party hereunder and claims of every nature and description of the Collateral Agent or such Secured Party against the Guarantor, in any currency, whether arising hereunder, under the Credit Agreement, any other Financing Document or otherwise, as the Collateral Agent or such Secured Party may elect, whether or not the Collateral Agent or any Secured Party has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Collateral Agent and each Secured Party shall notify the Guarantor promptly of any such set-off and the application made by the Collateral Agent or such Secured Party of the proceeds thereof, provided that -------- the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Collateral Agent and each Secured Party under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Collateral Agent or such Secured Party may have. 4. No Subrogation. Notwithstanding any payment or payments made by the -------------- Guarantor hereunder, or any set-off or application of funds of the Guarantor by the Collateral Agent or any Secured Party, the Guarantor shall not be entitled to be subrogated to any of the rights of the Collateral Agent or any Secured Party against the Borrower or against any collateral security or 6 guarantee or right of offset held by the Collateral Agent or any Secured Party for the payment of the Obligations, nor shall the Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower in respect of payments made by the Guarantor hereunder, until the Guarantee Termination Date. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time prior to the Guarantee Termination Date, such amount shall be held by the Guarantor in trust for the Collateral Agent and the Secured Parties, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to the Collateral Agent in the exact form received by the Guarantor (duly indorsed by the Guarantor to the Collateral Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Collateral Agent may determine. 5. Amendments, etc. with respect to the Obligations; Waiver of Rights. ------------------------------------------------------------------ The Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor and without notice to or further assent by the Guarantor, any demand for payment of any of the Obligations made by the Collateral Agent or any Secured Party may be rescinded by the Collateral Agent or such Secured Party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Collateral Agent or any Secured Party, and the Financing Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, and any collateral security, guarantee or right of offset at any time held by the Collateral Agent or any Secured Party for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Collateral Agent nor any Secured Party shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against the Guarantor, the Collateral Agent or any Secured Party may, but shall be under no obligation to, make a similar demand on the Borrower or any other guarantor, and any failure by the Collateral Agent or any Secured Party to make any such demand or to collect any payments from the Borrower or any such other guarantor or any release of the Borrower or such other guarantor shall not relieve the Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Collateral Agent or any Secured Party against the Guarantor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 6. Guarantee Absolute and Unconditional. The Guarantor waives any and ------------------------------------ all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Collateral Agent or any Secured Party upon this Guarantee or acceptance of this Guarantee; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between the Borrower or the Guarantor, on the one hand, and the Collateral Agent and the Secured Parties, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. The Guarantor waives diligence, 7 presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or the Guarantor with respect to the Obligations. This Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of any Financing Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Collateral Agent or any Secured Party, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower against the Collateral Agent or any Secured Party, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or the Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Obligations, or of the Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against the Guarantor, the Collateral Agent and any Secured Party may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Borrower or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Collateral Agent or any Secured Party to pursue such other rights or remedies or to collect any payment from the Borrower or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower or any such other Person or of any such collateral security, guarantee or right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Collateral Agent or any Secured Party against the Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantor and shall inure to the benefit of the Collateral Agent and the Secured Parties until the Guarantee Termination Date. 7. Reinstatement. This Guarantee shall continue to be effective, or be ------------- reinstated, as the case may be, if, at any time prior to the Guarantee Termination Date, payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Collateral Agent or any Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any substantial part of its property, or otherwise, all as though such payments had not been made. 8. Payments. The Guarantor hereby agrees that the Obligations will be -------- paid to the Collateral Agent without set-off or counterclaim in Dollars at the office of the Collateral Agent or to such other place as the Collateral Agent may specify in writing. 9. Representations and Warranties. The Guarantor represents and ------------------------------ warrants to the Collateral Agent and the Secured Parties that: (a) The Guarantor (i) is a corporation validly organized and existing and in good standing under the laws of the state of its incorporation, (ii) is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its 8 business requires such qualification and (iii) has all requisite corporate power and authority and holds all material requisite Governmental Approvals to enter into and perform its obligations under this Guarantee and to conduct its business substantially as currently conducted by it, except, with respect to clauses (ii) and (iii) above, where the failure to be so qualified or be in good standing or the failure to obtain such Governmental Approvals would not, individually or in the aggregate, cause a material adverse effect; (b) The execution, delivery and performance by the Guarantor of this Guarantee are within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action, and do not: (i) contravene the Guarantor's Organic Documents; (ii) contravene any material Requirement of Law or Contractual Obligation, binding on or affecting the Guarantor; or (iii) result in, or require the creation or imposition of, any Lien on any of the Guarantor's properties; (c) No Governmental Approval is required for the Guarantor to execute and perform its obligations under this Guarantee, except for those which have been duly obtained or effected. No material Governmental Approval is required for the Guarantor to carry on its business, except for those which have been duly obtained or effected; (d) The Guarantor is in compliance with all Requirements of Law and Contractual Obligations applicable to it, except to the extent that the failure to comply therewith would not have a material adverse effect; and (e) This Guarantee constitutes the legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms (except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and general principles of equity). 10. Authority of Collateral Agent. The Guarantor acknowledges that the ----------------------------- rights and responsibilities of the Collateral Agent under this Guarantee with respect to any action taken by the Collateral Agent or the exercise or non- exercise by the Collateral Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Guarantee shall, as between the Collateral Agent and the Secured Parties, be governed by the Collateral Agency and Intercreditor Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Guarantor, the Collateral Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and the Guarantor shall not be under any obligation, or entitlement, to make any inquiry respecting such authority. 9 11. Notices. All notices, requests and demands to or upon the ------- Collateral Agent or the Guarantor to be effective shall be in writing (or by telex, fax or similar electronic transfer confirmed in writing) and shall be deemed to have been duly given or made (i) when delivered by hand or (ii) if given by mail, when deposited in the mails by certified mail, return receipt requested, or (iii) if by telex, fax or similar electronic transfer, when sent and receipt has been confirmed, addressed as follows: (a) if to the Collateral Agent, at its address or transmission number for notices provided in the Collateral Agency and Intercreditor Agreement; and (b) if to the Guarantor, at its address or transmission number for notices set forth under its signature below. The Collateral Agent and the Guarantor may change its address and transmission numbers for notices by notice in the manner provided in this Section. 12. Severability. Any provision of this Guarantee which is prohibited ------------ or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 13. Integration. This Guarantee represents the agreement of the ----------- Guarantor with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Collateral Agent or any Secured Party relative to subject matter hereof not expressly set forth or referred to in this Guarantee. This Guarantee supersedes any and all prior agreements and understandings, oral or written, relative or with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Collateral Agent or any Secured Party relative to the subject matter hereof not expressly set forth or referred to herein. 14. Amendments; No Waiver; Cumulative Remedies. (a) None of the terms ------------------------------------------ or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except in accordance with the Collateral Agency and Intercreditor Agreement. (b) Neither the Collateral Agent nor any Secured Party shall by any act (except pursuant to paragraph (a)), delay, indulgence, omission or otherwise ------------- be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any Secured Party of any right or remedy 10 hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Secured Party would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 15. Section Headings. The section headings used in this Guarantee are ---------------- for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 16. Governing Law. This Guarantee shall be governed by, and construed ------------- and interpreted in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year first above written. EDISON MISSION ENERGY By:_______________________________ Name: Title: Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612-1046 Telex: (949) 752-5588 Fax: (949) 752-5624 EX-10.60 7 DEBT SERVICE GUARANTEE, DATED 3/18/1999 Exhibit 10.60 DEBT SERVICE RESERVE GUARANTEE, dated as of March 18, 1999 made by EDISON MISSION ENERGY, a California corporation (the "Guarantor"), in favor of --------- United States Trust Company of New York, as collateral agent (the "Collateral ---------- Agent") on behalf of the various financial institutions (the "Lenders") as are - ----- ------- or may become parties to the Credit Agreement, dated as of March 18, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit ------ Agreement"), among Edison Mission Holdings Co. (the "Borrower"), the Lenders and - --------- -------- Citicorp USA, Inc., as Administrative Agent (in such capacity, the "Administrative Agent"). -------------------- RECITALS -------- A. Pursuant to the Credit Agreement, the Lenders have severally agreed to make loans (the "Loans") to the Borrower upon the terms and subject to ----- the conditions set forth therein. B. Under Section 8.2.7 of the Credit Agreement, the Borrower has agreed not to make any Restricted Payments (as therein defined) unless, inter alia, the Debt Service Reserve Requirement (as therein defined) is satisfied. C. The Debt Service Reserve Requirement may be satisfied by cash, certain letters of credit, this Guarantee or a combination thereof. D. The Guarantor is the parent company of the Borrower and wishes to enter into this Guarantee so that the Borrower may meet the Debt Service Reserve Requirement under the Credit Agreement. E. Under the Credit Agreement, the Borrower is permitted to incur certain Senior Debt (as defined below) for which certain guarantees and liens are provided. F. In order to simplify administration of such guarantees and liens and to provide for the orderly enforcement of their respective rights, the Administrative Agent, the Lenders and the other Secured Parties (as defined below) have appointed the Collateral Agent to serve as their common representative, to be the beneficiary under any guarantee intended to benefit the Secured Parties and to hold the liens created, or to be created, under the terms and requirements of any Senior Debt. G. Pursuant to the Collateral Agency and Intercreditor Agreement, dated as of March 18, 1999 (as amended, supplemented or otherwise modified from time to time, the "Collateral Agency and Intercreditor Agreement"), among the --------------------------------------------- Borrower, the Administrative Agent, the Collateral Agent and certain other parties, the Collateral Agent has agreed to serve as a common collateral agent for all Secured Parties. 2 NOW, THEREFORE, in consideration of the premises, the Guarantor hereby agrees with the Collateral Agent, for the benefit of the Lenders, as follows: 1. Defined Terms. (a) Unless otherwise defined herein, terms defined in ------------- the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. (b) The following terms shall have the following meanings: "Collateral Agent" has the meaning set forth in the recitals. ---------------- "DSR Credit Instrument" has the meaning set forth in the Security Deposit --------------------- Agreement. "Guarantee" means this Debt Service Reserve Guarantee. --------- "Guarantor" has the meaning set forth in the preamble. --------- -------- "Guarantee Amount" means thirty million U.S. Dollars (U.S.$30,000,000). ---------------- "Obligations" means the collective reference to the unpaid principal of and ----------- interest on the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent and the Lenders (including interest accruing pursuant to Section 3.2.2 of the Credit Agreement), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, any Loan Document or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, guarantee obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by the Borrower or the Guarantor pursuant to the terms of this Guarantee or any other Loan Document). "Secured Parties" means the Collateral Agent, the Administrative Agent, the --------------- Lenders, each Person that provides any Senior Debt and each Person that serves as indenture trustee, collateral agent, lenders' representative or in any similar capacity for Persons that provide any Senior Debt. "Senior Debt" has the meaning set forth in the Credit Agreement. ----------- (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section and paragraph references are to this Guarantee unless otherwise specified. 3 (d) Each reference in this Guarantee to a Financing Document or other agreement shall be deemed to refer to such Financing Document or other agreement as the same may be amended, supplemented or otherwise modified from time to time. (e) Any term defined by reference to an agreement, instrument or other document shall have the meaning so assigned to it whether or not such agreement, instrument or document is in effect. (f) Each reference in this Guarantee to a Person shall refer to such Person and its successors and assigns. (g) Each reference in this Guarantee to a Requirement of Law shall be deemed to refer to such Requirement of Law as the same may be amended, supplemented or otherwise modified from time to time. (h) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Guarantee. (a) The Guarantor hereby unconditionally and irrevocably --------- guarantees to the Collateral Agent, for the benefit of the Lenders, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. Notwithstanding the aggregate amount of the Obligations at any time or from time to time payable or to be payable by the Borrower to the Administrative Agent or to any Lender, the aggregate maximum liability of the Guarantor hereunder during any Fiscal Quarter shall in no event exceed the Guarantee Amount for such Fiscal Quarter. The Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of the Guarantor hereunder without impairing this Guarantee or affecting the rights and remedies of the Collateral Agent or any Lender hereunder. (b) Notwithstanding the Guarantee Amount, the Guarantor further agrees to pay or reimburse each Lender and the Collateral Agent for all its costs and expenses incurred in collecting against the Guarantor under this Guarantee or otherwise enforcing or preserving any rights under this Guarantee, including the fees and disbursements of counsel to each Lender and of counsel to the Collateral Agent. Unless a demand for payment shall have been made hereunder and be unsatisfied, this Guarantee may be terminated in its entirety, or amended to reduce the Guarantee Amount, upon three (3) Business Days' notice by the Guarantor to the Collateral Agent, provided that the Debt Service Reserve -------- Requirement is then otherwise satisfied by one or more other DSR Credit Instruments, cash, Permitted Investments or a combination thereof. (c) No payment made by the Borrower or any other Person or received or collected by the Collateral Agent or any Secured Party from the Borrower or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release 4 or otherwise affect the liability of the Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by or collected from the Guarantor in respect of the Obligations), remain liable for the Obligations up to the Guarantee Amount until the Obligations are paid in full and the Commitments are terminated. 3. Right of Set-off. The Guarantor hereby irrevocably authorizes the ---------------- Collateral Agent and each Lender at any time and from time to time (i) upon the occurrence of an Event of Default of the kind described in clauses (a) or (b) of Section 9.1.6 of the Credit Agreement, (ii) upon the occurrence of any Default of the kind described in clauses (c) or (d) of Section 9.1.6 of the Credit Agreement with respect to the Borrower, or (iii) upon the occurrence and continuance beyond the applicable grace period, if any, of any other Event of Default and with the consent of the Required Lenders, without notice to the Guarantor, any such notice being expressly waived by the Guarantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Collateral Agent or such Lender to or for the credit or the account of the Guarantor, or any part thereof in such amounts as the Collateral Agent or such Lender may elect, against and on account of the obligations and liabilities of the Guarantor to the Collateral Agent or such Lender hereunder and claims of every nature and description of the Collateral Agent or such Lender against the Guarantor, in any currency, whether arising hereunder, under the Credit Agreement, any other Loan Document or otherwise, as the Collateral Agent or such Lender may elect, whether or not the Collateral Agent or any Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Collateral Agent and each Lender shall notify the Guarantor promptly of any such set-off and the application made by the Collateral Agent or such Lender of the proceeds thereof, provided that the -------- failure to give such notice shall not affect the validity of such set-off and application. The rights of the Collateral Agent and each Lender under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Collateral Agent or such Lender may have. 4. No Subrogation. Notwithstanding any payment or payments made by the -------------- Guarantor hereunder, or any set-off or application of funds of the Guarantor by the Collateral Agent or any Lender, the Guarantor shall not be entitled to be subrogated to any of the rights of the Collateral Agent or any Lender against the Borrower or against any collateral security or guarantee or right of offset held by the Collateral Agent or any Lender for the payment of the Obligations, nor shall the Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower in respect of payments made by the Guarantor hereunder, until all amounts owing to the Collateral Agent and the Lenders by the Borrower on account of the Obligations are paid in full and the Commitments are terminated. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full and any payment made by or collected from the Guarantor in respect of the Obligations is less than the Guarantee Amount applicable at such time, such amount shall be held by the Guarantor in trust for the Collateral Agent and the Lenders, segregated from other funds of the Guarantor, and shall, 5 forthwith upon receipt by the Guarantor, be turned over to the Collateral Agent in the exact form received by the Guarantor (duly indorsed by the Guarantor to the Collateral Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Collateral Agent may determine. 5. Amendments, etc. with respect to the Obligations; Waiver of Rights. ------------------------------------------------------------------ The Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor, and without notice to or further assent by the Guarantor, any demand for payment of any of the Obligations made by the Collateral Agent or any Lender may be rescinded by the Collateral Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Collateral Agent or any Lender, and the Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, and any collateral security, guarantee or right of offset at any time held by the Collateral Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Collateral Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against the Guarantor, the Collateral Agent or any Lender may, but shall be under no obligation to, make a similar demand on the Borrower or any other guarantor, and any failure by the Collateral Agent or any Lender to make any such demand or to collect any payments from the Borrower or any such other guarantor or any release of the Borrower or such other guarantor shall not relieve the Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Collateral Agent or any Lender against the Guarantor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 6. Guarantee Absolute and Unconditional. The Guarantor waives any and all ------------------------------------ notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Collateral Agent or any Lender upon this Guarantee or acceptance of this Guarantee; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between the Borrower or the Guarantor, on the one hand, and the Collateral Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. The Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or the Guarantor with respect to the Obligations. This Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of any Loan Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Collateral Agent or any Lender, (b) any defense, set-off or counterclaim (other 6 than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower against the Collateral Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or the Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Obligations, or of the Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against the Guarantor, the Collateral Agent and any Lender may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Borrower or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Collateral Agent or any Lender to pursue such other rights or remedies or to collect any payment from the Borrower or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower or any such other Person or of any such collateral security, guarantee or right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Collateral Agent or any Lender against the Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantor and shall inure to the benefit of the Collateral Agent and the Lenders until all the Obligations and the obligations of the Guarantor under this Guarantee shall have been satisfied by payment in full and the Commitments shall be terminated. 7. Reinstatement. This Guarantee shall continue to be effective, or be ------------- reinstated, as the case may be, if, at any time, payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Collateral Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any substantial part of its property, or otherwise, all as though such payments had not been made. 8. Payments. The Guarantor hereby agrees that the Obligations will be -------- paid to the Collateral Agent without set-off or counterclaim in Dollars at the office of the Collateral Agent, for deposit in the "Loan Debt Service Reserve Account", account no. 09040300, or to such other place as the Collateral Agent may specify in writing. 9. Representations and Warranties. The Guarantor represents and warrants ------------------------------ to the Administrative Agent and the Lenders that: (a) The Guarantor (i) is a corporation validly organized and existing and in good standing under the laws of the state of its incorporation, (ii) is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification and (iii) has all requisite corporate power and authority and holds all material requisite Governmental Approvals to enter into and perform its obligations under this Guarantee and to conduct its business substantially as 7 currently conducted by it, except, with respect to clause (ii) and (iii) above, where the failure to be so qualified or be in good standing or the failure to obtain such Governmental Approvals would not, individually or in the aggregate, cause a material adverse effect; (b) The execution, delivery and performance by the Guarantor of this Guarantee are within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action, and do not: (i) contravene the Guarantor's Organic Documents; (ii) contravene any material Requirement of Law or Contractual Obligations binding on or affecting the Guarantor; or (iii) result in, or require the creation or imposition of, any Lien on any of the Guarantor's properties; (c) No Governmental Approval is required for the Guarantor to execute and perform its obligations under this Guarantee, except for those which have been duly obtained or effected. No material Governmental Approval is required for the Guarantor to carry on its business, except for those which have been duly obtained or effected; (d) The Guarantor is in compliance with all Requirements of Law and Contractual Obligations applicable to it, except to the extent that the failure to comply therewith would not have a material adverse effect; and (e) This Guarantee constitutes the legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms (except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and general principles of equity). 10. Authority of Collateral Agent. The Guarantor acknowledges that the ----------------------------- rights and responsibilities of the Collateral Agent under this Guarantee with respect to any action taken by the Collateral Agent or the exercise or non- exercise by the Collateral Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Guarantee shall, as between the Collateral Agent and the Lenders, be governed by the Collateral Agency and Intercreditor Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Guarantor, the Collateral Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and the Guarantor shall not be under any obligation, or entitlement, to make any inquiry respecting such authority. 11. Notices. All notices, requests and demands to or upon the Collateral ------- Agent, the Lenders or the Guarantor to be effective shall be in writing (or by telex, fax or similar electronic 8 transfer confirmed in writing) and shall be deemed to have been duly given or made (i) when delivered by hand or (ii) if given by mail, when deposited in the mails by certified mail, return receipt requested, or (iii) if by telex, fax or similar electronic transfer, when sent and receipt has been confirmed, addressed as follows: (a) if to the Lenders, at the address or transmission number for notices provided in Schedule 1.1(b) of the Credit Agreement; (b) if to the Collateral Agent, at the address or transmission number for notices provided in the Collateral Agency and Intercreditor Agreement; and (c) if to the Guarantor, at its address or transmission number for notices set forth under its signature below. The Collateral Agent, the Lenders and the Guarantor may change its address and transmission numbers for notices in the manner provided in this Section. 12. Severability. Any provision of this Guarantee which is prohibited or ------------ unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 13. Integration. This Guarantee represents the agreement of the Guarantor ----------- with respect to the subject matter hereof and there are no promises, undertakings, representations or warranties by the Collateral Agent or any Lender relative to subject matter hereof not expressly set forth or referred to in this Guarantee. This Guarantee supersedes any and all prior agreements and understandings, oral or written, relative or with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Collateral Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein. 14. Amendments in Writing; No Waiver; Cumulative Remedies. (a) Except as ----------------------------------------------------- provided in Section 2(b), none of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Guarantor and the Collateral Agent, provided that any -------- provision of this Guarantee may be waived by the Collateral Agent and the Lenders in a letter or agreement executed by the Collateral Agent or by telex or facsimile transmission from the Collateral Agent. (b) Neither the Collateral Agent nor any Lender shall by any act (except by a written instrument pursuant to paragraph (a)), delay, indulgence, omission ------------- or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any Lender, any right, power or 9 privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Lender would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 15. Section Headings. The section headings used in this Guarantee are for ---------------- convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 16. Governing Law. This Guarantee shall be governed by, and construed ------------- and interpreted in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year first above written. EDISON MISSION ENERGY By ---------------------------- Name: Title: Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612-1046 Attention: Treasurer Telex: (949) 752-5588 Fax: (949) 752-5624 EX-10.61 8 CREDIT AGREEMENT DATED 3/18/1999 EXHIBIT 10.61 EXECUTION COPY CREDIT AGREEMENT dated as of March 18, 1999 among EDISON MISSION ENERGY and CERTAIN COMMERCIAL LENDING INSTITUTIONS, And CITICORP USA, INC. as the Administrative Agent for the Lenders Arranged by CREDIT SUISSE FIRST BOSTON, LEHMAN BROTHERS INC., SALOMON SMITH BARNEY INC. and SOCIETE GENERALE -i- TABLE OF CONTENTS ----------------- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS............................................................... -1- 1.1 Defined Terms................................................................... -1- 1.2 Use of Defined Terms............................................................ -12- 1.3 Cross-References................................................................ -12- 1.4 Accounting and Financial Determinations......................................... -12- ARTICLE II COMMITMENTS AND BORROWING PROCEDURES........................................................... -13- 2.1 Commitments..................................................................... -13- 2.1.1 Commitments................................................................. -13- 2.1.2 Lenders Not Required To Make Loans.......................................... -13- 2.2 Reduction of the Total Commitment Amount........................................ -13- 2.3 Borrowing Procedure............................................................. -13- 2.4 Continuation and Conversion Elections........................................... -14- 2.5 Funding......................................................................... -14- 2.6 Renewal of Commitments.......................................................... -15- ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES..................................................... -15- 3.1 Repayments and Prepayments...................................................... -15- 3.1.1 Optional Prepayments........................................................ -15- 3.2 Interest Provisions............................................................. -16- 3.2.1 Rates....................................................................... -16- 3.2.2 Post-Maturity Rates; Default Rates.......................................... -17- 3.2.3 Payment Dates............................................................... -17- 3.2.4 Interest Rate Determination................................................. -18- 3.3 Fees............................................................................ -18- 3.3.1 Facility Fee................................................................ -18- 3.3.2 Utilization Fee............................................................. -18- 3.3.3 Administrative Agent's Fee and Miscellaneous Fees........................... -18- ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS......................................................... -18- 4.1 LIBO Rate Lending Unlawful...................................................... -18- 4.2 Inability to Determine Rates.................................................... -19- 4.3 Increased LIBO Rate Loan Costs.................................................. -19- 4.4 Obligation to Mitigate.......................................................... -20- 4.5 Funding Losses.................................................................. -20- 4.6 Increased Capital Costs......................................................... -21-
-ii- Page 4.7 Taxes.......................................................................... -21- 4.8 Payments, Computations......................................................... -23- 4.9 Sharing of Payments............................................................ -23- 4.10 Setoff........................................................................ -24- 4.11 Replacement of Lender......................................................... -24- ARTICLE V CONDITIONS TO LOANS........................................................................... -25- 5.1 Conditions to Effectiveness..................................................... -25- 5.1.1 Delivery of Loan Documents................................................ -25- 5.1.2 Officer's Certificate..................................................... -25- 5.1.3 Resolutions............................................................... -25- 5.1.4 Opinions of Counsel....................................................... -25- 5.1.5 Closing Fees, Expenses.................................................... -25- 5.1.6 Financial Statements...................................................... -26- 5.1.7 Debt Ratings.............................................................. -26- 5.2 All Loans..................................................................... -26- 5.2.1 Representations and Warranties; No Default................................. -26- 5.2.2 Borrowing Request.......................................................... -26- 5.2.3 Satisfactory Legal Form.................................................... -26- ARTICLE VI REPRESENTATIONS AND WARRANTIES................................................................ -27- 6.1 Organization; Power; Compliance with Law and Contractual Obligations........... -27- 6.2 Due Authorization; Non-Contravention........................................... -27- 6.3 Governmental Approval; Regulation.............................................. -27- 6.4 Validity....................................................................... -28- 6.5 Financial Information.......................................................... -28- 6.6 No Material Adverse Change..................................................... -28- 6.7 Litigation..................................................................... -28- 6.8 Ownership of Properties........................................................ -28- 6.9 Taxes.......................................................................... -28- 6.10 Pension and Welfare Plans..................................................... -28- 6.11 Environmental Warranties...................................................... -29- 6.12 Regulations T, U and X........................................................ -30- 6.13 Accuracy of Information....................................................... -30- 6.14 The Obligations............................................................... -30- 6.15 Year 2000 Matters............................................................. -30-
-iii- Page ARTICLE VII COVENANTS........................................................................................ -30- 7.1 Affirmative Covenants............................................................. -30- 7.1.1 Financial Information, Reports................................................ -30- 7.1.2 Compliance with Laws.......................................................... -32- 7.1.3 Maintenance of Properties..................................................... -32- 7.1.4 Insurance..................................................................... -32- 7.1.5 Books and Records............................................................. -32- 7.1.6 Environmental Covenant........................................................ -33- 7.1.7 Conduct of Business and Maintenance of Existence.............................. -33- 7.1.8 Year 2000 Matters............................................................. -33- 7.1.9 Use of Proceeds............................................................... -33- 7.2 Negative Covenants................................................................ -33- 7.2.1 Restrictions on Secured Indebtedness.......................................... -34- 7.2.2 [Reserved].................................................................... -34- 7.2.3 Liens......................................................................... -34- 7.2.4 Financial Condition........................................................... -35- 7.2.5 Investments................................................................... -35- 7.2.6 Consolidation, Merger......................................................... -36- 7.2.7 Asset Dispositions............................................................ -36- 7.2.8 Transactions with Affiliates.................................................. -37- 7.2.9 Restrictive Agreements........................................................ -37- 7.3 ERISA............................................................................. -37- ARTICLE VIII EVENTS OF DEFAULT................................................................................ -37- 8.1 Listing of Events of Default...................................................... -37- 8.1.1 Non-Payment of Obligations.................................................... -37- 8.1.2 Breach of Warranty............................................................ -37- 8.1.3 Non-Performance of Certain Covenants and Obligations.......................... -38- 8.1.4 Non-Performance of Other Covenants and Obligations............................. -38- 8.1.5 Default on Other Indebtedness................................................. -38- 8.1.6 Judgments..................................................................... -38- 8.1.7 Pension Plans................................................................. -38- 8.1.8 Control of the Borrower....................................................... -39- 8.1.9 Bankruptcy, Insolvency........................................................ -39- 8.2 Action if Bankruptcy.............................................................. -39- 8.3 Action if Other Event of Default.................................................. -39- 8.4 Rescission of Declaration......................................................... -40-
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Page ARTICLE IX THE AGENT........................................................................................ -40- 9.1 Actions........................................................................... -40- 9.2 Funding Reliance.................................................................. -41- 9.3 Exculpation....................................................................... -41- 9.4 Successor......................................................................... -42- 9.5 Loans by CUSA..................................................................... -42- 9.6 Reliance by Administrative Agent.................................................. -42- 9.7 Notice of Default................................................................. -43- 9.8 Credit Decisions.................................................................. -43- 9.9 Copies............................................................................ -43- ARTICLE X MISCELLANEOUS PROVISIONS......................................................................... -44- 10.1 Waivers, Amendments.............................................................. -44- 10.2 Notices.......................................................................... -44- 10.3 Payment of Costs and Expenses.................................................... -45- 10.4 Indemnification.................................................................. -45- 10.5 Survival......................................................................... -46- 10.6 Severability..................................................................... -47- 10.7 Headings......................................................................... -47- 10.8 Execution in Counterparts........................................................ -47- 10.9 Governing Law; Entire Agreement.................................................. -47- 10.10 Successors and Assigns.......................................................... -47- 10.11 Sale and Transfer of Loans and Notes; Participations in Loans and Notes......... -47- 10.11.1 Assignments................................................................. -47- 10.11.2 Participations.............................................................. -49- 10.12 Other Transactions.............................................................. -50- 10.13 Submission To Jurisdiction; Waivers............................................. -50- 10.14 WAIVERS OF JURY TRIAL........................................................... -51- 10.15 Non-Recourse Persons............................................................ -51- 10.16 Acknowledgments................................................................. -51- 10.17 Confidentiality................................................................. -51-
-v- Annex I - Pricing Grid SCHEDULES 1.1(a)- Commitments 1.1(b)- Addresses for Notices and Lending Offices EXHIBITS A - Form of Note B - Form of Borrowing Request C - Form of Continuation/Conversion Notice D - Form of Lender Assignment Agreement -vi- CREDIT AGREEMENT, dated as of March 18, 1999, among EDISON MISSION ENERGY, a California corporation (the "Borrower"), the various financial -------- institutions as are or may become parties hereto (collectively, the "Lenders") ------- and CITICORP USA, INC. ("CUSA"), as administrative agent for the Lenders (in ---- such capacity, the "Administrative Agent"). -------------------- RECITALS -------- A. The Borrower has requested that the Lenders establish a credit facility to provide liquidity support for the Borrower's commercial paper program and for general corporate purposes; and B. The Lenders are willing to make such credit facility available upon and subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 Defined Terms. The following terms (whether or not ------------- underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Administrative Agent" means CUSA in its capacity as administrative -------------------- agent for the Lenders hereunder, and includes each other Person as may have subsequently been appointed as the successor Administrative Agent pursuant to Section 9.4. - ----------- "Affiliate" of any Person means any other Person which, directly or --------- indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Pension Plan or Welfare Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agent-Related Persons" means CUSA and any successor agent arising --------------------- under Section 9.4, together with their respective Affiliates, and the officers, ----------- directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Agreement" means, on any date, this Credit Agreement as originally in --------- effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date. "Alternate Base Rate" means, on any date and with respect to all Base ------------------- Rate Loans, a fluctuating rate of interest per annum equal to the higher of: (a) the rate of interest in effect for such day as publicly announced from time to time by the Administrative Agent at its principal office in New York, New York, as its "base rate" (or such other term used by any successor Administrative Agent). The "base rate" is a rate set by the Administrative Agent based upon various factors including the Administrative Agent's cost and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate; or (b) the Federal Funds Rate most recently determined by the Administrative Agent plus 1/2 of 1%. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by the Administrative Agent in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will give notice promptly to the Borrower and the Lenders of changes in the Alternate Base Rate. "Applicable Margin" means, for any day with respect to any LIBO Rate ----------------- Loans or Base Rate Loans, the rate per annum in effect for such day based on the Borrower's Debt Rating for such day determined as provided in the Pricing Grid. "Authorized Representative" means, relative to the Borrower, those of ------------------------- its officers and employees whose signatures and incumbency shall have been certified to the Administrative Agent and the Lenders pursuant to Section 5.1.3. ------------- "Base Rate Loan" means a Loan bearing interest at a fluctuating rate -------------- determined by reference to the Alternate Base Rate plus the Applicable Margin from time to time in effect. "Borrower" has the meaning set forth in the preamble. -------- -------- "Borrowing" means Loans of the same type and, in the case of LIBO Rate --------- Loans having the same Interest Period, made by all Lenders on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.l. ----------- "Borrowing Date" means any Business Day specified in a notice pursuant -------------- to Section 2.3 as a date which the Borrower requests the Lenders to make Loans. ----------- "Borrowing Request" means a loan request and certificate duly executed ----------------- by an Authorized Representative of the Borrower, substantially in the form of Exhibit B. - --------- "Business Day" means: ------------ (a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York; and -2- (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in Dollars are carried on in the London interbank market. "Capitalized Lease Liabilities" of any Person means all monetary ----------------------------- obligations of such Person under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of each Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "Cash Equivalent Investment" means, at any time: -------------------------- (a) any evidence of Indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States Government or an agency thereof; or (b) other investments in securities or bank instruments rated at least "A" by S&P and "A2" by Moody's or "A-1" by S&P and "P-1" by Moody's and with maturities of less than 366 days; or (c) other securities as to which the Borrower has demonstrated, to the satisfaction of the Administrative Agent, adequate liquidity through secondary markets or deposit agreements. "CERCLIS" means the Comprehensive Environmental Response Compensation ------- Liability Information System List. "Change in Control" means the failure of Edison International to own, ----------------- directly or indirectly, at least 50.l% of the outstanding shares of voting stock of the Borrower (or any successor pursuant to Section 7.2.6(c)) on a fully ---------------- diluted basis. "Code" means the Internal Revenue Code of 1986, as amended. ---- "Commitment" has the meaning set forth in Section 2.1.1. ---------- ------------- "Commitment Termination Date" means the earliest of: --------------------------- (a) the date which is 364 days after the Effective Date or, if such date has been extended by any Lender pursuant to Section 2.7, then, with ----------- respect to the Commitment of such Lender, such date as determined pursuant to Section 2.7; ----------- (b) the date on which the Total Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; or ----------- (c) the date on which any Commitment Termination Event occurs. "Commitment Termination Event" means: ---------------------------- -3- (a) the occurrence of any Default described in clauses (a) through (e) ----------- --- of Section 8.1.9 with respect to the Borrower; or ------------- (b) the occurrence and continuance of any other Event of Default and the declaration of the Loans to be due and payable pursuant to Section 8.3. ----------- "Committed Loan" means a Loan made pursuant to Section 2.1. -------------- ----------- "Contingent Liability" means any agreement, undertaking or arrangement -------------------- by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount of the debt, obligation or other liability guaranteed thereby; provided, however, that if the maximum amount of the debt, obligation or other - -------- ------- liability guaranteed thereby has not been established, the amount of such Contingent Liability shall be the maximum reasonably anticipated amount of the debt, obligation or other liability; provided, further, however, that any -------- ------- agreement to limit the maximum amount of such Person's obligation under such Contingent Liability shall not, of and by itself, be deemed to establish the maximum reasonably anticipated amount of such debt, obligation or other liability. "Continuation/Conversion Notice" means a notice of continuation or ------------------------------ conversion and certificate duly executed by an Authorized Representative of the Borrower, substantially in the form of Exhibit C. --------- "Contractual Obligation" means, as to any Person, any provision of any ---------------------- security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Controlled Group" means all members of a controlled group of ---------------- corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "CUSA" has the meaning set forth in the preamble. ---- -------- "Debt Rating" means a rating of the Borrower's long-term debt which is ----------- not secured or supported by a guarantee, letter of credit or other form of credit enhancement. If Moody's or S&P shall have changed its system of classifications after the date hereof, the Borrower's Debt Rating shall be considered to be at or above a specified level if it is at or above the new rating which most closely corresponds to the specified level under the old rating system. -4- "Declining Lenders" has the meaning set forth in Section 2.6. ----------------- ----------- "Default" means any Event of Default or any condition, occurrence or ------- event which, after notice or lapse of time or both, would constitute an Event of Default. "Dollar" and the sign "$" mean lawful money of the United States. ------ "Domestic Office" means, relative to any Lender, the office of such --------------- Lender designated on Schedule 1.1(b) or designated in the Lender Assignment --------------- Agreement or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. A Lender may have separate Domestic Offices for purposes of making, maintaining or continuing, as the case may be, Base Rate Loans. "Edison International" means Edison International, a California -------------------- corporation. "Effective Date" means the date this Agreement becomes effective -------------- pursuant to Section 5.1. ----------- "Eligible Assignee" means (a) a commercial bank organized or licensed ----------------- under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $250,000,000; and (b) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary or (iii) a Person of which a Lender is a Subsidiary. "Environmental Laws" means all applicable federal, state or local ------------------ statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to Hazardous Materials and/or to public health and protection of the environment, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and the Resource Conservation and Recovery Act, as amended. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. "Event of Default" has the meaning set forth in Section 8.1. ---------------- ----------- "Extending Lenders" has the meaning set forth in Section 2.6. ----------------- ----------- "Facility Fee" has the meaning set forth in Section 3.3.1. ------------ ------------- "Federal Funds Rate" means, for any period, a fluctuating interest ------------------ rate per annum equal for each day during such period to: -5- (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from not less than three of the Lead Arrangers (or if quotations are unavailable from any of them, up to three federal funds brokers of recognized standing selected by the Administrative Agent). "Fiscal Quarter" means any quarter of a Fiscal Year. -------------- "Fiscal Year" means any period of twelve consecutive calendar months ----------- ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "1999 Fiscal Year") referred to the Fiscal Year ---- ending on December 31 occurring during such calendar year. "F.R.S. Board" means the Board of Governors of the Federal Reserve ------------ System or any successor thereto. "GAAP" has the meaning set forth in Section 1.4. ---- ----------- "Governmental Approval" has the meaning set forth in Section 6.3. --------------------- ----------- "Hazardous Material" means: ------------------ (a) any "hazardous substance", as defined by any Environmental Law; (b) any "hazardous waste", as defined by any Environmental Law; (c) any petroleum product; or (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any Environmental Law. "herein", "hereof", "hereto", "hereunder" and similar terms contained ------ ------ ------ --------- in any Loan Document refer to such Loan Document as a whole and not to any particular Section, paragraph or provision of such Loan Document. "including" means including without limiting the generality of any --------- description preceding such term, and, for purposes of each Loan Document, the parties thereto agree that the rule of ejusdem generis shall not be applicable --------------- to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. -6- "Indebtedness" of any Person means, without duplication: ------------ (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services which purchase price is due more than six months from the date of incurrence of the obligation in respect thereof or is evidenced by a note or other instrument, except trade accounts arising in the ordinary course of business; (c) all reimbursement obligations with respect to surety bonds, letters of credit (to the extent not collateralized with cash or Cash Equivalent Investments), bankers' acceptances and similar instruments (in each case, whether or not matured); (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all Capitalized Lease Liabilities; (g) all net obligations with respect to sales of foreign exchange options; (h) all indebtedness referred to in clauses (a) through (g) above ------- - - secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (i) all Contingent Liabilities. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. "Initial Lenders" means CUSA, Credit Suisse First Boston, Lehman --------------- Commercial Paper Inc. and Societe Generale. "Interest Period" means, relative to any LIBO Rate Loan, the period --------------- beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or ----------- 2.4 and shall end on (but exclude) the day which numerically corresponds to - --- such date one, two or three months thereafter (or, if such -7- month has no numerically corresponding day, on the last Business Day of such month), in either case as the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4 ; provided, however, that: ----------- --- -------- ------- (a) the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than ten different dates or such other larger number of dates and on such terms as may be agreed to by the Borrower and the Administrative Agent; (b) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration; (c) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless, if such Interest Period applies to LIBO Rate Loans, such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and (d) no Interest Period may end later than the date set forth in clause (a) of the definition of "Commitment Termination Date". ---------- --------------------------- "Investment" means, relative to any Person: ---------- (a) any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business); (b) any Contingent Liability of such Person; and (c) any ownership or similar interest held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property. "Lead Arrangers" means Credit Suisse First Boston, Lehman Brothers -------------- Inc., Salomon Smith Barney Inc. and Societe Generale. "Lender Assignment Agreement" means a Lender Assignment Agreement, --------------------------- substantially in the form of Exhibit D. --------- "Lenders" has the meaning set forth in the preamble. ------- -------- -8- "LIBO Rate" has the meaning set forth in Section 3.2.1. --------- ------------- "LIBO Rate Loan" means a Loan bearing interest, at all times during an -------------- Interest Period applicable to such Loan at a fixed rate of interest determined by reference to the LIBO Rate. "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made, ---------------------------- continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest whole multiple of l/100 of 1%) determined pursuant to the following formula: LIBO Rate (Reserve Adjusted) = LIBO Rate ------------------------------- 1.00 - LIBOR Reserve Percentage The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Administrative Agent on the basis of the LIBOR Reserve Percentage in effect on, and the applicable rates furnished to and received by the Administrative Agent, two Business Days before the first day of such Interest Period. "LIBOR Office" means, relative to any Lender, the office of such ------------ Lender designated as such on Schedule 1.1(b) or designated in the Lender --------------- Assignment Agreement or such other office of a Lender as designated from time to time by notice from such Lender to the Borrower and the Administrative Agent pursuant to Section 4.4, whether or not outside the United States, which shall ----------- be making or maintaining LIBO Rate Loans of such Lender hereunder. "LIBOR Reserve Percentage" means, relative to any Interest Period for ------------------------ LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period. "Lien" means any security interest, mortgage, pledge, hypothecation, ---- assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property, in each case of any kind, to secure payment of a debt or performance of an obligation. "Loan" means Loans made by the Lenders to the Borrower pursuant to ---- Section 2.1 including Base Rate Loans and LIBO Rate Loans. - ----------- "Loan Documents" means this Agreement, the Notes and the other -------------- agreements, documents and instruments delivered in connection with this Agreement and the Notes, including the fee letter referred to in Section 3.3.3, ------------- each Borrowing Request and each Continuation/ Conversion Notice. -9- "Material Adverse Effect" means any event, development or circumstance ----------------------- that has had or could reasonably be expected to have a material adverse effect on (i) the business, assets, property, condition (financial or otherwise) or operations of the Borrower and its subsidiaries, taken as a whole since the Effective Date, or (ii) the ability of the Borrower to perform its obligations under any of the Loan Documents. "Moody's" means Moody's Investors Service, a division of Dun & ------- Bradstreet Corporation, and its successors and assigns. "Net Tangible Assets" means, as of the date of any determination ------------------- thereof, the total amount of all assets of the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP), less the sum of (a) the consolidated current liabilities of the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) and (b) assets properly classified as "intangible assets" in accordance with GAAP. "Non-Recourse Debt" means Indebtedness which the Borrower is not ----------------- directly or indirectly obligated to repay. "Non-Recourse Persons" means the Affiliates of the Borrower, including -------------------- The Mission Group, Edison International and Southern California Edison Company, and the officers, directors, employees, shareholders, agents, Authorized Representatives and other controlling persons of the Borrower or any of its Affiliates, provided that in no event shall the Borrower be deemed to be a Non- -------- Recourse Person. "Note" means a promissory note of the Borrower payable to any Lender, ---- in the form of Exhibit A hereto (as such promissory note may be amended, --------- endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Obligations" means all obligations (monetary or otherwise) of the ----------- Borrower arising under or in connection with the Loan Documents. "Organic Document" means, relative to the Borrower, its certificate of ---------------- incorporation, its by-laws and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock. "Participant" has the meaning set forth in Section 10.11.2. ----------- --------------- "Partnership" means a general partnership, limited partnership, joint ----------- venture or similar entity in which the Borrower or a Subsidiary is a partner, joint venturer or equity participant. "PBGC" means the Pension Benefit Guaranty Corporation and any entity ---- succeeding to any or all of its functions under ERISA. -10- "Pension Plan" means a "pension plan", as such term is defined in ------------ Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, has any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "Percentage" means, relative to any Lender, the percentage set forth ---------- on Schedule 1.1(a) opposite its name or set forth in the Lender Assignment --------------- Agreement pursuant to which such Lender became a Lender hereunder, as such percentage may be adjusted from time to time pursuant to any Lender Assignment Agreement executed by such Lender and delivered pursuant to Section 10.11 or ------------- adjusted from time to time pursuant to Section 2.6. ----------- "Person" means any natural person, corporation, partnership, limited ------ liability company, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "Pricing Grid" means the pricing grid attached as Annex I. ------------ ------- "Quarterly Payment Date" means the last day of each March, June, ---------------------- September, and December or, if any such day is not a Business Day, the next succeeding Business Day. "Register" has the meaning set forth in Section ------- 10.11.1. - ------- "Required Lenders" means, at any time, Lenders holding at least 66% ---------------- of the then aggregate outstanding principal amount of the Loans, or, if no such principal amount is then outstanding, Lenders having at least 66% of the Total Commitment Amount. "S&P" means Standard & Poor's Ratings Services and its successors and --- assigns. "Same Day Funds" means immediately available funds. -------------- "Subordinated Debt" means all unsecured Indebtedness of the Borrower ----------------- for money borrowed which is subordinated, upon terms (including the terms applicable to the payment, prepayment, redemption, purchase or defeasance thereof) satisfactory to the Required Lenders, in right of payment to the payment in full in cash of all Obligations. "Subsidiary" means, with respect to any Person, any corporation of ---------- which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. -11- "Tangible Net Worth" means the net worth of the Borrower and its ------------------ Subsidiaries (determined on a consolidated basis in accordance with GAAP) after subtracting therefrom the aggregate amount of any intangible assets of the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP), including goodwill, franchises, licenses, patents, trademarks, trade names, copyrights, service marks and brand names. "Taxes" has the meaning set forth in Section 4.7. ----- ----------- "Total Commitment Amount" means, on any date, $700,000,000, as such ----------------------- amount may be reduced from time to time pursuant to Section 2.2 or Section 2.6. ----------- ----------- "type" means, relative to any Loan, the portion thereof, if any, being ---- maintained as a Base Rate Loan or a LIBO Rate Loan. "United States" or "U.S." means the United States of America, its ------------- ---- fifty States and the District of Columbia. "Utilization Fee" has the meaning set forth in Section 3.3.2. --------------- -------------- "Welfare Plan" means a "welfare plan", as such term is defined in ------------ Section 3(1) of ERISA. "Year 2000 Problem" means any significant risk that computer hardware, ----------------- software or equipment containing embedded microchips essential to the businesses or operations of the Loan Parties will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000. SECTION 1.2 Use of Defined Terms. Unless otherwise defined or the -------------------- context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in each Note, Borrowing Request, Continuation/Conversion Notice, Loan Document, notice and other communication delivered from time to time in connection with any Loan Document. SECTION 1.3 Cross-References. Unless otherwise specified, references ---------------- in this Agreement to any Article, Section, Annex, Exhibit or Schedule are references to such Article, Section, Annex, Exhibit or Schedule of or to this Agreement, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.4 Accounting and Financial Determinations. Unless --------------------------------------- otherwise specified, all accounting terms used in any Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those generally accepted accounting principles in effect in the United States ("GAAP") applied ---- in -12- the preparation of the financial statements referred to in Section 6.5, except that quarterly financial statements are not required to contain footnotes. ARTICLE II COMMITMENTS AND BORROWING PROCEDURES SECTION 2.1 Commitments. On the terms and subject to the conditions ----------- of this Agreement, each Lender severally agrees to make Loans pursuant to such Lender's Commitment as provided in this Section 2.1. ----------- SECTION 2.1.1 Commitments. From time to time on any Business Day ----------- occurring prior to the related Commitment Termination Date, each Lender severally agrees to make Loans (each, a "Loan") to the Borrower equal to such ---- Lender's Percentage of the Borrowing of Loans requested or deemed to be requested by the Borrower to be made on such day. The commitment of each Lender described in this Section 2.1.1 is herein referred to as its "Commitment". The ------------- ---------- Borrower may from time to time borrow, prepay, in whole or in part, and reborrow Loans. Commitments shall terminate automatically on the related Commitment Termination Date. SECTION 2.1.2 Lenders Not Required To Make Loans. No Lender shall be ---------------------------------- required to make any Loan if, after giving effect thereto: (a) the aggregate outstanding principal amount of all Loans of all Lenders would exceed the Total Commitment Amount; or (b) the aggregate outstanding principal amount of all Loans of such Lender would exceed such Lender's Percentage of the Total Commitment Amount. SECTION 2.2 Reduction of the Total Commitment Amount. The Borrower ---------------------------------------- may, from time to time on any Business Day occurring after the Effective Date, voluntarily reduce the Total Commitment Amount without premium or penalty (subject, however, to Section 4.5); provided, however, that all such reductions ----------- -------- ------- shall require at least one Business Days' prior notice to the Administrative Agent and be permanent, and any partial reduction of the Total Commitment Amount shall be in a minimum amount of $10,000,000 and in an integral multiple of $1,000,000 in excess thereof; and, provided, further, that the Total Commitment -------- ------- Amount may not be reduced to an amount less than the aggregate amount of outstanding Loans. SECTION 2.3 Borrowing Procedure. By delivering a Borrowing Request ------------------- to the Administrative Agent on or before 12:00 Noon, New York City time, on a Business Day, the Borrower may from time to time irrevocably request, (i) on not less than three Business Days' notice, in the case of LIBO Rate Loans, and (ii) on the same Business Day, in the case of Base Rate Loans, that a Borrowing of Loans be made in minimum amounts of $10,000,000, or in the unused amount of the Total Commitment Amount. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the same type of Loans, and shall be made on the Business Day specified in such Borrowing Request. On or before 2:00 P.M., New York -13- City time, on the Business Day such Loans are to be made, each Lender shall deposit with the Administrative Agent Same Day Funds in an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Administrative Agent shall make such funds available to the Borrower by wire transfer to the accounts the Borrower shall have specified in its Borrowing Request. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. SECTION 2.4 Continuation and Conversion Elections. By delivering a ------------------------------------- Continuation/Conversion Notice to the Administrative Agent on or before 12:00 Noon, New York City time on a Business Day, the Borrower may from time to time irrevocably elect that all, or any portion in an aggregate minimum amount of $10,000,000 and an integral multiple of $1,000,000 in excess thereof, of any Loans be (i) on not less than three Business Days' notice, converted into, or continued as, LIBO Rate Loans, or (ii) on the same Business Day, be converted into, or continued as a Base Rate Loan. In the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan, such LIBO Rate Loan shall automatically be continued as a LIBO Rate Loan with an Interest Period of the same duration as the then expiring Interest Period; provided, -------- however, that (x) each such conversion or continuation shall be pro rated among - ------- the applicable outstanding Loans of all Lenders, (y) a LIBO Rate Loan may not be converted at any time other than the last day of the Interest Period applicable thereto and (z) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Default or Event of Default under Section 8.1.1 has occurred and is continuing. Each delivery of ------------- a Continuation/Conversion Notice shall constitute a certification and warranty by the Borrower that on the date of delivery of such notice no Default has occurred and is continuing. If prior to the time of such continuation or conversion any matter certified to by the Borrower by reason of the immediately preceding sentence will not be true and correct at such time if then made, the Borrower will immediately so notify the Administrative Agent. Except to the extent, if any, that prior to the time of such continuation or conversion the Administrative Agent shall have received written notice to the contrary from the Borrower, such certification and warranty shall be deemed to be made at the date of such continuation or conversion as if then made. Upon the occurrence and during the continuance of any Event of Default under Section 8.1.1, each LIBO ------------- Rate Loan shall convert automatically to a Base Rate Loan at the end of the Interest Period then in effect for such LIBO Rate Loan. SECTION 2.5 Funding. Each Lender may, if it so elects, fulfill its ------- obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; provided, -------- however, that such LIBO Rate Loan shall nonetheless be deemed to have been made - ------- and to be held by such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility. In addition, the Borrower hereby consents and agrees that, for purposes of any determination to be made for purposes of Sections 4.1, 4.2, 4.3, 4.4, or 4.5, it shall be ------------ --- --- --- --- conclusively assumed that each Lender elected to fund all LIBO Rate Loans by purchasing deposits in its LIBOR Office's interbank eurodollar markets. -14- SECTION 2.6 Renewal of Commitments. The Borrower may request that ---------------------- each Lender's Commitments be renewed by providing notice of such requests to the Administrative Agent no earlier than 45 days but no later than 30 days prior to the then existing Commitment Termination Date applicable to such Lenders. If a Lender agrees, in its individual and sole discretion, to renew its Commitment, such Lender (an "Extending Lender") will notify the Administrative Agent, in ---------------- writing, of its decision to do so no earlier than 30 days prior to the then existing Commitment Termination Date applicable to such Lender (but in any event no later than 20 days prior to the then existing Commitment Termination Date). Notwithstanding any provision of this Agreement to the contrary, any notice by any Lender of its willingness to renew its Commitment shall be revocable by such Lender in its sole and absolute discretion at any time prior to the date which is 20 days prior to the related Commitment Termination Date then in effect. The Administrative Agent will notify the Borrower, in writing, of each Lender's decisions no later than 15 days prior to the then existing Commitment Termination Date applicable to such Lender. The Extending Lenders' Commitments will be renewed for an additional 364 days from the then existing Commitment Termination Date applicable to such Lenders, provided that (i) each extension -------- of the Commitment Termination Date pursuant to this Section 2.6 shall be for a ----------- maximum of 364 days and (ii) more than 50% of the Total Commitment Amount as of the Commitment Termination Date then in effect is extended or otherwise committed to by Extending Lenders and any new Lenders. Any Lender that declines the Borrower's request for a Commitment renewal (a "Declining Lender") will have ---------------- its Commitment terminated on the then existing Commitment Termination Date applicable to such Lender (without regard to any renewals by other Lenders), unless terminated earlier in accordance with this Agreement. The Borrower will have the right to accept Commitments from third party financial institutions acceptable to the Administrative Agent in an amount up to the amount of the pre- termination Commitments of any Declining Lenders, provided that the Extending -------- Lenders will have the right to increase their Commitments up to the amount of the Declining Lenders' Commitments before the Borrower will be permitted to substitute other financial institutions for the Declining Lenders. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1 Repayments and Prepayments. The Loans of each Lender -------------------------- shall mature, and the Borrower unconditionally promises to pay in full the unpaid principal amount of such Loan to the Administrative Agent, for the account of such Lender, on the Commitment Termination Date for such Lender. SECTION 3.1.1 Optional Prepayments. (a) At any time, and from -------------------- time to time, the Borrower may, on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of the Loans; provided, however, that: -------- ------- (i) any such prepayment made shall be applied pro rata among Loans of --- ---- the same type and, if applicable, having the same Interest Period; -15- (ii) any such prepayment of any LIBO Rate Loan made on any day other than the last day of the Interest Period for such Loan shall be subject to the provisions of Section 4.5; ----------- (iii) any such prepayment of LIBO Rate Loans shall require at least two Business Days' prior written notice to the Administrative Agent and any such prepayment of Base Rate Loans may be made on same day's written notice to the Administrative Agent; and (iv) any such partial prepayment of Loans shall be in an aggregate minimum amount of $10,000,000 and an integral multiple of $1,000,000 in excess thereof. (b) The Borrower shall, immediately upon any acceleration of any Loans pursuant to Section 8.2 or Section 8.3, repay all Loans, unless, ----------- ----------- pursuant to Section 8.3, only a portion of all Loans is so accelerated. ----------- (c) Each prepayment of Loans made pursuant to this Section 3.1.1 shall ------------- be accompanied by accrued interest to the date of such prepayment on the amount prepaid, but shall be without premium or penalty, except as may be required by Section 4.5. No prepayment of principal of any Loan pursuant to Section - ----------- ------- 3.1.1(a) shall cause a reduction in the Total Commitment Amount. - -------- SECTION 3.2 Interest Provisions. Interest on the outstanding ------------------- principal amount of Loans shall accrue and be payable in accordance with this Section 3.2. - ----------- SECTION 3.2.1 Rates. (a) Pursuant to an appropriately delivered ----- Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue interest at a rate per annum: (i) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin from time to time in effect; and (ii) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate for such InterestPeriod plus the Applicable Margin from time to time in effect. "LIBO Rate" means, for each day during each Interest Period for each --------- LIBO Rate Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Telerate Service Page 3750 as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Telerate Service Page 3750, the "LIBO Rate" shall be determined by reference to such --------- other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent -16- or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein. Notwithstanding any other provision hereof, at such time as there shall exist for any Lender a LIBOR Reserve Percentage which is greater than zero, the LIBO Rate used in the determination of LIBO Rate Loans made by such Lender shall be the LIBO Rate (Reserve Adjusted). (b) All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan. SECTION 3.2.2 Post-Maturity Rates; Default Rates. (a) After the date ---------------------------------- any principal amount of any Loan is due and payable (whether on the related Commitment Termination Date, upon acceleration or otherwise), or after any monetary Obligation of the Borrower shall become due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such overdue amount at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin plus 2% until such amount is paid in full. (b) Upon the occurrence and during the continuance of any Event of Default (other than an Event of Default under Section 8.1.1, for which provision ------------- is made in Section 3.2.2(a) above), the Borrower shall pay, but only to the ---------------- extent permitted by law, in addition to the interest then payable on the Loans, interest (after as well as before judgment) on the Loans at 2% per annum until such Event of Default is cured. SECTION 3.2.3 Payment Dates. Interest accrued on each Loan shall be ------------- payable, without duplication: (a) on the related Commitment Termination Date; (b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan; (c) with respect to Base Rate Loans, on each Quarterly Payment Date occurring after the date of the initial Borrowing hereunder; (d) with respect to LIBO Rate Loans, the last day of each applicable Interest Period; and (e) on that portion of any Loans which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such acceleration. ----------- ----------- -17- Interest accrued on Loans or other monetary Obligations arising under or any Loan Document after the date such amount is due and payable (whether on the related Commitment Termination Date, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.2.4 Interest Rate Determination. The Administrative Agent --------------------------- shall determine the interest rate applicable to Loans and shall give prompt notice to the Borrower and the Lenders of such determination, and its determination thereof shall be conclusive in the absence of manifest error. SECTION 3.3 Fees. The Borrower agrees to pay the fees set forth in ---- this Section 3.3. SECTION 3.3.1 Facility Fee. The Borrower agrees to pay to the ------------ Administrative Agent, for the ratable account of each Lender, a facility fee (the "Facility Fee") in respect of the Total Commitment Amount (irrespective of ------------ usage) for each day from and after the Effective Date at the rate per annum in effect for such day based on the Borrower's Debt Rating for such day determined as provided in the Pricing Grid. Such fee shall be payable in arrears on each Quarterly Payment Date, commencing with the first such date following the Effective Date, and on the related Commitment Termination Date. SECTION 3.3.2 Utilization Fee. The Borrower agrees to pay to the --------------- Administrative Agent, for the ratable account of each Lender, a utilization fee (the "Utilization Fee") in respect of the percentage of the Total Commitment --------------- Amount outstanding on any date of determination at the rate per annum in effect for such day based on the Borrower's Debt Rating for such day determined as provided in the Pricing Grid. Such fee shall be payable in arrears on each Quarterly Payment Date, commencing with the first such date following the Effective Date, or at the end of each Interest Period, in each case, in accordance with Section 3.2.3, and on the related Commitment Termination Date. ------------- SECTION 3.3.3 Administrative Agent's Fee and Miscellaneous Fees. The ------------------------------------------------- Borrower agrees to pay to the Administrative Agent, for (i) its own account, (ii) the account of the Lenders and (iii) the account of the Lead Arrangers, the respective fees as agreed to in the letter dated February 19, 1999, between the Administrative Agent, the Lead Arrangers, the Initial Lenders and the Borrower. ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 4.1 LIBO Rate Lending Unlawful. If any Lender shall -------------------------- reasonably determine (which determination shall, upon notice thereof to the Borrower and the Administrative Agent, be conclusive and binding on the Borrower absent manifest error) that the introduction of or any change in or in the interpretation of any law, rule or regulation makes it unlawful, or any central bank or other governmental authority or comparable agency asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO -18- Rate Loan, the obligations of such Lender to make, continue, maintain or convert any such Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and all LIBO Rate Loans of such Lender shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion. SECTION 4.2 Inability to Determine Rates. If the Administrative ---------------------------- Agent shall have determined that by reason of circumstances affecting the Administrative Agent's relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then, upon notice from the Administrative Agent to the Borrower and the Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue ----------- ----------- any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 4.3 Increased LIBO Rate Loan Costs. If after the date ------------------------------ hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its LIBOR Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall increase the cost to such Lender of, or result in any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans, then the Borrower agrees to pay to the Administrative Agent for the account of each Lender the amount of any such increase or reduction. Such Lender shall promptly notify the Administrative Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by the Borrower directly to such Lender within ten Business Days of its receipt of such notice, and such notice shall be binding on the Borrower absent clear and convincing evidence to the contrary. SECTION 4.4 Obligation to Mitigate. Each Lender agrees that as ---------------------- promptly as practicable after it becomes aware of the occurrence of an event that would entitle it to give notice pursuant to Section 4.l, 4.3 or 4.6, and ----------- --- --- in any event if so requested by the Borrower, each Lender shall use reasonable efforts to make, fund or maintain its affected Loans through another lending office if as a result thereof the increased costs would be avoided or materially reduced or the illegality would thereby cease to exist and if, in the reasonable opinion of such Lender, the making, funding or maintaining of such Loans through such other lending office would not in any material respect be disadvantageous to such Lender, contrary to such Lender's normal banking practices or violate any applicable law or regulation. No change by a Lender in its Domestic Office or LIBOR Office made for such Lender's convenience shall result in any increased cost to -19- the Borrower. The Borrower shall not be obligated to compensate any Lender for the amount of any additional amount pursuant to Section 4.1, 4.3 or 4.6 ----------- --- --- accruing prior to the date which is 90 days before the date on which such Lender first notifies the Borrower that it intends to claim such compensation; it being understood that the calculation of the actual amounts may not be possible within such period and that such Lender may provide such calculation as soon as reasonably practicable thereafter without affecting or limiting the Borrower's payment obligation thereunder. If any Lender demands compensation pursuant to Section 4.1, 4.3 or 4.6 with respect to any LIBO Rate Loan, the Borrower may, - ----------- --- --- at any time upon at least one Business Days prior notice to such Lender through the Administrative Agent, elect to convert such Loan into a Base Rate Loan. Thereafter, unless and until such Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, all such LIBO Rate Loans by such Lender shall bear interest as Base Rate Loans, notwithstanding any prior election by the Borrower to the contrary. If such Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, the Borrower may elect that the principal amount of each such Loan again bear interest as LIBO Rate Loans in accordance with this Agreement, on the first day of the next succeeding Interest Period applicable to the related LIBO Rate Loans of other Lenders. Additionally, the Borrower may, at its option, upon at least five Business Days' prior notice to such Lender, elect to prepay in full, without premium or penalty, such Lender's affected LIBO Rate Loans. If the Borrower elects to prepay any Loans pursuant to this Section 4.4, the Borrower ----------- shall pay within ten Business Days after written demand any additional increased costs of such Lender accruing for the period prior to such date of prepayment. If such conversion or prepayment is made on a day other than the last day of the current Interest Period for such affected LIBO Rate Loans, such Lender shall be entitled to make a request for, and the Borrower shall pay, compensation under Section 4.5. - ----------- SECTION 4.5 Funding Losses. In the event any Lender shall incur any -------------- loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of: (a) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or ----------- otherwise; (b) Borrower's failure to borrow any LIBO Rate Loans in accordance with the Borrowing Request therefor; or (c) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/Conversion Notice therefor; then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within ten Business Days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such -20- Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall be binding on the Borrower absent manifest error. SECTION 4.6 Increased Capital Costs. If after the date hereof any ----------------------- change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any applicable law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority affects the amount of capital required to be maintained by any Lender, and such Lender reasonably determines that the rate of return on its capital as a consequence of its Commitment or the Loans made by such Lender is reduced in a material amount to a level below that which such Lender could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender to the Borrower, the Borrower shall pay within ten Business Days after such demand directly to such Lender additional amounts sufficient to compensate such Lender for such reduction in rate of return. A statement of such Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall be binding on the Borrower absent manifest error. SECTION 4.7 Taxes. (a) All payments by the Borrower of principal ----- of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes or taxes imposed on or measured by any Lender's net income, in each case, imposed as a result of a connection between the Lender and the jurisdiction imposing the tax (other than a connection arising solely from the Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement), and the Lenders will use reasonable efforts to minimize, to the extent possible, any such applicable taxes; provided, however, that such taxes does not include franchise taxes receipts, - -------- net worth or shareholders' capital (such non-excluded items being called "Taxes"). In the event that any withholding or deduction from any payment to be ----- made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will: (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; (ii) within 30 days after such payment forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority; and (iii) pay to the Administrative Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required. -21- Moreover, if any Taxes are directly asserted against the Administrative Agent or any Lender with respect to any payment received by the Administrative Agent or such Lender hereunder, the Administrative Agent or such Lender may pay such Taxes and, upon receipt of notice from the Administrative Agent or such Lender within 30 days after such payment, the Borrower will promptly pay such additional amounts (including any penalties, interest or expenses ) as is necessary in order that the net amount received by such person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such person would have received had no such Taxes been asserted. (b) If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent, for the account of the respective Lenders, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lenders for any incremental Taxes, interest or penalties that may become payable by any Lender as a result of any such failure. For purposes of this Section 4.7, a ----------- distribution hereunder by the Administrative Agent or any Lender to or for the account of any Lender shall be deemed a payment by the Borrower. (c) Each Lender that is not a United States person as defined in Section 7701(a)(3) of the Code (a "Non-U.S. Lender") shall deliver to the --------------- Borrower and the Administrative Agent two copies of either U.S. Internal Revenue Service Form 1001 or Form 4224, or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under the Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement. In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). The Borrower shall not be required to increase any such amounts payable to any Non- U.S. Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Non-U.S. Lender's failure to comply with the requirements of this Section ------- 4.7(C) or (ii) that are United States withholding taxes imposed on amounts - ------ payable to such Lender at the time the Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to Section 4.7(a). Notwithstanding any other -------------- provision of this Section 4.7(c), a Non-U.S. Lender shall not be required to -------------- deliver any form pursuant to this Section 4.7(C) that such Non-U.S. Lender is -------------- not legally able to deliver. SECTION 4.8 Payments, Computations. Unless otherwise expressly ---------------------- provided, all payments by the Borrower pursuant to any Loan Document shall be made by the Borrower to the Administrative Agent for the pro rata account of the -------- Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 12:00 Noon, New York City time, on the date due, in -22- Same Day Funds, to such account as the Administrative Agent shall specify from time to time by notice to the Borrower; provided that such payment shall be -------- deemed made timely if made by wire transfer and by such time as an Authorized Representative has advised the Administrative Agent of the applicable Federal Reserve System wire transfer confirmation number. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly remit in Same Day Funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base Rate Loan, 365 days or, if appropriate, 366 days). Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (c) of the ---------- definition of the term "Interest Period" with respect to LIBO Rate Loans) be --------------- made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. SECTION 4.9 Sharing of Payments. If any Lender shall obtain any ------------------- payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Committed Loan (other than pursuant to the terms of Sections 4.3, 4.4, 4.5, 4.6, and 4.7) in excess of its pro rata --------------------------- --- --- ---- share of payments then or therewith obtained by all Lenders holding Loans of such type, such Lender shall purchase from the other Lenders such participations in Committed Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other - -------- ------- recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to the proportion of (a) the amount of such selling Lender's required repayment to the purchasing Lender to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 4.9 may, to the fullest extent permitted by law, ----------- exercise all its rights of payment (including pursuant to Section 4.10) with ------------ respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section ------- 4.9 applies, such Lender shall, to the extent practicable, exercise its rights - --- in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 4.9 to share in the benefits of any recovery ----------- on such secured claim. SECTION 4.10 Setoff. Each Lender shall, upon the occurrence of any ------ Event of Default described in clauses (a) or (b) of Section 8.1.9. and, upon the ----------- --- ------------- occurrence of any Default described in clauses (c) through (d) of Section 8.1.9 ----------- --- ------------- with respect to the Borrower or, with the -23- consent of the Required Lenders, upon the occurrence and continuance beyond the expiration of the applicable grace period, if any, of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) the Borrower hereby grants to each Lender a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with such Lender or any bank controlling such Lender; provided, however, that any such appropriation and application -------- ------- shall be subject to the provisions of Section 4.9. ----------- Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the - -------- ------- validity of such setoff and application. The rights of each Lender under this Section 4.10 are in addition to ------------ other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have. SECTION 4.11 Replacement of Lender. The Borrower shall be permitted --------------------- to replace (with one or more replacement Lenders) any Lender which requests reimbursement for amounts owing pursuant to Section 4.1, 4.3, 4.6 or 4.7; --------------------- --- provided that (i) such replacement does not conflict with any law, treaty, rule - -------- or regulation or determination of an arbitrator or a court or other governmental authority, in each case applicable to the Borrower or such Lender or to which the Borrower or such Lender or any of their respective property is subject, (ii) no Default or Event of Default shall have occurred and be continuing at the time of such replacement, (iii) the Borrower shall repay (or the replacement bank or institution shall purchase, at par) all Loans and other amounts owing to such replaced Lender prior to the date of replacement, (iv) the Borrower shall be liable to such replaced Lender under Section 4.5 if any LIBO Rate Loan owing to ----------- such replaced Lender shall be prepaid (or purchased) other than on the last day of the Interest Period relating thereto, (v) the replacement bank or institution, if not already a Lender, shall be reasonably satisfactory to the Administrative Agent, (vi) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 10.11.1 (provided that --------------- the Borrower or replacement Lender shall be obligated to pay the registration and processing fee), (vii) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Section 4.1, 4.3, 4.6 or 4.7, as the case may be, (viii) any such --------------------- --- replacement shall not be deemed to be a waiver of any rights which the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender, and (ix) if such replacement bank or institution is not already a Lender, the Borrower shall pay to the Administrative Agent an administrative fee of $3,500. ARTICLE V CONDITIONS TO LOANS SECTION 5.1 Conditions to Effectiveness. This Agreement shall become effective upon the satisfaction of each of the conditions precedent set forth in this Section 5.1. ----------- -24- SECTION 5.1.1 Delivery of Loan Documents. The Administrative Agent -------------------------- shall have received from the Borrower this Agreement, executed and delivered by an Authorized Representative of the Borrower, with a counterpart for each Lender and, for the account of each Lender who so requests, its Note duly executed and delivered by the Borrower. SECTION 5.1.2 Officer's Certificate. The Administrative Agent shall --------------------- have received, with a copy for each Lender, a certificate of an Authorized Representative of the Borrower, substantially in the form of Exhibit E. --------- SECTION 5.1.3 Resolutions. The Administrative Agent shall have received from the Borrower a certificate, substantially in the form of Exhibit F --------- hereto, dated the Effective Date, of its Secretary or Assistant Secretary as to: (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of each Loan Document to be executed by it; (b) the incumbency and signatures of those of its officers and representatives authorized to act with respect to each Loan Document executed by it; and (c) the Borrower's Organic Documents. The Administrative Agent and each Lender may conclusively rely upon such certificate until it shall have received a further certificate of the Secretary, Assistant Secretary or other Authorized Representative of the Borrower canceling or amending such prior certificate. SECTION 5.1.4 Opinions of Counsel. The Administrative Agent shall ------------------- have received opinions, dated the Effective Date and addressed to the Administrative Agent and the Lenders, from the Assistant General Counsel of the Borrower, substantially in the form of Exhibit G hereto and given upon the --------- express instruction of the Borrower. SECTION 5.1.5 Closing Fees, Expenses. The Administrative Agent shall ---------------------- have received for its own account, or for the account of each Lender or Lead Arranger, as the case may be, all fees due and payable pursuant to Section 3.3 ----------- and 10.3 , and all costs and expenses for which invoices have been presented. ---- SECTION 5.1.6 Financial Statements. The Administrative Agent shall -------------------- have received, with a copy for each Lender, the audited consolidated financial statements of the Borrower for the 1997 Fiscal Year and the audited consolidated financial statements of the Borrower for the 1998 Fiscal Year. SECTION 5.1.7 Debt Ratings. The Borrower shall have received short ------------ term debt ratings of A-2 and P-2 or better and maintain long term debt ratings of at least BBB and Baa2 from S&P and Moody's, respectively. -25- SECTION 5.2 All Loans. The obligation of each Lender to make any --------- Loan (including the initial Loan) shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 5.2. ----------- SECTION 5.2.1 Representations and Warranties; No Default. Both ------------------------------------------ before and after giving effect to any Borrowing (but, if any Default of the nature referred to in Section 8.1.5 shall have occurred with respect to any ------------- other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds of such Borrowing), the following statements shall be true and correct: (a) the representations and warranties set forth in Article VI shall ---------- be true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date); and (b) no Default or Event of Default has occurred and is continuing or would result from such Borrowing. SECTION 5.2.2 Borrowing Request. The Administrative Agent shall have ----------------- received a Borrowing Request for such Borrowing. Each of the delivery of a Borrowing Request and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing (both immediately before and after giving effect to such Borrowing and the application of the proceeds thereof) the statements made in Section 5.2.1 are true and correct. ----- SECTION 5.2.3 Satisfactory Legal Form. All documents executed or ----------------------- submitted pursuant hereto by or on behalf of the Borrower shall be satisfactory in form and substance to the Administrative Agent and its counsel. ARTICLE VI REPRESENTATIONS AND WARRANTIES In order to induce the Administrative Agent and each Lender to enter into this Agreement and to make Loans hereunder, the Borrower represents and warrants unto the Administrative Agent and each Lender as set forth in this Article VI. - ---------- SECTION 6.1 Organization; Power; Compliance with Law and Contractual -------------------------------------------------------- Obligations. The Borrower (a) is a corporation validly organized and existing - ----------- and in good standing under the laws of the state of its incorporation, (b) is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, (c) has all requisite corporate power and authority and holds all material requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under each Loan Document and to conduct its business substantially as currently conducted by it and (d) is in compliance with all laws, governmental regulations, court decrees, -26- orders and Contractual Obligations applicable to it, except, with respect to clauses (b), (c) and (d) to the extent that the failure to comply therewith - ------- -------- --- could not reasonably be expected to have a Material Adverse Effect. SECTION 6.2 Due Authorization; Non-Contravention. The execution, ------------------------------------ delivery and performance by the Borrower of each Loan Document are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not: (a) contravene the Borrower's Organic Documents; (b) contravene any law, governmental regulation, court decree or order or material Contractual Obligation binding on or affecting the Borrower; or (c) result in, or require the creation or imposition of, any Lien on any of the Borrower's properties. SECTION 6.3 Governmental Approval; Regulation. (a) No --------------------------------- authorization, consent, approval, license, exemption of or filing or registration with any court or governmental authority or regulatory body ("Governmental Approval") is required for the Borrower to execute and perform --------------------- its obligations under the Loan Documents, except for those which have been duly obtained or effected. No material Governmental Approval is required for the Borrower to carry on its business, except for those which have been duly obtained or effected. (b) The Borrower is not subject to any regulation as an "investment company" subject to the Investment Company Act of 1940, as amended, or as a "holding company" or a "subsidiary company" or an "affiliate" of a "holding company" subject to the Public Utility Holding Company Act of 1935, as amended ("PUHCA"), except that the Borrower is a "subsidiary company" of Edison ----- International which is a "holding company" that is exempt from all regulation under PUHCA (except Section 9(a)(2) thereof) pursuant to Section 3(a) thereof. The Borrower is not otherwise subject to any regulation as a "public utility" under any other applicable law, rule or regulation, which would have a Material Adverse Effect. SECTION 6.4 Validity. Each Loan Document constitutes the legal, -------- valid and binding obligations of the Borrower enforceable in accordance with their respective terms (except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and general principles of equity). SECTION 6.5 Financial Information. The consolidated balance sheets --------------------- of the Borrower as at December 31, 1997, and December 31, 1998, and the related consolidated statements of income and cash flows of the Borrower, copies of which have been furnished to the Administrative Agent, have been prepared in accordance with GAAP consistently applied, and present fairly the consolidated financial condition of the Borrower and its Subsidiaries as at the dates thereof and the results of their operations for the periods then ended. -27- SECTION 6.6 No Material Adverse Change. There has not occurred any -------------------------- event or condition having a Material Adverse Effect since December 31, 1998. SECTION 6.7 Litigation. There is no pending or, to the knowledge of ---------- the Borrower, threatened litigation, action, proceeding, or labor controversy affecting the Borrower, or any of its properties, businesses, assets or revenues, which, if adversely determined (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without any reservations), would have a Material Adverse Effect or which purports to adversely affect the legality, validity or enforceability of this or any Loan Document. SECTION 6.8 Ownership of Properties. The Borrower owns good and ----------------------- marketable title to, or a valid leasehold interest in or other enforceable interest in all properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights) purported to be owned, leased or held by it, free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.2.3. ------------- SECTION 6.9 Taxes. The Borrower has filed all tax returns and ----- reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 6.10 Pension and Welfare Plans. During the consecutive ------------------------- twelve-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any Borrowing hereunder, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which could reasonably be expected to result in the incurrence by the Borrower or any member of the Controlled Group of any material liability (other than liabilities incurred in the ordinary course of maintaining the Pension Plan), fine or penalty. Neither the Borrower nor any member of the Controlled Group has any contingent liability with respect to any post- retirement benefit under a Welfare Plan which could reasonably be expected to have a Material Adverse Effect, other than liability for continuation coverage described in Part 6 of Title I of ERISA. SECTION 6.11 Environmental Warranties. (a) All facilities and ------------------------ property owned or leased by the Borrower or any of its Subsidiaries or Partnerships have been, and continue to be, owned or leased by the Borrower and its Subsidiaries in compliance with all Environmental Laws, except where the failure so to comply would not have, or be reasonably expected to have, a Material Adverse Effect. (b) There are no pending or, to the knowledge of the Borrower, threatened: -28- (i) material claims, complaints, notices or requests for information received by the Borrower from governmental authorities with respect to any alleged violation by the Borrower of any Environmental Law; or (ii) material complaints, notices or inquiries to the Borrower from governmental authorities regarding potential liability under any Environmental Law. (c) There have been no Releases (as defined under any Environmental Law) of Hazardous Materials at, on or under any property now or previously owned or leased by the Borrower that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect. (d) The Borrower has obtained and is in compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary for the Borrower's business, except where the failure to obtain, maintain or comply with such permits, certificates, approvals, licenses or other authorizations would not have, or be reasonably expected to have, a Material Adverse Effect. (e) No property now or previously owned or leased by the Borrower is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to any Environmental Law, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up. (f) No conditions exist at, on or under any property now or previously owned or leased by the Borrower which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law which liability would have, or may reasonably be expected to have, a Material Adverse Effect. SECTION 6.12 Regulations T, U and X. The Borrower is not engaged in ---------------------- the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation T, U or X. Terms for which meanings are provided in F.R.S. Board Regulation T, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. SECTION 6.13 Accuracy of Information. All factual information ----------------------- heretofore or contemporaneously furnished by the Borrower in writing to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such written factual information hereafter furnished by the Borrower in writing to the Administrative Agent or any Lender will be, true and materially accurate in every material respect on the date as of which such information is dated or certified and as of the date of execution and delivery of this Agreement by the Administrative Agent and such Lender, and such -29- information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not materially misleading. SECTION 6.14 The Obligations. The Obligations are senior, unsecured --------------- Indebtedness of the Borrower ranking at least pari passu with all other senior, ---- ----- unsecured Indebtedness of the Borrower. SECTION 6.15 Year 2000 Matters. The Borrower has reviewed its ----------------- operations and those of its Subsidiaries with a view to assessing whether its businesses or the businesses of any of its Subsidiaries will, in the receipt, transmission, processing, manipulation, storage, retrieval, retransmission or other utilization of data, be vulnerable to a Year 2000 Problem or will be vulnerable to the effects of a Year 2000 Problem suffered by any of the Borrower's or any of its Subsidiaries' major commercial counter-parties. Based on such review the Borrower has no reason to believe that a Material Adverse Effect will occur with respect to its businesses or operations or the businesses or operations of any of its Subsidiaries resulting from a Year 2000 Problem. ARTICLE VII COVENANTS SECTION 7.1 Affirmative Covenants. The Borrower agrees with the --------------------- Administrative Agent and each Lender that, until the Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will perform the obligations set forth in this Section 7.1. ----------- SECTION 7.1.1 Financial Information, Reports, Notices. The Borrower --------------------------------------- will furnish, or will cause to be furnished, to the Administrative Agent copies of the following financial statements, reports, notices and information: (a) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter and consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, certified by an Authorized Representative with responsibility for financial matters; (b) as soon as available and in any event within 120 days after the end of each Fiscal Year of the Borrower, a copy of the annual audit report for such Fiscal Year for the Borrower and its Subsidiaries, including therein consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such Fiscal Year, and accompanied by the unqualified opinion of Arthur Andersen & Co. or other internationally recognized independent auditors selected by the Borrower which report -30- shall state that such consolidated financial statements present fairly in all material respects the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior periods; (c) concurrently with the delivery of the financial statements referred to in Section 7.1.1.(a), a certificate, executed by the ----------------- controller, treasurer or chief financial officer of the Borrower, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Administrative Agent) compliance with the financial covenant set forth in Section 7.2.4; ------------- (d) as soon as possible and in any event within five Business Days after any Authorized Representative obtains knowledge of the occurrence of each Default, a statement of such Authorized Representative setting forth details of such Default or default and the action which the Borrower has taken and proposes to take with respect thereto; (e) as soon as possible and in any event within five Business Days after (x) the occurrence of any material adverse development with respect to any litigation, action, proceeding, or labor controversy of the type described in Section 6.7 or (y) the commencement of any labor controversy, ----------- litigation, action, proceeding of the type described in Section 6.7, notice ----------- thereof and, upon request of the Administrative Agent, copies of all non- privileged documentation relating thereto; (f) promptly after the sending or filing thereof, copies of all reports and registration statements which the Borrower files with the Securities and Exchange Commission or any national securities exchange; (g) immediately upon becoming aware of the institution of any steps by the Borrower or any other Person to terminate any Pension Plan (other than a standard termination under ERISA Section 4041(b)), or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Borrower or any member of the Controlled Group of any material liability (other than liabilities incurred in the ordinary course of maintaining the Pension Plan), fine or penalty, or any increase in the contingent liability of the Borrower with respect to any post-retirement Welfare Plan benefit which has a Material Adverse Effect, notice thereof and copies of all documentation relating thereto; and (h) as soon as known, any changes in Borrower's Debt Rating by Moody's or S&P or any other rating agency which maintains a Debt Rating on the Borrower which is used in the Pricing Grid. -31- SECTION 7.1.2 Compliance with Laws. The Borrower will comply in all -------------------- material respects with all applicable law, rules, regulations and orders, such compliance to include the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property (except to the extent such assignments and charges are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books). SECTION 7.1.3 Maintenance of Properties. The Borrower will, and will ------------------------- use reasonable efforts to cause each of its Subsidiaries and Partnerships to, maintain, preserve, protect and keep its property and equipment in good repair, working order and condition (ordinary wear and tear excepted), and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless the Borrower determines in good faith that the continued maintenance of any of its properties or equipment is no longer economically desirable and except where the failure so to do would not have a Material Adverse Effect. SECTION 7.1.4 Insurance. The Borrower will maintain or cause to be --------- maintained with responsible insurance companies insurance with respect to its properties and business against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses. SECTION 7.1.5 Books and Records. The Borrower will, and will cause ----------------- each of its active Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Administrative Agent and each Lender or any of their respective representatives (at the Administrative Agent's or such Lender's expense), at reasonable times and intervals upon reasonable prior notice, to visit all of its offices, to discuss its financial matters with its officers and independent public accountant. The Borrower will at any reasonable time and from time to time upon reasonable prior notice, permit the Administrative Agent and the Lenders or any of their respective agents or representatives to examine and make copies of and abstracts from the records and books of account of the Borrower; provided that by virtue of this Section 7.1.5 the Borrower shall not be deemed to have waived ------------- any right to confidential treatment of the informational obtained, subject to the provisions of applicable law or court order. SECTION 7.1.6 Environmental Covenant. The Borrower will, and will ---------------------- use best efforts to cause each of its Subsidiaries and Partnerships to: (a) use and operate all of its facilities and properties in compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws, in each case where the failure to do so may reasonably be expected to have a Material Adverse Effect; -32- (b) promptly cure and have dismissed with prejudice to the reasonable satisfaction of the Administrative Agent any actions and proceedings relating to compliance with Environmental Laws where such action or proceeding may reasonably be expected to have a Material Adverse Effect; provided that the Borrower or such Subsidiary or Partnership may postpone -------- such cure and dismissal during any period in which it is diligently pursuing any available appeals in such action or proceeding so long as such postponement would not be reasonably likely to have a Material Adverse Effect; and (c) provide such non-privileged information as the Administrative Agent may reasonably request from time to time to evidence compliance with this Section 7.1.6. ------------- SECTION 7.1.7 Conduct of Business and Maintenance of Existence. The ------------------------------------------------ Borrower will continue to engage in business of the same type as now conducted by it and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all material rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 7.2.6. ------------- SECTION 7.1.8 Year 2000 Matters. The Borrower will, and will use best ----------------- efforts to cause each of its Subsidiaries and Partnerships to assure that its computer based systems are able to effectively process data including dates on and after January 1, 2000. SECTION 7.1.9 Use of Proceeds. The Borrower will apply the proceeds --------------- of the Loans to provide liquidity support for the Borrower's commercial paper program or for general corporate purposes. SECTION 7.2 Negative Covenants. The Borrower agrees with the ------------------ Administrative Agent and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will, and will cause each of its Subsidiaries and Partnerships, as applicable, to perform the obligations set forth in this Section 7.2. ----------- SECTION 7.2.1 Restrictions on Secured Indebtedness. The Borrower ------------------------------------ will not create, incur, assume or suffer to exist any secured Indebtedness other than: (a) Capitalized Lease Liabilities and other secured Indebtedness of any kind whatsoever (including, without limitation, Indebtedness secured by a pledge of the stock of a Subsidiary not otherwise permitted under clause ------ (b) of this Section 7.2.1) at any time outstanding not exceeding an --- ------------- aggregate principal amount equal to 10% of Net Tangible Assets; provided that any Indebtedness exceeding such amount may be secured pursuant to Section 7.2.3(f); and ---------------- (b) Non-Recourse Debt with respect to which the Borrower has pledged the stock of a Subsidiary in order to secure initial project financing obtained or being obtained -33- after the Effective Date hereof by such Subsidiary (or the Partnership in which such Subsidiary is a partner). SECTION 7.2.2 [Reserved]. -------- SECTION 7.2.3 Liens. The Borrower will not create, incur, assume or ----- suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens granted to secure payment of Indebtedness of the type permitted and described in clause (b) of Section 7.2.l; ---------- ------------- (b) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (c) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (d) Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (e) judgment Liens in existence less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies; (f) Liens upon any property at any time directly owned by the Borrower to secure any Indebtedness of the nature described in clause (a) of Section ---------- ------- 7.2.1 in excess of the amount otherwise permitted thereby, provided that ----- -------- the Obligations shall be equally and ratably secured with any and all such Indebtedness and with any other Indebtedness similarly entitled to be equally and ratably secured; and (g) any Lien existing on the property of the Borrower on the Effective Date. In the event that the Borrower shall propose to create, incur, assume or suffer to exist any Lien upon any property at any time directly owned by it to secure any Indebtedness as contemplated by clause (f) above, the Borrower ---------- will give prior written notice thereof to the -34- Administrative Agent, who shall give notice to the Lenders, and the Borrower will, prior to or simultaneously with the creation of such Lien, effectively secure the Obligations equally and ratably with such Indebtedness. SECTION 7.2.4 Financial Condition. The Borrower will not permit its ------------------- Tangible Net Worth to be less than $400,000,000 plus 25% of the Borrower's and ---- its Subsidiaries' consolidated net income earned (without subtracting net losses) in each Fiscal Quarter commencing with the quarter ending after September 30, 1992. SECTION 7.2.5 Investments. The Borrower will not, and will not ----------- permit any of its Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except: (a) Investments existing on the Effective Date; (b) Cash Equivalent Investments, provided, however, that any -------- ------- Investment which when made complies with the requirements of the definition of the term "Cash Equivalent Investment" may continue to be held -------------------------- notwithstanding that such Investment if made thereafter would not comply with such requirements. (c) without duplication, Investments permitted as Indebtedness pursuant to Section 7.2.1; ------------- (d) otherwise in the ordinary course of business; and (e) Investments permitted pursuant to Section 7.2.6(b). ---------------- SECTION 7.2.6 Consolidation, Merger. The Borrower will not, and will --------------------- not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof) except: (a) any such Subsidiary may liquidate or dissolve voluntarily into, and may merge with and into, the Borrower or any other Subsidiary, and the assets or stock of any Subsidiary may be purchased or otherwise acquired by the Borrower or any other Subsidiary; (b) so long as no Default (by reason of the violation of Section ------- 7.2.4) has occurred and is continuing or would occur after giving effect ----- thereto, the Borrower or any of its Subsidiaries may purchase all or substantially all of the assets of any Person, or (in the case of any such Subsidiary) acquire such person by merger; and (c) provided that no Default has occurred and is continuing or would occur after giving effect thereto (including, without limitation, a Change in Control), the -35- Borrower may consolidate with or merge into any other Person, or convey, transfer or lease its properties and assets substantially as an entirety to any person, or permit any Person to merge into or consolidate with the Borrower if the Borrower is the surviving corporation or the surviving corporation or purchaser or lessee is a corporation incorporated under the laws of the United States of America or Canada and assumes the Obligations. SECTION 7.2.7 Asset Dispositions. The Borrower will not, and will ------------------ not permit any of its Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to, all or any substantial part of its assets (including accounts receivable and capital stock of Subsidiaries) to any Person, unless: (a) such sale, transfer, lease, contribution or conveyance is the ordinary course of its business; or (b) the net book value of such assets, together with the net book value of all other assets sold, transferred, leased, contributed or conveyed otherwise than in the ordinary course of business by the Borrower or any of its Subsidiaries pursuant to this Section 7.2.7(b) during the ---------------- most recent 12-month period since the Effective Date, does not exceed 10% of Net Tangible Assets computed as of the end of the most recent quarter preceding such sale; provided, however, that any such sales shall be -------- ------- disregarded for purposes of the limitation of this Section 7.2.7(b) if the ---------------- proceeds are invested in assets in similar or related lines of business of the Borrower, and provided further, that the Borrower may sell or otherwise -------- ------- dispose of assets in excess of such 10% if the proceeds from such sales or dispositions, which are not so reinvested, are retained by the Borrower as cash or Cash Equivalent Investments. SECTION 7.2.8 Transactions with Affiliates. The Borrower will not ---------------------------- enter into, or cause, suffer or permit to exist any arrangement or contract with any of its Affiliates unless such arrangement or contract is fair and equitable to the Borrower and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrower with a Person which is not one of its Affiliates. SECTION 7.2.9 Restrictive Agreements. The Borrower will not, and ---------------------- will not permit any of its Subsidiaries to, enter into any agreement (excluding any Loan Document and any agreement governing any Indebtedness permitted by clause (b) of Section 7.2.1 as to the assets financed with the proceeds of such - ---------- ------------- Indebtedness) prohibiting: (a) the ability of the Borrower to amend or otherwise modify any Loan Document; or (b) the ability of any Subsidiary to make any payments, directly or indirectly, to the Borrower by way of dividend, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or -36- other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrower where such prohibition or restriction has a Material Adverse Effect. SECTION 7.3 ERISA. The Borrower will not engage in any prohibited ----- transactions under Section 406 of ERISA or under Section 4975 of the Internal Revenue Code, which would subject the Borrower to any tax, penalty or other liabilities having a Material Adverse Effect. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 Listing of Events of Default. Each of the following ---------------------------- events or occurrences described in this Section 8.1 shall constitute an "Event ----------- ----- of Default". - ---------- SECTION 8.1.1 Non-Payment of Obligations. The Borrower shall default -------------------------- in the payment when due of any principal of or interest on any Loan or the Borrower shall default (and such default shall continue unremedied for a period of five Business Days) in the payment when due of any Facility Fee, Utilization Fee or of any other Obligation. SECTION 8.1.2 Breach of Warranty. Any representation or warranty of ------------------ the Borrower made or deemed to be restated or remade in any Loan Document or any other writing or certificate furnished by or on behalf of the Borrower to the Administrative Agent or any Lender for the purposes of or in connection with any Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect when made or deemed made in any material respect. SECTION 8.1.3 Non-Performance of Certain Covenants and Obligations. ---------------------------------------------------- The Borrower shall default in the due performance and observance of any of its obligations under Section 7.2 (other than Sections 7.2.4 and 7.2.8 ). ----------- -------------- ----- SECTION 8.1.4 Non-Performance of Other Covenants and Obligations. -------------------------------------------------- The Borrower shall default in the due performance and observance of any other covenant or agreement contained in any Loan Document, and such default shall continue unremedied for a period of 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent. SECTION 8.1.5 Default on Other Indebtedness. A default shall occur ----------------------------- in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness of the Borrower or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable -37- prior to its expressed maturity, in either case, such default having a principal amount, individually or in the aggregate, in excess of $20,000,000 (other than ---------- Indebtedness described in Section 8.1.1 ). -------------- SECTION 8.1.6 Judgments. Any judgment or order for the payment of --------- money in excess of $20,000,000 (taking into account any Insurance proceeds payable under a policy where the insurer has accepted coverage without reservation) shall be rendered against the Borrower and either: (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or (b) there shall be any period of fifteen (15) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. SECTION 8.1.7 Pension Plans. Any of the following events shall occur ------------- with respect to any Pension Plan: (a) the institution of any steps by the Borrower, any member of its Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, the Borrower or any such member could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $20,000,000; or (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. SECTION 8.1.8 Control of the Borrower. Any Change in Control shall ----------------------- occur. SECTION 8.1.9 Bankruptcy, Insolvency. The Borrower shall: ---------------------- (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower or a substantial portion of its property, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestration or other custodian for the Borrower or for a substantial part of its property, and such trustee, receiver, sequestration or other custodian shall not be discharged within 60 days, provided that nothing in -------- the Loan Documents shall prohibit or restrict any right the Administrative -38- Agent or any Lender may have under applicable law to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend its rights under the Loan Documents (and the Borrower shall not object to any such appearance); (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower, and, if any such case or proceeding is not commenced by the Borrower, such case or proceeding shall be consented to or acquiesced in by the Borrower or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided -------- that nothing in the Loan Documents shall prohibit or restrict any right the Administrative Agent or any Lender may have under applicable law to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend its rights under the Loan Documents (and the Borrower shall not object to any such appearance); or (e) take any corporate action authorizing, or in furtherance of, any of the foregoing. SECTION 8.2 Action if Bankruptcy. If any Event of Default described -------------------- in clauses (a) through (e) of Section 8.1.9 shall occur with respect to the ----------- --- ------------- Borrower, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 8.3 Action if Other Event of Default. If any Event of -------------------------------- Default (other than any Event of Default described in clauses (a) through (e) of ----------- --- Section 8.1.9) shall occur for any reason, whether voluntary or involuntary, and - -------------- be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by written notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment and/or, as the case may be, the Commitments shall terminate. The rights provided for in the Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. SECTION 8.4 Rescission of Declaration. Any declaration made pursuant ------------------------- to Section 8.3 may, should the Required Lenders in their sole and absolute ----------- discretion so elect, be rescinded by written notice to the Borrower at any time after the principal of the Loans and the Notes shall have become due and payable, but before any judgment or decree for the payment of the monies so due, or any part thereof, shall have been entered; provided that the Borrower shall -------- have paid all arrears of interest upon the Loans and all other amounts then owed to the -39- Administrative Agent and the Lenders including all costs, expenses and liabilities incurred by the Administrative Agent and the Lenders in respect of such declaration and all consequences thereof (except that principal of the Loans which by such declaration shall have become payable) and every other Event of Default shall have been made good, waived or cured; provided that no such -------- rescission or annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon. ARTICLE IX THE AGENT SECTION 9.1 Actions. (a) Each Lender hereby appoints CUSA as its ------- Administrative Agent under and for purposes of each Loan Document. Each Lender authorizes the Administrative Agent to act on behalf of such Lender under each Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in any Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into any Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) Each Lender hereby agrees to indemnify (which indemnity shall survive any termination of this Agreement) the Agent-Related Persons pro rata --- ---- according to such Lender's Percentage, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Agent-Related Persons in any way relating to or arising out of any Loan Document, including reasonable attorneys' fees, and as to which the Administrative Agent is not reimbursed by the Borrower; provided, however, that -------- ------- no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted from the Agent-Related Person's gross negligence or wilful misconduct. No Agent- Related Persons shall be required to take any action under any Loan Document, or to prosecute or defend any suit in respect of or any Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Administrative Agent shall be or become, in its determination, -40- inadequate, the Agent-Related Person may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. SECTION 9.2 Funding Reliance. Unless the Administrative Agent shall ---------------- have been notified by telephone, confirmed in writing, by any Lender by 12:00 Noon, New York City time, on the Business Day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, may, but shall not be required to, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and the Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing; provided, that if such Lender makes available the -------- amount which is its Percentage of such Borrowing on or before the next Business Day following the day when due, the interest rate payable on such amount shall be the Federal Funds Rate. SECTION 9.3 Exculpation. No Agent-Related Person shall be liable to ----------- any Lender for any action taken or omitted to be taken by it under or any Loan Document, or in connection therewith, except for its own wilful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of any Loan Document, nor to make any inquiry respecting the performance by the Borrower of its obligations under any Loan Document. Any such inquiry which may be made by the Administrative Agent shall not obligate it to make any further inquiry or to take any action. Each Agent-Related Person shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Administrative Agent believes to be genuine and to have been presented by a proper Person. SECTION 9.4 Successor. The Administrative Agent may resign as such --------- at any time upon at least 30 days' prior notice to the Borrower and all Lenders. If the Administrative Agent at any time shall resign, the Required Lenders may, within ten (10) days after such notice and with the consent of the Borrower (not to be unreasonably withheld), appoint another Lender as a successor Administrative Agent which shall thereupon become the Administrative Agent hereunder. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, after notice to and consultation with the Borrower, appoint a successor Administrative Agent, which shall be one of the Lenders or an Eligible Assignee, and shall have a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the retiring Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may reasonably -41- request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After the effective date of any retiring Administrative Agents resignation hereunder as the Administrative Agent, the provisions of (a) this Article IX shall inure to its benefit as to any actions ---------- taken or omitted to be taken by it while it was the Administrative Agent under this Agreement; and (b) Section 10.3 and Section 10.4 shall continue to inure to ------------ ------------ its benefit. SECTION 9.5 Loans by CUSA. CUSA shall have the same rights and ------------- powers with respect to the Loans made by it or any of its Affiliates as any other Lender and may exercise the same as if it were not the Administrative Agent. CUSA and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if CUSA were not the Administrative Agent hereunder. SECTION 9.6 Reliance by Administrative Agent. (a) The Administrative -------------------------------- Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under any Loan Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 5.1, each Lender that has executed this Agreement shall be ----------- deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender. SECTION 9.7 Notice of Default. The Administrative Agent shall not be ----------------- deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested -42- by the Required Lenders in accordance with Article VIII; provided, however, that -------- ------- unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders. SECTION 9.8 Credit Decisions. Each Lender acknowledges that it has, ---------------- independently of the Agent-Related Person and each other Lender, and based on such Lender's review of the financial information of the Borrower, the Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of the Administrative Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under any Loan Document. SECTION 9.9 Copies. The Administrative Agent shall give prompt ------ notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by the Borrower). The Administrative Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Administrative Agent from the Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of this Agreement. ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1 Waivers, Amendments. (a) The provisions of each Loan ------------------- Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided, however, that no such amendment, -------- ------- modification or waiver shall (i) forgive the principal amount or extend the final scheduled date of maturity of any Loan, reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Commitment without the consent of each Lender directly affected thereby; (ii) amend, modify or waive any provision of this Section 10.1 or any percentage ------------ specified in the definition of Required Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under the Loan Documents, in each case without the written consent of all Lenders; (iii) amend, modify or waive any pro rata provision of Section 4.9, or any provision in the --- ---- ----------- Loan Documents which provides for amounts paid in respect of the Obligations to be shared among the Lenders ratably, without the consent of all Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Borrower and its Subsidiaries, the Lenders and the Administrative Agent shall be restored to their -43- former position and rights and under the Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. (b) No failure or delay on the part of the Administrative Agent or any Lender in exercising any power or right under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Administrative Agent or any Lender under any Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 10.2 Notices. All notices and other communications provided ------- to any party hereto under any Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth on Schedule 1.1(b) or set forth in the Lender --------------- Assignment Agreement or at such other address or facsimile number as may be designated by such party in a written notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid shall be effective five Business Days after being sent or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted (if confirmed). SECTION 10.3 Payment of Costs and Expenses. (a) The Borrower agrees ----------------------------- to pay promptly on demand all reasonable costs and expenses of the Lead Arrangers and the Administrative Agent (including the reasonable fees and out- of-pocket costs and expenses of counsel to the Administrative Agent) in connection with: (i) the negotiation, preparation, execution and delivery of each Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to any Loan Document as may from time to time hereafter be required; and (ii) the preparation and review of the form of any document or instrument relevant to any Loan Document; provided, however, that the -------- ------- Borrower shall have no obligation to pay for the cost of the documentation of assignments or participations as provided in Section ------- 10.11 (unless such assignment is made pursuant to Section 4.11); ----- ------------- in each case, upon presentation of statement of account, whether or not the transactions contemplated hereby are consummated. (b) The Borrower further agrees to pay upon demand, and to save the Administrative Agent and the Lenders harmless from all liability for, any stamp or other taxes -44- which may be payable in connection with the execution, delivery or enforcement of any Loan Document or with the Borrowings hereunder. The Borrower also agrees to reimburse the Administrative Agent and each Lender, as applicable, promptly upon demand for (x) all reasonable out-of-pocket costs and expenses (including fees and out-of-pocket expenses of counsel) incurred by the Administrative Agent and each Lender in connection with the negotiation of any restructuring or work- out, whether or not consummated, of any Obligations and (y) all out-of-pocket costs and expenses (including fees and out-of-pocket costs and expenses of counsel) by the Administrative Agent and each Lender in connection with the enforcement of any Obligations after an Event of Default; provided that, in -------- either case, the Borrower shall not be obligated to reimburse such costs and expenses that are found in a final judgment by a court of competent jurisdiction to have been incurred in an attempt to enforce such rights and remedies that were pursued by such Administrative Agent or Lender in bad faith and without any reasonable basis in fact or law. SECTION 10.4 Indemnification. (a) In consideration of the execution --------------- and delivery of this Agreement by each Lender and the extension of the Commitments, the Borrower hereby indemnifies, exonerates and holds the Administrative Agent, the Lead Arrangers and each Lender and each of their respective affiliates, officers, directors and employees (collectively, the "Indemnified Parties") free and harmless from and against any and all losses, ------------------- costs, actions, causes of action, suits, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including any amounts paid to any Agent-Related Person pursuant to Section ------- 9.1(b) and reasonable attorneys' fees and disbursements but excluding claims for - ------ lost profits (collectively, the "Indemnified Liabilities"), joint or several, ----------------------- that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or relating to: (i) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan; (ii) the entering into and performance of any Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to Article VI not to fund any Borrowing); ---------- (iii) any investigation, litigation, proceeding, or obligation related to any Environmental Law or other matter in any case arising out of the relationship of the parties under this Agreement; or (iv) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission or release from, any real property owned, leased or operated by any Loan Party thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), or at any other locations regardless of whether caused by, or -45- within the control of, such Loan Party, where such claim or liability arises out of the relationship of the parties under this Agreement; whether or not such investigation, litigation or proceeding is brought by the Borrower or its Affiliates, any of their respective shareholders or creditors, an Indemnified Party or any other person, or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated, except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's (i) gross negligence or willful misconduct or (ii) breach of such Indemnified Party's obligations under this Agreement. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. (b) To the extent permitted by applicable law, no Indemnified Party shall have any liability to the Borrower or its Affiliates or any of their respective shareholders or creditors under any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, any Loan or the use of the proceeds thereof. SECTION 10.5 Survival. The obligations of the Borrower under -------- Sections 4.3, 4.5 , 4.6 , 4.7 , 10.3 and 10.4 , and the obligations of the - ------------ --- --- --- ---- ---- Lenders under Section 9.1, shall in each case survive any termination of this ----------- Agreement, the payment in full of all Obligations and the termination of all Commitments. The representations and warranties made by the Borrower in each Loan Document shall survive the execution and delivery of such Loan Document. SECTION 10.6 Severability. Any provision of any Loan Document which ------------ is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 10.7 Headings. The various headings of each Loan Document -------- are inserted for convenience only and shall not affect the meaning or interpretation of such other Loan Document or any provisions hereof or thereof. SECTION 10.8 Execution in Counterparts. This Agreement may be ------------------------- executed by the parties hereto in several counterparts, each of which shall be executed by the Borrower and the Administrative Agent and be deemed to be an original and all of which shall constitute together but one and the same agreement. SECTION 10.9 Governing Law; Entire Agreement. This Agreement, the ------------------------------- Notes and the rights and obligations of the parties under this Agreement shall be governed by, and construed and interpreted in accordance with, the law of the state of New York. The Loan Documents, together with the fee letter referred to in Section 3.3.3 and the commitment letter of ------------- -46- even date therewith, represent the agreement of the Borrower, the Administrative Agent and the Lenders and supersede any and all prior agreements and understandings, oral or written, relative or with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to in the Loan Documents. SECTION 10.10 Successors and Assigns. This Agreement shall be ---------------------- binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that: -------- ------- (a) the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent and all Lenders; and (b) the rights of sale, assignment and transfer of the Lenders are subject to Section 10.11. ------------- SECTION 10.11 Sale and Transfer of Loans and Notes; Participations in ------------------------------------------------------- Loans and Notes. Each Lender may assign, or sell participations in, its Loans - --------------- and Commitments to one or more other Persons in accordance with this Section ------- 10.11. - ----- SECTION 10.11.1 Assignments. (a) Any Lender (an "Assignor") may, in ----------- -------- accordance with applicable law, at any time and from time to time assign to any Eligible Assignee, with the consent of the Administrative Agent and, except at any time a Default or Event of Default shall have occurred and be continuing, the Borrower (which, in each case, shall not be unreasonably withheld or delayed), all or any part of its rights and obligations under this Agreement pursuant to a Lender Assignment Agreement, executed by such Eligible Assignee, such Assignor and any other Person whose consent is required pursuant to this paragraph, and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that no such assignment to an Eligible -------- Assignee (other than any Lender or any affiliate thereof) shall be in an aggregate principal amount of less than $10,000,000 (other than in the case of an assignment of all of a Lender's interests under this Agreement), unless otherwise agreed by the Borrower and the Administrative Agent and; provided, -------- further, that after giving effect to any such assignment the assigning Lender - ------- shall have a Commitment remaining of at least $10,000,000 in the aggregate amount (other than in the case of an assignment of all of a Lender's interests under this Agreement). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Lender Assignment Agreement, (x) the Eligible Assignee thereunder shall be a party hereto and, to the extent provided in such Lender Assignment Agreement, have the rights and obligations of a Lender hereunder with a Commitment and/or Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent provided in such Lender Assignment Agreement, be released from its obligations under this Agreement (and, in the case of a Lender Assignment Agreement covering all of an Assignor's rights and obligations under this Agreement, such Assignor shall cease to be a party hereto). Notwithstanding any provision of this Section ------- 10.11, the consent of the Borrower shall not be - ----- -47- required for any assignment that occurs when a Default or an Event of Default pursuant to Section 8.1 shall have occurred and be continuing with respect to ----------- the Borrower. (b) The Administrative Agent shall, on behalf of the Borrower, maintain at its address referred to on Schedule 1.1(b) a copy of each Lender --------------- Assignment Agreement delivered to it and a register (the "Register") for the -------- recordation of the names and addresses of the Lenders and the Commitment of, and the principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans and any Notes evidencing the Loans recorded therein for all purposes of this Agreement. Any assignment of any Loan, whether or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Loan, accompanied by a duly executed Lender Assignment Agreement, and thereupon one or more new Notes shall be issued to the designated Eligible Assignee. (c) Upon its receipt of a Lender Assignment Agreement executed by an Assignor, an Eligible Assignee and any other Person whose consent is required by Section 10.11.1(a), together with payment to the Administrative Agent of a - ------------------ registration and processing fee of $3,000, the Administrative Agent shall (i) promptly accept such Lender Assignment Agreement and (ii) record the information contained therein in the Register on the effective date determined pursuant thereto. (d) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section 10.11.1 concerning assignments of Loans --------------- relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. (e) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) of this Section 10.11.1. ------------- --------------- SECTION 10.11.2 Participations. Any Lender may at any time sell to -------------- one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "Participant") participating interests in ----------- any of the Loans, Commitments, or other interests of such Lender hereunder; provided, however, that: - -------- ------- (a) no participation contemplated in this Section 10.11.2 shall --------------- relieve such Lender from its Commitments or its other obligations under any Loan Document; -48- (b) such Lender shall remain solely responsible for the performance of its Commitments and such other obligations; (c) the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under each of the Loan Documents; (d) no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action under any Loan Document, except as provided in clause (f) of this Section 10.11.2; ---------- --------------- (e) the Borrower shall not be required to pay any amount under Sections 4.3, 4.4 , 4.5 , 4.6 , 4.7 , 4.8 , 4.9 , 10.3 and 10.4 , ------------ --- --- --- --- --- --- ---- ---- that is greater than the amount which it would have been required to pay had no participating interest been sold; (f) in no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Loans or any fees payable hereunder, extend the due date of such principal, interest or fee payments or increase the amount or extend the Commitment Termination Date of such Loans, in each case to the extent subject to such participation; (g) the Borrower agrees that if amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such -------- participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 4.10 as ------------ fully as if it were a Lender hereunder; and (h) the Borrower also agrees that each Participant shall be entitled to the benefits of Sections 4.3, 4.6 and 4.7 with respect to its ------------ --- --- participation in the Commitments, and the Loans outstanding from time to time as if it was a Lender; provided that, in the case of Section 4.7, such -------- ----------- Participant shall have complied with the requirements of said Section and provided, further, that no Participant shall be entitled to receive any -------- ------- greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. SECTION 10.12 Other Transactions. Nothing contained herein shall ------------------ preclude the Administrative Agent or any other Lender from engaging in any transaction, in addition to those -49- contemplated by any Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 10.13 Submission To Jurisdiction; Waivers. Each of the ----------------------------------- Borrower, the Administrative Agent and the Lenders hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to the Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non- exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Person at its address set forth on Schedule 1.1(b) or at such other address --------------- of which the Administrative Agent shall have been notified pursuant to Section 10.2; ------------ (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. SECTION 10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE --------------------- ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO ANY LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. SECTION 10.15 Non-Recourse Persons. The Lenders acknowledge that no -------------------- Non-Recourse Person shall have any responsibility or liability for the Obligations. SECTION 10.16 Acknowledgments. The Borrower hereby acknowledges --------------- that: (a) it has been advised by counsel in the negotiation, execution and delivery of the Loan Documents; -50- (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with any of the Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created by any of the Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. SECTION 10.17 Confidentiality. Each of the Administrative Agent and --------------- each Lender agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement; provided that nothing herein -------- shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or any affiliate of any Lender, (b) to any transferee or prospective transferee that agrees to comply with the provisions of this Section 10.17, (c) to its employees, ------------- directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, (d) upon the request or demand of any governmental authority, (e) in response to any order of any court or other governmental authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (i) in connection with the exercise of any remedy under any Loan Document. -51- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers as of the day and year first above written. EDISON MISSION ENERGY By:__________________________________ Name: Kevin M. Smith Title: Vice President and Treasurer CITICORP USA, INC., as Administrative Agent and Initial Lender By:__________________________________ Name: Title: CREDIT SUISSE FIRST BOSTON, as Initial Lender By:__________________________________ Name: Title: LEHMAN COMMERCIAL PAPER INC., as Initial Lender By:__________________________________ Name: Title: SOCIETE GENERALE, as Initial Lender By:__________________________________ Name: Title: [Additional Lenders] -52- ANNEX I Pricing Grid
BASIS FOR PRICING LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 Applicable Margin 40.00 bps 50.00 bps 60.00 bps 80.00 bps 160.00 bps (LIBO Rate Loans Applicable Margin 0.00 bps 0.00 bps 0.00 bps 0.00 bps 0.00 bps (Base Rate Loans) Facility Fee (1) 10.00 bps 12.50 bps 15.00 bps 20.00 bps 40.00 bps Utilization Fee (0% less than or equal to 0.00 bps 0.00 bps 0.00 bps 0.00 bps 0.00 bps n less than 33 1/3%) (33 1/3% less than or equal 12.50 bps 12.50 bps 12.50 bps 12.50 bps 12.50 bps to n less than 66 2/3%) (66 2/3% less than or 12.50 bps 12.50 bps 12.50 bps 12.50 bps 12.50 bps equal to n less than or equal to 100%) n=usage (2)
(1) Paid quarterly in arrears on each bank's commitment irrespective of usage. (2) The percentage of total outstanding Loans as compared to the total commitment amount. bps = basis points per annum -54- The Applicable Margin shall be determined at Level 1 so long as the ------- Borrower's Debt Rating is A3 or better by Moody's and A- or better by S&P. The Applicable Margin shall be determined at Level 2 so long as the ------- Borrower's Debt Rating is Baa1 by Moody's and BBB+ by S&P. The Applicable Margin shall be determined at Level 3 so long as the ------- Borrower's Debt Rating is Baa2 by Moody's and BBB by S&P. The Applicable Margin shall be determined at Level 4 so long as the ------- Borrower's Debt Rating is Baa3 by Moody's and BBB- by S&P. The Applicable Margin shall be determined at Level 5 so long as the ------- Borrower's Debt Rating is lower than Baa3 by Moody's and BBB- by S&P, or if the Borrower has not received a final Debt Rating before June 1, 1999. In the event that the Debt Rating established by Moody's is at a different Level than the Debt Rating established by S&P, the lower Debt Rating shall apply and the Level associated with such lower rating shall be the Applicable Margin, except that, in the event that the difference is greater than one rating Level, the average of the two Debt Ratings by Moody's and by S&P shall apply to determine the Applicable Margin. Changes in the Level for determining the Applicable Margin resulting from a change in rating(s) shall become effective on the day such change in the ratings is announced by the relevant rating agency. In the event that the Borrower does not maintain a Debt Rating with both Moody's and S&P, the Borrower may, with the reasonable consent of Required Lenders, select Duff & Phelps, Fitch Investor Services Inc. or another nationally recognized rating agency to replace Moody's or S&P, and such replacement agency and the Debt Rating established by such agency shall be used thereafter in the calculation of Applicable Margin in the same fashion as the agency which no longer maintains such Debt Rating. From the date which the Debt Rating of Moody's or S&P ceases to be current until the date which is 120 days thereafter, the Applicable Margin shall be determined by reference to the Debt Ratings of Moody's and S&P most recently in effect. In the event that such replacement agency has not established a Debt Rating within 120 days after the Debt Rating of Moody's or S&P ceases to be current, then, until such time as such Debt Rating is established, the Applicable Margin shall be determined at one Level lower than the Level otherwise established based on the remaining Debt Rating. -----END PRIVACY-ENHANCED MESSAGE-----