-----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, PMkEbJM7u0El+1jTRnfbowgQjPeS3nACY/8UWvcA3iBBEMiWYA6zt6R0BPnrRtRW NTO3RegA808diqjOY/y/7w== 0000912057-01-509789.txt : 20010424 0000912057-01-509789.hdr.sgml : 20010424 ACCESSION NUMBER: 0000912057-01-509789 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 70 FILED AS OF DATE: 20010420 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIDWEST GENERATION LLC CENTRAL INDEX KEY: 0001134016 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-59348 FILM NUMBER: 1608094 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL PLZ. STREET 2: 4400 S. LASALLE ST. #3500 CITY: CHICAGO STATE: IL ZIP: 60605 BUSINESS PHONE: 3125836000 MAIL ADDRESS: STREET 1: ONE FINANCIAL PLZ. STREET 2: 4400 S. LASALLE ST. #3500 CITY: CHICAGO STATE: IL ZIP: 60605 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: S-4 SEC ACT: SEC FILE NUMBER: 333-59348-01 FILM NUMBER: 1608095 BUSINESS ADDRESS: STREET 1: 18101 VON KARMAN AVE STREET 2: STE 1700 CITY: IRVINE STATE: CA ZIP: 92612 BUSINESS PHONE: 9497525588 MAIL ADDRESS: STREET 1: 18101 VON KARMAN AVE STREET 2: STE 1700 CITY: IRVINE STATE: CA ZIP: 92612 FORMER COMPANY: FORMER CONFORMED NAME: MISSION ENERGY CO DATE OF NAME CHANGE: 19941003 S-4 1 a2031364zs-4.txt S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 2001 REGISTRATION NO. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------ MIDWEST GENERATION, LLC EDISON MISSION ENERGY (Exact names of Registrants as specified in their charters) DELAWARE CALIFORNIA (State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or organization) organization) 4911 4911 (Primary Standard Industrial Classification Code Number) (Primary Standard Industrial Classification Code Number) 33-0868558 95-4031807 (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.) ONE FINANCIAL PLACE 18101 VON KARMAN AVENUE, SUITE 1700 440 SOUTH LASALLE STREET, SUITE 3500 IRVINE, CALIFORNIA 92612 CHICAGO, ILLINOIS 60605 (949) 752-5588 (312) 583-6000 (Address, including zip code, and telephone number, (Address, including zip code, and telephone number, including area code, of registrant's principal executive including area code, of registrant's principal executive offices) offices)
STEVEN EISENBERG, ESQ. EDISON MISSION ENERGY 18101 VON KARMAN AVENUE, SUITE 1700 IRVINE, CALIFORNIA 92612 (949) 752-5588 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------ COPY TO: ROBERT M. CHILSTROM, ESQ. HAROLD F. MOORE, ESQ. Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 ------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. ------------------------------ If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. / / If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ------------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PRICE PER AGGREGATE AMOUNT OF TO BE REGISTERED REGISTERED CERTIFICATE(1) OFFERING PRICE(1) REGISTRATION FEE Pass-Through Certificates, Series A......... $333,500,000 100% $333,500,000 $83,375 Pass-Through Certificates, Series B......... $813,500,000 100% $813,500,000 $203,375 Guarantees of Lease Payments of Midwest Generation, LLC by Edison Mission Energy.................................... (2) (2) (2) (2)
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f) under the Securities Act of 1933, as amended. (2) No separate consideration is payable in respect of these Guarantees. Pursuant to Rule 457(n), no separate fee is payable in connection with these Guarantees. ------------------------------ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION (8)(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION (8)(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUBJECT TO COMPLETION, DATED APRIL 20, 2001 THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. PROSPECTUS Offer to Exchange $333,500,000 8.30% Series A Pass-Through Certificates and $813,500,000 8.56% Series B Pass-Through Certificates for Identical Principal Amounts of 8.30% Series A Pass-Through Certificates and 8.56% Series B Pass-Through Certificates, Respectively, Which Have Been Registered Under the Securities Act of 1933, of MIDWEST GENERATION, LLC A SUBSIDIARY OF EDISON MISSION ENERGY (GUARANTOR OF LEASE PAYMENTS) [LOGO] THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [30 DAYS AFTER COMMENCEMENT OF EXCHANGE OFFER], 2001, UNLESS EXTENDED. -------------------------- Terms of the exchange offer: - The new certificates are being registered with the Securities and Exchange Commission and are being offered in exchange for the original certificates that were previously issued in an offering exempt from the Securities and Exchange Commission's registration requirements. The terms of the exchange offer are summarized below and more fully described in this prospectus. - We will exchange all original certificates that are validly tendered and not withdrawn prior to the expiration of the exchange offer. - You may withdraw tenders of original certificates at any time prior to the expiration of the exchange offer. - We believe that the exchange of original certificates will not be a taxable event for U.S. federal income tax purposes, but you should see "Material U.S. Federal Income Tax Consequences" on page 131 for more information. - We will not receive any proceeds from the exchange offer. - The exchange certificates will represent the same fractional undivided interest in two pass-through trusts as the original certificates they are replacing. The terms of the exchange certificates are substantially identical to the original certificates, except that the exchange certificates are registered under the Securities Act and the transfer restrictions and registration rights applicable to the original certificates do not apply to the exchange certificates. -------------------------- SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF THE RISKS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR ORIGINAL CERTIFICATES.
PASS-THROUGH ANNUAL FINAL CERTIFICATES PRINCIPAL AMOUNT INTEREST RATE DISTRIBUTION DATE Series A.............................. $333,500,000 8.30% July 2, 2009 Series B.............................. $813,500,000 8.56% January 2, 2016 TOTAL............................... $1,147,000,000
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS - , 2001. TABLE OF CONTENTS
PAGE -------- Forward-Looking Statements.................................. ii Available Information....................................... ii Incorporation of Documents by Reference..................... iii Prospectus Summary.......................................... 1 Edison Mission Energy....................................... 5 Midwest Generation, LLC..................................... 6 The Leveraged Lease Transactions............................ 7 Lease Transactions Cash Flow Structure...................... 9 Summary of Terms of the Exchange Certificates............... 10 Summary Consolidated Financial Data of Edison Mission Energy.................................................... 17 Summary Financial Data of Midwest Generation, LLC........... 18 Risk Factors................................................ 19 Use of Proceeds............................................. 34 The Exchange Offer.......................................... 35 Capitalization.............................................. 44 Selected Consolidated Financial Data of Edison Mission Energy.................................................... 45 Selected Financial Data of Midwest Generation............... 46 Management's Discussion and Analysis of Financial Condition of Midwest Generation, LLC................................ 47 Our Business................................................ 55 Regulation.................................................. 74 Management of Midwest Generation, LLC....................... 85 Intercompany Relationships and Related Transactions......... 87 Description of the Certificates............................. 90 Description of the Lessor Notes............................. 103 Description of the Leases and Other Lease Documents......... 112 Book-Entry; Delivery and Form............................... 126 Exchange Offer; Registration Rights......................... 129 Material U.S. Federal Income Tax Consequences............... 131 ERISA Considerations........................................ 134 Plan of Distribution........................................ 136 Legal Matters............................................... 137 Experts..................................................... 137 Index to Financial Statements............................... F-1 Appendix A.................................................. A-1
i FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements. We and Edison Mission Energy have based these forward-looking statements on our current expectations and projections about future events based upon our knowledge of facts as of the date of this prospectus and our assumptions about future events. These forward-looking statements are subject to various risks and uncertainties that may be outside our or Edison Mission Energy's control, including, among other things: - the direct and indirect effects of the current California power crisis on Edison Mission Energy and us and on Edison Mission Energy's investments, as well as the measures adopted and being contemplated by federal and state authorities to address the crisis; - general political, economic and business conditions in the countries in which Edison Mission Energy does business; - governmental, statutory, regulatory or administrative changes or initiatives affecting us, Edison Mission Energy or the electricity industry generally; - political and business risks of international projects, including uncertainties associated with currency exchange rates, currency repatriation, expropriation, political instability, privatization efforts and other issues; - supply, demand and price for electric capacity and energy in the markets served by our generating units and/or the markets served by Edison Mission Energy's other generating units; - competition from other power plants, including new plants and technologies that may be developed in the future; - operating risks, including equipment failure, dispatch levels, availability, heat rate and output; - the cost, availability and pricing of fuel and fuel transportation services for our generating units and/or Edison Mission Energy's other generating units; - Edison Mission Energy's ability to complete the development or acquisition of current and future projects; - Edison Mission Energy's ability to maintain an investment grade rating; and - Edison Mission Energy's ability to refinance short-term debt or raise additional financing for its future cash requirements. We use words like "believe," "expect," "anticipate," "intend," "may," "will," "should," "estimate," "projected" and similar expressions to help identify forward-looking statements in this prospectus. For additional factors that could affect the validity of our forward-looking statements, you should read "Risk Factors" beginning on page 19. In light of these and other risks, uncertainties and assumptions, actual events or results may be very different from those expressed or implied in the forward-looking statements in this prospectus or may not occur. We have no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. AVAILABLE INFORMATION We are Midwest Generation, LLC, a wholly-owned indirect subsidiary of Edison Mission Energy, formed for the purpose of acquiring, in 1999, power plants totaling 9,539 megawatts of generating capacity located in Illinois. Edison Mission Energy is subject to the informational requirements of the Securities Exchange Act of 1934 and, in accordance with these requirements, files reports and information statements and other information with the Securities and Exchange Commission. In connection with the exchange offer, we become subject to those requirements, and we too will file reports and information statements and other information with the SEC. These reports and information statements and other information filed by Edison Mission Energy or us with the SEC can be read and copied at the Public Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, ii N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies may be obtained from the Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a Web site that contains reports, proxy and information statements and other materials that are filed through the SEC's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. This Web site can be accessed at http://www.sec.gov. This prospectus constitutes a part of a registration statement on Form S-4 filed by Edison Mission Energy and us with the SEC under the Securities Act. As permitted by the rules and regulations of the SEC, this prospectus does not contain all the information contained in the registration statement and the exhibits and schedules to the registration statement. Reference is made to the registration statement and its exhibits and schedules for further information with respect to Edison Mission Energy, us and the securities offered through this exchange offer. Statements contained in this prospectus concerning the provisions of any documents filed as an exhibit to the registration statement or otherwise filed with the SEC are not necessarily complete, and in each instance reference is made to the copy of the document so filed. Each of those statements is qualified in its entirety by the reference to that document. INCORPORATION OF DOCUMENTS BY REFERENCE The following documents filed by Edison Mission Energy with the SEC are incorporated by reference into this prospectus: (i) Edison Mission Energy's Annual Report on Form 10-K for the year ended December 31, 2000; and (ii) Edison Mission Energy's Current Report on Form 8-K dated March 22, 2001. All reports and other documents Edison Mission Energy subsequently files pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act subsequent to the date of this prospectus and prior to the date on which the exchange offer described in this prospectus is terminated shall be deemed to be incorporated by reference into this prospectus and to be part of this prospectus from the date Edison Mission Energy subsequently files these reports and documents. Copies of the Edison Mission Energy Annual Report on Form 10-K for the year ended December 31, 2000 and Current Report on Form 8-K, dated March 22, 2001, are available, without charge, from Edison Mission Energy. You may request a copy of any of these filings, at no cost, by writing or telephoning Edison Mission Energy at the following address or phone number: Edison Mission Energy 18101 Von Karman Avenue, Suite 1700 Irvine, California 92612 (949) 752-5588 Attention: Corporate Secretary IN ORDER TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THIS INFORMATION NO LATER THAN 5 BUSINESS DAYS BEFORE YOU MAKE YOUR INVESTMENT DECISION. Any statement contained in a document incorporated by reference in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus modifies or supersedes that statement. Any statement so modified or superseded will not be deemed to constitute a part of this prospectus except as so modified or superseded. ------------------------ iii PROSPECTUS SUMMARY THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND MAY NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. THIS PROSPECTUS INCLUDES SPECIFIC TERMS OF THE EXCHANGE CERTIFICATES WE ARE OFFERING, AS WELL AS INFORMATION REGARDING OUR BUSINESS AND EDISON MISSION ENERGY'S BUSINESS AND DETAILED FINANCIAL DATA. WE ENCOURAGE YOU TO READ THIS PROSPECTUS IN ITS ENTIRETY. IN THIS PROSPECTUS, THE WORDS "MIDWEST," "WE," "OUR," "OURS" AND "US" REFER TO MIDWEST GENERATION, LLC. "EDISON MISSION ENERGY" REFERS TO EDISON MISSION ENERGY AND ITS DIRECT AND INDIRECT SUBSIDIARIES, UNLESS THE CONTEXT OTHERWISE REQUIRES. ELECTRIC INDUSTRY TERMS THAT ARE USED AND NOT OTHERWISE DEFINED IN THIS PROSPECTUS HAVE THE MEANINGS GIVEN TO THOSE TERMS IN THE "GLOSSARY" ATTACHED AS APPENDIX A. YOU SHOULD PAY SPECIAL ATTENTION TO THE "RISK FACTORS" SECTION BEGINNING ON PAGE 19 OF THIS PROSPECTUS. SUMMARY OF THE EXCHANGE OFFER On August 24, 2000, we completed the private offering of $333,500,000 aggregate principal amount of 8.30% Series A Pass-Through Certificates and $813,500,000 aggregate principal amount of 8.56% Series B Pass-Through Certificates. As part of that offering, we and Edison Mission Energy entered into a registration rights agreement with the initial purchasers of these original certificates in which we agreed, among other things, to deliver this prospectus to you and to complete an exchange offer for the original certificates. Below is a summary of the exchange offer. SECURITIES OFFERED................... Up to $333,500,000 aggregate principal amount of new 8.30% Series A Pass-Through Certificates and up to $813,500,000 aggregate principal amount of new 8.56% Series B Pass-Through Certificates, which have been registered under the Securities Act. The form and terms of these exchange certificates are identical in all material respects to those of the original certificates. The exchange certificates, however, will not contain transfer restrictions and registration rights applicable to the original certificates. THE EXCHANGE OFFER................... We are offering to exchange $1,000 principal amount of our 8.30% Series A Pass-Through Certificates, which have been registered under the Securities Act, for $1,000 principal amount of our outstanding 8.30% Series A Pass-Through Certificates, and to exchange $1,000 principal amount of our 8.56% Series B Pass-Through Certificates, which have been registered under the Securities Act, for $1,000 principal amount of our outstanding 8.56% Series B Pass-Through Certificates. In order to be exchanged, original certificates must be properly tendered and accepted. All original certificates that are validly tendered and not withdrawn will be exchanged. We will issue exchange certificates promptly after the expiration of the exchange offer. RESALES.............................. Based on interpretations by the staff of the SEC, as detailed in a series of no-action letters issued by the SEC to third parties, we believe that the exchange certificates issued in the exchange offer may be offered for resale, resold or otherwise transferred by you without compliance with the registration and prospectus delivery requirements of the Securities Act as long as: - you are acquiring the exchange certificates in the ordinary course of your business;
1 - you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate, in a distribution of the exchange certificates; and - you are not an "affiliate" of ours or an "affiliate" of Edison Mission Energy. If you are an affiliate of ours or an affiliate of Edison Mission Energy, are engaged in or intend to engage in or have any arrangement or understanding with any person to participate in the distribution of the exchange certificates: - you cannot rely on the applicable interpretations of the staff of the SEC; and - you must comply with the registration requirements of the Securities Act in connection with any resale transaction. Each broker or dealer that receives exchange certificates for its own account in exchange for original certificates that were acquired as a result of market-making or other trading activities must acknowledge that it will comply with the registration and prospectus delivery requirements of the Securities Act in connection with any offer to resell, resale, or other transfer of the exchange certificates issued in the exchange offer, including the delivery of a prospectus that contains information with respect to any selling holder required by the Securities Act in connection with any resale of the exchange certificates. Furthermore, any broker-dealer that acquired any of its original certificates directly from us: - may not rely on the applicable interpretation of the staff of the SEC's position contained in Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan, Stanley & Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1983); and - must also be named as a selling certificateholder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction. EXPIRATION DATE...................... 5:00 p.m., New York City time, on -, 2001 unless we extend the expiration date. ACCRUED INTEREST ON THE EXCHANGE CERTIFICATES AND ORIGINAL CERTIFICATES....................... The exchange certificates will bear interest from the most recent date to which interest has been paid on the original certificates. If your original certificates are accepted for exchange, then you will receive interest on the exchange certificates and not on the original certificates.
2 CONDITIONS TO THE EXCHANGE OFFER..... The exchange offer is subject to customary conditions. We may assert or waive these conditions in our sole discretion. If we materially change the terms of the exchange offer, we will re-solicit tenders of the original certificates. Please read the section "The Exchange Offer--Conditions to the Exchange Offer" of this prospectus for more information regarding conditions to the exchange offer. PROCEDURES FOR TENDERING ORIGINAL CERTIFICATES....................... Except as described in the section titled "The Exchange Offer--Guaranteed Delivery Procedures," a tendering holder must, on or prior to the expiration date: - transmit a properly completed and duly executed letter of transmittal, including all other documents required by the letter of transmittal, to United States Trust Company of New York at the address listed in this prospectus; or - if original certificates are tendered in accordance with the book-entry procedures described in this prospectus, the tendering holder must transmit an agent's message to the exchange agent at the address listed in this prospectus. See "The Exchange Offer--Procedures for Tendering Outstanding Certificates." SPECIAL PROCEDURES FOR BENEFICIAL HOLDERS............................ If you are the beneficial holder of original certificates that are registered in the name of your broker, dealer, commercial bank, trust company or other nominee, and you wish to tender in the exchange offer, you should promptly contact the person in whose name your original certificates are registered and instruct that person to tender on your behalf. See "The Exchange Offer--Procedures for Tendering Outstanding Certificates." GUARANTEED DELIVERY PROCEDURES......................... If you wish to tender your original certificates and you cannot deliver your certificates, the letter of transmittal or any other required documents to the exchange agent before the expiration date, you may tender your original certificates by following the guaranteed delivery procedures under the heading "The Exchange Offer--Guaranteed Delivery Procedures." WITHDRAWAL RIGHTS.................... Tenders may be withdrawn at any time before 5:00 p.m., New York City time, on the expiration date. ACCEPTANCE OF ORIGINAL CERTIFICATES AND DELIVERY OF EXCHANGE CERTIFICATES....................... Subject to the conditions stated in the section "The Exchange Offer--Conditions to the Exchange Offer" of this prospectus, we will accept for exchange any and all original certificates which are properly tendered in the exchange offer before 5:00 p.m., New York City time, on the expiration date. The exchange certificates will be delivered promptly after the expiration date. See "The Exchange Offer--Terms of the Exchange Offer."
3 MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES................... We believe that your exchange of original certificates for exchange certificates to be issued in connection with the exchange offer will not result in any gain or loss to you for U.S. federal income tax purposes. See "Material U.S. Federal Income Tax Consequences." EXCHANGE AGENT....................... United States Trust Company of New York is serving as exchange agent in connection with the exchange offer. The address and telephone number of the exchange agent are listed in the section "The Exchange Offer--Exchange Agent." USE OF PROCEEDS...................... We will not receive any proceeds from the issuance of exchange certificates in the exchange offer. We will pay all expenses incident to the exchange offer. See "Use of Proceeds."
4 EDISON MISSION ENERGY Edison Mission Energy is a leading global power producer as measured by megawatts. Through its subsidiaries, Edison Mission Energy engages in the business of developing, acquiring, owning or leasing and operating electric power generation facilities worldwide. As further described below, Edison International owns Edison Mission Energy and also owns Southern California Edison Company, one of the largest electric utilities in the United States. At December 31, 2000, Edison Mission Energy had consolidated assets of approximately $15.0 billion and total shareholder's equity of approximately $2.9 billion. In connection with the leveraged lease transactions described in this prospectus, Edison Mission Energy guarantees our lease payment obligations under each of the four separate Edison Mission Energy guarantees. For more information about the Edison Mission Energy guarantees, see "Description of the Leases and Other Lease Documents--The Intercompany Notes and the Edison Mission Energy Guarantees" and "Risk Factors--Claims against Edison Mission Energy under each guarantee are limited in selected circumstances." Our lease payment obligations are not the obligations of, or guaranteed by, Edison International, and the certificateholders can look only to Edison Mission Energy and us for repayment. Edison Mission Energy is incorporated under the laws of the State of California. Its headquarters and principal executive offices are located at 18101 Von Karman Avenue, Suite 1700, Irvine, California 92612, and its telephone number is (949) 752-5588. 5 MIDWEST GENERATION, LLC We were formed in July 1999 as an indirect wholly-owned subsidiary of Edison Mission Energy for the purpose of operating and owning or leasing all the fossil fuel (non-nuclear) power generation assets that we acquired from Commonwealth Edison Company, a wholly-owned subsidiary of Exelon Corporation. In March 1999, Edison Mission Energy entered into an asset sale agreement to acquire these power generation assets from Commonwealth Edison for an aggregate purchase price of approximately $4.9 billion. We acquired these power generation assets in December 1999. In connection with the acquisition, Edison Mission Energy assigned the right to acquire one of these power generation assets, the Collins facility, to third party trusts for a total of $860 million. We currently own or lease all these power generation assets, and we continue to be the operator of these plants. To finance a portion of the purchase price of these power generation assets, Edison Mission Midwest Holdings Co., our direct parent, entered into credit facilities totaling $1.83 billion. The net proceeds of these facilities were loaned to us through affiliates of ours. These credit facilities were increased to $1.9 billion in December 2000. For more information on these transactions, see "Intercompany Relationships and Related Transactions." The power generation assets we acquired from Commonwealth Edison consist of power plants totaling 9,539 megawatts of generating capacity located in Illinois. The power generation assets include the Powerton facility and the Joliet facility, both of which are subject to the leveraged lease transactions described in this prospectus. We sometimes refer to the Powerton facility and the Joliet facility individually as a facility or collectively as the facilities in this prospectus. For more information concerning the acquisition and our power generation assets, see "Our Business." In connection with the acquisition of these power generation assets, we entered into three five-year power purchase agreements with Commonwealth Edison. Subsequently, Commonwealth Edison assigned its rights and obligations under these power purchase agreements to Exelon Generation Company, LLC. We currently derive a substantial majority of our revenue from the sale of energy and capacity to Exelon Generation under these power purchase agreements. For the year ended December 31, 2000, we derived 99% of our revenue from the sale of energy and capacity to Commonwealth Edison under these power purchase agreements. For more information concerning these power purchase agreements and other agreements we entered into with Exelon Generation and Commonwealth Edison, see "Our Business--Exelon Generation and Commonwealth Edison Agreements." Our principal executive offices are located at One Financial Place, 440 South LaSalle Street, Suite 3500, Chicago, Illinois 60605, and our telephone number is (312) 583-6000. 6 THE LEVERAGED LEASE TRANSACTIONS The Powerton facility and the Joliet facility are subject to the leveraged lease transactions. The leveraged lease transactions involved the sale by us of the Powerton facility and Units 7 and 8 of the Joliet facility to four Delaware business trusts called owner trusts. The leveraged lease transactions raised approximately $1,385 million, which was used by the owner trusts to acquire the facilities. We loaned the proceeds from the sale of the facilities to Edison Mission Energy, which used the funds to repay debt. See "Use of Proceeds." In return for the loan, Edison Mission Energy issued four intercompany notes to us. The aggregate amount of the intercompany notes equaled the proceeds from the sale of the facilities. The institutional investors who hold the beneficial interests in the owner trusts are the owner participants. The equity funding by the owner participants plus the transaction expenses, which were paid by the owner participants, totaled $237.8 million. The issuance and sale of the original certificates on August 24, 2000 raised the remaining $1,147 million. After the owner trusts acquired their respective ownership interests in the facilities from us, they leased these ownership interests in the facilities to us under four separate lease agreements. Our payment obligations under the leases are guaranteed by Edison Mission Energy. For more information on the Edison Mission Energy guarantees, see "Description of the Leases and Other Lease Documents--The Intercompany Notes and the Edison Mission Energy Guarantees." The terms and conditions of each lease and each guarantee are substantially similar. One pass-through trust was created for each series of the certificates. Each pass-through trust used its share of the proceeds of the offering of the original certificates to purchase one of the two series of lessor notes issued by each owner trust. The lessor notes held in the pass-through trusts represent in the aggregate the entire debt portion of the lease transactions. Each pass-through trustee distributes the amount of the payments received by it as holder of the lessor notes to the certificateholders of the pass-through trust for which it is pass-through trustee. A certificateholder has an ownership interest only in the pass-through trust that is the issuer of the certificate held by the certificateholder. As described above, we lease the owner trusts' ownership interests in the facilities from the owner trusts. At the same time, we lease to each owner trust an interest in the parcel of land on which the respective facility is located. Each owner trust also entered into a site sublease agreement with us, according to which these interests in the parcels of land are subleased by us from each owner trust. See "Our Business--Our Properties." LEASE COLLATERAL The lessor notes issued by each owner trust are secured by a lien on and first priority security interest in the rights and interests of the owner trust in the collateral as described in "Summary of Terms of the Exchange Certificates--Lessor notes collateral." We will refer to the collateral listed in the preceding sentence as the trust estate. The trust estate does not include customary excepted payments and excepted rights reserved to each owner trust and the owner participant. These excepted payments and excepted rights are referred to in this prospectus simply as "excepted payments." LEASE PAYMENTS AND LESSOR NOTE PAYMENTS We pay lease payments under each lease to the applicable owner trust. However, recourse to us is limited solely to cash which our parent could otherwise dividend to its parent. For more information concerning this limitation, see "Risk Factors--Claims against us for nonpayment of our obligations under each lease are limited." Each lease is assigned to the lease indenture trustee, who acts as trustee under each lease indenture corresponding to each ownership interest in the facilities. As a result of these assignments, we make lease payments directly to the lease indenture trustee. From these lease payments, the lease indenture trustee first makes payments of principal and interest due to the 7 pass-through trustee on the lessor notes issued under the lease indentures and held in the pass-through trusts. The lease indenture trustee pays any remaining balance to the owner trusts for the benefit of the owner participants. United States Trust Company of New York acts as the pass-through trustee of each of the pass-through trusts and as lease indenture trustee under each of the lease indentures. The pass-through trustee distributes to the certificateholders of the pass-through trust for which it is pass-through trustee payments received on the lessor notes held in that pass-through trust. For a diagram of payment flows in the lease transactions, see "--Lease Transactions Cash Flow Structure." SOURCES AND USES OF FUNDS The following table states the approximate sources and uses of funds in connection with the leveraged lease transactions described in this prospectus:
(IN MILLIONS) % ------------- -------- SOURCES OF FUNDS TO OWNER TRUST: Lessor notes (purchased by the pass-through trusts)..... $1,147.0 82.8% Lease equity (contributed by the owner participants).... 237.8 17.2% TOTAL................................................. 1,384.8 100.0% USE OF FUNDS BY OWNER TRUSTS: Purchase of ownership interests in the facilities....... 1,367.0 98.7% Transaction costs....................................... 17.8(1) 1.3% TOTAL................................................. 1,384.8 100.0% USE OF FUNDS BY MIDWEST GENERATION: Loan to Edison Mission Energy........................... 1,367.0 100.0% USE OF FUNDS BY EDISON MISSION ENERGY: Repayment of debt....................................... 1,367.0 100.0%
- ------------------------ (1) Transaction costs include legal, accounting and advisors' fees incurred in connection with the original private offering discussed in this prospectus and related out-of-pocket expenses. 8 LEASE TRANSACTIONS CASH FLOW STRUCTURE The following diagram illustrates some of the ongoing payment flows in the lease transactions involving the Powerton and Joliet facilities among us, Edison Mission Energy, the owner trusts, the owner participants, the indenture trustees, the pass-through trustees and the certificateholders. [CHART] 9 SUMMARY OF TERMS OF THE EXCHANGE CERTIFICATES THE FORM AND TERMS OF THE EXCHANGE CERTIFICATES AND THE ORIGINAL CERTIFICATES ARE IDENTICAL IN ALL MATERIAL RESPECTS, EXCEPT THAT TRANSFER RESTRICTIONS AND REGISTRATION RIGHTS APPLICABLE TO THE ORIGINAL CERTIFICATES DO NOT APPLY TO THE EXCHANGE CERTIFICATES. THE EXCHANGE CERTIFICATES WILL EVIDENCE THE SAME OBLIGATIONS AS THE ORIGINAL CERTIFICATES AND WILL BE ISSUED UNDER THE SAME PASS-THROUGH TRUST AGREEMENTS. WHERE WE REFER TO "CERTIFICATES" IN THIS DOCUMENT, WE ARE REFERRING TO BOTH THE ORIGINAL CERTIFICATES AND THE EXCHANGE CERTIFICATES FOR EACH SERIES. EXCHANGE CERTIFICATES OFFERED........ Up to $333,500,000 in aggregate principal amount of 8.30% Series A Pass-Through Certificates, which we call the Series A Certificates. Up to $813,500,000 in aggregate principal amount of 8.56% Series B Pass-Through Certificates, which we call the Series B Certificates. LESSEE............................... Midwest Generation, LLC. GUARANTOR............................ Edison Mission Energy. RATINGS.............................. The Series A and Series B Certificates are currently rated BBB- and Baa3 by Standard & Poor's and Moody's, respectively. PASS-THROUGH TRUSTS.................. The certificates are governed by two pass-through trusts. The pass-through trusts were formed under separate pass-through trust agreements between us and the pass-through trustees. INTEREST............................. Interest accrues on the principal amount of the lessor notes at the applicable annual rate as described below. Interest is payable on the lessor notes, and distributions have been and will be made under the certificates, semiannually in arrears on January 2 and July 2 of each year. The first interest payment was made on January 2, 2001.
CERTIFICATE ANNUAL INTEREST RATE ----------- -------------------- Series A.. 8.30% Series B.. 8.56%
PAYMENT DATES........................ Principal payments will be made on the lessor notes and the resulting distributions will be made on the certificates according to the amortization schedule on page 92, commencing July 2, 2006 for the Series A Certificates and July 2, 2005 for the Series B Certificates.
10 INITIAL AVERAGE LIFE................. The average life of each series of certificates is as follows:
CERTIFICATE AVERAGE LIFE ----------- ------------ Series A.. 7.7 years Series B.. 11.0 years
EDISON MISSION ENERGY GUARANTEES..... The Edison Mission Energy guarantees cover our payment obligations under the leases and the other operative documents owed to the owner trusts, including the obligation to pay termination value in all circumstances, except in the case where a majority of the relevant certificateholders instructs the indenture trustee to seek remedies against the related ownership interest in a facility without first seeking payment of termination value under the related lease. In that case, certificateholders will receive proceeds from the foreclosure on the related ownership interest, and the claim under the applicable Edison Mission Energy guarantee will be equal to the termination value, less the higher of: - the predetermined fair market value of the related ownership interest in a facility; and - the proceeds from the foreclosure on the related ownership interest in a facility. The termination value under each lease will pay, among other things, principal, interest and premium, if any, on the related lessor notes. RANKING OF EDISON MISSION ENERGY GUARANTEES......................... Each Edison Mission Energy guarantee ranks equally and ratably with all other senior unsecured obligations of Edison Mission Energy. As of December 31, 2000, Edison Mission Energy had no senior secured indebtedness outstanding and approximately $2.1 billion of senior unsecured indebtedness outstanding. See "Description of the Leases and Other Lease Documents--The Intercompany Notes and the Edison Mission Energy Guarantees" and "Risk Factors--Claims against Edison Mission Energy under each guarantee are limited in selected circumstances."
11 RANKING OF OUR LEASE PAYMENT OBLIGATIONS........................ Because our lease payment obligations cannot exceed the amount of cash flow available for distribution by our direct parent company, Edison Mission Midwest Holdings Co., and by us, they are in effect structurally subordinated to all existing and future secured and unsecured indebtedness of us and Edison Mission Midwest Holdings. As of December 31, 2000, we had secured debt outstanding in an aggregate amount of approximately $1.6 billion arising from guarantees we provide for obligations of Edison Mission Midwest Holdings. Our lease payments in excess of the amount available for distribution by our parent are subordinated to specified indebtedness of our parent and us. See "Description of the Leases and Other Lease Documents--Subordination of Claims." PASS-THROUGH TRUST PROPERTY.......... The property of each pass-through trust consists solely of the applicable lessor notes issued on a non-recourse basis by each of the owner trusts in separate lease transactions. Each owner trust issued two series of lessor notes. Each pass-through trust purchased one series of the lessor notes issued by each owner trust. LESSOR NOTES COLLATERAL.............. The lessor notes issued by each owner trust are secured by: - the Edison Mission Energy guarantee of which the owner trust is a beneficiary, - the owner trust's ownership interest in a facility, - the owner trust's interest in any components and improvements in connection with its ownership interest in a facility, - the lease to which the owner trust is a party, - the site lease to which the owner trust is a party and the interest in the land subject to the site lease, - the site sublease to which the owner trust is a party and the interest in the land subject to the site sublease, - the fixtures on the facility site relating to the owner trust's ownership interest in a facility, - the facility deed relating to the owner trust's ownership interest in a facility, - the bill of sale relating to the owner trust's ownership interest in a facility, and - each other operative document to which the owner trust is a party, other than the tax indemnity agreement, the Edison Mission Energy owner participant guaranty agreement and the reimbursement agreement, each entered into in connection with the leveraged lease transactions. See "Description of the Lessor Notes--Security." For more information on agreements referred to above, see "Description of the Leases and Other Lease Documents."
12 LIMITATIONS ON RECOURSE AGAINST US... Claims by the lease indenture trustees against us for non-payment under each lease cannot exceed the amount of cash flow available for distribution by Edison Mission Midwest Holdings and by us. The Edison Mission Energy guarantees are not limited in this manner. For a more detailed description of the cash flow available for distribution by Edison Mission Midwest Holdings, see "Risk Factors--Claims against us for nonpayment of our obligations under each lease are limited." For more information about the limitations on recourse, see "Description of the Leases and Other Lease Documents--Subordination of Claims." EDISON MISSION MIDWEST HOLDINGS CO................................. Edison Mission Midwest Holdings is our direct parent. We guarantee Edison Mission Midwest Holdings' debt under its $1.9 billion credit facilities. Edison Mission Midwest Holdings has no other material obligations besides these $1.9 billion credit facilities. We are Edison Mission Midwest Holdings' only material asset. OPTIONAL REDEMPTION.................. We may request or, with our consent, the owner participants may cause, the owner trusts to redeem the lessor notes under the applicable lease indenture, and consequently cause the pass-through trust to redeem the certificates, at a redemption price equal to: - 100% of the principal amount of the lessor notes being redeemed, plus - accrued interest on the lessor notes being redeemed, plus - a make-whole premium based on the rates of comparable treasury securities plus 50 basis points. We agree not to request that any lessor note under a lease indenture be redeemed nor consent to a request from any owner participant to cause the related owner trusts to redeem its lessor notes unless all lessor notes under the same lease indenture are being redeemed. MANDATORY REDEMPTION WITH MAKE-WHOLE PREMIUM............................ The owner trust must repay the lessor notes issued under a lease indenture in whole, together with accrued interest, the make-whole premium and all other amounts then payable to the holders of the lessor notes under the related operative documents, upon the earliest of the following events: - the related lease is terminated because the facility has become obsolete as a result of any change in the markets for the wholesale purchase and/or sale of energy or any material abrogation of power purchase agreements, - the related lease is terminated because an event has occurred which, in our good faith judgment, will cause the facility to become obsolete,
13 - the related lease is terminated because the facility is surplus to our needs or is no longer useful in our business, or - the obligations represented by the lessor notes issued under a lease indenture are refinanced in whole but not in part. See "Description of the Lessor Notes--Purchase of Lessor Notes--Mandatory Prepayment with Make-Whole Premium." MANDATORY REDEMPTION WITHOUT MAKE-WHOLE PREMIUM................. The owner trust is required to repay the lessor notes issued under a lease indenture in whole, together with accrued interest and any other amounts then payable to the holders of the lessor notes under the related operative documents, but excluding any make-whole premium, upon the earlier of the following events: - the related lease is terminated because of an event of loss, - the related lease is terminated because it has become illegal for us to comply with it, - the related lease is terminated because it has become economically or technologically obsolete solely as a result of a change of law or an inability to obtain or renew a required governmental approval, or - the related lease is terminated because events outside our control have made the lease burdensome for us to comply with. See "Description of the Lessor Notes--Purchase of Lessor Notes--Mandatory Prepayment Without Premium."
14 OWNER PARTICIPANT'S RIGHT TO PURCHASE LESSOR NOTES UPON MATURITY OR DEFAULT............................ The owner trust, the owner participant or a guarantor of an owner participant's obligations, whom we refer to as the owner participant guarantor, may choose to purchase either all the related lessor notes then outstanding or all the related lessor notes then outstanding not held by us or our affiliates upon the occurrence of any of the following events: - a continuing event of default under the related lease, or - the lessor notes become due prior to their stated maturity as a result of a related lease indenture event of default, or - the lease indenture trustee has commenced the exercise of material remedies under the related lease indenture. See "Description of the Lessor Notes--Purchase of Lessor Notes." A purchaser of the lessor notes will pay to each holder of the lessor notes an amount equal to the aggregate unpaid principal amount of all lessor notes then held by that holder, together with accrued and unpaid interest on the lessor notes to the date of their payment, and all other sums then due to the holder of the lessor notes under the operative documents. No premium will be paid by the purchaser under these circumstances. OWNER PARTICIPANT'S RIGHT TO ASSUME LESSOR NOTES....................... The owner trust, the owner participant or an owner participant guarantor may choose to assume the related lessor notes upon the occurrence of the following events: - a continuing event of default under the related lease, or - the related lease is terminated because the applicable facility has become economically or technologically obsolete, and the owner trust has elected to retain its ownership interest in the applicable facility. In either case, the assumption is subject to either specified ratings requirements or an increase in the interest rate on the applicable lessor notes. See "Description of the Lessor Notes--Assumption of Lessor Notes."
15 OUR RIGHT TO ASSUME LESSOR NOTES..... We may choose to assume the lessor notes issued under a lease indenture then outstanding upon the occurrence of the following events: - an event of loss due to burdensome governmental regulation of the owner trust or the owner participant, - the owner participant has elected to terminate the related lease and transfer its ownership interest in a facility to us and we have acquired this ownership interest from the owner trust, and - the transfer will remove the basis of burdensome governmental regulation. See "Description of the Lessor Notes--Assumption of Lessor Notes." MIDWEST GENERATION COVENANTS......... The operative documents include covenants that limit, among other things, our ability to sell, transfer or otherwise dispose of substantially all our assets, to merge or consolidate, to change our legal form, to engage in business other than the business related to the facilities and the sale of wholesale electric power and related products and services or to assign, transfer or sublease our interest in the leased facilities. See "Description of the Certificates--Covenants." EDISON MISSION ENERGY COVENANTS...... The operative documents include covenants that limit, among other things, Edison Mission Energy's ability to incur secured debt, to create liens, and that limit, among other things, Edison Mission Energy's ability and the ability of Edison Mission Energy's subsidiaries to merge or consolidate or to sell assets. See "Description of the Certificates--Covenants." GOVERNING LAW........................ The certificates, the pass-through trust agreements, the lease indentures and the lessor notes and other lease documents are governed by the laws of the State of New York except to the extent that the leases, the site leases and the site subleases and the lease indentures are required to be governed by the laws of the State of Illinois. LEASE INDENTURE AND PASS-THROUGH TRUSTEE............................ United States Trust Company of New York acts as pass-through trustee, paying agent and registrar for the certificates issued by each pass-through trust. United States Trust Company of New York also acts as the indenture trustee under each lease indenture. RISK FACTORS......................... For a description of factors that should be considered by holders who tender their original certificates in the exchange offer, see "Risk Factors."
16 SUMMARY CONSOLIDATED FINANCIAL DATA OF EDISON MISSION ENERGY The following table sets forth a summary of Edison Mission Energy's consolidated financial data for the periods indicated. The summary consolidated financial data were derived from the audited consolidated financial statements of Edison Mission Energy and its consolidated subsidiaries. This summary is qualified in its entirety by the more detailed information and financial statements, including the notes to that information and those financial statements, included in the documents incorporated by reference in this prospectus.
YEARS ENDED DECEMBER 31, ---------------------------------------------------- 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- (IN MILLIONS) INCOME STATEMENT DATA Operating revenues................................... $3,241.0 $1,635.9 $893.8 $975.0 $843.6 Operating expenses................................... 2,410.2 1,209.5 543.3 581.1 476.5 -------- -------- ------ ------ ------ Operating income..................................... 830.8 426.4 350.5 393.9 367.1 Interest expense..................................... (721.5) (375.5) (196.1) (223.5) (164.2) Interest and other income............................ 74.0 55.8 50.9 53.9 40.7 Minority interest.................................... (3.2) (3.0) (2.8) (38.8) (69.5) -------- -------- ------ ------ ------ Income before income taxes........................... 180.1 103.7 202.5 185.5 174.1 Provision (benefit) for income taxes................. 72.5 (40.4) 70.4 57.4 82.0 -------- -------- ------ ------ ------ Income before accounting change and extraordinary loss............................................... 107.6 144.1 132.1 128.1 92.1 Cumulative effect on prior years of change in accounting for major maintenance costs, net of tax................................................ 17.7 -- -- -- -- Cumulative effect on prior years of change in accounting for start-up costs, net of tax.......... -- (13.8) -- -- -- Extraordinary loss on early extinguishment of debt, net of income tax benefit.......................... -- -- -- (13.1) -- -------- -------- ------ ------ ------ Net income........................................... $ 125.3 $ 130.3 $132.1 $115.0 $ 92.1 ======== ======== ====== ====== ======
AS OF DECEMBER 31, ------------------------------------------------------ 2000 1999 1998 1997 1996 --------- --------- -------- -------- -------- (IN MILLIONS) BALANCE SHEET DATA Assets......................................... $15,017.1 $15,534.2 $5,158.1 $4,985.1 $5,152.5 Current liabilities............................ 3,911.0 1,772.8 358.7 339.8 270.9 Long-term obligations.......................... 5,334.8 7,439.3 2,396.4 2,532.1 2,419.9 Preferred securities of subsidiaries........... 326.8 476.9 150.0 150.0 150.0 Shareholder's equity........................... 2,948.2 3,068.5 957.6 826.6 1,019.9
YEARS ENDED DECEMBER 31, ------------------------------------------------------ 2000 1999 1998 1997 1996 --------- --------- -------- -------- -------- OTHER DATA Ratio of earnings to fixed charges(1).......... 1.23 1.18 1.69 1.64 1.42
- -------------------------- (1) For purposes of computing the ratio of earnings to fixed charges, earnings are divided by fixed charges. "Earnings" represents the aggregate of income before income taxes of Edison Mission Energy (adjusted for the excess or shortfall of dividends or other distributions over equity in earnings of less than 50%-owned entities), amortization of previously capitalized interest and fixed charges (net of capitalized interest). "Fixed Charges" represents interest (whether expensed or capitalized), the amortization of debt discount and interest portion of rental expense. 17 SUMMARY FINANCIAL DATA OF MIDWEST GENERATION, LLC The following table sets forth a summary of our financial data for the periods indicated. On December 15, 1999, we acquired the power generation assets from Commonwealth Edison for a purchase price of approximately $4.9 billion. We had no significant activity prior to the acquisition. The summary financial statements for the period since our formation (July 12, 1999) through December 31, 1999 and for the year ended December 31, 2000 were derived from our audited financial statements, including the notes to the financial statements, included in this prospectus. The summary financial data are qualified in their entirety by the more detailed information and financial statements, including the notes to the financial statements, included in this prospectus.
PERIOD FROM INCEPTION YEAR ENDED (JULY 12, 1999) TO DECEMBER 31, 2000 DECEMBER 31, 1999 ----------------- --------------------- (IN MILLIONS) INCOME STATEMENT DATA Operating revenues........................ $1,083.5 $ 23.7 Operating expenses........................ 936.0 29.5 -------- ------ Income (loss) from operations............. 147.5 (5.8) Interest and other expense................ 305.6 (14.3) -------- ------ Loss before income taxes.................. (158.1) (20.1) Benefit for income taxes.................. (61.7) (7.7) -------- ------ Net loss.................................. $ (96.4) $(12.4) ======== ======
DECEMBER 31, ------------------------------ 2000 1999 ------------ ------------ (IN MILLIONS, EXCEPT RATIOS) BALANCE SHEET DATA Assets................................................ $6,730.4 $5,183.9 Current liabilities................................... 260.4 49.3 Long-term debt........................................ 3,518.8 3,422.0 Lease financing....................................... 2,188.8 860.0 Other long-term obligations........................... 212.5 214.1 Member's equity....................................... 549.9 638.5 OTHER DATA Ratio of earnings to fixed charges(1)(2).............. .57 --
- ------------------------ (1) For purposes of computing the ratio of earnings to fixed charges, earnings are divided by fixed charges. "Earnings" represent the aggregate of income (loss) before income taxes of Midwest Generation and fixed charges (net of capitalized interest). "Fixed charges" represent interest expense (prior to capitalization) and the interest portion of rental expense. (2) For the period since inception (July 12, 1999) to December 31, 1999 and for the year ended December 31, 2000 there was a fixed charge deficiency of $20.1 million and $158.1 million, respectively. 18 RISK FACTORS IN ADDITION TO THE INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE EXCHANGE OFFER AND AN INVESTMENT IN THE CERTIFICATES. THE FOLLOWING RISK FACTORS, OTHER THAN "YOU MAY HAVE DIFFICULTY SELLING THE CERTIFICATES THAT YOU DO NOT EXCHANGE," GENERALLY APPLY TO THE ORIGINAL CERTIFICATES AS WELL AS THE EXCHANGE CERTIFICATES. THE CURRENT CALIFORNIA POWER CRISIS HAS HAD, AND MAY CONTINUE TO HAVE, AN ADVERSE IMPACT ON EDISON MISSION ENERGY AND US. Edison International, Edison Mission Energy's ultimate parent company, is a holding company. Edison International is also the corporate parent of Southern California Edison Company, an electric utility that buys and sells power in California. In the past year, various market conditions and other factors have resulted in higher wholesale power prices to California utilities. At the same time, two of the three major utilities, Southern California Edison and Pacific Gas and Electric Co., have operated under a retail rate freeze. As a result, there has been a significant under recovery of costs by Southern California Edison and Pacific Gas and Electric, and each of these companies has failed to make payments due to power suppliers and others. On April 6, 2001, Pacific Gas and Electric filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in San Francisco bankruptcy court. On April 9, 2001, Edison International and Southern California Edison signed a memorandum of understanding with the California Department of Water Resources which calls for legislation, regulatory action and definitive agreements to resolve important aspects of the energy crisis, and which the parties expect will help restore Southern California Edison's creditworthiness and liquidity. Nevertheless, given Southern California Edison's payment defaults, creditors of Southern California Edison could file an involuntary bankruptcy petition against it. For more information on the current regulatory situation in California, see "Regulation--California Deregulation." For more information on how the current California power crisis affects Edison Mission Energy's investments in energy projects in California, see "The current California power crisis has had, and may continue to have, an adverse impact on Edison Mission Energy's California partnership investments." Southern California Edison's current financial condition has had, and may continue to have, an adverse impact on Edison International's credit quality and, as previously reported by Edison International, has resulted in cross-defaults under Edison International's credit facilities. Both Standard & Poor's Ratings Services and Moody's Investors Service, Inc. have lowered the credit ratings of Edison International and Southern California Edison to substantially below investment grade levels. The ratings remain under review for potential downgrade by both Standard & Poor's and Moody's. Edison Mission Energy has taken measures to isolate itself from the credit downgrades and potential bankruptcies of Edison International and Southern California Edison, and to facilitate its ability and the ability of its subsidiaries to maintain their respective investment grade ratings. On January 17, 2001, Edison Mission Energy adopted so-called "ring-fencing" provisions which are intended to preserve Edison Mission Energy as a stand-alone investment grade rated entity in spite of the current credit difficulties of Edison International and Southern California Edison. The ring-fencing provisions take the form of amendments to Edison Mission Energy's articles of incorporation and bylaws. These provisions require the unanimous approval of Edison Mission Energy's board of directors, including at least one independent director, before Edison Mission Energy can do any of the following: - declare or pay dividends or distributions unless either of the following are true: - Edison Mission Energy then has an investment grade rating and receives rating agency confirmation that the dividend or distribution will not result in a downgrade; or 19 - the dividends do not exceed $32.5 million in any fiscal quarter and Edison Mission Energy then meets an interest coverage ratio of not less than 2.2 to 1 for the immediately preceding four fiscal quarters. Edison Mission Energy currently meets this interest coverage ratio; - institute or consent to bankruptcy, insolvency or similar proceedings or actions; or - consolidate or merge with any entity or transfer substantially all its assets to any entity, except to an entity that is subject to similar restrictions. In January 2001, after the implementation by Edison Mission Energy of the ring-fencing amendments, Standard & Poor's and Moody's lowered their ratings on us, Edison Mission Energy and other subsidiaries of Edison Mission Energy. As shown in the table below, both our and Edison Mission Energy's debt ratings remain investment grade. Standard & Poor's and Moody's indicated that the ratings outlook is stable for all the ratings listed below.
RATINGS RATINGS ACTION - ------- -------------- Series A and Series B Certificates........... Downgraded to "BBB-" from "A-" by Standard & Poor's. Downgraded to "Baa3" from "Baa1" by Moody's. Edison Mission Energy's senior unsecured and short-term debt ratings.................... Downgraded to "BBB-" and "A-3" from "A-" and "A-2" by Standard & Poor's. Downgraded to "Baa3" and "Prime-3" from "Baa1" and "Prime-2" by Moody's. Midwest Generation bank loan rating.......... Confirmed at "Baa2" by Moody's.
As a result of the downgrades, Edison Mission Energy's and our cost of capital has increased. Future downgrades could further increase Edison Mission Energy's and our cost of capital, make efforts to raise capital more difficult and could have an adverse impact on Edison Mission Energy and us. For more information on the effect of further downgrades, see "Ratings of the certificates from Moody's and Standard and Poor's do not constitute a recommendation to purchase the certificates, and the ratings of the certificates, as well as the Edison Mission Energy debt ratings and our debt ratings, are subject to change" and "Contractual and structural obligations may limit our disposition of our excess cash flow." On March 15, 2001, the California Public Utilities Commission released a draft of a proposed order instituting an investigation into whether California's investor-owned utilities, including Southern California Edison, have complied with past Commission decisions authorizing the formation of their holding companies and governing affiliate transactions, as well as applicable statutes. The proposed order would reopen the past holding company decisions and initiate an investigation into the following matters: - whether the holding companies, including Edison International, violated requirements to give priority to the capital needs of their respective utility subsidiaries; - whether the ring-fencing actions by Edison International and PG&E Corporation and their respective non-utility affiliates also violated the requirements to give priority to the capital needs of their utility subsidiaries; - whether the payment of dividends by the utilities violated requirements that the utilities maintain dividend policies as though they were comparable stand-alone utility companies; - any additional suspected violations of laws or Commission rules and decisions; and 20 - whether additional rules, conditions, or other changes to the holding company decisions are necessary. A prehearing conference has been set for April 20, 2001, and the parties have been asked to inform the California Public Utilities Commission of their view of the impact of the recently signed memorandum of understanding among Southern California Edison, Edison International and the California Department of Water Resources, on specified issues from the order, how to expedite resolution of those issues, and how to conduct the remainder of the investigation to the extent other issues and other parties are not affected. See "Regulation--California Deregulation--The Current Power Crisis in California." Neither Edison Mission Energy nor we can predict whether the Commission will institute this investigation or what effects any investigation or subsequent actions by the Commission may have on Edison International, Edison Mission Energy or indirectly on us. THE CURRENT CALIFORNIA POWER CRISIS HAS HAD, AND MAY CONTINUE TO HAVE, AN ADVERSE IMPACT ON EDISON MISSION ENERGY'S CALIFORNIA PARTNERSHIP INVESTMENTS. Edison Mission Energy has partnership interests in eight partnerships which own power plants in California which have power purchase contracts with Pacific Gas and Electric and/or Southern California Edison. Three of these partnerships have a contract with Southern California Edison, four of them have a contract with Pacific Gas and Electric, and one of them has contracts with both. In 2000, Edison Mission Energy's share of earnings before taxes from these partnerships was $168 million, which represented 20% of its operating income. Edison Mission Energy's investment in these partnerships at December 31, 2000 was $345 million. As a result of Southern California Edison's and Pacific Gas and Electric's current liquidity crisis, each of these utilities has failed to make payments to qualifying facilities supplying them power. These qualifying facilities include the eight power plants which are owned by partnerships in which Edison Mission Energy has a partnership interest. Southern California Edison did not pay any amount due to the partnerships in January, February and March 2001 and may continue to miss future payments. Pacific Gas and Electric made its January payment in full but paid only a small portion of the amounts due to the partnerships in February and March, and, as discussed below, may not pay all or a portion of its future payments. At March 31, 2001, accounts receivable due to these partnerships from Southern California Edison were $472 million and from Pacific Gas & Electric were $59 million. Edison Mission Energy's share of these receivables was $234 million and $29 million, respectively. On April 6, 2001, Pacific Gas and Electric filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in San Francisco bankruptcy court. Payments by Pacific Gas and Electric to the qualifying facilities, including those owned by partnerships in which Edison Mission Energy has a partnership interest, are expected to be subject to significant delays associated with the bankruptcy court process and may not be paid in full. Furthermore, Pacific Gas and Electric's power purchase agreements with the qualifying facilities will be subject to review by the bankruptcy court. Edison Mission Energy cannot assure you that the partnerships with contracts with Pacific Gas and Electric will not be adversely affected by the bankruptcy proceeding. See "Regulation--California Deregulation--The Current Power Crisis in California." The California utilities' failure to pay has adversely affected the operations of Edison Mission Energy's eight California qualifying facilities. Continuing failures to pay similarly could have an adverse impact on the operations of Edison Mission Energy's California qualifying facilities. Provisions in the partnership agreements stipulate that partnership actions concerning contracts with affiliates are to be taken through the non-affiliated partner in the partnership. Therefore, partnership actions concerning the enforcement of rights under each qualifying facility's power purchase agreement with Southern California Edison in response to Southern California Edison's suspension of payments under that power purchase agreement are to be taken through the non-Edison Mission Energy affiliated partner in 21 the partnership. Some of the partnerships have sought to minimize their exposure to Southern California Edison by reducing deliveries under their power purchase agreements. Three of the partnerships have filed complaints requesting, among other things, a declaration that they are entitled to suspend delivery of capacity and energy to Southern California Edison, and to resell such capacity and energy to other purchasers, so long as Southern California Edison does not pay amounts due under its power purchase agreement and until Southern California Edison establishes that it is creditworthy and able to make future payments when due. It is unclear at this time what additional actions, if any, the partnerships will take in regard to the utilities' suspension of payments due to the qualifying facilities. As a result of the utilities' failure to make payments due under these power purchase agreements, the partnerships have called on the partners to provide additional capital to fund operating costs of the power plants. From January 1, 2001 through March 31, 2001, subsidiaries of Edison Mission Energy have made equity contributions totaling approximately $115 million to meet capital calls by the partnerships. Edison Mission Energy's subsidiaries and the other partners may be required to make additional capital contributions to the partnerships. Southern California Edison has stated that it is attempting to avoid bankruptcy and, subject to the outcome of regulatory and legal proceedings and negotiations regarding purchased power costs, it intends to pay all its obligations once a permanent solution to the current energy and liquidity crisis has been reached. However, it is possible that Southern California Edison will not pay all its obligations in full. In addition, it is possible that creditors of Southern California Edison could file an involuntary bankruptcy petition against Southern California Edison. If this were to occur, payments to the qualifying facilities, including those owned by partnerships in which Edison Mission Energy has a partnership interest, could be subject to significant delays associated with the lengthy bankruptcy court process and may not be paid in full. Furthermore, Southern California Edison's power purchase agreements with the qualifying facilities could be subject to review by a bankruptcy court. While Edison Mission Energy believes that the generation of electricity by the qualifying facilities, including those owned by partnerships in which it has a partnership interest, is needed to meet California's power needs, Edison Mission Energy cannot assure you either that these partnerships will continue to generate electricity without payment by the purchasing utility, or that the power purchase agreements will not be adversely affected by a bankruptcy or contract renegotiation as a result of the current power crisis. On March 27, 2001, the California Public Utilities Commission issued a decision that ordered the three California investor owned utilities, including Southern California Edison and Pacific Gas and Electric, to commence payment for power generated from qualifying facilities beginning in April 2001. In addition, the decision modified the pricing formula for determining short run avoided costs for qualifying facilities subject to these provisions. Depending on the utilities' continued reaction to this order, the impact of this decision may be that the qualifying facilities subject to this pricing adjustment will be paid significantly reduced prices for their power. Furthermore, this decision called for further study of the pricing formula tied to short run avoided costs and, accordingly, may be subject to more changes in the future. Finally, this decision is subject to challenge before the Commission, the Federal Energy Regulatory Commission and, potentially, state or federal courts. Although it is premature to assess the full effect of this recent decision, it could have a material adverse effect on Edison Mission Energy's investment in the California partnerships, depending on how it is implemented and future changes in the relationship between the pricing formula and the actual cost of natural gas procured by Edison Mission Energy's California partnerships. This decision did not address payment to the qualifying facilities for amounts due prior to April 2001. A number of federal and state, legislative and regulatory initiatives addressing the issues of the California electric power industry have been proposed, including wholesale rate caps, retail rate 22 increases, acceleration of power plant permitting and state entry into the power market. Many of these activities are ongoing. These activities may result in a restructuring of the California power market. At this time, these activities are in their preliminary stages, and it is not possible to estimate their likely ultimate outcome. The situation in California changes on an almost daily basis. You should monitor developments in California for the most up to date information. For more information on the current regulatory situation in California, see "Regulation--State Energy Regulation--California Deregulation." EDISON MISSION ENERGY'S ABILITY TO PERFORM UNDER THE EDISON MISSION ENERGY GUARANTEES DEPENDS UPON THE PERFORMANCE OF ITS SUBSIDIARIES. The Edison Mission Energy guarantees are exclusively Edison Mission Energy's obligations and are not the obligations of any of its subsidiaries or affiliates. Because substantially all Edison Mission Energy's operations are conducted by its project subsidiaries, Edison Mission Energy's cash flow and ability to service its indebtedness, including its ability to pay its obligations under the Edison Mission Energy guarantees when due, are dependent upon the ability of its subsidiaries to pay dividends and make distributions to it. As mentioned above, the California power crisis has had, and may continue to have, an adverse impact on Edison Mission Energy's California partnership investments and may adversely affect Edison Mission Energy's ability to receive distributions from these investments. Financing agreements for Edison Mission Energy's subsidiaries and affiliates generally place limitations on the ability of those subsidiaries and affiliates to pay dividends, make distributions or otherwise transfer funds to Edison Mission Energy. In addition, financing agreements for Edison Mission Energy's subsidiaries and affiliates, are generally secured and contain some representations, warranties, covenants and other agreements that, if not met, could lead to a default under those agreements. After a default under a project financing for any reason, project lenders may exercise rights and remedies typically granted to secured parties, including the ability to take control of the project's collateral assets and/or Edison Mission Energy's ownership interest in the project company. In addition, Edison Mission Energy owns a minority interest in some of its projects, and so is unable unilaterally to cause dividends or distributions to be made to it from those projects. Lastly, many of Edison Mission Energy's projects are located overseas and, therefore, distributions from foreign operations, if needed, would likely be subject to additional taxes in the United States upon repatriation. Accordingly, Edison Mission Energy cannot assure you that it will receive sufficient distributions from its subsidiaries to pay its obligations under the Edison Mission Energy guarantees if and when due. Any right of Edison Mission Energy to receive any assets of any of its subsidiaries upon any liquidation or reorganization of a subsidiary, and the consequent right of the certificateholders to participate in the distribution of, or to realize proceeds from, those assets, will be effectively subordinated to the claims of the subsidiary's creditors, including trade creditors and holders of debt incurred by the subsidiary. One of Edison Mission Energy's subsidiaries, Edison First Power, is not in compliance with a required financial ratio and other requirements under the financing documents related to the acquisition of the Fiddler's Ferry and Ferrybridge power plants. Edison First Power is currently in the process of requesting the necessary waivers and consents to amendments from the financing parties. Edison Mission Energy cannot assure you that these waivers and consents to amendments will be forthcoming. The financing documents stipulate that a breach of the financial ratio covenant constitutes an immediate event of default and, if the event of default is not waived, the financing parties are entitled to enforce their security over Edison First Power's assets, including the Fiddler's Ferry and Ferrybridge plants. Due to the timing of its cash flows and debt service payments, Edison First Power utilized L37 million from its debt service reserve to meet its debt service requirements in 2000. Edison Mission Energy's net investment in its subsidiary that holds the Ferrybridge and Fiddlers' Ferry power plants and related debt was $918 million at December 31, 2000. 23 The operative documents governing the lease transactions and certificates impose no limitations on the ability of Edison Mission Energy's subsidiaries, including us, to permit contractual restrictions on their or our ability to make dividends or distributions. CLAIMS AGAINST EDISON MISSION ENERGY UNDER EACH GUARANTEE ARE LIMITED IN SELECTED CIRCUMSTANCES. Claims against Edison Mission Energy under each guarantee may be limited. In consideration of the intercompany loans, according to which we loaned the proceeds from the sale of the facilities to Edison Mission Energy, Edison Mission Energy issued a separate guarantee in favor of each of the four owner trusts. In these guarantees, Edison Mission Energy guarantees the payment by us of all our payment obligations under the leases. The guarantees are not subject to the limitation on claims against us found in the other lease financing documents. Edison Mission Energy's obligations under the guarantees are not limited unless: - an event of default occurs under the related lease, and - without first providing to us and Edison Mission Energy a written demand for payment of termination value, either the owner trust or the lease indenture trustee, as the case may be, - terminates the applicable lease and takes possession of the related ownership interest in a facility, or - sells the related ownership interest in a facility at public or private sale, or - holds, keeps idle or leases to others the related ownership interest in a facility. If the applicable owner trust or the lease indenture trustee does any of the foregoing without first demanding payment of termination value, the amount payable under the applicable Edison Mission Energy guarantee will be limited to termination value, less the higher of: - the predetermined fair market value of the related ownership interest in a facility, and - the proceeds of any sale of the related ownership interest in a facility. EDISON MISSION ENERGY'S SUBSTANTIAL AMOUNT OF INDEBTEDNESS, INCLUDING A SUBSTANTIAL AMOUNT OF SHORT-TERM INDEBTEDNESS, MAY AFFECT ITS ABILITY TO SERVICE ITS INDEBTEDNESS, FINANCE THE ACQUISITION AND DEVELOPMENT OF ADDITIONAL PROJECTS, COMPETE EFFECTIVELY OR OPERATE SUCCESSFULLY UNDER ADVERSE ECONOMIC CONDITIONS. As of December 31, 2000, Edison Mission Energy had $2.1 billion of debt which was recourse to Edison Mission Energy and $5.9 billion of debt which was non-recourse to Edison Mission Energy but was recourse to Edison Mission Energy's subsidiaries appearing on its consolidated balance sheet. Edison Mission Energy has a substantial amount of short-term debt that will need to be extended or refinanced. Edison Mission Energy has two credit facilities, in a total amount of $1 billion, that are scheduled to expire in May 2001 and one credit facility, in the amount of $500 million, that is scheduled to expire in October 2001. On April 5, 2001, Edison Mission Energy completed a private offering of $600 million principal amount of senior notes. The notes rank equally with Edison Mission Energy's senior unsecured indebtedness. Edison Mission Energy used the proceeds from the offering to repay debt, including mandatory repayments of $225 million which also reduced the amount available under these facilities. We cannot assure you that Edison Mission Energy will be able to extend its existing credit facilities or obtain new credit facilities to finance its needs, or that any new credit facility can be obtained under similar terms and rates as its existing credit facilities. If Edison Mission Energy cannot extend its existing credit facilities or obtain new credit facilities to finance its needs on similar terms and rates as 24 its existing credit facilities, this could have a negative impact on Edison Mission Energy's liquidity and its ability to make payments on the guarantees. Edison Mission Energy's substantial amount of debt and financial obligations present the risk that Edison Mission Energy might not have sufficient cash to service its indebtedness, including payments under the Edison Mission Energy guarantees, and that its existing corporate and project debt could limit its ability to finance the acquisition and development of additional projects, to compete effectively or to operate successfully under adverse economic conditions. See "Capitalization" and "Selected Consolidated Financial Data of Edison Mission Energy." EDISON MISSION ENERGY'S CREDIT RATINGS ARE SUBJECT TO CHANGE, AND A DOWNGRADE OF ITS CREDIT RATING BELOW INVESTMENT GRADE COULD HAVE AN ADVERSE IMPACT ON EDISON MISSION ENERGY. Edison Mission Energy cannot assure you that Standard & Poor's and Moody's will not downgrade Edison Mission Energy below investment grade, whether as a result of the California power crisis or otherwise. If Edison Mission Energy is downgraded, it could be required to, among other things: - provide additional guarantees, collateral, letters of credit or cash for the benefit of counterparties in its trading activities, - post a letter of credit or cash collateral to support its $58.5 million equity contribution obligation in connection with its acquisition in February 2001 of a 50% interest in the Caliraya-Botocan-Kalayaan hydroelectric project in the Philippines, and - repay a portion of the preferred shares issued by its subsidiary in connection with its 1999 acquisition of a 40% interest in Contact Energy Limited, a New Zealand power company, which, based on their value at March 20, 2001, would require a payment of approximately $19 million. Edison Mission Energy's downgrade could result in a downgrade of Edison Mission Midwest Holdings Co., our parent. In the event of a downgrade of Edison Mission Midwest Holdings below its current credit rating, provisions in the agreements binding on us would limit our ability to use excess cash flow to make distributions. See "Contractual and structural obligations may limit our disposition of our excess cash flow." A downgrade in Edison Mission Energy's credit rating below investment grade could increase its cost of capital, increase its credit support obligations, make efforts to raise capital more difficult and could have an adverse impact on Edison Mission Energy and us. Furthermore, a downgrade in Edison Mission Energy's credit rating could adversely affect its ability to make payment on the guarantees and, indirectly, our ability to make lease payments. SIGNIFICANT PORTIONS OF EDISON MISSION ENERGY'S PROJECTS OPERATE WITHOUT LONG-TERM POWER PURCHASE AGREEMENTS AND ARE SUBJECT TO MARKET FORCES THAT AFFECT THE PRICE OF POWER. Some of the projects in which Edison Mission Energy has acquired an interest do not have long-term power purchase agreements. Also, projects which Edison Mission Energy may acquire or develop in the future may not have long-term power purchase agreements. Because their output is not committed to be sold under long-term contracts, these projects are subject to market forces which determine the amount and price of power that they sell. Edison Mission Energy cannot assure you that these plants will be successful in selling power into their respective markets. If they are unsuccessful, they may not be able to generate enough cash to service their own debt or to make distributions to Edison Mission Energy. In addition, some utilities have commenced litigation aimed at forcing the renegotiation or termination of long-term power purchase agreements based upon, among other things, revised estimates of avoided cost or power demands. Edison Mission Energy cannot assure you that, in the future, utilities that purchase power from Edison Mission Energy's contract-based power plants or other power purchasers that purchase power under long-term agreements from Edison Mission Energy will not seek to abrogate their existing agreements with Edison Mission Energy. 25 EDISON MISSION ENERGY'S INTERNATIONAL PROJECTS ARE SUBJECT TO RISKS OF DOING BUSINESS IN FOREIGN COUNTRIES. Edison Mission Energy's international projects are subject to political and business risks, including uncertainties associated with currency exchange rates, currency repatriation, expropriation, political instability and other issues that have the potential to impair the projects from making dividends or other distributions to Edison Mission Energy and against which Edison Mission Energy may not be fully capable of insuring. In particular, fluctuations in currency exchange rates can affect, on a U.S. dollar equivalent basis, the amount of Edison Mission Energy's equity contributions to, and distributions from, its international projects. At times, Edison Mission Energy has hedged a portion of its exposure to fluctuations in currency exchange rates. However, hedge contracts may involve risks, including default by the other party to the contract, and Edison Mission Energy cannot assure you that fluctuations in currency exchange rates will be fully offset by these hedges or that these hedges will be available throughout the term of the certificates. Generally, the uncertainty of the legal structure in some foreign countries in which Edison Mission Energy may develop or acquire projects could make it more difficult to enforce its rights under agreements relating to the projects. In addition, the laws and regulations of some countries may limit Edison Mission Energy's ability to hold a majority interest in some of the projects that Edison Mission Energy may develop or acquire. The economic crisis in Indonesia has raised concerns over the ability of PT PLN (Persero), formerly known as PT Perusahaan Listrik Negara, the state-owned utility, to meet its obligations under its power sales contract with Edison Mission Energy's Paiton project and has negatively affected and may continue to negatively affect that project's dividends to Edison Mission Energy. COMPETITION COULD ADVERSELY AFFECT EDISON MISSION ENERGY'S BUSINESS. The global independent power industry is characterized by numerous strong and capable competitors, some of which may have more extensive operating experience in the acquisition and development of power projects, larger staffs and greater financial resources than Edison Mission Energy. Further, in recent years some power markets have been characterized by strong and increasing competition as a result of regulatory changes and other factors which have contributed to a reduction in market prices for power. These regulatory and other changes may continue to increase competitive pressures in the markets where Edison Mission Energy operates. Increased competition for Edison Mission Energy's new project investment opportunities may adversely affect Edison Mission Energy's ability to develop or acquire projects on economically favorable terms. EDISON MISSION ENERGY IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND ITS ABILITY TO COMPLY WITH EXISTING REGULATIONS OR REQUIREMENTS OR CHANGES IN APPLICABLE REGULATIONS OR REQUIREMENTS MAY HAVE A NEGATIVE IMPACT ON EDISON MISSION ENERGY'S BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL CONDITIONS. Edison Mission Energy's operations are subject to extensive regulation by governmental agencies in each of the countries in which Edison Mission Energy conducts operations. See "Regulation." Edison Mission Energy's domestic projects are subject to energy, environmental and other governmental laws and regulations at the federal, state and local levels in connection with the development, ownership and operation of the projects. Edison Mission Energy's projects are also subject to federal, state and local laws and regulations that govern the geographical location, zoning, land use and operation of a project. Edison Mission Energy's international projects are subject to the energy, environmental and other laws and regulations of the foreign jurisdictions in which these projects are located. The degree of regulation varies according to each country and may be materially different from the regulatory regimes in the United States. 26 Edison Mission Energy cannot assure you that the introduction of new laws or other future regulatory developments in countries in which Edison Mission Energy conducts its business will not have a material adverse effect on its business, results of operations or financial condition, nor can Edison Mission Energy assure you that it will be able to obtain and comply with all necessary licenses, permits and approvals for its proposed energy projects. If Edison Mission Energy cannot comply with all applicable regulations, its business, results of operations and financial condition could be adversely affected. In addition, if any of Edison Mission Energy's projects loses its status as a qualifying facility, eligible facility or foreign utility company under U.S. federal regulations, Edison Mission Energy could become subject to regulation as a "holding company" under the Public Utility Holding Company Act of 1935. If that were to occur, Edison Mission Energy would be required to divest all operations not functionally related to the operation of a single integrated utility system and would be required to obtain approval of the Securities and Exchange Commission for various actions. See "Regulation--U.S. Federal Energy Regulation." GENERAL OPERATING RISKS AND CATASTROPHIC EVENTS MAY ADVERSELY AFFECT EDISON MISSION ENERGY'S PROJECTS. The operation of power generating plants involves many risks, including start-up problems, the breakdown or failure of equipment or processes, performance below expected levels of output, the inability to meet expected efficiency standards, operator error, strikes, work stoppages or labor disputes and catastrophic events such as earthquakes, landslides, fires, floods, explosions or similar calamities. The occurrence of any of these events could significantly reduce revenues generated by Edison Mission Energy's projects or increase their generating expenses, thus diminishing distributions by the projects to Edison Mission Energy and, as a result, Edison Mission Energy's ability to make payments under the Edison Mission Energy guarantees. Equipment and plant warranties and insurance obtained by Edison Mission Energy may not be adequate to cover lost revenues or increased expenses and, as a result, a project may be unable to fund principal and interest payments under its financing obligations and may operate at a loss. A default under a financing obligation could cause Edison Mission Energy to lose its interest in the project. EDISON MISSION ENERGY'S FUTURE ACQUISITIONS AND DEVELOPMENT PROJECTS MAY NOT BE SUCCESSFUL. Edison Mission Energy's strategy includes the development and acquisition of electric power generation facilities. The development projects and acquisitions in which Edison Mission Energy has invested or in which Edison Mission Energy may invest in the future, including those described in this prospectus, may be large and complex, and Edison Mission Energy may not be able to complete the development or acquisition of any particular project. The development of a power project may require Edison Mission Energy to expend significant sums for preliminary engineering, permitting, legal and other expenses before it can determine whether it will win a competitive bid, or whether a project is feasible, economically attractive or financeable. Moreover, Edison Mission Energy's access to capital for future projects is uncertain. Furthermore, due to the effects of the California power crisis on Edison International, Edison Mission Energy does not expect to receive capital contributions from Edison International in the near future. Edison Mission Energy cannot assure you that it will be successful in obtaining financing for its projects or that it will obtain sufficient additional equity capital, project cash flow or additional borrowings to enable it to fund the equity commitments required for future projects. CONTRACTUAL AND STRUCTURAL OBLIGATIONS MAY LIMIT OUR DISPOSITION OF OUR EXCESS CASH FLOW. Current contractual obligations restrict the ability of Edison Mission Midwest Holdings, our immediate parent company, to make payments under specified conditions. Those contractual obligations also limit our ability to use our excess cash flow to make lease payments. 27 On December 15, 1999, Edison Mission Midwest Holdings entered into a $1.8 billion credit agreement, which amount was increased to $1.9 billion in December 2000. In the original transaction, a special purpose limited liability company named Midwest Funding LLC entered into credit facilities totaling $774 million. The credit agreement includes restrictions on our ability and the ability of Edison Mission Midwest Holdings to use excess cash flow. These restrictions are based on the debt rating of the outstanding debt of Edison Mission Midwest Holdings and Midwest Funding under the credit facilities. Currently, Edison Mission Midwest Holdings' applicable debt rating is "BBB-" and "Baa2" by Standard & Poor's and Moody's, respectively. The Midwest Funding debt rating is "BBB-" and "Baa2" by Standard & Poor's and Moody's, respectively. Both Standard & Poor's and Moody's have indicated that the ratings outlook on these debt ratings is stable. If the debt ratings of the outstanding debt of Edison Mission Midwest Holdings or Midwest Funding under the credit facilities fall below any of the following two-pronged thresholds, 50% of the excess cash flow must be deposited into a special fund, where it will be held by the secured parties in connection with that credit facility: - "BBB-" and "Baa3" by Standard & Poor's and Moody's, respectively, or - at least "BB+" and "Baa3" by Standard & Poor's and Moody's, respectively, or - "BBB-" and at least "Ba1" by Standard & Poor's and Moody's, respectively. If either Edison Mission Midwest Holdings' or Midwest Funding's debt rating falls below "BB+" and "Ba1" by Standard & Poor's and Moody's, respectively, 100% of the excess cash flow must be deposited into the special fund to be held by the secured parties. If either Edison Mission Midwest Holdings' or Midwest Funding's debt rating falls below any of the following two-pronged thresholds, all excess cash flow must be used to prepay the outstanding loans under the credit facilities: - "BB" or lower and "Ba2" or lower by Standard & Poor's and Moody's, respectively, or - "BB+" and "Ba2" or lower by Standard & Poor's and Moody's, respectively, or - "BB" or lower and "Ba1" by Standard & Poor's and Moody's, respectively. If at any time the debt ratings are split between Standard & Poor's and Moody's by more than one rating level, the lower rating shall govern. Under circumstances where we have insufficient excess cash flow to make lease payments or where we do not have any excess cash flow, certificateholders will have to look to the Edison Mission Energy guarantees for payment. If the debt rating of Edison Mission Midwest Holdings were to fall below investment grade, this could lead to a refinancing of debt at Edison Mission Midwest Holdings. A required refinancing due to a downgrade below investment grade would likely be on less favorable terms than a refinancing that was chosen by Edison Mission Midwest Holdings based on favorable terms. In that case, a required refinancing could possibly adversely affect the availability of excess cash from Edison Mission Midwest Holdings since it would likely have to pay a higher interest rate on the refinancing. Since our ability to make payments under the leases is determined by how much excess cash we have after meeting our own and Edison Mission Midwest Holdings' debt service and other expenses, if Edison Mission Midwest Holdings pays a higher interest rate on the refinancing, we would have less excess cash available to make lease payments. 28 WE CURRENTLY RELY ON EXELON GENERATION AS OUR PRIMARY CUSTOMER AND MAY BE ADVERSELY AFFECTED IF EXELON GENERATION FAILS TO FULFILL ITS OBLIGATIONS UNDER THE POWER PURCHASE AGREEMENTS. We currently derive a substantial majority of our revenue from the sale of energy and capacity to Exelon Generation, a subsidiary of Exelon Corporation, under three five-year power purchase agreements terminating in December 2004. Exelon Corporation is the holding company of Commonwealth Edison and PECO Energy Company, major utilities located in Illinois and Pennsylvania. Payments from Commonwealth Edison under these power purchase agreements constituted approximately 99% of our revenues during 2000, with the balance of our revenues coming from third party sales of electric energy. It is uncertain whether we would be able to find another purchaser or similar terms for the output of our power generation assets if Exelon Generation fails or is unable to fulfill its obligations under the power purchase agreements. Any material failure by Exelon Generation to make payments under the power purchase agreements could adversely affect our revenues, and therefore, our ability to make lease payments. The ability to amend or terminate the power purchase agreements is limited. However, the terms of our power purchase agreements do allow amendment or early termination under some limited circumstances. See "Our Business--Exelon Generation and Commonwealth Edison Agreements." The amendment or early termination of any power purchase agreement could adversely affect the revenues we receive and, therefore, our ability to make lease payments. CLAIMS AGAINST US FOR NONPAYMENT OF OUR OBLIGATIONS UNDER EACH LEASE ARE LIMITED. Claims against us for nonpayment of rent, termination value or any other amounts payable by us to the financing parties are limited to free cash flow. Free cash flow is: - THE SUM OF THE FOLLOWING TWO AMOUNTS, (1) payments to us from Edison Mission Energy under the intercompany loan transaction and several other intercompany notes to the extent we are entitled to retain those proceeds and have not distributed them directly or indirectly to Edison Mission Energy, and (2) our revenues MINUS our operating expenses MINUS the sum of (a) our debt service payments, (b) our payments on preferred stock and (c) amounts required to be deposited into a special account under the credit agreement Edison Mission Midwest Holdings entered into in connection with the acquisition of the power generation assets from Commonwealth Edison (which we refer to as base free cash flow), - MINUS obligations under the leases and obligations under several other transactions paid by us. Base free cash flow is deemed to be zero if Edison Mission Midwest Holdings has not paid amounts due under the credit agreement or other secured indebtedness, an event of default has occurred under the credit agreement or under Edison Mission Midwest Holdings' other secured indebtedness, or Edison Mission Midwest Holdings does not meet specified debt service coverage ratios. Claims against us for nonpayment of rent, termination value or any other amounts payable by us to the financing parties are permitted for any amounts of rent or termination value in excess of free cash flow. However, claims for amounts over the amount of free cash flow will be subordinated to the claims of specified holders of our other currently existing debt and specified holders of the currently existing debt of Edison Mission Midwest Holdings. See "Description of the Leases and Other Lease Documents--Subordination of Claims." However, Edison Mission Energy remains liable under the Edison Mission Energy guarantees for any and all rent, termination value or other amounts payable by us to the financing parties, subject to the limitation described in the risk factor entitled "--Claims against Edison Mission Energy under each guarantee are limited in selected circumstances." 29 BANKRUPTCY LAW CONSIDERATIONS COULD LIMIT CLAIMS AGAINST US, EDISON MISSION ENERGY OR THE OWNER TRUSTS. WITH RESPECT TO THE LEASES If we were to become a debtor in a case under the Bankruptcy Code (located at title 11 of the United States Code, 11 U.S.C. Sections 101 et seq.), the right to exercise virtually all remedies against us would be stayed, including the right to terminate the leases. The bankruptcy court could hold that the leases are "true leases" rather than financing arrangements. If the bankruptcy court were to hold that the leases are true leases, it would likely also hold that the leases are leases of real property rather than of personal property. If the bankruptcy court were to hold that the leases are true leases of real property, we would have the right to reject each lease under Bankruptcy Code Section 365, and Bankruptcy Code Section 502(b)(6) would limit the owner trusts' claims against us for damages resulting from the rejection or other termination of the leases, whether occurring before or after the commencement of our bankruptcy case, to the rent reserved by the leases, for the greater of one year or 15% (not to exceed three years) of the remaining term of the leases, from the earlier of either the date of the filing of the bankruptcy petition or the date on which the owner trusts repossessed or we surrendered the facilities. The owner trusts are entitled to recover the limited damages as described above and also to either recover amounts owed under the Edison Mission Energy guarantees or to foreclose on the ownership interests in the facilities. If the owner trusts select to foreclose on the ownership interests in the facilities, the sum of the liquidation proceeds from the sale of the facilities, plus the amount of the owner trusts' damage claims, as limited by Section 502(b)(6), may be insufficient to cover all amounts due on the lessor notes. If the bankruptcy court were to hold that the leases are financing arrangements rather than true leases, Section 502(b)(6) would not limit the owner trusts' claims against us. In that event, however, any attempt by the owner trusts to enforce remedies against us for collection of the damage claims would be stayed unless it was authorized by the bankruptcy court. In addition, the owner trusts' liens could be transferred to other collateral or limited in amount to the value of the owner trusts' interests in the collateral as of the date that the bankruptcy case commenced, and the priority of the claims could be subordinated to bankruptcy court-approved financing. We cannot predict with any degree of certainty whether or not a bankruptcy court would hold that the leases are true leases or financing arrangements because the resolution of this issue would depend on the bankruptcy court's analysis of the particular facts and circumstances associated with the transaction. Regardless of how a bankruptcy court were to characterize the leases, the amount of recovery on any claims against us and the amount of time that would pass between the commencement of our bankruptcy case and the receipt of any recovery also cannot be predicted with any degree of certainty. Furthermore, in a bankruptcy case, we could elect to cure defaults under the leases and to assume or assign the leases if the leases were deemed true leases. If we were to assign the leases, the ultimate source of payments under the leases, and thus on the certificates, would be an entity other than us. While the assignee would have to demonstrate its ability to perform under the assumed leases to the bankruptcy court, there can be no definitive assurances that the assignee would satisfy our obligations under the leases. If we were to become a debtor in a case under the Bankruptcy Code, but Edison Mission Energy were not a debtor in a case under the Bankruptcy Code, the obligations of Edison Mission Energy under the Edison Mission Energy guarantees should not be limited by Section 502(b)(6). 30 WITH RESPECT TO THE GUARANTEES The ring-fencing provisions in the bylaws and articles of incorporation of Edison Mission Energy were adopted to facilitate the ability of Edison Mission Energy and the ability of its subsidiaries to maintain their respective investment grade ratings. However, there is no assurance that Edison Mission Energy will not become a debtor in a case under the Bankruptcy Code. For a discussion of the ring-fencing provisions, see "The current California power crisis has had, and may continue to have, an adverse impact on Edison Mission Energy and us." If Edison Mission Energy were to become a debtor in a case under the Bankruptcy Code, the right to exercise virtually all remedies against Edison Mission Energy would be stayed. In addition, as noted above, the bankruptcy court could hold that the leases are true leases of real property rather than financing arrangements. In that event, Bankruptcy Code Section 502(b)(6) would limit the owner trusts' claims against Edison Mission Energy under the guarantees for amounts due under the leases in the same manner that it would limit the owner trusts' claims against us for those amounts in our bankruptcy case, as described in the preceding paragraphs. A bankruptcy court could hold that Section 502(b)(6) or other provisions of the Bankruptcy Code limit enforcement of the guarantees in a bankruptcy case of Edison Mission Energy. Regardless of how a bankruptcy court were to characterize the leases or the guarantees, the amount of recovery on any claims against Edison Mission Energy and the amount of time that would pass before the commencement of any bankruptcy case of Edison Mission Energy and the receipt of any recovery cannot be predicted with any degree of certainty. If Edison Mission Energy were to become a debtor in a case under the Bankruptcy Code, but we were not a debtor in a case under the Bankruptcy Code, our obligations under the leases should not be limited by Section 502(b)(6). WITH RESPECT TO THE LESSOR NOTES If any of the owner trusts were to become a debtor in a case under the Bankruptcy Code, the right to exercise virtually all remedies against that owner trust would be stayed. The bankruptcy court could permit the owner trust to use or dispose of payments made to it under the leases or the guarantees for purposes other than making payments on the lessor notes and could reduce the amount of, and modify the time for making, payments due under the lessor notes, subject to procedural and substantive safeguards for the benefit of the owner trust. In that event, payments on the lessor notes could be reduced or delayed. If the court were to hold that the leases are true leases of real property rather than financing arrangements, the owner trusts would have the right to reject the leases under Bankruptcy Code Section 365. In the event of rejection we could elect to remain in possession for the remaining term of the leases and continue our obligations under the leases (in which event Edison Mission Energy's guarantees would remain effective), or treat the leases as being terminated and terminate our obligation to make further payments to the owner trusts in respect of the facilities (in which event Edison Mission Energy's obligations under the guarantees to make payments for amounts that otherwise would have been due under the leases might effectively be discharged). In addition, the amount of recovery on any claims against the owner trust and the amount of time that would pass between commencement of the owner trust's bankruptcy case and the receipt of any recovery cannot be predicted with any degree of certainty. WE ARE SUBJECT TO ENVIRONMENTAL REGULATION, AND OUR INABILITY TO COMPLY WITH CHANGES IN APPLICABLE REGULATIONS OR REQUIREMENTS MAY HAVE A NEGATIVE IMPACT ON OUR FINANCIAL POSITION OR RESULTS OF OPERATIONS. Possible future regulatory developments, such as more stringent environmental laws and regulations and proceedings which may be taken by environmental authorities, could affect the costs and the manner in which we conduct our business and could cause us to make capital expenditures substantially in excess of anticipated amounts. We cannot assure you that in that case we would be able 31 to recover the increased costs from our customers or that our financial position and results of operations would not be materially adversely affected. See "Our Business--Environmental Regulation" for a further discussion of environmental regulatory developments that could affect our business in the future. RIGHTS OF COMMONWEALTH EDISON IN THE LEASED FACILITIES MAY DELAY OR HINDER FORECLOSURE ON THE LEASED FACILITIES. Any foreclosure on the Powerton Station or the Joliet Station is subject to the rights of Commonwealth Edison. Although we have purchased the facilities from Commonwealth Edison, Commonwealth Edison retains ownership interests in several easements and interconnection systems associated with the facilities. While we have entered into agreements with Commonwealth Edison which allow us to utilize these easements and interconnection systems, in the case of foreclosure upon the Powerton Station or the Joliet Station, Commonwealth Edison would retain its ownership of the easements and interconnection systems and these easements and interconnection systems would not be subject to foreclosure claims made upon the facilities. Also, any transferee in foreclosure would be required to honor the power purchase agreement with Exelon Generation relating to these facilities and would assume liabilities with respect to the power purchase agreement and the facilities, interconnection and easement agreements if those agreements are still in effect. For more information regarding the power purchase agreement and the facilities, interconnection and easement agreements, see "Our Business--Exelon Generation and Commonwealth Edison Agreements." IT MAY BE DIFFICULT TO REALIZE THE VALUE OF THE COLLATERAL PLEDGED TO SECURE THE LESSOR NOTES, AND THE PROCEEDS RECEIVED FROM A SALE OF THE COLLATERAL MAY BE INSUFFICIENT TO REPAY THE LESSOR NOTES. The lessor notes issued by each owner trust are secured by an assignment of the owner trust's rights and interests in its respective ownership interest in the Powerton Station or Joliet Station, the participation agreement, the site lease, the lease and the Edison Mission Energy guarantee to the lease indenture trustee. If a default occurs with respect to the lessor notes, there can be no assurance that an exercise of remedies, including foreclosure on the related facility arrangements, would provide sufficient funds to repay all amounts due on the lessor notes and, accordingly, the certificates. If the lease indenture trustee exercises its right to foreclose on a particular ownership interest in the Powerton Station or Joliet Station, transferring required government approvals to, or obtaining new approvals by, a purchaser or new operator of the facility may require governmental proceedings with consequent delays. If we default under a particular lease and the lease indenture trustee exercises its right to foreclose on the ownership interest in the Powerton Station or Joliet Station, the lease indenture trustee must rely on the facility services agreement and/or covenants in the participation agreements in order to operate the facility. In a bankruptcy proceeding, the facility services agreements might be regarded as executory contracts that we, as debtor, or a bankruptcy trustee could reject. If we or a bankruptcy trustee reject the facility services agreements, the lease indenture trustee might not have authority to operate the ownership interest in the Powerton Station or Joliet Station in order to provide revenues for payments of lease rentals or might incur significant additional costs in doing so. In addition, the leases and the other operative documents do not contain cross-collateralization provisions. Accordingly, each lease indenture trustee's security interests in each owner trust's ownership interest in a facility and the collateral pertaining to each ownership interest in a facility are separate and secure separate amounts. The amounts secured are, in the aggregate, at least equal to the aggregate amounts due under the lessor notes. If each lease indenture trustee exercises its right to foreclose on and sell the collateral, the proceeds from the sale of each ownership interest in a facility and the collateral pertaining to the ownership interest in a facility would be separately applied against the amount secured by that particular ownership interest in a facility and could not be used to satisfy 32 any deficiency in the proceeds from the sale of the other ownership interests in the facilities and the collateral pertaining to the other ownership interests in the facilities. By operation of law, any excess of sale proceeds would be remitted to the applicable owner trust. As a result, the amount of sale proceeds from the foreclosure of the collateral related to a particular ownership interest in a facility available to a lease indenture trustee for distribution to the pass-through trust for which it is pass-through trustee might not be sufficient to pay all principal, premium, if any, and interest due on the certificates, even though aggregate sale proceeds were sufficient to pay those amounts. RATINGS OF THE CERTIFICATES FROM MOODY'S AND STANDARD & POOR'S DO NOT CONSTITUTE A RECOMMENDATION TO PURCHASE THE CERTIFICATES, AND THE RATINGS OF THE CERTIFICATES, AS WELL AS THE EDISON MISSION ENERGY DEBT RATINGS AND OUR DEBT RATINGS, ARE SUBJECT TO CHANGE. Standard & Poor's and Moody's have assigned ratings to the Series A and Series B Certificates of BBB- and Baa3, respectively. A rating is not a recommendation to purchase, hold or sell certificates, because a rating does not address market price or suitability for a particular investor. There can be no assurance that a rating will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances in the future, including Edison Mission Energy's downgrading or our downgrading, so warrant. The rating of the certificates is based primarily on Edison Mission Energy's default risk under the guarantees of our lease payment obligations. If Edison Mission Energy's rating were reduced below investment grade for any reason, it is possible that the ratings of Edison Mission Energy's subsidiaries, including us, would similarly be reduced. If our rating were reduced below investment grade, it would have a material adverse effect on our liquidity and access to capital. Furthermore, if Edison Mission Midwest Holdings or Midwest Funding were downgraded below specified thresholds, this would trigger contractual limitations which would require us to deposit portions of our cash flow into a special fund. For more information on these limitations, see "--Contractual and structural obligations may limit our disposition of our excess cash flow." YOU MAY HAVE DIFFICULTY SELLING THE CERTIFICATES THAT YOU DO NOT EXCHANGE. If you do not exchange your original certificates for exchange certificates in the exchange offer, you will continue to be subject to the restrictions on transfer of your original certificates described in the legend on your original certificates. The restrictions on transfer of your original certificates arise because we issued the original certificates under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the original certificates if they are registered under the Securities Act and applicable state securities laws, or offered and sold under an exemption from these requirements. We do not intend to register the original certificates under the Securities Act. To the extent original certificates are tendered and accepted in the exchange offer, the trading market, if any, for the original certificates would be adversely affected. See "The Exchange Offer--Consequences of Exchanging or Failing to Exchange Original Certificates." YOU MAY FIND IT DIFFICULT TO SELL YOUR CERTIFICATES BECAUSE THERE IS NO EXISTING TRADING MARKET FOR THE EXCHANGE CERTIFICATES. You may find it difficult to sell your certificates because an active trading market for the certificates may not develop. The exchange certificates are being offered to the holders of the original certificates. The original certificates were issued on August 24, 2000, primarily to a small number of institutional investors. After the exchange offer, the trading market for the remaining untendered original certificates could be adversely affected. 33 There is no existing trading market for the exchange certificates. We do not intend to apply for listing or quotation of the exchange certificates on any exchange, and so we do not know the extent to which investor interest will lead to the development of a trading market or how liquid that market might be. Although Credit Suisse First Boston Corporation, Lehman Brothers Inc., Chase Securities Inc., Salomon Smith Barney Inc. and SG Cowen Securities Corp., the initial purchasers in the offering of the original certificates, have informed us that they intend to make a market in the exchange certificates, they are not obligated to do so, and any market-making may be discontinued at any time without notice. As a result, the market price of the exchange certificates could be adversely affected. BROKER-DEALERS OR CERTIFICATEHOLDERS MAY BECOME SUBJECT TO THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT. Any broker-dealer that: - exchanges its original certificates in the exchange offer for the purpose of participating in a distribution of the exchange certificates, or - resells exchange certificates that were received by it for its own account in the exchange offer, may be deemed to have received restricted securities and may be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction by that broker-dealer. Any profit on the resale of the exchange certificates and any commission or concessions received by a broker-dealer may be deemed to be underwriting compensation under the Securities Act. In addition to broker-dealers, any certificateholder that exchanges its original certificates in the exchange offer for the purpose of participating in a distribution of the exchange certificates may be deemed to have received restricted securities and may be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction by that certificateholder. USE OF PROCEEDS We will not receive any proceeds from the exchange offer. In consideration for issuing the exchange certificates, we will receive in exchange original certificates of like principal amount, the terms of which are identical in all material respects to the exchange certificates. The original certificates surrendered in exchange for exchange certificates will be retired and canceled and cannot be reissued. Issuance of the exchange certificates will not result in a change in our lease rental obligations. We have agreed to bear the expenses of the exchange offer. No underwriter is being used in connection with the exchange offer. On August 24, 2000, we issued and sold the original certificates. The pass-through trusts used the net proceeds of that offering in the amount of $1,147 million to purchase $1,147 million principal amount of lessor notes issued by the owner trusts. The owner trusts used the proceeds from the sale of the lessor notes, together with $220 million of equity contributed to the owner trusts by the equity investors, to purchase the Powerton and Joliet facilities from us. We loaned the net proceeds of the offering to Edison Mission Energy in return for four intercompany notes of Edison Mission Energy. The aggregate amount of our loan to Edison Mission Energy was $1,367 million. Edison Mission Energy used the proceeds of the intercompany notes to repay portions of its corporate debt consisting of floating rate notes of $500 million at a rate of 7.48% due June 15, 2001; a $500 million commercial paper facility at a time weighted average yield of 6.80% due December 15, 2000; $337 million of its $500 million revolving credit facility, at a rate of 6.795% due October 10, 2001; and $30 million of its $300 million senior credit facility, at a rate of 7.02% due May 30, 2001. 34 THE EXCHANGE OFFER TERMS OF THE EXCHANGE OFFER Upon the terms and conditions listed in this prospectus and in the accompanying letter of transmittal, which together constitute the exchange offer, we will accept for exchange original certificates which are properly tendered on or before the expiration date and not withdrawn as permitted below. As used in this prospectus, the term "expiration date" means 5:00 p.m., New York City time, on - , 2001. However, if we, in our sole discretion, have extended the period of time for which the exchange offer is open, the term "expiration date" means the latest time and date to which we extend the exchange offer. The exchange offer, however, will not be in effect any longer than 45 business days from the date of this prospectus. As of the date of this prospectus, $333,500,000 aggregate principal amount of the original Series A pass-through certificates and $813,500,000 aggregate principal amount of the original Series B pass-through certificates are outstanding. This prospectus, together with the letter of transmittal, is first being sent on or about - , 2001, to all holders of original certificates known to us. Our obligation to accept original certificates for exchange in the exchange offer is subject to the conditions described under "--Conditions to the Exchange Offer." We reserve the right to extend the period of time during which the exchange offer is open. We would then delay acceptance for exchange of any original certificates by giving oral or written notice of an extension to the holders of original certificates as described below. During any extension period, all original certificates previously tendered will remain subject to the exchange offer and may be accepted for exchange by us. Any original certificates not accepted for exchange will be returned to the tendering holder after the expiration or termination of the exchange offer. Original certificates tendered in the exchange offer must be in denominations of principal amount of $1,000 and any integral multiple of $1,000. We reserve the right to amend or terminate the exchange offer, and not to accept for exchange any original certificates not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offer specified below under "--Conditions to the Exchange Offer." We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the original certificates as promptly as practicable. If we materially change the terms of the exchange offer, we will re-solicit tenders of the original certificates, file a post-effective amendment to this prospectus and provide notice to the certificateholders. If the change is made less than five business days before the expiration of the exchange offer, we will extend the offer so that the certificateholders have at least five business days to tender or withdraw. We will notify you of any extension by means of a press release or other public announcement no later than 9:00 a.m., New York City time on that date. Our acceptance of the tender of original certificates by a tendering holder will form a binding agreement upon the terms and subject to the conditions provided in this prospectus and in the accompanying letter of transmittal. PROCEDURES FOR TENDERING OUTSTANDING CERTIFICATES Except as described below, a tendering certificateholder must, on or prior to the expiration date: - transmit a properly completed and duly executed letter of transmittal, including all other documents required by the letter of transmittal, to United States Trust Company of New York at the address listed below under the heading "--Exchange Agent," or - if certificates are tendered in accordance with the book-entry procedures listed below, the tendering holder must transmit an agent's message to the exchange agent at the address listed below under the heading "--Exchange Agent." 35 In addition: - the exchange agent must receive, on or before the expiration date, certificates for the original certificates or a timely confirmation of book-entry transfer of the original certificates into the exchange agent's account at The Depository Trust Company, the book-entry transfer facility, along with the letter of transmittal or an agent's message, or - the holder must comply with the guaranteed delivery procedures described below. The term "agent's message" means a message, transmitted to The Depository Trust Company and received by the exchange agent and forming a part of a book-entry transfer, that states that The Depository Trust Company has received an express acknowledgment that the tendering holder agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against this holder. The method of delivery of original certificates, letters of transmittal and all other required documents is at your election and risk. If the delivery is by mail, we recommend that you use registered mail, properly insured, with return receipt requested. In all cases, you should allow sufficient time to assure timely delivery. You should not send letters of transmittal or original certificates to us. If you are a beneficial owner whose original certificates are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and wish to tender, you should promptly instruct the registered holder to tender on your behalf. Any registered holder that is a participant in The Depository Trust Company's book-entry transfer facility system may make book-entry delivery of the original certificates by causing The Depository Trust Company to transfer the original certificates into the exchange agent's account. Signatures on a letter of transmittal or a notice of withdrawal must be guaranteed unless the original certificates surrendered for exchange are tendered: - by a registered holder of the original certificates who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal, or - for the account of an "eligible institution." If signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, the guarantees must be by an "eligible institution." An "eligible institution" is a financial institution--including most banks, savings and loan associations and brokerage houses--that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program. We will determine in our sole discretion all questions as to the validity, form and eligibility of original certificates tendered for exchange. This discretion extends to the determination of all questions concerning the timing of receipts and acceptance of tenders. These determinations will be final and binding. We reserve the right to reject any particular original certificate not properly tendered or any the acceptance of which might, in our judgment or our counsel's judgment, be unlawful. We also reserve the right to waive any defects or irregularities or conditions of the exchange offer as to any particular original certificate either before or after the expiration date, including the right to waive the ineligibility of any tendering holder. Our interpretation of the terms and conditions of the exchange offer as to any particular original certificate either before or after the expiration date, including the letter of transmittal and the instructions to the letter of transmittal, shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of original certificates must be cured within a reasonable period of time. Neither we, the exchange agent nor any other person will be under any duty to give notification of any defect or irregularity in any tender of original certificates. 36 Nor will we, the exchange agent or any other person incur any liability for failing to give notification of any defect or irregularity. If the letter of transmittal is signed by a person other than the registered holder of original certificates, the letter of transmittal must be accompanied by a written instrument of transfer or exchange in satisfactory form duly executed by the registered holder with the signature guaranteed by an eligible institution. The original certificates must be endorsed or accompanied by appropriate powers of attorney. In either case, the original certificates must be signed exactly as the name of any registered holder appears on the original certificates. If the letter of transmittal or any original certificates or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, these persons should so indicate when signing. Unless waived by us, proper evidence satisfactory to us of their authority to so act must be submitted. By tendering, each holder will represent to us that, among other things, - the exchange certificates are being acquired in the ordinary course of business of the person receiving the exchange certificates, whether or not that person is the holder, and - neither the holder nor the other person has any arrangement or understanding with any person to participate in the distribution of the exchange certificates. In the case of a holder that is not a broker-dealer, that holder, by tendering, will also represent to us that the holder is not engaged in and does not intend to engage in a distribution of the exchange certificates. If any holder or other person is an "affiliate" of ours or an "affiliate" of Edison Mission Energy, as defined under Rule 405 under the Securities Act, or is engaged in, or intends to engage in, or has an arrangement or understanding with any person to participate in, a distribution of the exchange certificates, that holder or other person cannot rely on the applicable interpretations of the staff of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives exchange certificates for its own account in exchange for original certificates, where the original certificates were acquired by it as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus that meets the requirements of the Securities Act in connection with any resale of the exchange certificates. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "Plan of Distribution." ACCEPTANCE OF ORIGINAL CERTIFICATES FOR EXCHANGE; DELIVERY OF EXCHANGE CERTIFICATES Upon satisfaction or waiver of all the conditions to the exchange offer, we will accept, promptly after the expiration date, all original certificates properly tendered. We will issue the exchange certificates promptly after acceptance of the original certificates. See "--Conditions to the Exchange Offer" below. For purposes of the exchange offer, we will be deemed to have accepted properly tendered original certificates for exchange when, as and if we have given oral or written notice to the exchange agent, with prompt written confirmation of any oral notice. For each original certificate accepted for exchange, the holder of the original certificate will receive an exchange certificate having a principal amount equal to that of the surrendered original certificate. The exchange certificates will bear interest from the most recent date to which interest has been paid on the original certificates. Accordingly, registered holders of exchange certificates on the relevant record date for the first interest payment date following the completion of the exchange offer will receive interest accruing from the most recent date to which interest has been paid. Original 37 certificates accepted for exchange will cease to accrue interest from and after the date of completion of the exchange offer. Holders of original certificates whose original certificates are accepted for exchange will not receive any payment for accrued interest on the original certificates otherwise payable on any interest payment date the record date for which occurs on or after completion of the exchange offer and will be deemed to have waived their rights to receive the accrued interest on the original certificates. In all cases, issuance of exchange certificates for original certificates will be made only after timely receipt by the exchange agent of: - certificates for the original certificates, or a timely book-entry confirmation of the original certificates, into the exchange agent's account at the book-entry transfer facility, - a properly completed and duly executed letter of transmittal, and - all other required documents. Unaccepted or non-exchanged original certificates will be returned without expense to the tendering holder of the original certificates. In the case of original certificates tendered by book-entry transfer in accordance with the book-entry procedures described below, the non-exchanged original certificates will be credited to an account maintained with the book-entry transfer facility, as promptly as practicable after the expiration or termination of the exchange offer. BOOK-ENTRY TRANSFER The exchange agent will make a request to establish an account at The Depository Trust Company for purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in The Depository Trust Company's systems must make book-entry delivery of original certificates by causing The Depository Trust Company to transfer those original certificates into the exchange agent's account at The Depository Trust Company in accordance with The Depository Trust Company's procedure for transfer. This participant should transmit its acceptance to The Depository Trust Company on or prior to the expiration date or comply with the guaranteed delivery procedures described below. The Depository Trust Company will verify this acceptance, execute a book-entry transfer of the tendered original certificates into the exchange agent's account at The Depository Trust Company and then send to the exchange agent confirmation of this book-entry transfer. The confirmation of this book-entry transfer will include an agent's message confirming that The Depository Trust Company has received an express acknowledgment from this participant that this participant has received and agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against this participant. Delivery of exchange certificates issued in the exchange offer may be effected through book-entry transfer at The Depository Trust Company. However, the letter of transmittal or facsimile of it or an agent's message, with any required signature guarantees and any other required documents, must: - be transmitted to and received by the exchange agent at the address listed below under "--Exchange Agent" on or prior to the expiration date, or - comply with the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES If a registered holder of original certificates desires to tender the original certificates, and the original certificates are not immediately available, or time will not permit the holder's original certificates or other required documents to reach the exchange agent before the expiration date, or the 38 procedure for book-entry transfer described above cannot be completed on a timely basis, a tender may nonetheless be made if: - the tender is made through an eligible institution, - prior to the expiration date, the exchange agent received from an eligible institution a properly completed and duly executed letter of transmittal, or a facsimile of the letter of transmittal, and notice of guaranteed delivery, substantially in the form provided by us, by facsimile transmission, mail or hand delivery, (1) stating the name and address of the holder of the original certificates and the amount of original certificates tendered, (2) stating that the tender is being made, and (3) guaranteeing that within three New York Stock Exchange trading days after the expiration date, the certificates for all physically tendered original certificates, in proper form for transfer, or a book-entry confirmation, as the case may be, and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent, and - the certificates for all physically tendered original certificates, in proper form for transfer, or a book-entry confirmation, as the case may be, and all other documents required by the letter of transmittal, are received by the exchange agent within three New York Stock Exchange trading days after the expiration date. WITHDRAWAL RIGHTS Tenders of original certificates may be withdrawn at any time before 5:00 p.m., New York City time, on the expiration date. For a withdrawal to be effective, the exchange agent must receive a written notice of withdrawal at the address or, in the case of eligible institutions, at the facsimile number, indicated below under "--Exchange Agent" before 5:00 p.m., New York City time, on the expiration date. Any notice of withdrawal must: - specify the name of the person, referred to as the depositor, having tendered the original certificates to be withdrawn, - identify the certificates to be withdrawn, including the certificate number or numbers and the principal amount of the original certificates, - contain a statement that the holder is withdrawing his election to have the original certificates exchanged, and - specify the name in which the original certificates are registered, if different from that of the depositor. If certificates for original certificates have been delivered or otherwise identified to the exchange agent, then, prior to the release of these certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and signed notice of withdrawal with signatures guaranteed by an eligible institution unless this holder is an eligible institution. If original certificates have been tendered in accordance with the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn original certificates. We will determine all questions as to the validity, form and eligibility, including time of receipt, of notices of withdrawal. Any original certificates so withdrawn will be deemed not to have been validly tendered for exchange. No exchange certificates 39 will be issued unless the original certificates so withdrawn are validly re-tendered. Any original certificates that have been tendered for exchange, but which are not exchanged for any reason, will be returned to the tendering holder without cost to the holder. In the case of original certificates tendered by book-entry transfer, the original certificates will be credited to an account maintained with the book-entry transfer facility for the original certificates. Properly withdrawn original certificates may be re-tendered by following the procedures described under "--Procedures for Tendering Outstanding Certificates" above at any time on or before 5:00 p.m., New York City time, on the expiration date. CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provision of the exchange offer, we shall not be required to accept for exchange, or to issue exchange certificates in exchange for, any original certificates, and may terminate or amend the exchange offer, if at any time before the acceptance of the original certificates for exchange or the exchange of the exchange certificates for the original certificates, any of the following events shall occur: - there shall be threatened, instituted or pending any action or proceeding before, or any injunction, order or decree shall have been issued by, any court or governmental agency or other governmental regulatory or administrative agency or commission: (1) seeking to restrain or prohibit the making or completion of the exchange offer or any other transaction contemplated by the exchange offer, or assessing or seeking any damages as a result of this transaction, or (2) resulting in a material delay in our ability to accept for exchange or exchange some or all the original certificates in the exchange offer; or any statute, rule, regulation, order or injunction shall be sought, proposed, introduced, enacted, promulgated or deemed applicable to the exchange offer or any of the transactions contemplated by the exchange offer by any governmental authority, domestic or foreign, - any action shall have been taken, proposed or threatened, by any governmental authority, domestic or foreign, that in our sole judgment might directly or indirectly result in any of the consequences referred to in clauses (1) or (2) above or, in our sole judgment, might result in the holders of exchange certificates having obligations with respect to resales and transfers of exchange certificates which are greater than those described in the interpretation of the SEC referred to above, or would otherwise make it inadvisable to proceed with the exchange offer; or - there shall have occurred: (1) any general suspension of or general limitation on prices for, or trading in, securities on any national securities exchange or in the over-the-counter market, (2) any limitation by a governmental authority which may adversely affect our ability to complete the transactions contemplated by the exchange offer, (3) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any limitation by any governmental agency or authority which adversely affects the extension of credit, or (4) a commencement of a war, armed hostilities or other similar international calamity directly or indirectly involving the United States, or, in the case of any of the preceding events existing at the time of the commencement of the exchange offer, a material acceleration or worsening of these calamities, or - any change, or any development involving a prospective change, shall have occurred or be threatened in our business, financial condition, operations or prospects and those of our 40 subsidiaries taken as a whole that is or may be adverse to us, or we shall have become aware of facts that have or may have an adverse impact on the value of the original certificates or the exchange certificates, which in our sole judgment in any case makes it inadvisable to proceed with the exchange offer and/or with the acceptance for exchange or with the exchange. These conditions to the exchange offer are to our sole benefit, and we may assert them regardless of the circumstances giving rise to any of these conditions, or we may waive them in whole or in part in our sole discretion. If we do so, the exchange offer will remain open for at least 5 business days following any waiver of the preceding conditions. Our failure at any time to exercise any of the preceding rights will not be deemed a waiver of any right. In addition, we will not accept for exchange any original certificates tendered, and no exchange certificates will be issued in exchange for any original certificates, if at this time any stop order is threatened or in effect relating to the registration statement of which this prospectus constitutes a part or the qualification of the pass-through trust agreements under the Trust Indenture Act of 1939. EXCHANGE AGENT We have appointed United States Trust Company of New York as the exchange agent for the exchange offer. You should direct all executed letters of transmittal to the exchange agent at the address indicated below. You should direct questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery to the exchange agent addressed as follows: DELIVERY TO: United States Trust Company of New York, EXCHANGE AGENT BY HAND BEFORE 4:30 P.M.: BY REGISTERED OR CERTIFIED MAIL: United States Trust Company of New York United States Trust Company of New York 30 Broad Street P.O. Box 112 B-Level Bowling Green Station New York, NY 10004 New York, NY 10274 Attention: Corporate Trust Services
BY HAND OR OVERNIGHT DELIVERY AFTER 4:30 P.M. ON THE EXPIRATION DATE: United States Trust Company of New York 30 Broad Street, 14th Floor New York, NY 10004 FOR INFORMATION CALL: (800) 548-6565 BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY): (212) 422-0183 Attention: Customer Service CONFIRM BY TELEPHONE: (800) 548-6565 IF YOU DELIVER THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN ANY ADDRESS INDICATED ABOVE OR TRANSMIT INSTRUCTIONS VIA FACSIMILE OTHER THAN TO ANY FACSIMILE NUMBER INDICATED ABOVE, THEN YOUR DELIVERY OR TRANSMISSION WILL NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL. 41 FEES AND EXPENSES We will not make any payment to brokers, dealers, or others soliciting acceptances of the exchange offer. The estimated cash expenses to be incurred in connection with the exchange offer will be paid by us. We estimate these expenses in the aggregate to be approximately $1 million. ACCOUNTING TREATMENT We will not recognize any gain or loss for accounting purposes upon the consummation of the exchange offer. We will expense the costs of the exchange offer under generally accepted accounting principles. TRANSFER TAXES Holders who tender their original certificates for exchange will not be obligated to pay any related transfer taxes, except that holders who instruct us to register exchange certificates in the name of, or request that original certificates not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer taxes. CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE ORIGINAL CERTIFICATES Holders of original certificates who do not exchange their original certificates for exchange certificates in the exchange offer will continue to be subject to the provisions in the pass-through trust agreements regarding transfer and exchange of the original certificates and the restrictions on transfer of the original certificates as described in the legend on the certificates as a consequence of the issuance of the original certificates under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the original certificates may not be offered or sold, unless registered under the Securities Act, except under an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not intend to register the original certificates under the Securities Act. Based on interpretations by the staff of the SEC, as described in no-action letters issued to third parties, we believe that exchange certificates issued in the exchange offer in exchange for original certificates may be offered for resale, resold or otherwise transferred by holders of the original certificates, other than any holder which is an "affiliate" of ours or an "affiliate" of Edison Mission Energy within the meaning of Rule 405 under the Securities Act, without compliance with the registration and prospectus delivery provisions of the Securities Act, if the exchange certificates are acquired in the ordinary course of the holders' business and the holders have no arrangement or understanding with any person to participate in the distribution of the exchange certificates. However, the SEC has not considered the exchange offer in the context of a no-action letter issued to us. We cannot assure you that the staff of the SEC would make a similar determination with respect to the exchange offer as in the other circumstances. Each holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of exchange certificates and has no arrangement or understanding to participate in a distribution of exchange certificates. If any holder is an affiliate of ours or an affiliate of Edison Mission Energy, is engaged in or intends to engage in or has any arrangement or understanding with any person to participate in the distribution of the exchange certificates to be acquired in the exchange offer, that holder: - could not rely on the applicable interpretations of the staff of the SEC, and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. 42 Each broker-dealer that receives exchange certificates for its own account in exchange for original certificates must acknowledge that the original certificates were acquired by the broker-dealer as a result of market-making activities or other trading activities and that it will comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, including the delivery of a prospectus that contains information with respect to any selling holder required by the Securities Act in connection with any resale of the exchange certificates. Furthermore, any broker-dealer that acquired any of its outstanding certificates directly from us: - may not rely on the applicable interpretation of the staff of the SEC, and - must also be named as a selling certificateholder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction. See "Plan of Distribution." In addition, to comply with state securities laws, the exchange certificates may not be offered or sold in any state unless they have been registered or qualified for sale in that state or an exemption from registration or qualification, with which there has been compliance, is available. The offer and sale of the exchange certificates to "qualified institutional buyers," as defined under Rule 144A of the Securities Act, is generally exempt from registration or qualification under the state securities laws. We currently do not intend to register or qualify the sale of exchange certificates in any state where an exemption from registration or qualification is required and not available. 43 CAPITALIZATION The following table sets forth the capitalization of Edison Mission Energy and our capitalization as of December 31, 2000. The information regarding Edison Mission Energy in the table is qualified in its entirety by the more detailed information included in the documents incorporated by reference in this prospectus. See "Incorporation of Documents by Reference."
AT DECEMBER 31, 2000 -------------------- (IN MILLIONS) Edison Mission Energy Capitalization as of December 31, 2000 Short-term Indebtedness................................. $ 2,651.2 Long-term Indebtedness.................................. 5,334.8 Preferred Securities.................................... 326.8 --------- Total Indebtedness.................................... 8,312.8 Shareholder's Equity...................................... 2,948.2 --------- Total Edison Mission Energy Capitalization............ $11,261.0 ========= Midwest Generation Capitalization as of December 31, 2000 Long-term Indebtedness.................................. $ 3,518.8 Lease Financing......................................... 2,188.8 Member's Equity......................................... 549.9 --------- Total Midwest Generation Capitalization............... $ 6,257.5 =========
The completion of the exchange offer described in this prospectus will have no effect on the capitalization of Edison Mission Energy or Midwest Generation as of December 31, 2000. 44 SELECTED CONSOLIDATED FINANCIAL DATA OF EDISON MISSION ENERGY The following table sets forth selected consolidated financial data of Edison Mission Energy for the periods indicated. The selected consolidated financial data were derived from the audited consolidated financial statements of Edison Mission Energy and its consolidated subsidiaries. These selected consolidated financial data are qualified in their entirety by the more detailed information and financial statements, including the notes to that information and those financial statements, included in the documents incorporated by reference in this prospectus.
YEARS ENDED DECEMBER 31, ---------------------------------------------------- 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- (IN MILLIONS) INCOME STATEMENT DATA Operating revenues...................................... $3,241.0 $1,635.9 $ 893.8 $ 975.0 $ 843.6 Operating expenses...................................... 2,410.2 1,209.5 543.3 581.1 476.5 -------- -------- ------- ------- ------- Operating income........................................ 830.8 426.4 350.5 393.9 367.1 Interest expense........................................ (721.5) (375.5) (196.1) (223.5) (164.2) Interest and other income............................... 74.0 55.8 50.9 53.9 40.7 Minority interest....................................... (3.2) (3.0) (2.8) (38.8) (69.5) -------- -------- ------- ------- ------- Income before income taxes.............................. 180.1 103.7 202.5 185.5 174.1 Provision (benefit) for income taxes.................... 72.5 (40.4) 70.4 57.4 82.0 -------- -------- ------- ------- ------- Income before accounting change and extraordinary loss.................................................. 107.6 144.1 132.1 128.1 92.1 Cumulative effect on prior years of change in accounting for major maintenance costs, net of tax............... 17.7 -- -- -- -- Cumulative effect on prior years of change in accounting for start-up costs, net of tax........................ -- (13.8) -- -- -- Extraordinary loss on early extinguishment of debt, net of income tax benefit................................. -- -- -- (13.1) -- -------- -------- ------- ------- ------- Net income.............................................. $ 125.3 $ 130.3 $ 132.1 $ 115.0 $ 92.1 ======== ======== ======= ======= =======
AS OF DECEMBER 31, ------------------------------------------------------ 2000 1999 1998 1997 1996 --------- --------- -------- -------- -------- (IN MILLIONS) BALANCE SHEET DATA Assets............................................. $15,017.1 $15,534.2 $5,158.1 $4,985.1 $5,152.5 Current liabilities................................ 3,911.0 1,772.8 358.7 339.8 270.9 Long-term obligations.............................. 5,334.8 7,439.3 2,396.4 2,532.1 2,419.9 Preferred securities of subsidiaries............... 326.8 476.9 150.0 150.0 150.0 Shareholder's equity............................... 2,948.2 3,068.5 957.6 826.6 1,019.9
YEARS ENDED DECEMBER 31, ------------------------------------------------------ 2000 1999 1998 1997 1996 --------- --------- -------- -------- -------- OTHER DATA Ratio of earnings to fixed charges(1).............. 1.23 1.18 1.69 1.64 1.42
- -------------------------- (1) For purposes of computing the ratio of earnings to fixed charges, earnings are divided by fixed charges. "Earnings" represents the aggregate of income (loss) before income taxes of Edison Mission Energy (adjusted for the excess or shortfall of dividends or other distributions over equity in earnings of less than 50% owned entities), amortization of previously capitalized interest and fixed charges (net of capitalized interest). "Fixed Charges" represents interest (whether expensed or capitalized), the amortization of debt discount and interest portion of rental expense. 45 SELECTED FINANCIAL DATA OF MIDWEST GENERATION The following table sets forth our selected financial data for the periods indicated. On December 15, 1999, we acquired the power generation assets from Commonwealth Edison for a purchase price of approximately $4.9 billion. We had no significant activity before the acquisition. The selected financial statements for the period since our formation (July 12, 1999) through December 31, 1999 and for the year ended December 31, 2000 were derived from our audited financial statements. These selected financial data are qualified in their entirety by the more detailed information and financial statements, including the notes to the financial statements, included in this prospectus.
PERIOD FROM INCEPTION YEAR ENDED (JULY 12, 1999) DECEMBER 31, TO DECEMBER 31, 2000 1999 ------------ --------------- (IN MILLIONS) INCOME STATEMENT DATA Operating revenues................................ $1,083.5 $ 23.7 Operating expenses................................ 936.0 29.5 -------- -------- Income (loss) from operations..................... 147.5 (5.8) Interest and other expense........................ 305.6 (14.3) -------- -------- Loss before income taxes.......................... (158.1) (20.1) Benefit for income taxes.......................... (61.7) (7.7) -------- -------- Net loss.......................................... $ (96.4) $ (12.4) ======== ======== DECEMBER 31, ------------------------------ 2000 1999 ------------ --------------- (IN MILLIONS, EXCEPT RATIOS) BALANCE SHEET DATA Assets............................................ $6,730.4 $5,183.9 Current liabilities............................... 260.4 49.3 Long-term debt.................................... 3,518.8 3,422.0 Lease financing................................... 2,188.8 860.0 Other long-term obligations....................... 212.5 214.1 Member's equity................................... 549.9 638.5 OTHER DATA Ratio of earnings to fixed charges(1)(2).......... .57 --
- ------------------------ (1) For purposes of computing the ratio of earnings to fixed charges, earnings are divided by fixed charges. "Earnings" represent the aggregate of income (loss) before income taxes of Midwest Generation and fixed charges (net of capitalized interest). "Fixed charges" represent interest expense (prior to capitalization) and the interest portion of rental expense. (2) For the period since inception (July 12, 1999) to December 31, 1999 and for the year ended December 31, 2000 there was a fixed charge deficiency of $20.1 million and $158.1 million, respectively. 46 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OF MIDWEST GENERATION, LLC THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS REGARDING OUR OPERATIONS AND FINANCIAL CONDITION. THESE STATEMENTS ARE BASED ON OUR CURRENT PLANS AND EXPECTATIONS AND INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL FUTURE ACTIVITIES AND RESULTS OF OPERATIONS TO BE MATERIALLY DIFFERENT FROM THOSE PRESENTED IN THE FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER INCLUDE RISKS LISTED IN "RISK FACTORS." ELECTRIC INDUSTRY TERMS THAT ARE USED AND NOT OTHERWISE DEFINED IN THIS PROSPECTUS HAVE THE MEANINGS GIVEN TO THOSE TERMS IN THE "GLOSSARY" ATTACHED AS APPENDIX A. GENERAL We are a special-purpose Delaware limited liability company formed on July 12, 1999 for the purpose of owning or leasing, making improvements to and operating the power generation assets we purchased from Commonwealth Edison. We acquired these power generation assets from Commonwealth Edison on December 15, 1999 for a purchase price of approximately $4.9 billion, with adjustments for changes in the book value of inventories and pro-rations related to specific items including but not limited to taxes, rents and fees. Prior to the acquisition of these power generation assets, we had no significant business activity. The acquisition has been accounted for utilizing the purchase method. The purchase price was allocated to the assets acquired and liabilities assumed based upon their respective fair market values. The acquisition was financed through a capital contribution by Edison Mission Midwest Holdings of approximately $650 million and subordinated debt provided by an affiliate of ours of approximately $3.4 billion. Concurrent with the acquisition, we assigned our right to purchase the Collins Station, a 2,698 megawatt gas and oil-fired generating station located in Illinois, to four third party entities. After this assignment, and the purchase of the facility by the third parties, an affiliate of ours leased and we subleased the Collins Station. Each of the leases and subleases has a term of 33.75 years. These subleases have been accounted for as a lease financing for accounting purposes. The aggregate megawatts we currently own or lease as a result of the Commonwealth Edison transaction is approximately 9,539 megawatts. The power generation assets we purchased from Commonwealth Edison consist of the following: - six coal-fired generating plants consisting of 5,646 megawatts, which include Powerton, Joliet, Will County, Waukegan, Crawford and Fisk, - the Collins gas and oil-fired generating station consisting of 2,698 megawatts, and - a group of on-site generating peakers consisting of 632 megawatts and off-site generating peakers consisting of 563 megawatts, based on the average of the summer and winter ratings. In connection with the acquisition of these power generation assets, we entered into three five-year power purchase agreements for the coal-fired stations, the Collins Station, and the peaking stations. We currently derive a substantial majority of our revenue from the sale of energy and capacity to Exelon Generation under these power purchase agreements. We have entered into a contract with a marketing affiliate for scheduling and related services and to market energy that is permitted to be sold under the power purchase agreements with Exelon Generation and to engage in hedging activities. The marketing affiliate also purchases fuel, including gas, and enters into fuel hedging arrangements on our behalf. Under the terms of the power purchase contracts with Exelon Generation, we receive significantly higher capacity payments during June through September, the summer months. Accordingly, our 47 operating results are substantially higher during these months and lower, including expected losses, during non-summer months. RESULTS OF OPERATIONS We have a limited operating history. Separate financial statements for our operations are available only for the period since our acquisition of the power generation assets from Commonwealth Edison. There are no separate financial statements available with regard to the operations of these power generation assets prior to our taking ownership because their operations were fully integrated with, and their results of operations were consolidated into, the former owner of these power generation assets. In addition, the electric output of these power generation assets was sold based on rates set by regulatory authorities. As a result of these factors and because electricity rates are now set under the Exelon Generation power purchase agreements or by market forces, historical financial data with respect to these power generation assets prior to our acquisition are not meaningful or are not indicative of our future results. For purposes of the following discussion, we refer to the period from the date of acquisition (December 15, 1999) to December 31, 1999 as the initial period. REVENUES Our revenues for the initial period and the year ended December 31, 2000 were $23.7 million and $1,083.5 million, respectively. The initial period revenues consisted of $15.7 million of energy revenues and $8.0 million of capacity payments. Revenues for the year ended December 31, 2000 consisted primarily of $507.5 million of energy revenues and $576.0 million of capacity payments. Substantially all our energy and capacity revenues during these periods were made through our marketing affiliate to Commonwealth Edison, the predecessor in interest to Exelon Generation, under the power purchase agreements. Our availability factor was 80.2% during the year ended December 31, 2000. OPERATING COSTS Operating costs for the initial period and the year ended December 31, 2000 were $29.5 million and $936.0 million, respectively. Operating costs consist mainly of expenses for fuel, transmission tariffs, plant operations and maintenance and general and administrative expenses. Fuel expenses for the initial period and the year ended December 31, 2000 were $14.9 million and $404.0 million, respectively. Fuel expenses are principally the costs of coal, natural gas and fuel oil used in operations of the generating facilities. Partially offsetting our fuel costs in 2000 was a gain realized for calendar year 2001 financial options entered into beginning August 2000 as a hedge of our price risk associated with expected natural gas purchases. During the fourth quarter, we determined that it was no longer probable that we would purchase natural gas during 2001. This decision resulted from sustained gas prices far greater than were contemplated when we originally projected our 2001 gas needs and the fact that we can use fuel oil interchangeably with natural gas at some of the Illinois Plants. At the time we made our revised determination, the fair value of our financial option was $38 million. This gain is being deferred as required by hedge accounting and will be recognized upon either purchasing natural gas in 2001 or determining that it is probable we will not purchase natural gas in 2001. Subsequent to our revised determination, we settled the option for a $56 million gain. Accordingly, $18 million of gain was recognized in the fourth quarter. Concurrent with our revised determination of our 2001 natural gas requirements, we entered into some additional fuel contracts to offset our financial option and economically hedge the price risk associated with fuel oil. We recognized a $12 million loss at December 31, 2000 on these additional fuel contracts. 48 Plant operations expense for the initial period was $7.6 million, which included labor and overhead of $6.3 million, maintenance expense of $0.6 million, and parts and supplies of $0.7 million. Plant operations expense for the year ended December 31, 2000 was $341.9 million, which included labor and overhead of $140.6 million, maintenance expenses of $87.2 million, parts and supplies of $29.1 million and other plant costs of $85.0 million. Depreciation and amortization expense for the initial period and the year ended December 31, 2000 were $5.7 million and $167.7 million, respectively. Depreciation expense primarily relates to the acquisition of the power generation assets we purchased from Commonwealth Edison, which are being depreciated over periods ranging from 20-40 years. General administrative costs for the year ended December 31, 2000 were $22.4 million, which relate to support services provided by our indirect parent, Midwest Generation EME, LLC, for operations and maintenance management, construction management and technical services, environmental health and safety services, computer services, and other related support activities. OTHER INCOME (EXPENSE) Interest expense for the initial period and the year ended December 31, 2000 was $14.3 million and $361.2 million, respectively. Interest expense primarily relates to borrowings from an affiliate, Edison Mission Overseas Co., under the subordinated loan agreements discussed below and interest expense related to the lease financings of the Collins, Powerton and Joliet Stations. Interest income and other for the year ended December 31, 2000 was $55.6 million and consisted primarily of interest income from loans to Edison Mission Energy, which occured from the proceeds of our sale-leaseback transactions, and from short-term investments. PROVISION (BENEFIT) FOR INCOME TAXES We had an effective income tax benefit rate of 38.5% during the initial period and 39.0% during the year ended December 31, 2000. The effective tax rate during the initial period was different from the federal statutory rate of 35% due to state income taxes. The income tax benefit results from tax sharing agreements with our indirect parent, Edison International. NET LOSSES Net losses for the initial period and the year ended December 31, 2000 were $12.4 million and $96.4 million, respectively. Although we expect to generate significant cash flow from operations, we expect to incur losses after depreciation, amortization and interest expense for several years. Our future results of operations will depend primarily on revenues from the sale of energy, capacity and other related products, and the level of our operating expenses. LIQUIDITY AND CAPITAL EXPENDITURES Net cash flow provided by operating activities during the initial period was $2.0 million. Net cash flow provided by operating activities for the year ended December 31, 2000 was $93.1 million. Net working capital was $72.9 million at December 31, 1999 and $38.2 million at December 31, 2000. In December 1999, we completed the acquisition of the power generation assets from Commonwealth Edison for approximately $4.9 billion. In order to finance the acquisition, we: - received an equity contribution from Edison Mission Midwest Holdings of $650 million, - entered into two subordinated loan agreements with an affiliate, Edison Mission Overseas, under which we subsequently borrowed $3.4 billion, and 49 - assigned our rights under the acquisition agreement to four third-party lessors to purchase the Collins Station, as described under "--Collins Station Lease" below, for $860 million. The acquisition has been accounted for utilizing the purchase method. The purchase price was allocated to the assets acquired and liabilities assumed based upon an assessment of their respective fair market values. GUARANTY OF DEBT OF EDISON MISSION MIDWEST HOLDINGS AND PLEDGE OF OWNERSHIP INTERESTS We have guaranteed Edison Mission Midwest Holdings' third party debt in the amount of $1.6 billion at December 31, 2000. Our parent also pledged the membership interests in us to the lenders in connection with the third party debt arrangements. COLLINS STATION LEASE In connection with the acquisition of the power generation assets from Commonwealth Edison, we assigned the right to purchase the Collins gas-fired power plant to four third party entities. The third parties purchased the Collins Station for an aggregate price of $860 million and entered into leases of the plant with an affiliate of ours. Our affiliate entered into subleases of the plant with us. The subleases, which are being accounted for as a lease financing, each have an initial term of 33.75 years with payments due on a quarterly basis. The base sublease rent includes both a fixed and variable component, the variable component of which is affected by movements in defined interest rate indexes and the determination of such index as provided for under the related agreements. Under the terms of the subleases, we may request a lessor, at its option, to refinance the lessor's debt, which if completed would affect the base lease and sublease rent. If a lessor intends to sell its interest in the Collins Station, we have a first right of refusal to acquire the interest at fair market value. Minimum sublease payments during the next five years are $42.3 million in 2001; $50.3 million in 2002; $50.3 million in 2003; $50.4 million in 2004; and $50.3 million in 2005. At December 31, 2000, the total remaining minimum sublease payments were $1.5 billion. FUEL COMMITMENTS At December 31, 2000, we had contractual commitments to purchase and/or transport coal and fuel oil. Based on the contract provisions, these minimum commitments, which are based on fixed prices, subject to adjustment, are currently estimated to aggregate $664 million over five years summarized as follows: $252 million in 2001; $181 million in 2002; $108 million in 2003; $61 million in 2004; and $62 million in 2005. POWERTON/JOLIET FACILITIES SALE-LEASEBACK In August 2000, we entered into a sale-leaseback transaction with respect to the Powerton and Joliet facilities as described in this prospectus. Proceeds from the sale of the assets were used by us to make a loan to Edison Mission Energy. We make semi-annual rent payments under leases of the Powerton and Joliet facilities on each January 2 and July 2 during the terms of the leases, beginning January 2, 2001. Our minimum lease rental obligations under these leases are approximately $83.3 million for 2001, $97.3 million for 2002, $97.3 million for 2003, $97.3 million for 2004 and $141.1 million for 2005. At December 31, 2000, the total remaining minimum lease payments was $2.4 billion. We make lease payments from the principal and interest payments we receive on the loans to Edison Mission Energy of the proceeds from the sale of the ownership interests in the facilities as well as our cash flow from operating activities. We are also required to pay operating expenses and other expenses, including interest on and principal of, our subordinated loans. The gain on the sale of the power facilities has been deferred and is being amortized over the term of the leases. 50 ILLINOIS PEAKER SALE-LEASEBACK In July 2000, we entered into a sale-leaseback of equipment, primarily Illinois peaker power units, to a third party lessor for $300 million. Under the terms of the 5-year lease, we have a fixed price purchase option at the end of the lease term of $300 million. Edison Mission Energy guaranteed our monthly payments under the lease. In connection with the sale-leaseback, Midwest Peaker Holdings, Inc., a subsidiary of Edison Mission Energy, purchased $255 million of notes issued by the lessor, which accrue interest at LIBOR plus 0.65% to 0.95%, depending on Edison Mission Energy's credit rating. The notes are due and payable in five years. The gain on the sale of the equipment has been deferred and is being amortized over the term of the lease. NEW GENERATING CAPACITY As part of the purchase of the generating assets from Commonwealth Edison, Edison Mission Energy is committed to install one or more gas-fired electric generating units having an additional gross dependable capacity of 500 megawatts at Crawford Station, Fisk Station, the off-site Calumet Peaking site or at property in Illinois adjacent to those sites. The installation must be completed and the unit or units must be fully operational by December 15, 2003, the fourth anniversary of the date of purchase of the assets. The estimated cost to complete construction of the 500 MW gas-fired power plant is approximately $250 million. If Edison Mission Energy violates its obligation to install the new generating capacity, Commonwealth Edison may seek legal or equitable relief, including injunctive relief, to prevent Edison Mission Energy's violation of its obligation. If Edison Mission Energy decides to offer capacity and electric energy from the new units on a firm, committed basis, it must first offer it to Commonwealth Edison before it markets or sells the capacity and energy to anyone else. If Commonwealth Edison refuses Edison Mission Energy's offer, Edison Mission Energy may offer the energy and capacity to a third party. However, this does not preclude Commonwealth Edison from purchasing capacity and energy from Edison Mission Energy after an initial refusal. CHANGES IN INTEREST RATES, CHANGES IN COMMODITY PRICES AND OTHER OPERATING RISKS Changes in interest rates and changes in commodity prices can have a significant impact on our results of operations. Interest rate changes affect the cost of capital needed to operate the facilities and our lease costs under the Collins Station lease and lease of Illinois peaker power units. Based on the amount of variable rate debt and leases outstanding on March 31, 2001, a 10% increase or decrease in short term interest rates would increase or decrease our annual income before taxes by approximately $12.5 million. With the exception of revenue generated by contracts with Commonwealth Edison, our revenues and results of operations during the estimated useful lives of the power plants will depend upon prevailing commodity prices in Illinois and neighboring markets. Among the factors that influence the commodity prices in Illinois are: - prevailing market prices for fuel oil, coal and natural gas and associated transportation costs, - the extent of additional supplies of capacity, energy and ancillary services from current competitors or new market entrants, including the development of new generation facilities that may be able to produce electricity at a lower cost, - transmission congestion in and to Illinois, - the market structure rules to be established for Illinois by an independent system operator, - the reliability and operation of nuclear generating plants in Illinois beyond their presently expected dates of decommissioning, - weather conditions prevailing in Illinois and surrounding areas from time to time, and 51 - the rate of growth in electricity usage as a result of factors such as regional economic conditions and the implementation of conservation programs. Virtually all our energy and capacity sales through the end of 2001 will be made under contract to Exelon Generation, and a significant portion will continue to be sold to Exelon Generation through the end of 2004. Remaining energy and capacity will be sold under pricing provisions that are individually negotiated with customers by our marketing affiliate and may include fixed prices or prices based on a daily or monthly market index. We may benefit from forward energy sales contracts entered into by our marketing affiliate depending on market conditions. As of December 31, 2000, we had not entered into forward energy sales contracts other than those with Exelon Generation. Under the Collins Station power purchase agreement, Exelon Generation purchases energy from us at fixed rate prices that vary from $30/MWhr to $34/MWhr plus a fuel adjustment based on market prices of natural gas for annual purchases greater than an annual threshold of 2.7 million MWhrs. This provision allows us to recover changes in the market price of natural gas above the annual threshold. However, we bear the risk of increases in market prices of natural gas below the annual threshold. Exelon Generation has the right under the power purchase agreement to purchase all the available production capability of the Collins Station. The Collins Station has the capability to burn fuel oil in lieu of natural gas, which enables us to use fuel oil when it costs less than natural gas. Due to the substantial increase in natural gas prices, our affiliate has entered into futures contracts on our behalf to hedge against price increases of fuel oil for a substantial portion of our fuel requirements in 2001. Our risk management policy allows for the use of derivative financial instruments through our marketing affiliate to limit financial exposure to fuel prices for non-trading purposes. Our marketing affiliate's risk management activities give rise to commodity price risk, which represents the potential loss that can be caused by a change in the market value of a particular commodity. Commodity price risks are actively monitored to ensure compliance with our risk management policies. Policies are in place which limit the amount of total net exposure that we may enter into at any point in time. Procedures exist which allow for monitoring of all commitments and positions with daily reporting to senior management. Our marketing affiliate performs a "value at risk" analysis in our daily business to measure, monitor and control our overall market risk exposure. The use of value at risk allows management to aggregate overall risk, compare risk on a consistent basis and identify the drivers of the risk. Value at risk measures the worst expected loss over a given time interval, under normal market conditions, at a given confidence level. Given the inherent limitations of value at risk and relying on a single risk measurement tool, our marketing affiliate supplements this approach with industry "best practice" techniques including the use of stress testing and worst-case scenario analysis, as well as stop limits and counterparty credit exposure limits. Our marketing affiliate has the following commodity price hedges outstanding on the dates presented:
DECEMBER 31, ------------------------------------------- 2000 1999 -------------------- -------------------- NOTIONAL CONTRACT NOTIONAL CONTRACT AMOUNT EXPIRES AMOUNT EXPIRES --------- -------- --------- -------- (IN THOUSANDS) COMMODITY CONTRACTS Forward contracts.................... $ 1,663 2001 -- -- Futures contracts.................... (95,575) 2001 -- -- Swaps agreements..................... (179,778) 2001 -- --
52 The following table summarizes the fair values for outstanding financial instruments used for price risk management activities by instrument type:
DECEMBER 31, ------------------------------------------ 2000 1999 ------------------- -------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- -------- --------- -------- (IN THOUSANDS) COMMODITY CONTRACTS Forward contracts....................... -- $1,689 -- -- Futures contracts....................... -- (8,189) -- -- Swaps agreements........................ -- 93 -- --
A 10% increase in fuel and energy prices would result in an $15.3 million decrease in the fair value of commodity contracts at December 31, 2000 entered into by our marketing affiliate. A 10% decrease in fuel and energy prices would result in an $15.3 million increase in the fair value of commodity contracts at December 31, 2000 entered into by our marketing affiliate. ENVIRONMENTAL MATTERS AND REGULATIONS We are subject to environmental regulation by federal, state and local authorities in the United States. We believe that we are in substantial compliance with environmental regulatory requirements and that maintaining compliance with current requirements will not materially affect our financial position or results of operation. However, possible future developments, such as the promulgation of more stringent environmental laws and regulations, and future proceedings which may be taken by environmental authorities, could affect the costs and the manner in which we conduct our business and could cause us to make substantial additional capital expenditures. We cannot assure you that we would be able to recover these increased costs from our customers or that our financial position and results of operations would not be materially adversely affected. Typically, environmental laws require a lengthy and complex process for obtaining licenses, permits and approvals prior to construction and operation of a project. Meeting all the necessary requirements can delay or sometimes prevent the completion of a proposed project as well as require extensive modifications to existing projects, which may involve significant capital expenditures. We expect that the implementation of Clean Air Act Amendments and the regulations and revised State Implementation Plans developed as a consequence of the Act will result in increased capital expenditures and operating expenses. For example, we anticipate upgrades to the environmental controls at the power generation assets we purchased from Commonwealth Edison to control nitrogen oxides emissions to result in expenditures of approximately $61 million, $67 million, $130 million, $123 million and $57 million for 2001, 2002, 2003, 2004 and 2005, respectively. However, possible future developments, such as the promulgation of more stringent environmental laws and regulations and future proceedings which may be taken by environmental authorities, could affect the costs and the manner in which we conduct our business and could cause us to make capital expenditures substantially in excess of these anticipated amounts. We cannot assure you that in that case we would be able to recover the increased costs from our customers or that our financial position and results of operations would not be materially adversely affected. See "Our Business--Environmental Regulation" for a further discussion of environmental regulation developments that could affect our business in the future. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133 Effective January 1, 2001, we adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting 53 and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. For derivatives that qualify for hedge accounting, depending on the nature of the hedge, changes in fair value are either offset by changes in the fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings. Upon adoption of SFAS No. 133, we will record all derivatives associated with our risk management activities at fair value unless the derivatives qualify for the normal sales and purchases exception. We expect that a portion of our risk management activities related to forward physical purchases or sales will qualify for this exception. For derivatives associated with our risk management activities that do not qualify as normal sales and purchases, we expect our financial instruments will qualify as a cash flow hedge with appropriate adjustments made to other comprehensive income. The cumulative effect on prior years' net income resulting from the change in accounting for derivatives in accordance with SFAS No. 133 is not expected to be material. SUBSEQUENT EVENT On April 18, 2001, Unit 6 at the Joliet Station (314 MW) was taken offline after a coal-dust explosion occurred in the building housing the unit. We are undertaking a review of the cause of the explosion, and the extent of damage and will prepare a plan to return the unit to commercial operations on an expedited basis. The cost to repair the unit and the schedule to complete the repairs cannot be estimated at this time. 54 OUR BUSINESS INDUSTRY OVERVIEW Over the last several years, changes in the United States electric industry, including the entry of companies engaged in providing generation, transmission, distribution, and ancillary services, have led to significant deregulation and increased competition. The Federal Energy Regulatory Commission requires the owners and operators of electric transmission facilities to make the facilities available to all wholesale generators, sellers and buyers of electricity on a nondiscriminatory basis. In addition to wholesale transmission, or wheeling, throughout the United States, there have been an increasing number of proposals to allow retail customers to choose their electricity suppliers. Numerous electric utilities nationwide are in the process of divesting all or a portion of their electricity generation business or expect to commence this process in the foreseeable future. Edison Mission Energy, through us and its other subsidiaries, has actively pursued the opportunities created by the deregulated domestic electric markets. MIDWEST GENERATION OVERVIEW In December 1999, we purchased power generation assets from Commonwealth Edison for an aggregate purchase price of approximately $4.9 billion. These power generation assets currently consist of: - six coal-fired generating stations consisting of 5,646 megawatts, which include Powerton, Joliet, Will County, Waukegan, Crawford and Fisk, - the Collins gas and oil-fired generating station consisting of 2,698 megawatts, and - a group of on-site peaking units consisting of 632 megawatts and off-site peaking units consisting of 563 megawatts, based on the average of the summer and winter ratings. We describe the generating stations in more detail in the section titled "--Description of the Stations Owned or Leased by Us" and the on-site and off-site peaking units in the section titled "--Overview of the On-Site and Off-Site Peaking Facilities." The power generation assets we purchased from Commonwealth Edison are competitive generation units connected to the Mid-America Interconnected Network and are located close to our primary market, Chicago. The Mid-America Interconnected Network borders the East Central Area Reliability Council. The Mid-America Interconnected Network and the East Central Area Reliability Council are two of the ten regional reliability councils that form the North American Electric Reliability Council. We and Commonwealth Edison entered into transition contracts as part of our acquisition of these power generation assets from Commonwealth Edison and Commonwealth Edison assigned these contracts to Exelon Generation, a subsidiary of Exelon Corporation, Commonwealth Edison's parent corporation. See "--Exelon Generation and Commonwealth Edison Agreements." These contracts ensure that Exelon Generation has access to sufficient capacity and energy to guarantee reliable supply to its customer base. Exelon Generation produces and purchases electricity and Commonwealth Edison distributes and sells it to approximately 3.4 million customers in northern Illinois, including Chicago. Commonwealth Edison has continued to provide electricity transmission and interconnection services to us since the acquisition. See "--Commonwealth Edison Facilities, Interconnection and Easement Agreements." 55 DESCRIPTION OF THE STATIONS OWNED OR LEASED BY US THE POWERTON STATION The Powerton Station is a 1,538 megawatts net coal-fired station located in Pekin, Illinois approximately 16 miles southwest of Peoria or 166 miles from Chicago on an approximately 568 acre site (plus an approximately 1,440 acre lake) on the Illinois River near Illinois Route 29. The original Powerton Station was constructed in 1928. The remaining operating generating units are Units 5 and 6, as the other generating units have been retired. The operation of Units 5 and 6 started in 1972 and 1975, respectively. Powerton Station currently receives southern Powder River Basin coal, primarily from the Rochelle mine and also from the Jacobs Ranch, Decker and Antelope mines, as well as the Black Thunder mine. With the exception of the Decker mine, which is located in Montana, all these mines are located in Wyoming. The Powerton Station may burn coal from a variety of Powder River Basin source mines. THE JOLIET STATION The Joliet Station is located in Joliet, Illinois approximately 40 miles southwest of Chicago on a combined approximately 467 acre site on the Des Plaines River near Interstate 80. The original Joliet facility was constructed in 1917. The remaining operating generating units are Units 6, 7 and 8, as the other generating units have been retired. Only Units 7 and 8 are subject to the leveraged lease transactions described in this prospectus. The operation of Units 7 and 8 started in 1965 and 1966, respectively. Joliet Unit 6 is a 314 megawatts net coal-fired unit located adjacent to, but across the river from, Joliet Units 7 and 8, in Will County, Illinois. Joliet Units 7 and 8, which are also coal-fired, have a combined capacity of 1,044 megawatts net. The original generating units have been retired. Unit 6 began operation in 1959. On April 18, 2001, Unit 6 was taken off line after an explosion occurred in the building housing the unit. Units 7 and 8 were not affected by the explosion and remain in operation. There were no power outages or injuries as a result of the explosion. The Joliet Station is accessible by road and railroad. The railroad spur can be used for major equipment hauling and is designed for unit train coal deliveries. Natural gas is delivered by Nicor Gas Company under a delivery contract for the boilers as a startup and stabilizing fuel. The Joliet Station receives coal by train delivered by the Chicago, Central, and Pacific Railroad Company from interchange points with the Union Pacific or Burlington Northern Santa Fe Railroads. The Joliet Station receives southern Powder River Basin coal, primarily from the Black Thunder mine, that is sodium enhanced for improved precipitator performance. THE WILL COUNTY STATION The Will County Station is a 1,092 megawatts net coal-fired power plant located in Lockport, in Will County, Illinois. The station was built in 1955 and occupies approximately 215 acres, inclusive of the switchyard and other coal-fired steam generators. Units 1, 2, 3 and 4 began operations between 1955 and 1963. The units utilize oil for ignition and startup. The Will County Station receives coal deliveries by unit train by the Elgin, Joliet & Eastern Railway Company from interchange points with the Union Pacific Railroad or the Burlington Northern Santa Fe Railroad. Will County receives Powder River Basin coal from the Decker, Rochelle and Jacobs Ranch mines. Decker coal is blended with southern Powder River Basin coals to obtain sodium levels sufficient for improved precipitator performance. Will County uses No. 2 distillate fuel oil for ignition and combustion support, which is delivered by tanker truck to a 100,000 gallon storage tank. Will County has no natural gas service. 56 THE WAUKEGAN STATION The Waukegan Station is a 789 megawatts net coal-fired power plant located in Waukegan, in Lake County, Illinois, on Lake Michigan. The original plant was built in 1923. The newer portion of the plant was built beginning in 1952. The plant occupies approximately 194 acres, inclusive of the switchyard. Units 6, 7 and 8 began operations between 1952, 1958 and 1962, respectively. Waukegan Station consists of three coal-fired generators. Unit 6 utilizes oil for ignition and startup, while Unit 7 utilizes oil or natural gas and Unit 8 utilizes natural gas. The facilities receive coal by unit train delivered by the Union Pacific Railroad. The Elgin, Joliet and Eastern Railroad can also deliver to Waukegan Station from an interconnection point with the Union Pacific Railroad. Waukegan Station receives Powder River Basin coal primarily from Jacobs Ranch. This coal is sodium enhanced, if necessary, for improved precipitator performance. THE FISK STATION The Fisk Station is a 327 megawatts net coal-fired power plant located in Cook County, Illinois, and is within the city limits of Chicago. The original plant was built in 1903 and occupies approximately 44 acres, inclusive of the switchyard. The original generating units have been retired. Unit 19 began operations in 1959. Coal is delivered by barge, which is moved via the Chicago Sanitary and Ship Canal to Fisk Station. The barge towing company delivers two to three barges daily and removes empty barges. Barges are unloaded directly to the bunkers. Fisk Station has no ground storage and receives its coal on a "just in time" basis. Coal for Fisk Station is loaded into barges at the Will County Station. There are no intervening locks to prevent the timely delivery of coal. Fisk Station receives a blend of Decker and southern Powder River Basin coal, although it can burn several Powder River Basin coals as long as sodium in the ash is sufficient for improved precipitator performance. Natural gas is used for ignition and combustion support and for full boiler operation, if desired. Peoples Gas delivers natural gas under a delivery contract that includes balancing storage, which is also shared by the Crawford Station. THE CRAWFORD STATION The Crawford Station is a 542 megawatts net coal-fired power plant located in Cook County, Illinois, and is within the city limits of Chicago. The original plant was built in 1925 and occupies approximately 72 acres, inclusive of the switchyard. The original generating units have been retired. Units 7 and 8 began operations in 1958 and 1961, respectively. Coal is delivered by barge, which is moved via the Chicago Sanitary and Ship Canal to Crawford Station. The barge towing company delivers three to four barges daily and removes empty barges. Barges are unloaded directly to the bunkers or to ground storage. Coal for the Crawford Station is loaded into barges at the Will County Station. Crawford Station receives a blend of Decker and southern Powder River Basin coal, although it can burn several Powder River Basin coals as long as sodium in the ash is sufficient to maintain precipitator performance. Natural gas is used for ignition and combustion support and for full boiler operation, if desired. Peoples Gas delivers natural gas under a delivery contract that includes balancing storage, which is also shared by Fisk Station and Commonwealth Edison's peakers located in Chicago. THE COLLINS STATION The Collins Station is a 2,698 megawatts net gas and oil-fired power plant located in Grundy County, near Morris, Illinois. The plant was built in 1977 and occupies approximately 3,723 acres, inclusive of Heideke Lake, the station's cooling lake. Collins Station contains five dual-fueled steam 57 generators originally fired using No. 6 heavy fuel oil, but now capable of burning natural gas or oil. This duel fuel capacity gives Collins Station flexibility to switch between natural gas and oil based on economics. Natural gas is procured in the monthly and daily spot markets, shipped at the seller's risk to Chicago, and then delivered to Collins Station by Nicor Gas Company under a delivery contract that runs through 2003. Nicor Gas Company manages storage inventory and purchases gas for us under an agency agreement that runs concurrently with the delivery contract. OVERVIEW OF THE ON-SITE AND OFF-SITE PEAKING FACILITIES The On-Site Peaking units consist of four peaking facilities: Crawford, Fisk, Waukegan and Joliet. The On-Site Peaking units were commissioned in 1968, except for Joliet, which was commissioned in 1969. The Off-Site Peaking units consist of five peaking facilities: Bloom, Calumet, Electric Junction, Lombard and Sabrooke. The Off-Site Peaking units were commissioned in 1969, except for Electric Junction, which was commissioned in 1970. Both the On-Site Peaking units and the Off-Site Peaking units burn either No. 2 distillate oil (jet fuel) or both natural gas and No. 2 distillate oil. Natural gas is purchased in the monthly and daily spot markets and is shipped at the seller's risk to Chicago. Peoples Gas provides delivery services, including balancing storage, to the site under tariffs approved by the Illinois Commerce Commission. We purchase No. 1 distillate oil (jet oil) from low bidders from bids taken annually. Shipments to the site are in tanker trucks and inventory is replenished as needed by the site. The oil price is tied to the Oil Price Information Service posted weekly price (market price) on the date of delivery. Truck delivery charges are at fixed agreed-upon prices. No. 2 distillate oil is purchased from low bidders from bids taken annually. Shipments to the site are in tanker trucks, and inventory is replenished as needed by the site. The oil price is tied to the Oil Price Information Service posted weekly price (market price) on the date of delivery. Truck delivery charges are at fixed agreed-upon prices. OPERATION OF THE STATIONS The operating performance of the stations, based on equivalent availability factors for the years 1996 to 2000, is shown below: EQUIVALENT AVAILABILITY FACTOR
FACILITY 1996 1997 1998 1999 2000 - -------- -------- -------- -------- -------- -------- COLLINS......................................... 76.4% 76.9% 79.4% 88.8% 86.9% CRAWFORD........................................ 63.6% 43.1% 67.8% 50.6% 82.0% FISK............................................ 52.3% 84.5% 75.0% 59.4% 93.9% JOLIET 9........................................ 32.7% 86.7% 62.6% 89.9% 81.7% JOLIET 29....................................... 70.7% 67.9% 69.4% 81.1% 74.8% POWERTON........................................ 58.5% 64.3% 68.8% 71.5% 80.8% WAUKEGAN........................................ 57.5% 81.5% 75.9% 65.7% 83.7% WILL COUNTY..................................... 75.0% 64.8% 70.1% 51.7% 74.0% ON-SITE PEAKERS................................. 89.0% 94.0% 94.6% 51.3% 85.7% OFF-SITE PEAKERS................................ 74.4% 93.4% 83.3% 74.3% 86.1%
58 EXELON GENERATION AND COMMONWEALTH EDISON AGREEMENTS In connection with the acquisition of the power generation assets from Commonwealth Edison, we entered into the following acquisition-related contracts: - Three power purchase agreements with Commonwealth Edison in which Commonwealth Edison agreed to purchase, and we agreed to sell, electric capacity, energy and other generation related services from the power generation stations we purchased from Commonwealth Edison for a period of up to five years. For more information on these agreements, see "--Power Purchase Agreements" below. - 13 facilities, interconnection and easement agreements with Commonwealth Edison in which we and Commonwealth Edison agreed to our interconnection with Commonwealth Edison's transmission and distribution system. For more information on these agreements, see "--Commonwealth Edison Facilities, Interconnection and Easement Agreements" below. - Several auxiliary power agreements with Commonwealth Edison in which Commonwealth Edison agrees to provide station service power. - A peaker control agreement that governs procedures relating to the startup of units located at the Fisk, Waukegan and Lombard facilities. POWER PURCHASE AGREEMENTS On December 15, 1999, we entered into three separate power purchase agreements with Commonwealth Edison with terms of up to five years, and, in January 2001, Commonwealth Edison assigned these agreements to Exelon Generation. Under these agreements, we have agreed to make the capacity of the power generation stations we purchased from Commonwealth Edison available to Exelon Generation. These agreements allow us to sell any excess electric energy, including energy not dispatched by Exelon Generation, to other purchasers under specified conditions. Payments under these power purchase agreements constituted approximately 99% of our revenues during the year ended December 31, 2000, with the balance of our revenues coming from third party sales of electric energy. Exelon Corporation, Exelon Generation's parent company, is a public company and is subject to the informational requirements of the Exchange Act. Exelon Corporation's consolidated financial statements are filed with the SEC. COAL-FIRED STATIONS POWER PURCHASE AGREEMENT. In connection with the acquisition of the Commonwealth Edison coal-fired stations, including the Powerton Station and the Joliet Station, we entered into a five-year power purchase agreement with Commonwealth Edison which was assigned to Exelon Generation. This agreement provides stability of cash flows to us, especially during the early years, when the majority of power is contracted. Under this agreement, Exelon Generation purchases capacity and has the right to purchase energy generated by the coal-fired stations from us. The agreement provides for capacity and energy payments. Exelon Generation is obligated to make a capacity payment for the units under contract, providing us revenue for fixed charges such as debt service, labor and insurance, and an energy payment for the electricity produced by these units, compensating us for variable costs of production. If Exelon Generation does not fully dispatch the units under contract, we may sell the excess energy to third 59 parties, subject to several conditions. Some provisions of the coal power purchase agreement are outlined in the following table: TERM................................. - 5 years (expires December 31, 2004) PAYMENTS............................. - Monthly capacity charge varying on a seasonal (summer/non- summer) basis - Energy charge based on amount of electric energy purchased - Start-up and low load payments - Performance bonuses/penalties CONTRACTED, OPTIONAL AND CANCELLABLE CAPACITY........................... - Capacity of individual units is designated as reserved or optional capacity according to an annual schedule - Optional capacity may be reserved by Exelon Generation Company for the upcoming year at higher rates with 6 months' notice AVAILABILITY......................... - Capacity payments are adjusted based on availability - Capacity payment is forfeited below 65% in the summer, 55% in the non-summer
YEAR 2000 2001 2002 2003 2004 - ---- -------- -------- -------- -------- -------- Reserved Capacity (megawatts)............ 5,005 4,535 4,013 1,696 1,696 Optional Capacity (megawatts)............ 640 1,110 1,632 3,949 3,949
The power purchase agreement includes the requirement that we supply ancillary services with respect to the reserved capacity of the reserved units. The agreement identifies the units that are contracted to Exelon Generation as reserved or optional capacity during its term. The number of units identified as reserved capacity is gradually decreased based on a table presented in the agreement. The decrease in reserved capacity, if Exelon Generation does not exercise its option to purchase the energy and capacity, provides us with the opportunity to sell the capacity to the open market during the later years of the agreement. Exelon Generation is able to exercise call options on available capacity with commensurate higher capacity charges during the five year period. Exelon Generation has exercised its options on all optional capacity units for 2001. Power from the Joliet Unit 7 is committed through December 2001, and then callable for the next three years, while power from the Joliet Unit 8 is committed for five years. Power from the Powerton Station is committed through December 2002, and then callable for the next two years. Since Exelon Generation is able to dispatch the coal-fired stations as required for the duration of the agreement, compensation is also provided to us for the cost of startups, shutdowns, and some low load operations, which is not covered by the normal energy charge rate. The power purchase agreement contains the "Mid-America Interconnected Network Guide Number 3A" titled "Procedures for the Uniform Rating of Generating Equipment" as an appendix. The Guide specifies the generating test used to establish the capacity rating for each of the generating units. The power purchase agreement has a set of communication guidelines for interfacing with Commonwealth Edison's Electric Operations Department transmission and generation dispatchers. The power purchase agreement sets forth different capacity charges for the summer months of June, July, August and September and the non-summer months of October through May. The reserved capacity payments are based on the contracted amounts identified in the power purchase agreement 60 and are adjusted by a factor that is in part based on the group equivalent availability factor. The formula for calculation of the group equivalent availability factor is included in the agreement. If the group equivalent availability factor is higher than a specified threshold, then the adjustment factor calculation provides us with the opportunity to increase the normal monthly capacity payment, but if the group equivalent availability factor is lower than the minimum, then we are penalized by a loss in the monthly capacity payment. The monthly capacity payment adjustment factor provides us with an incentive to maintain the individual units at high equivalent availabilities. The appropriate group equivalent availability factor required in the calculation for potentially achieving the full monthly capacity payment for the coal-fired units is 65% for the summer months and 55% for the non-summer months. While the historic annual equivalent availability factors for the facilities have not consistently demonstrated the levels required in the power purchase agreement on an annual basis, we believe the average annual equivalent availability for the different unit types should be achievable based on data from similar units in the North American Electric Reliability Council availability data. The facilities have achieved forced outage rates consistent with the agreement availability levels following major rehabilitation work performed by Commonwealth Edison. However, our ability to achieve the desired monthly equivalent availability is largely a function of the operations and maintenance of the individual units. The 2000 equivalent availability factor of the coal-fired units was 77.4%, and the summer month availability factor was 95%, both of which are well above the targets set forth in the power purchase agreement. COLLINS STATION POWER PURCHASE AGREEMENT. In connection with the acquisition of the Collins Station, we entered into a five-year power purchase agreement with Commonwealth Edison which was also assigned to Exelon Generation. This power purchase agreement was amended on July 12, 2000 and amended and restated on September 13, 2000. References to the "agreement" in this section are references to the power purchase agreement as amended and restated. Under the agreement, Exelon Generation purchases capacity and has the right to purchase electric energy generated by the units at the Collins Station from us. Under the agreement, all units that are contracted to Exelon Generation during the term are considered reserved capacity. The agreement provides for capacity and energy payments. Exelon Generation is obligated to make a capacity payment for the units under contract, providing us revenue for fixed charges such as debt service, labor and insurance, and an energy payment for the electricity produced by these units, compensating us for variable costs of production. Exelon Generation is obligated to dispatch and purchase a specified minimum amount of electric energy or pay an additional payment calculated under the agreement to meet this minimum purchase requirement. If Exelon Generation does not fully dispatch the units under contract, we may sell the excess energy to third parties, subject to several conditions. Some provisions of this power purchase agreement are outlined in the following table: TERM PAYMENTS........................ - 5 years (expires December 31, 2004) - Monthly capacity charge varying on a seasonal (summer/non- summer) basis - Variable energy charge - Start-up and low load payments - Annual settlement amount relating to natural gas prices and the amount of energy purchased AVAILABILITY......................... - Capacity payments are adjusted based on availability - Capacity payment is forfeited below 50% in both summer and non-summer months
61 The Collins Station power purchase agreement includes the requirement that we supply ancillary services with respect to the reserved capacity. Exelon Generation has the option to terminate this agreement in its entirety or with respect to any generating unit or units for each of 2002, 2003 and 2004 by giving us notice of its decision to terminate at least ninety days before each contract year. The power purchase agreement contains the "Mid-America Interconnected Network Guide Number 3A" titled "Procedures for the Uniform Rating of Generating Equipment" as an appendix. The Guide specifies the generating test used to establish the capacity rating for each of the generating units. The power purchase agreement has a set of communication guidelines for interfacing with Commonwealth Edison's Electric Operations Department transmission and generation dispatchers. The power purchase agreement divides the capacity charges into summer months of June, July, August and September and non-summer months of October through May. The capacity payments are based on the contracted amounts identified in the agreement and are adjusted by a factor that is in part based on the group equivalent availability factor. The formula for calculation of the group equivalent availability factor is included in the agreement. With respect to all electricity purchased under the agreement, Exelon Generation is obligated to pay: a monthly capacity charge for the reserved units which varies according to the time of year; a per megawatt hour charge which varies from $30 to $34 over the term of the agreement; various charges for start-up of the reserved units; low load charges that apply at any hour in which Exelon Generation Company schedules a reserved unit to operate at an output below a level specified in the agreement; and an annual settlement amount to the extent natural gas prices exceed a specified amount and Exelon Generation dispatches a minimum amount of electric energy. The 2000 equivalent availability factor of the Collins Station was 86.9%, and the summer month availability factor was 99%, both of which are well above the targets set forth in the power purchase agreement. PEAKING UNITS POWER PURCHASE AGREEMENT. In connection with the acquisition of Commonwealth Edison's Crawford, Fisk, Waukegan, Calumet, Joliet, Bloom, Electric Junction, Sabrooke and Lombard Peaking Units, we entered into a five-year power purchase agreement with Commonwealth Edison which was assigned to Exelon Generation. Under this agreement, Exelon Generation purchases capacity and has the right to purchase from us electric energy generated by the peaking units. The agreement provides for capacity and energy payments. Exelon Generation has the right to receive and purchase the generating capacity for the peaking units. If Exelon Generation does not fully dispatch the units under contract, we may sell the excess energy to third parties, subject to several conditions. Some provisions of the agreement are outlined in the following table: TERM................................. - 5 years (expires December 31, 2004) PAYMENTS............................. - Monthly capacity charge varying on a seasonal (summer/non- summer) basis - Energy charge based on amount of electric energy purchased - Low load payments - Performance bonuses/penalties
The peaking units power purchase agreement contains the "Mid-America Interconnected Network Guide Number 3A" titled "Procedures for the Uniform Rating of Generating Equipment" as an appendix. The Guide specifies the generating test used to establish the capacity rating for each of the generating units. The peaking units power purchase agreement has a set of communication guidelines for interfacing with Commonwealth Edison's Electric Operations Department transmission and generation dispatchers. 62 The agreement divides the capacity charges into summer months of June, July, August and September and non-summer months of October through May. The reserved capacity payments are based on the contracted amounts identified in the agreement and are adjusted by a factor that is in part based on the capacity adjustment factor. The formula for calculation of the capacity adjustment factor is included in the agreement. Exelon Generation is obligated to pay a capacity charge for the reserved peaking units and a per megawatt hour charge of $75 to $95 for oil-fired energy and $40 to $60 for gas-fired energy. Exelon Generation may also be obligated to pay a bonus fee if an unit is operated at peak capacity or a payment calculated under the agreement if a specified minimum of generating capacity is not dispatched and purchased by Exelon Generation. Exelon Generation has the option to terminate this agreement in its entirety or with respect to any of the generating unit or units for each of 2002, 2003 and 2004 by giving us notice of its decision to terminate at least 90 days before each contract year. INDEMNIFICATION, DEFAULT AND TERMINATION UNDER THE POWER PURCHASE AGREEMENTS. Each power purchase agreement described above contains customary indemnification language for the parties to the agreement, and the limits of liability for each party are limited to direct damages incurred as a result of default. The following conditions constitute a default on our part under each agreement: - we fail to pay any sum due under the agreement on the due date and we do not remedy this failure within ten business days after receiving written notice; - we abandon any control center responsible for receiving dispatch orders from Exelon Generation for a period of over 24 hours; - our bankruptcy; or - we fail in any material respect to perform any of our obligations under the agreement, which failure adversely affects Exelon Generation and is not remedied within 60 days after Exelon Generation has given us written notice. The following conditions constitute a default on the part of Exelon Generation under each agreement: - Exelon Generation fails to pay any monthly charge on its due date and this failure is not remedied within ten business days after receiving written notice; - Exelon Generation fails to pay any other charge due under the agreement on its due date and this failure is not remedied within 15 business days after receiving written notice; - Exelon Generation's bankruptcy; or - Exelon Generation fails in any material respect to perform any of its obligations under the agreement, which failure adversely affects us and is not remedied within 60 days after we have given Exelon Generation written notice. Either party, which is the non-breaching party, may terminate each agreement upon 30 days' written notice if the other party is in default under the agreement and may exercise any legal rights available at law or in equity. Exelon Generation may also terminate the Collins Station and Peaking Units power purchase agreements at its option with respect to each of 2002, 2003 and 2004 by giving us notice of termination at least 90 days before each respective year. Each agreement also has standard force majeure provisions which would suspend the obligations of the party affected by the force majeure event for the duration of the event. 63 COMMONWEALTH EDISON CONSENT AGREEMENTS COLLINS LEVERAGED LEASE. As required by the Collins Station power purchase agreement, in December 1999, Commonwealth Edison agreed to the assignment of our interest in the Collins Station power purchase agreement and the facilities, interconnection and easement agreement relating to the Collins Station as security for the lenders under the Collins leveraged lease transaction. We entered into four separate consent agreements, each with Commonwealth Edison, an owner trust and Citibank, N.A., under which we consented to the assignment of our interest in, and granted a security interest in, the Collins Station power purchase agreement and the facilities, interconnection and easement agreement to each owner trust. We also consented to each owner trust's assignment of its interest in the agreements to Citibank, N.A. as security for loans used by the owner trusts to purchase the Collins Station. In an event of a default under a lease or sublease of the Collins Station, the applicable owner trust, Citibank and the initial lender, as the secured parties, or a designee, may take action and exercise our rights under the power purchase agreement and the facilities, interconnection and easement agreement, including performing our obligations under these agreements. In that case, Commonwealth Edison and Exelon Generation would continue to perform their obligations under the agreements if the substituted party is creditworthy and has experience and skill in the operation of electric generation plants or Commonwealth Edison and Exelon Generation otherwise consents. When a Collins Station lease or sublease expires or terminates or one of the secured parties assigns our interest in the agreements, the secured parties or a substitute party may perform our obligations under the agreements. The party assuming our obligations would not have to remedy any defaults caused by us or assume any of our liability prior to the termination, expiration or assignment. Furthermore, the secured parties or their designees will in that case have no liability or obligation under the agreements nor will they be required to perform our obligations. Neither Commonwealth Edison nor Exelon Generation may amend, transfer or terminate the agreements, transfer its interest under them, or consent to the transfer of our interest unless it receives prior written consent from the secured parties. POWERTON AND JOLIET LEVERAGED LEASE. The power purchase agreement for the Powerton and Joliet Station requires that before we sell or transfer either or both of the stations, we must first obtain Exelon Generation's written consent, however, before the power purchase agreements were transferred to Exelon Generation, we were required to obtain Commonwealth Edison's written consent before we sold or transferred either or both of the stations. We, each owner trust and each lease indenture trustee entered into consent agreements with Commonwealth Edison. In the consent agreements, Commonwealth Edison agreed to our sale of Powerton Station and Units 7 and 8 of the Joliet Station to the owner trusts as part of the leveraged lease transactions described in this prospectus. Each consent agreement provides that no owner trust will have rights or duties under the power purchase agreement and the facilities, interconnection and easement agreements covering the Powerton and Joliet Stations unless the owner trust assumes ownership of the Powerton and Joliet Stations, or any part of the stations and we are prohibited or restricted from performing our obligations under those agreements. In that case, the owner trusts agree to be bound, and to cause any designee or transferee of the owner trusts or the operator of the Powerton and Joliet Stations, or any part of the stations, to be bound, by all the terms and conditions of the power purchase agreement and the facilities, interconnection and easement agreements covering the Powerton and Joliet Stations which currently apply to us, to the extent the terms and conditions 64 relate to the Powerton and Joliet Stations. However, even if an owner trust becomes so bound under those agreements, we will continue to be bound by the terms and conditions of the agreements. Under the consent agreements, we indemnify Commonwealth Edison for any expenses Commonwealth Edison suffers as a result of our sale of the Powerton and Joliet Stations to the owner trusts, the negligence or willful misconduct of the owner trusts and any breach of the terms of the consent agreements by the owner trusts or us. COMMONWEALTH EDISON FACILITIES, INTERCONNECTION AND EASEMENT AGREEMENTS Also in connection with our acquisition of the power generation assets from Commonwealth Edison, we entered into several facilities, interconnection and easement agreements covering these assets. These agreements delineate the ownership rights regarding easements and interconnection systems associated with these assets. The agreements also describe the procedures we and Commonwealth Edison are to follow with respect to the operation of the stations and peaking units, the interconnection of the facilities with Commonwealth Edison's electric transmission and distribution system, the maintenance of equipment at the stations and peaking units and the delivery by us to Commonwealth Edison of energy from the stations and peaking units. THE FACILITY SERVICES AGREEMENTS As part of the leveraged lease transactions described in this prospectus, we entered into facility services agreements with each owner trust which owns an interest in the Joliet Station. Upon termination of either lease of an ownership interest in the Joliet Station, we will be required to maintain in good repair the facilities that we own which are required for the operation of the portion of the Joliet Station owned by the owner trust. We also agree to provide specified services and to otherwise operate the facilities which we own for our benefit and for the benefit of the portion of the Joliet Station owned by the owner trusts on a non-discriminatory basis. At the same time, each owner trust owning an interest in the Joliet Station has agreed that, upon termination of its lease, it will maintain in good repair the portion of the Joliet Station that it owns which is required for the operation of the portion of the Joliet Station owned by us, and to operate it for the benefit of the ownership interest owned by it and for our benefit on a non-discriminatory basis. Each owner trust has agreed to provide specified services that are required for the operation of the portion of the Joliet Station owned by us. Each facility services agreement provides for a cash payment to the service provider equal to the fair market value of the services, with full right of set-off between the parties. As a part of the leveraged lease transactions, we retained some of the assets of the Joliet Station which are necessary for the operation of Units 7 and 8. To the extent that the effective use and operation of Units 7 and 8 requires those retained assets, we have arranged for the owner trusts to have access to, and use of, those retained assets. POWER MARKETS/SALES STRATEGY We currently derive substantially all of our revenue from the sale of energy and capacity to Exelon Generation under the three five-year power purchase agreements described above. Our energy and capacity that are not purchased under the power purchase agreements are sold at market prices to neighboring utilities, municipalities, third party electricity retailers, large consumers and power marketers. While formal market mechanisms such as independent system operators and power exchanges do not yet exist in the Mid-America Interconnected Network and the East Central Area Reliability Council, a significant bilateral trading infrastructure is already present. This infrastructure facilitates the 65 marketing of electricity. This is a consequence of the very deep Mid-America Interconnected Network market and East Central Area Reliability Council market, as well as the already significant electricity deregulation that is occurring in states such as Illinois and Ohio. Consequently, our marketing strategy will be largely influenced by the applicable market structure that develops. We expect that the coal units will have some contracted revenues apart from the power purchase agreements. The remainder of coal-fired generation output, together with output from the Collins Station and the peaking output, will be sold on a spot basis. Our market trading activities are performed by Edison Mission Marketing & Trading, Inc., a wholly-owned subsidiary of Edison Mission Energy. On September 1, 2000, Edison Mission Energy acquired the trading operations of Citizens Power LLC, and a minority interest in structured transaction investments relating to long-term power purchase agreements, from P&L Coal Holdings Corporation and Gold Fields Mining Corporation (Peabody) for a purchase price of $44.9 million. By the end of the third quarter of 2000, the Citizens trading operations were merged into Edison Mission Energy's marketing operations under Edison Mission Marketing & Trading, Inc. As a result of this acquisition, Edison Mission Energy expanded its trading operations beyond the traditional marketing of electric power generated by its projects. The objective of Edison Mission Marketing & Trading's proprietary trading portfolio is to profit from the movement of commodity prices through a combination of physical and financial positions with third parties. These activities are undertaken in accordance with Edison Mission Energy's established risk management policies. A consistent trading policy of Edison Mission Marketing & Trading is that all counterparties must have an investment-grade credit rating or credit support from an investment-grade entity. Any counterparties that cannot meet these requirements are subject to rigorous review, and trading with these companies is only permitted after approval by the risk management committee. FUEL SUPPLY Coal is the fuel for 5,646 megawatts of our generating capacity. The coal is purchased from several suppliers that operate mines in the Powder River Basin of Wyoming and Montana. The coal is purchased under a variety of supply agreements ranging from one year to more than ten years in length. All the coal is low sulfur, averaging less than 0.76 pounds of SO(2) per million Btu's of heat input for the period since the date of transfer of the assets. Total volume of coal consumed annually is approximately 15,000,000 to 16,000,000 tons. All coal is transported under long term transportation agreements with the Union Pacific Railroad and Burlington Northern Santa Fe Railroad. The coal is delivered in unit trains of 115 to 126 railcars each. At December 31, 2000, we leased approximately 3,800 railcars to transport the coal from the mines to the generating stations. The railcar leases have terms from as short as one year to more than twelve years, with options to extend or purchase the railcars at the end of the lease term. The coal is transported nearly 1,200 miles from the mines to the stations which are located in the greater Chicago area, except for Powerton Station which is located near Pekin, Illinois. Coal is delivered to two stations via river barges which we have under charter. The coal is first delivered to the Will County Station in Romeoville, Illinois by unit trains where it is dumped from the railcars, blended to meet station specifications and loaded into river barges. These barges are towed by an independent contractor under a multiyear transportation agreement with us to the stations located inside the city limits of Chicago. The stations unload the coal from the barges into their bunkers. The 2,698 megawatt Collins Station is a residual fuel oil or gas fired steam generating station. The principal fuel has been the lower cost natural gas since the units were converted to allow firing of natural gas in the mid-1990's. Approximately 4,250,000 barrels of on-site fuel oil storage exists at the station. The recent increase in both oil and natural gas prices makes the future fuel choice a day-to-day decision. Edison Mission Marketing & Trading purchases the natural gas and provides hedges for both 66 fuel oil and natural gas. Most fuel oil purchasing is done as necessary by Edison Mission Energy Fuel Services, LLC, but we also sometimes buy small quantities for on-site plant use. Approximately 1,195 megawatts of peaking capacity in the form of simple cycle combustion turbines are located throughout the northern part of Illinois. These units are fueled with either natural gas or distillate fuel oils, depending on the specific site. The natural gas is purchased by Edison Mission Marketing & Trading. The fuel oil is purchased by Edison Mission Energy Fuel Services under annual contracts with local suppliers. Our contractual commitments for the purchase of coal and fuel oil and for the transport of coal, subject to adjustment, are currently estimated to aggregate $664 million in the next five years, summarized as follows: $252 million in 2001; $181 million in 2002; $108 million in 2003; $61 million in 2004; and $62 million in 2005, in each case subject to adjustment. EMPLOYEES At December 31, 2000, we employed 1,406 employees. Most of our employees were recruited and selected in accordance with the asset sale agreement according to which we acquired the power generating assets from Commonwealth Edison, and are former employees of Commonwealth Edison. We employ a skilled and disciplined workforce that is well prepared to operate within a competitive and deregulated environment. Our staffing levels are comparable with benchmark standards for facilities of a similar size and type, and we have significantly improved equivalent availability and safety since taking over the operation and maintenance of these plants. Under Illinois law and as a result of agreements with the union representing the physical, technical, and clerical employees at the time we acquired the facilities, wages, benefits, and working conditions are set. Under these agreements, we have the flexibility to manage the operations more efficiently than they were managed under the prior owner, and we are in the process of enhancing the training of our workforce in accordance with Edison Mission Energy's operating standards and guidelines. The term of the collective bargaining agreement covering our employees is currently in dispute, with the union maintaining that the agreement expired as early as March 31, 2001, while we maintain that the agreement remains in effect until June 2002. The dispute will be heard by an administrative law judge with the National Labor Relations Board. While no strike has been authorized or strike vote taken, the union has indicated that is one possibility. We have operational plans in place and intend to operate the Illinois Plants in the event of a strike if the current dispute is not resolved. Although we cannot predict the outcome of this dispute, we believe the impact on our operations will not be material. OPERATION AND MAINTENANCE Our operating and maintenance plan, as well as several planned overhauls of major equipment and controls, are consistent with our goal of extending the remaining life of the units for an additional 45 years. We utilize state-of-the-art computerized maintenance systems to plan and schedule all maintenance activities. We also employ a preventative maintenance program complemented by new predictive maintenance technologies such as lubrication analysis, thickness testing, thermography, vibration analysis, and acoustic analysis. Reliability-centered maintenance techniques are currently being developed for critical systems to better define condition monitoring parameters and redefine maintenance strategies. 67 TRANSMISSION AND INTERCONNECTION Station units at Joliet, Will County, Crawford, Waukegan and Fisk Stations and offsite peakers located at Electric Junction, Lombard, Calumet, Bloom and Sabrooke are connected to Commonwealth Edison's 138kV transmission system. The offsite peakers are connected via transmission substations, and the station units are connected through various circuit breakers and transformers. Power output from the Collins Station's units are connected to Commonwealth Edison's 765kV transmission system and 345kV transmission system. The two Joliet units subject to the lease transactions and the two Powerton units deliver their power into Commonwealth Edison's 345kV transmission system. OUR PROPERTIES We own a fee interest in the following sites, with the exception of the Collins Station, the Powerton Station and the Joliet Station, as more particularly described below. The first eight listed sites are electric generating facilities, and the last five listed sites are peaking units. We purchased all the properties, with the exception of the Collins Station, from Commonwealth Edison in December 1999. We assigned the right to purchase Collins Station to third parties, as described below. The conveyance transaction involved Commonwealth Edison selling only a portion of its then owned properties to us. Commonwealth Edison retained the remaining portions of its properties for its own uses. We and Commonwealth Edison have various reciprocal permanent and temporary easements over our respective parcels for the location, use, maintenance and repair of those facilities and equipment that are used in connection with our operations and the operations of Commonwealth Edison. COLLINS STATION SITE The Collins Station Site is the 3,723-acre parcel of land on which the Collins Station is located. The land is owned in fee by us. The Collins Station is leased by us, as described in more detail below. The Collins Station is located at 4200 Pine Bluff Road, near the town of Morris, in Grundy County, Illinois, approximately 40 miles southwest of Chicago. The land and the Collins Station are encumbered by leases and a mortgage security for a loan in an amount up to $774 million. The financing is structured as a sale-leaseback transaction. Specifically, with respect to the land, we, as the fee owner, lease the land to four separate third parties. These third parties are Collins Trust I, Collins Trust II, Collins Trust III and Collins Trust IV. Each of these third parties leases from us a 25% undivided interest in the land and subleases the undivided interests to our affiliate, Collins Holdings EME, LLC. Collins Holdings in turn sub-subleases the land back to us. With respect to the Collins Station, Collins Trust I, Collins Trust II, Collins Trust III and Collins Trust IV each own a 25% undivided fee interest in the Collins Station. Each of these trusts leases its corresponding 25% undivided interest in the Collins Station to Collins Holdings, which subleases the same to us. Each trust entered into a mortgage, dated December 15, 1999, in favor of the holder representative, encumbering, among other things, its respective leasehold interests in land and its respective fee ownership interests in Collins Station. We are the true borrower in this transaction, with Collins Holdings and each Collins Trust acting as "pass-through" middlemen. POWERTON STATION SITE The Powerton Station Site is the 2,008-acre parcel of land on which the Powerton Station is located. The land is owned in fee by us. The Powerton Station is leased by us, as described in more detail in the section titled "The Leveraged Lease Transactions." The Powerton Station is located at 13082 East Manito Road, in Pekin, Illinois. 68 JOLIET #9 SITE Joliet #9 Site is the parcel of land on which the Joliet #9 Station and Joliet Unit 6 are located. The land is owned in fee by us. The Joliet #9 Station is located at 1601 South Patterson, in Joliet, Illinois. JOLIET #29 SITE The Joliet #29 Site is the parcel of land on which the Joliet #29 Station and Joliet Units 7 and 8 are located. The land is owned in fee by us. The Joliet #29 Station is leased by us, as described in more detail in the section titled "The Leveraged Lease Transactions." The Joliet #29 Station is located at 1800 Channahon Road, in Joliet, Illinois. CRAWFORD STATION SITE The Crawford Station Site is the 72-acre parcel of land on which Crawford Station is located. The Crawford Station is located at 3501 South Pulaski Road, in Chicago, Illinois. FISK STATION SITE The Fisk Station Site is the 44-acre parcel of land on which the Fisk Station is located, including a canal commonly known as the Sampsons Canal. The Fisk Station is located at 1101 West Cermack, in Chicago, Illinois. WAUKEGAN STATION SITE The Waukegan Station Site is the 194-acre parcel of land on which the Waukegan Station is located. The Waukegan Station is located at 401 East Greenwood Avenue, in Waukegan, Illinois. WILL COUNTY STATION SITE The Will County Station Site is the 215-acre parcel of land on which the Will County Station is located. The Will County Station is located at 529 East 135th Street, in the town of Romeoville, Illinois. THE PEAKING SITES On July 10, 2000, we sold our peaking stations to EME/CDL Trust, a Delaware business trust. We retained ownership of the land on which the peaking stations are located. Four of our peaking units are located on one of the Crawford Station, Fisk Station, Waukegan Station, or Joliet Station Sites. The other five peaking units are located on one of the peaking sites described below. With respect to the peaking stations, EME/CDL Trust leases its interest in the peaking stations to us. For more information on this transaction, see "Management's Discussion and Analysis of Financial Condition of Midwest Generation--Liquidity and Capital Expenditures--Illinois Peaker Sale-Leaseback." CALUMET. The Calumet Peaking Site is the 18.9-acre parcel of land located at 3200 East 100th Street, in Chicago, Illinois. BLOOM. The Bloom Peaking Site is the 25-acre parcel of land located at 305 East Sauk Trail, in Chicago Heights, Illinois. ELECTRIC JUNCTION. The Electric Junction Peaking Site is the 37.5-acre parcel of land located at Eola & Diehl Roads, in Aurora, Illinois. LOMBARD. The Lombard Peaking Site is the 19.5-acre parcel of land located at 1N 321 Swift Road, in Lombard, Illinois. 69 SABROOKE. The Sabrooke Peaking Site is the 42.5-acre parcel of land located at 123 Energy Avenue, in Rockford, Illinois. COMPETITION FEDERAL. The Energy Policy Act of 1992 laid the groundwork for a competitive wholesale market for electricity. Among other things, the Energy Policy Act expanded the Federal Energy Regulatory Commission's authority to order electric utilities to transmit, or wheel, third-party electricity over their transmission lines, thus allowing qualifying facilities under the Public Utility Regulatory Policies Act of 1978, power marketers and those qualifying as exempt wholesale generators under the Public Utility Holding Company Act of 1935 to compete more effectively in the wholesale market. In April 1996, the Federal Energy Regulatory Commission issued the Open Access Rules, which require utilities to offer eligible wholesale transmission customers non-discriminatory open access on utility transmission lines on a comparable basis to the utilities' own use of the lines. In addition, the Open Access Rules directed the regional power pools that control the major electric transmission networks to file uniform, non-discriminatory open access tariffs. On March 4, 1997, the Federal Energy Regulatory Commission issued Order No. 888-A, reaffirming its basic determinations in Order No. 888, promoting wholesale competition through open access non-discriminatory transmission services by public utilities. Over the past few years, Congress and the Clinton Administration had considered various pieces of legislation to restructure the electric industry which would require, among other things, customer choice, repeal of the Public Utility Holding Company Act and of the Public Utility Regulatory Policies Act. In January 2001, President Bush appointed a Cabinet level task force, headed by Vice President Cheney, to examine long-term energy policy. The task force was prompted in part by the California power crisis and its potential effect on neighboring states and other parts of the U.S. economy. The task force is charged with exploring ways to develop new sources of energy. It is unclear at this time, however, to what extent, if any, legislative or regulatory actions may result from this task force. Congress may also conduct hearings on the issue of long-term energy security. STATE. The Energy Policy Act did not preempt state authority to regulate retail electric service. Historically, in most states, competition for retail customers is limited by statutes or regulations granting existing electric utilities exclusive retail franchises and service territories. Since the passage of the Energy Policy Act, the advisability of retail competition has been the subject of intense debate in federal and state legislative and regulatory forums. Retail competition in Illinois commenced on October 1, 1999 for mostly large commercial and industrial customers, with full access, including all residential customers, scheduled by May 1, 2002. INSURANCE We maintain insurance coverages consistent with those normally carried by companies engaged in similar business and owning similar properties. Our insurance program includes all-risk property insurance, including business interruption, covering the replacement value of all real and personal property, including losses from boilers, machinery breakdowns, and the perils of earthquake and flood, subject to specific sublimits. We also carry general liability insurance covering liabilities to third parties for bodily injury or property damage resulting from operations, automobile liability insurance and excess liability insurance. Further, we have the benefit of title insurance. Limits and deductibles in respect of these insurance policies are comparable to those carried by other electric generating facilities of similar size. 70 LEGAL PROCEEDINGS No material legal proceedings are presently pending against us or our parent company, Edison Mission Midwest Holdings. ENVIRONMENTAL REGULATION We and Edison Mission Energy are subject to environmental regulation by federal, state and local authorities in the United States and foreign regulatory authorities with jurisdiction over the projects located outside the United States. Edison Mission Energy believes that, as of the date of this prospectus, these projects are in substantial compliance with environmental regulatory requirements and that maintaining compliance with current requirements will not materially affect the financial condition or results of operations of either Edison Mission Energy or us. However, possible future developments, such as the promulgation of more stringent environmental laws and regulations and future proceedings which may be taken by environmental authorities, could affect the costs and the manner in which Edison Mission Energy and we conduct business and could cause Edison Mission Energy and us to make substantial additional capital expenditures. Neither Edison Mission Energy nor we can assure you that either of us would be able to recover the increased costs from Edison Mission Energy's or our customers or that our respective financial position and results of operations would not be materially adversely affected. Typically, environmental laws require a lengthy and complex process for obtaining licenses, permits and approvals prior to construction and operation of a project. Meeting all the necessary requirements can delay or sometimes prevent the completion of a proposed project as well as require extensive modifications to existing projects, which may involve significant capital expenditures. The Clean Air Act provides the statutory framework to implement a program for achieving national ambient air quality standards in areas exceeding those standards and provides for maintenance of air quality in areas already meeting those standards. Among other requirements, it also restricts the emission of toxic air contaminants and provides for the reduction of sulfur dioxide emissions to address acid deposition. In 1990, Congress passed amendments to the Clean Air Act that greatly expanded the scope of federal regulations in several significant respects. Edison Mission Energy expects that compliance with the Clean Air Act and the regulations and revised State Implementation Plans developed as a consequence of the Act will result in increased capital expenditures and operating expenses. For example, Edison Mission Energy expects to spend approximately $67 million in 2001 to install upgrades to the environmental controls at the Homer City plant to control sulfur dioxide and nitrogen oxide emissions. Similarly, Edison Mission Energy anticipates upgrades to the environmental controls at the power generation assets we purchased from Commonwealth Edison to control nitrogen oxide emissions to result in expenditures of approximately $61 million, $67 million, $130 million, $123 million and $57 million for 2001, 2002, 2003, 2004 and 2005, respectively. Provisions related to nonattainment, air toxins, permitting of new and existing units, enforcement and acid rain may affect Edison Mission Energy's domestic plants; however, final details of all these programs have not been issued by the United States Environmental Protection Agency and state agencies. In addition, at the Ferrybridge and Fiddler's Ferry plants, Edison Mission Energy anticipates environmental costs arising from plant modification of approximately $52 million for the 2001-2005 period. Edison Mission Energy owns an indirect 50% interest in EcoElectrica, L.P., a limited partnership which owns and operates a liquified natural gas import terminal and cogeneration project at Penuelas, Puerto Rico. In 2000, the U.S. Environmental Protection Agency issued to EcoElectrica a notice of violation and a compliance order alleging violations of the Federal Clean Air Act primarily related to start-up activities. Representatives of EcoElectrica have met with the Environmental Protection Agency to discuss the notice of violations and compliance order. To date, EcoElectrica has not been informed 71 of the commencement of any formal enforcement proceedings. It is premature to assess what, if any, action will be taken by the Environmental Protection Agency. On November 3, 1999, the United States Department of Justice filed suit against a number of electric utilities for alleged violations of the Clean Air Act's "new source review" requirements related to modifications of air emissions sources at electric generating stations located in the southern and midwestern regions of the United States. Several states have joined these lawsuits. In addition, the United States Environmental Protection Agency has also issued administrative notices of violation alleging similar violations at additional power plants owned by some of the same utilities named as defendants in the Department of Justice lawsuit, as well as other utilities, and also issued an administrative order to the Tennessee Valley Authority for similar violations at certain of its power plants. The Environmental Protection Agency has also issued requests for information pursuant to the Clean Air Act to numerous other electric utilities seeking to determine whether these utilities also engaged in activities that may have been in violation of the Clean Air Act's new source review requirements. To date, one utility--the Tampa Electric Company--has reached a formal agreement with the United States to resolve alleged new source review violations. Two other utilities, the Virginia Electric Power Co. and Cinergy Corp., have reached agreements in principle with the Environmental Protection Agency. In each case, the settling party has agreed to incur over $1 billion in expenditures over several years for the installation of additional pollution control, the retirement or re-powering of coal-fired generating units, supplemental environmental projects and civil penalties. These agreements provide for a phased approach to achieving required emission reductions over the next 10-15 years. The settling utilities have also agreed to pay civil penalties ranging from $3.5 million to $8.5 million. Prior to Edison Mission Energy's purchase of the Homer City plant, the Environmental Protection Agency requested information from the prior owners of the plant concerning physical changes at the plant. Other than with respect to the Homer City plant, no proceedings have been initiated or requests for information issued with respect to any of Edison Mission Energy's and our United States facilities. However, Edison Mission Energy and we have been in informal voluntary discussions with the Environmental Protection Agency relating to these facilities, which may result in the payment of civil fines. Edison Mission Energy and we cannot assure you that Edison Mission Energy and we will reach a satisfactory agreement or that these facilities will not be subject to proceedings in the future. Depending on the outcome of the proceedings, Edison Mission Energy and we could be required to invest in additional pollution control requirements, over and above the upgrades we are planning to install, and could be subject to fines and penalties. A new ambient air quality standard was adopted by the Environmental Protection Agency in July 1997 to address emissions of fine particulate matter. It is widely understood that attainment of the fine particulate matter standard may require reductions in nitrogen oxides and sulfur dioxides, although under the time schedule announced by the Environmental Protection Agency when the new standard was adopted, non-attainment areas were not to have been designated until 2002 and control measures to meet the standard were not to have been identified until 2005. In May 1999, the United States Court of Appeals for the District of Columbia Circuit held that Section 109(b)(1) of the Clean Air Act, the section of the Clean Air Act requiring the promulgation of national ambient air quality standards, as interpreted by the Environmental Protection Agency, was an unconstitutional delegation of legislative power. The Court of Appeals remanded both the fine particulate matter standard and the revised ozone standard to allow the Environmental Protection Agency to determine whether it could articulate a constitutional application of Section 109(b)(1). On February 27, 2001, the Supreme Court, in WHITMAN V. AMERICAN TRUCKING ASSOCIATIONS, INC., reversed the Circuit Court's judgment on this issue and remanded the case back to the Court of Appeals to dispose of any other preserved challenges to the particulate matter and ozone standards. Accordingly, as the final application of the revised 72 particulate matter ambient air quality standard is potentially subject to further judicial proceedings, the impact of this standard on Edison Mission Energy's and our facilities is uncertain at this time. On December 20, 2000, the Environmental Protection Agency issued a regulatory finding that it is "necessary and appropriate" to regulate emissions of mercury and other hazardous air pollutants from coal-fired power plants. The agency has added coal-fired power plants to the list of source categories under Section 112(c) of the Clean Air Act for which "maximum available control technology" standards will be developed. Eventually, unless overturned or reconsidered, the Environmental Protection Agency will issue technology-based standards that will apply to every coal-fired unit owned by Edison Mission Energy or us in the United States. This section of the Clean Air Act provides only for technology-based standards, and does not permit market trading options. Until the standards are actually promulgated, the potential cost of these control technologies cannot be estimated, and neither Edison Mission Energy nor we can evaluate the potential impact on the operations of Edison Mission Energy's or our facilities. Since the adoption of the United Nations Framework on Climate Change in 1992, there has been worldwide attention with respect to greenhouse gas emissions. In December 1997, the Clinton Administration participated in the Kyoto, Japan negotiations, where the basis of a Climate Change treaty was formulated. Under the treaty, known as the Kyoto Protocol, the United States would be required, by 2008-2012, to reduce its greenhouse gas emissions by 7% from 1990 levels. The Kyoto Protocol was not submitted by the Clinton Administration to the Senate for ratification, and the Bush Administration has announced its opposition to the Kyoto Protocol. Although legislative developments at the federal and state level related to controlling greenhouse gas emissions are beginning, neither Edison Mission Energy nor we are aware of any state legislative developments in the states in which Edison Mission Energy or we operate. If the United States ratifies the Kyoto Protocol or Edison Mission Energy and we otherwise become subject to limitations on emissions of carbon dioxide from Edison Mission Energy's or our plants, these requirements could have a significant impact on Edison Mission Energy's or our respective operations. The Comprehensive Environmental Response, Compensation, and Liability Act, which is also known as CERCLA, and similar state statutes, require the cleanup of sites from which there has been a release or threatened release of hazardous substances. As of the date of this prospectus, neither Edison Mission Energy nor we are aware of any CERCLA liability. However, neither Edison Mission Energy nor we can assure you that either of us will not incur CERCLA liability or similar state law liability in the future. 73 REGULATION GENERAL Federal laws and regulations govern, among other things, transactions by and with purchasers of power, including utility companies, the operations of a project and the ownership of a project. Edison Mission Energy's operations are subject to extensive regulation by governmental agencies in each of the countries in which it conducts operations. Edison Mission Energy's domestic projects, including us, are subject to energy, environmental and other governmental laws and regulations at the federal, state and local levels in connection with the development, ownership and operation of, and use of, electric energy, capacity and related products, including ancillary services from, Edison Mission Energy's projects. Under limited circumstances where exclusive federal jurisdiction is not applicable or specific exemptions or waivers from state or federal laws or regulations are otherwise unavailable, federal and/or state utility regulatory commissions may have broad jurisdiction over non-utility owned electric power plants. Energy-producing projects are also subject to federal, state and local laws and regulations that govern the geographical location, zoning, land use and operation of a project. Federal, state and local environmental requirements generally require that a wide variety of permits and other approvals be obtained before the commencement of construction or operation of an energy-producing station and that the station then operate in compliance with the permits and approvals. While both we and Edison Mission Energy believe that the requisite approvals for our existing projects have been obtained and that our businesses are operated in substantial compliance with applicable laws, we and Edison Mission Energy remain subject to a varied and complex body of laws and regulations that both public officials and private parties may seek to enforce. Regulatory compliance for the construction of new facilities is a costly and time consuming process. Intricate and changing environmental and other regulatory requirements may necessitate substantial expenditures and may create a significant risk of expensive delays or significant loss of value in a project if the project is unable to function as planned due to changing requirements or local opposition. Furthermore, each of Edison Mission Energy's international projects is subject to the energy and environmental laws and regulations of the foreign country in which the project is located. The degree of regulation varies according to each country and may be materially different from the regulatory regime in the United States. U.S. FEDERAL ENERGY REGULATION The Federal Energy Regulatory Commission has ratemaking jurisdiction and other authority with respect to interstate sales and transmission of electric energy under the Federal Power Act and with respect to interstate sales, transportation and storage of natural gas under the Natural Gas Act of 1938. The Securities and Exchange Commission has regulatory powers with respect to upstream owners of electric and natural gas utilities under the Public Utility Holding Company Act of 1935. The enactment of the Public Utility Regulatory Policies Act of 1978 and the adoption of regulations under that Act by the Federal Energy Regulatory Commission provided incentives for the development of cogeneration facilities and small power production facilities using alternative or renewable fuels by establishing several exemptions from the Federal Power Act and the Public Utility Holding Company Act for the owners of qualifying facilities. The passage of the Energy Policy Act in 1992 further encouraged independent power production by providing additional exemptions from the Public Utility Holding Company Act for exempt wholesale generators and foreign utility companies. A "QUALIFYING FACILITY" under the Public Utility Regulatory Policies Act is a cogeneration facility or a small power production facility that satisfies criteria adopted by the Federal Energy Regulatory Commission. In order to be a qualifying facility, a cogeneration facility must - sequentially produce both useful thermal energy, such as steam, and electric energy, 74 - meet specified operating standards, and energy efficiency standards when oil or natural gas is used as a fuel source and - not be controlled, or more than 50% owned by one or more of the following: - electric utilities, where "electric utility" is interpreted with reference to the Public Utility Holding Company Act definition of an "electric utility company," - electric utility holding companies, defined by reference to the Public Utility Holding Company Act definitions of "electric utility company" and "holding company," or - affiliates of an electric utility or electric utility holding company. A small power production facility seeking to be a qualifying facility must produce power from renewable energy sources, such as geothermal energy, waste sources of fuel, such as waste coal, or any combination of renewable energy sources and waste sources of fuel and must meet the ownership restrictions discussed above. Before 1990, a small power production facility seeking to be a qualifying facility was subject to 30 MW or 80 MW size limits, depending upon its fuel source. In 1990, these limits were lifted for solar, wind, waste, and geothermal qualifying facilities, so long as applications for or notices of qualifying facility status were filed with the Federal Energy Regulatory Commission for these facilities on or before December 31, 1994, and so long as, in the case of new facilities, the construction of these facilities commenced on or before December 31, 1999. An "EXEMPT WHOLESALE GENERATOR" under the Public Utility Holding Company Act is an entity determined by the Federal Energy Regulatory Commission to be exclusively engaged, directly or indirectly, in the business of owning and/or operating specified eligible facilities and selling electric energy at wholesale or, if located in a foreign country, at wholesale or retail. A "FOREIGN UTILITY COMPANY" under the Public Utility Holding Company Act is, in general, an entity located outside the United States that owns or operates facilities used for the generation, distribution or transmission of electric energy for sale or the distribution at retail of natural or manufactured gas, but that derives none of its income, directly or indirectly, from these activities within the United States. FEDERAL POWER ACT. The Federal Power Act grants the Federal Energy Regulatory Commission exclusive ratemaking jurisdiction over wholesale sales of electricity in interstate commerce, including ongoing, as well as initial, rate jurisdiction. This jurisdiction allows the Federal Energy Regulatory Commission to revoke or modify previously approved rates. These rates may be based on a cost-of-service approach or, in geographic and product markets determined by the Federal Energy Regulatory Commission to be workably competitive, may be market-based. As noted, most qualifying facilities are exempt from the ratemaking and several other provisions of the Federal Power Act. Exempt wholesale generators and other non-qualifying facility independent power projects are subject to the Federal Power Act and to the ratemaking jurisdiction of the Federal Energy Regulatory Commission under that Act, but the Federal Energy Regulatory Commission typically grants exempt wholesale generators the authority to charge market-based rates as long as the absence of market power is shown. In addition, the Federal Power Act grants the Federal Energy Regulatory Commission jurisdiction over the sale or transfer of jurisdictional facilities, including wholesale power sales contracts, and in some cases, jurisdiction over the issuance of securities or the assumption of specified liabilities and some interlocking directorates. In granting authority to make sales at market-based rates, the Federal Energy Regulatory Commission typically also grants blanket approval for the issuance of securities and partial waiver of the restrictions on interlocking directorates. Currently, in addition to the facilities owned or operated by us, a number of Edison Mission Energy's operating projects, including the Homer City plant, the Nevada Sun-Peak, Brooklyn Navy Yard, Commonwealth Atlantic and Harbor facilities, are subject to the Federal Energy Regulatory Commission ratemaking regulation under the Federal Power Act. Edison Mission Energy's future 75 domestic non-qualifying facility independent power projects will also be subject to Federal Energy Regulatory Commission jurisdiction on rates. THE PUBLIC UTILITY HOLDING COMPANY ACT. Unless exempt or found not to be a holding company by the Securities and Exchange Commission, a company that falls within the definition of a holding company must register with the Securities and Exchange Commission and become subject to Securities and Exchange Commission regulation as a registered holding company under the Public Utility Holding Company Act. "HOLDING COMPANY" is defined in Section 2(a)(7) of the Public Utility Holding Company Act to include, among other things, any company that owns 10% or more of the voting securities of an electric utility company. "ELECTRIC UTILITY COMPANY" is defined in Section 2(a)(3) of the Public Utility Holding Company Act to include any company that owns facilities used for generation, transmission or distribution of electric energy for resale. Exempt wholesale generators and foreign utility companies are not deemed to be electric utility companies and qualifying facilities are not considered facilities used for the generation, transmission or distribution of electric energy for resale. Securities and Exchange Commission precedent also indicates that it does not consider "paper facilities," such as contracts and tariffs used to make power sales, to be facilities used for the generation, transmission or distribution of electric energy for resale, and power marketing activities will not, therefore, result in an entity being deemed to be an electric utility company. A registered holding company is required to limit its utility operations to a single integrated utility system and to divest any other operations not functionally related to the operation of that utility system. In addition, a registered holding company will require Securities and Exchange Commission approval for the issuance of securities, other major financial or business transactions (such as mergers) and transactions between and among the holding company and holding company subsidiaries. Because it owns Southern California Edison, an electric utility company, Edison International, Edison Mission Energy's parent company, is a holding company. Edison International is, however, exempt from registration pursuant to Section 3(a)(1) of the Public Utility Holding Company Act, because the public utility operations of the holding company system are predominantly intrastate in character. Consequently, Edison Mission Energy is not a subsidiary of a registered holding company, so long as Edison International continues to be exempt from registration pursuant to Section 3(a)(1) or another of the exemptions enumerated in Section 3(a). Nor is Edison Mission Energy a holding company under the Public Utility Holding Company Act, because Edison Mission Energy's interests in power generation facilities are exclusively in qualifying facilities, exempt wholesale generators and foreign utility companies. All international projects and specified U.S. projects that Edison Mission Energy is currently developing or proposing to acquire will be non-qualifying facility independent power projects. Edison Mission Energy intends for each project to qualify as an exempt wholesale generator or as a foreign utility company. Loss of exempt wholesale generator, qualifying facility or foreign utility company status for one or more projects could result in Edison Mission Energy becoming a holding company subject to registration and regulation under the Public Utility Holding Company Act and could trigger defaults under the covenants in Edison Mission Energy's project agreements. Becoming a holding company could, on a retroactive basis, lead to, among other things, fines and penalties and could cause certain of Edison Mission Energy's project agreements and other contracts to be voidable. PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978. The Public Utility Regulatory Policies Act provides two primary benefits to qualifying facilities. First, as discussed above, ownership of qualifying facilities will not result in a company's being deemed an electric utility company for purposes of the Public Utility Holding Company Act. In addition, all cogeneration facilities and all small production facilities that generate power from sources other than geothermal and whose capacity exceeds 30 MWs that are qualifying facilities are exempt from most provisions of the Federal Power Act and regulations of the Federal Energy Regulatory Commission under that Act. Second, the Federal Energy Regulatory Commission regulations promulgated under the Public Utility Regulatory Policies Act require that electric utilities purchase electricity generated by qualifying facilities at a price based on the purchasing 76 utility's avoided cost, and that the utilities sell back up power to the qualifying facility on a non discriminatory basis. The Federal Energy Regulatory Commission's regulations define "avoided cost" as the incremental cost to an electric utility of electric energy or capacity or both which, but for the purchase from the qualifying facility or qualifying facilities, the utility would generate itself or purchase from another source. The Federal Energy Regulatory Commission's regulations also permit qualifying facilities and utilities to negotiate agreements for utility purchases of power at prices different than the utility's avoided costs. While it has been common for utilities to enter into long term contracts with qualifying facilities in order, among other things, to facilitate project financing of independent power facilities and to reflect the deferral by the utility of capital costs for new plant additions, increasing competition and the development of new power markets have resulted in a trend toward shorter term power contracts that would place greater risk on the project owner. If one of the projects in which Edison Mission Energy has an interest were to lose its status as a qualifying facility, the project would no longer be entitled to the qualifying facility-related exemptions from regulation under the Public Utility Holding Company Act and the Federal Power Act. As a result, the project could become subject to rate regulation by the Federal Energy Regulatory Commission under the Federal Power Act, and Edison Mission Energy could inadvertently become a holding company under the Public Utility Holding Company Act. Under Section 26(b) of the Public Utility Holding Company Act, any project contracts that are entered into in violation of the Public Utility Holding Company Act, including contracts entered into during any period of non-compliance with the registration requirement, could be determined by the courts or the Securities and Exchange Commission to be void. If a project were to lose its qualifying facility status, Edison Mission Energy could attempt to avoid holding company status on a prospective basis by qualifying the project owner as an exempt wholesale generator. However, assuming this changed status would be permissible under the terms of the applicable power sales agreement, rate approval from the Federal Energy Regulatory Commission would be required. In addition, the project would be required to cease selling electricity to any retail customers, in order to qualify for exempt wholesale generator status, and could become subject to additional state regulation. Loss of qualifying facility status by one project could also potentially cause other projects with the same partners to lose their qualifying facility status to the extent those partners became electric utilities, electric utility holding companies or affiliates of electric utilities or electric utility holding companies for purposes of the ownership criteria applicable to qualifying facilities. Loss of qualifying facility status could also trigger defaults under covenants to maintain qualifying facility status in the project's power sales agreements, steam sales agreements and financing agreements and result in termination, penalties or acceleration of indebtedness under such agreements. If a power purchaser were to cease taking and paying for electricity or were to seek to obtain refunds of past amounts paid because of the loss of qualifying facility status, Edison Mission Energy cannot assure you that the costs incurred in connection with the project could be recovered through sales to other purchasers. Moreover, Edison Mission Energy's business and financial condition could be adversely affected if regulations or legislation were modified or enacted that changed the standards for maintaining qualifying facility status or that eliminated or reduced the benefits, such as the mandatory purchase provisions of the Public Utility Regulatory Policies Act and exemptions currently enjoyed by qualifying facilities. Loss of qualifying facility status on a retroactive basis could lead to, among other things, fines and penalties being levied against Edison Mission Energy, or claims by a utility customer for the refund of payments previously made. Edison Mission Energy endeavors to develop qualifying facility projects, monitor regulatory compliance by these projects and choose customers in a manner that minimizes the risks of losing these projects' qualifying facility status. However, some factors necessary to maintain qualifying facility status are subject to risks of events outside of Edison Mission Energy's control. For example, loss of a thermal energy customer or failure of a thermal energy customer to take required amounts of thermal energy from a cogeneration facility that is a qualifying facility could cause a facility to fail to meet the requirements regarding the minimum level of useful thermal energy output. Upon the occurrence of 77 this type of event, Edison Mission Energy would seek to replace the thermal energy customer or find another use for the thermal energy that meets the requirements of the Public Utility Regulatory Policies Act. NATURAL GAS ACT. Twenty-four of the domestic operating facilities that Edison Mission Energy owns, operates or has investments in use natural gas as their primary fuel. Under the Natural Gas Act, the Federal Energy Regulatory Commission has jurisdiction over some sales of natural gas and over transportation and storage of natural gas in interstate commerce. The Federal Energy Regulatory Commission has granted blanket authority to all persons to make sales of natural gas without restriction but continues to exercise significant oversight with respect to transportation and storage of natural gas services in interstate commerce. STATE ENERGY REGULATION State public utility commissions have broad jurisdiction over non-qualifying facility independent power projects, including exempt wholesale generators, which are considered public utilities in many states. This jurisdiction often includes the issuance of certificates of public convenience and necessity and/or other certifications to construct, own and operate a facility, as well as the regulation of organizational, accounting, financial and other corporate matters on an ongoing basis. Qualifying facilities may also be required to obtain these certificates of public convenience and necessity in some states. Some states that have restructured their electric industries require generators to register to provide electric service to customers. Many states are currently undergoing significant changes in their electric statutory and regulatory frameworks that result from restructuring the electric industries that may affect generators in those states. Although the Federal Energy Regulatory Commission generally has exclusive jurisdiction over the rates charged by a non-qualifying facility independent power project to its wholesale customers, a state's public utility commission has the ability, in practice, to influence the establishment of these rates by asserting jurisdiction over the purchasing utility's ability to pass through the resulting cost of purchased power to its retail customers. A state's public utility commission also has the authority to determine avoided costs for qualifying facilities and to regulate the retail rates charged by qualifying facilities. In addition, states may assert jurisdiction over the siting and construction of independent power projects and, among other things, the issuance of securities, related party transactions and the sale or other transfer of assets by these facilities. The actual scope of jurisdiction over independent power projects by state public utility commissions varies from state to state. In addition, state public utility commissions may seek to modify, suspend or terminate a qualifying facility's power sales contract under specified circumstances. This could occur if the state public utility commission were to determine that the pricing mechanism of the power sales contract is unfairly high in light of the current prevailing market cost of power for the utility purchasing the power. In this instance, the state public utility commission could attempt to alter the terms of the power sales contract to reflect more accurately market conditions for the prevailing cost of power. While Edison Mission Energy believes that these attempts are not common, and that a state public utility commission may not have any jurisdiction to modify the terms of wholesale power sales, it cannot assure you that the power sales contracts of its projects will not be subject to adverse regulatory actions. The California Public Utilities Commission has authorized the electric utilities in California to "monitor" compliance by qualifying facilities with the Public Utility Regulatory Policies Act rules and regulations. However, the United States Court of Appeals for the Ninth Circuit found in 1994 that a California Public Utilities Commission program was preempted by the Public Utility Regulatory Policies Act, to the extent it authorized utilities to determine that a qualifying facility was not in compliance with the Public Utility Regulatory Policies Act rules and regulations, to then pay a reduced avoided cost rate and to take other action contrary to a facility's status as a qualifying facility. The court did, 78 however, uphold reasonable monitoring of qualifying facility operating data. Other states, like New York and Virginia, have also instituted qualifying facility monitoring programs. Edison Mission Energy buys and transports the natural gas used at its domestic facilities through local distribution companies. State public utility commissions have jurisdiction over the transportation of natural gas by local distribution companies. Each state's regulatory laws are somewhat different. However, all generally require local distribution companies to obtain approval from the relevant public utility commission for the construction of facilities and transportation services if the local distribution company's generally applicable tariffs do not cover the proposed transaction. Local distribution companies' rates are usually subject to continuing public utility commission oversight. CALIFORNIA DEREGULATION DEREGULATION PLAN Efforts to restructure the California electric industry began in 1994 in response to high electricity prices. A final restructuring order was issued by the California Public Utility Commission in December 1995, which led to the unanimous enactment of Assembly Bill 1890, the Restructuring Legislation, in September 1996 and its signature by the Governor of California at the time. The main points of this legislation included the following: - the creation of the California Independent System Operator and California Power Exchange by January 1998 and simultaneous initiation of direct access between electricity suppliers and end use customers; - the creation of the California Electricity Oversight Board; and - the adoption of a Competitive Transition Charge for the recovery of stranded costs. The state's utilities were authorized to divest much of their generation assets and apply the proceeds to their stranded costs resulting from deregulation of the retail markets. The restructuring also required that California investor-owned utilities sell into and purchase most of their power requirements from the California Power Exchange but did not permit them to hedge their risk through long-term forward contracts. Through this mechanism, a spot market was created that set the purchase price for power by establishing the highest bid as the market clearing price for all bidders. Additionally, the legislation provided for a limited transition period ending March 31, 2002, or an earlier date at which it is determined that a utility has recovered its stranded costs. During the transition period, there is a rate reduction of no less than 10% for residential and small commercial ratepayers. The rate reduction was financed through the issuance of rate reduction bonds. The rate reduction scheme capped retail electric rates at 1996 levels. The retail rate cap and bond offering were intended to assist utilities in the recovery of stranded costs incurred by their investments made prior to deregulation. At the conclusion of the transition period, the legislation anticipated that residential and small business purchasers of electricity would pay 20% less for electricity due to effective implementation of Assembly Bill 1890. THE CURRENT POWER CRISIS IN CALIFORNIA Wholesale power prices rose significantly in California during 2000 and early 2001, we believe primarily as a result of supply shortages, high natural gas and petroleum prices and a variety of other factors. Unregulated wholesale rates rose above the fixed retail rates the California utilities were permitted to charge their customers. The inability of utilities to recover the full amount of wholesale prices has led to billions of dollars in unrecovered costs by the California utilities and to their current liquidity crisis. 79 Ongoing legislative and regulatory efforts seek to address both market structure and supply problems. In September 2000, legislation was enacted in California seeking to accelerate the power plant siting approval process. Other initiatives may seek to stimulate entry into the market of new power generation capacity. In December 2000, the Federal Energy Regulatory Commission issued an order permitting California utilities to negotiate long-term supply contracts, and establishing a "soft-cap" limiting the wholesale price that could be charged without additional cost justification, as opposed to allowing the highest bid price to set the market clearing price for all generators. At that time the Federal Energy Regulatory Commission refused to set a regional price cap for wholesale power prices as sought by state officials. On January 4, 2001, the California Public Utilities Commission authorized an interim surcharge on customers' bills, subject to refund, to be applied only to ongoing power procurement costs, which was to result in rate increases of 7-15% during a 90-day period. On March 27, 2001, the California Public Utilities Commission made the interim surcharge permanent and authorized a rate increase of three cents per kilowatt-hour. Neither the interim surcharge nor the rate increase affected the retail rate freeze which has been in effect since deregulation began in 1998. On February 1, 2001, legislation was enacted in California that, among other things: authorized the California Department of Water Resources to enter into long-term power purchase contracts; authorized the Department of Water Resources to sell revenue bonds to finance electricity purchases; provided for rate recovery of the Department of Water Resources' costs through rate increases, subject to specified limits; authorized the Department of Water Resources to sell power at its costs to retail customers and, with specified exceptions, to local publicly owned electric utilities; appropriated a total of $500 million toward additional spot market power purchases; and provided for suspension of the ability of customers to choose alternative energy providers while the Department of Water Resources is procuring power. Executive Orders promoting energy conservation measures were also signed by the Governor of California, including a mandatory requirement that retail businesses reduce outdoor retail lighting during non-business hours or face fines. In addition, on February 21, 2001, the California Senate approved formation of a California state power authority, which (if formed) will have the power to own and operate generation and transmission facilities in the state. The formation of the state power authority has not yet been approved by the California Assembly. The Governor of California has also proposed that the state acquire the transmission assets of the investor-owned utilities, including Southern California Edison, and that the proceeds from such sales be applied against the utilities' existing debts. As part of an investigation that the Federal Energy Regulatory Commission has been conducting on wholesale power prices in the California market, the Federal Energy Regulatory Commission ordered a number of power generators, not including Edison Mission Energy, to justify charges to California utilities during the months of January and February 2001 or refund such charges. The Federal Energy Regulatory Commission has further required a power generator and a marketer to justify their decision to bring plants off-line or refund to the California utilities the increased costs resulting from such shutdowns. Also, the Governor of California and other western states have petitioned the Federal Energy Regulatory Commission and the United States Congress for "cost-based" price caps for wholesale power rates on the spot market, permitting power generators to recover all their costs with a small level of profit. Further actions are anticipated as both the Federal and California state governments have intervened to address the short- and long-term issues associated with the power crisis. A recent Federal Energy Regulatory Commission report estimates that it could take up to 24 months to address these issues. On March 15, 2001, the California Public Utilities Commission released a draft of a proposed order instituting an investigation into whether California's investor-owned utilities, including Southern California Edison, have complied with past Commission decisions authorizing the formation of their holding companies and governing affiliate transactions, as well as applicable statutes. The proposed 80 order would reopen the past holding company decisions and initiate an investigation into the following matters: - whether the holding companies, including Edison International, violated requirements to give priority to the capital needs of their respective utility subsidiaries; - whether the ring-fencing actions by Edison International and PG&E Corporation and their respective non-utility affiliates also violated the requirements to give priority to the capital needs of their utility subsidiaries; - whether the payment of dividends by the utilities violated requirements that the utilities maintain dividend policies as though they were comparable stand-alone utility companies; - any additional suspected violations of laws or Commission rules and decisions; and - whether additional rules, conditions, or other changes to the holding company decisions are necessary. A prehearing conference has been set for April 20, 2001, and the parties have been asked to inform the California Public Utilities Commission of their view of the impact of the recently signed memorandum of understanding, discussed below, among Southern California Edison, Edison International and the California Department of Water Resources, on specified issues from the order, how to expedite resolution of those issues, and how to conduct the remainder of the investigation to the extent other issues and other parties are not affected. Neither Edison Mission Energy nor we can predict whether the Commission will institute this investigation or what effects any investigation or subsequent actions by the Commission may have on Edison International, Edison Mission Energy or indirectly on us. On March 27, 2001, the California Public Utilities Commission issued a decision that ordered the three California investor owned utilities, including Southern California Edison and Pacific Gas and Electric, to commence payment for power generated from qualifying facilities beginning in April 2001. In addition, the decision modified the pricing formula for determining short run avoided costs for qualifying facilities subject to these provisions. Depending on how the utilities react to this order, the immediate impact of this decision may be to commence payment in April 2001 at significantly reduced prices for power to qualifying facilities subject to this pricing adjustment. Furthermore, this decision called for further study of the pricing formula tied to short run avoided costs and, accordingly, may be subject to more changes in the future. Finally, this decision is subject to challenge before the Commission, the Federal Energy Regulatory Commission and, potentially, state or federal courts. Although it is premature to assess the full effect of this recent decision, it could have a material adverse effect on Edison Mission Energy's investment in the California partnerships, depending on how it is implemented and future changes in the relationship between the pricing formula and the actual cost of natural gas procured by Edison Mission Energy's California partnerships. This decision did not address payment to the qualifying facilities for amounts due prior to April 2001. As previously disclosed by Edison International, on April 9, 2001, Edison International and Southern California Edison signed a Memorandum of Understanding with the California Department of Water Resources. The Memorandum calls for legislation, regulatory action and definitive agreements to resolve important aspects of the energy crisis, and which the parties expect will help restore Southern California Edison's creditworthiness and liquidity. Edison International filed a Form 8-K on April 10, 2001, which describes key elements of the Memorandum. Among other things, the Memorandum provides that Edison Mission Energy will execute a contract with the Department of Water Resources or another state agency for the provision of power from the Sunrise Project, a power project currently under development by Edison Mission Energy, to the State at cost-based rates for ten years. Edison International agreed that Edison Mission Energy will use all commercially reasonable efforts to place the first phase of the project into service before the end of Summer 2001. 81 Edison International and Southern California Edison have stated that they believe that the Memorandum is an important step toward an acceptable resolution of the major issues affecting Edison International and Southern California Edison as a result of the California energy crisis, but this result is not assured. The parties agreed in the Memorandum that each of its elements is part of an integrated package, and effectuation of each element will depend upon effectuation of the others. To implement the Memorandum, numerous actions must be taken by the parties and by other agencies of the State of California. Southern California Edison, Edison International and the Department of Water Resources committed to proceed in good faith to sponsor and support the required legislation and to negotiate in good faith the necessary definitive agreements. However, the California Legislature, the California Public Utilities Commission, the Federal Energy Regulatory Commission, and other governmental entities on whose part action will be necessary to implement the Memorandum are not parties to the Memorandum. Furthermore, the Memorandum may be terminated by either Southern California Edison or the California Department of Water Resources if required legislation is not adopted and definitive agreements executed by August 15, 2001, or if the California Public Utilities Commission does not adopt the required implementing decisions within 60 days after the Memorandum was signed, or if specified other adverse changes occur. Neither Edison Mission Energy nor we can provide assurance that all the required legislation will be enacted, regulatory actions taken, and definitive agreements executed before the applicable deadlines. In addition, a California voter initiative or referendum previously has been threatened against any measures that would raise consumer rates or aid California's investor-owned utilities. Finally, execution of the Memorandum does not eliminate the possibility that some of Southern California Edison's creditors could take steps to force Southern California Edison into bankruptcy proceedings. On April 6, 2001, Pacific Gas and Electric announced that it had filed for reorganization under Chapter 11 of the United States Bankruptcy Code. Pacific Gas and Electric said that neither its parent holding company nor any of the parent's other subsidiaries are affected by Pacific Gas and Electric's filing. Pacific Gas and Electric cited as reasons for its bankruptcy filing the failure by the State of California to assume full procurement responsibility for Pacific Gas and Electric's net short position, the California Public Utilities Commission's actions on March 27 and April 3, 2001 that created new payment obligations for Pacific Gas and Electric, lack of progress in negotiations with the State to provide recovery of power purchase costs, the California Public Utilities Commission's adoption of an illegal and retroactive accounting change, and the slow progress of discussions with the Governor's representatives. The situation in California changes on an almost daily basis. You should monitor developments in California for the most up to date information. MIDWEST DEREGULATION STATUS ILLINOIS RESTRUCTURING In December 1997, the Governor of Illinois signed into law the Electric Service Customer Choice and Rate Relief Law of 1997. We will refer to this law as the Illinois Electric Law. The Illinois Electric Law has required and is requiring electric utilities to file delivery services implementation plans for non-residential retail customers no later than March 1, 1999 and for residential customers no later than August 1, 2001 and to recover the costs associated with the provision of delivery services. The Illinois Electric Law also requires the Illinois Commerce Commission to adopt reliability rules for the transmission and distribution systems of Illinois utilities. These rules have been adopted and include reporting and penalty provisions that apply to Commonwealth Edison. Illinois' transition to retail electric competition is being conducted in phases with approximately one-third of non-residential customers having had the opportunity to purchase electricity from alternative retail electric suppliers or electric utilities serving retail customers outside their service 82 areas, effective October 1, 1999. Choice of suppliers is now available to all non-residential customers and choice for all residential customers will be available on or before May 1, 2002. Alternative retail electric suppliers include any person or company, other than an Illinois electric utility, that sells electricity to one or more retail electric customers in Illinois. During the transition to full open access, customers that switch to alternative retail electric suppliers or electric utilities serving retail customers outside their service areas may be required to pay transition charges to compensate the utilities that previously supplied these customers for past investments, including investments in generating plants. The Illinois Electric Law calls for these transition charges to end no later than December 31, 2006, although some utilities may petition the Illinois Commerce Commission to extend the period for collection of transition charges until December 31, 2008. Calculation of the transition charge amounts is one of the issues under the Illinois Electric Law currently in litigation in proceedings before the Illinois Commerce Commission. INDEPENDENT SYSTEM OPERATOR/REGIONAL TRANSMISSION OPERATOR The Illinois Electric Law provides that each Illinois electric utility that owns or controls transmission facilities or provides transmission services in Illinois, and is a member in the Mid-American Interconnected Network, shall submit for approval to the Federal Energy Regulatory Commission an application for establishing or joining an independent system operator. At least two entities with the potential to involve Commonwealth Edison's transmission facilities or services have submitted materials to the Federal Energy Regulatory Commission. These are the Midwest Independent System Operator and the Alliance Regional Transmission Operator. It is not possible at this time to determine which of these entities, or possibly another entity, ultimately will be involved with the management of the flow of electricity through Commonwealth Edison's transmission facilities. TRANSMISSION OF WHOLESALE POWER Generally, projects that sell power to wholesale purchasers other than the local utility to which the project is interconnected require the transmission of electricity over power lines owned by others, also known as wheeling. The prices and other terms and conditions of transmission contracts are regulated by the Federal Energy Regulatory Commission when the entity providing the wheeling service is a jurisdictional public utility under the Federal Power Act. Until 1992, the Federal Energy Regulatory Commission's ability to compel wheeling was very limited, and the availability of voluntary wheeling service could be a significant factor in determining whether a site was viable for project development. The Federal Energy Regulatory Commission's authority under the Federal Power Act to require electric utilities to provide transmission service on a case by case basis to qualifying facilities, exempt wholesale generators, and other power generators was expanded substantially by the Energy Policy Act. Furthermore, in 1996 the Federal Energy Regulatory Commission issued a rulemaking order, Order 888, in which the Federal Energy Regulatory Commission asserted the power, under its authority to eliminate undue discrimination in transmission, to compel all jurisdictional public utilities under the Federal Power Act to file open access transmission tariffs consistent with a pro forma tariff drafted by the Federal Energy Regulatory Commission. The Federal Energy Regulatory Commission subsequently issued Orders 888-A, 888-B and 888-C to clarify the terms that jurisdictional transmitting utilities are required to include in their open access transmission tariffs. The Federal Energy Regulatory Commission also issued Order 889, which required those transmitting utilities to abide by specified standards of conduct when using their own transmission systems to make wholesale sales of power, and to post specified transmission information, including information about transmission requests and availability, on a publicly available computer bulletin board. Although the pro forma tariff does not cover the pricing of transmission service, Order 888 and the subsequently issued regional transmission organization rulemaking are expected to improve transmission access for independent power producers like Edison Mission Energy. A 1999 decision by the United States Court of Appeals for the Eighth 83 Circuit has cast doubt on the extent of the Federal Energy Regulatory Commission's authority to require specified curtailment policies in the pro forma tariff. The United States Court of Appeals for the D.C. Circuit issued an opinion on June 30, 2000 that affirmed the Federal Energy Regulatory Commission's Order 888 et seq. in all material respects. RETAIL COMPETITION In response to pressure from retail electric customers, particularly large industrial users, the state commissions or state legislatures of most states are considering, or have considered, whether to open the retail electric power market to competition. Retail competition is possible when a customer's local utility agrees, or is required, to "unbundle" its distribution service (for example, the delivery of electric power through its local distribution lines) from its transmission and generation service (for example, the provision of electric power from the utility's generating facilities or wholesale power purchases). Several state commissions and legislatures have issued orders or passed legislation requiring utilities to offer unbundled retail distribution service, which is called retail wheeling, and phasing in retail wheeling over the next several years. The competitive pricing environment that will result from retail competition may cause utilities to experience revenue shortfalls and deteriorating creditworthiness. However, Edison Mission Energy expects that most, if not all, state plans will insure that utilities receive sufficient revenues, through a distribution surcharge if necessary, to pay their obligations under existing long-term power purchase contracts with qualifying facilities and exempt wholesale generators. On the other hand, qualifying facilities and exempt wholesale generators may be subject to pressure to lower their contract prices in an effort to reduce the stranded investment costs of their utility customers. Edison Mission Energy believes that, as a predominantly low cost producer of electricity, it will ultimately benefit from any increased competition that may arise from the opening of the retail market. Although its exempt wholesale generators are forbidden under the Public Utility Holding Company Act from selling electric power in the retail market, Edison Mission Energy's exempt wholesale generators can sell at wholesale to a power marketer which could resell at retail. Furthermore, qualifying facilities are permitted to market power directly to large industrial users that could not previously be served, because of local franchise laws or the inability to obtain retail wheeling. Edison Mission Energy also believes it will compete effectively as a wholesale supplier to power marketers serving the newly-open retail markets. 84 MANAGEMENT OF MIDWEST GENERATION, LLC MANAGERS AND EXECUTIVE OFFICERS OF MIDWEST GENERATION Our members elect the Board of Managers. The Board of Managers may appoint officers as our business may require. Listed below are our current managers and executive officers and their positions with us.
NAME AGE POSITION - ---- -------- ------------------------------------------ Georgia R. Nelson......................... 51 Manager and President Raymond W. Vickers........................ 58 Manager Kevin M. Smith............................ 43 Manager and Vice President Fred W. McCluskey......................... 41 Vice President Paul C. Gracey, Jr........................ 41 Vice President and General Counsel John K. Deshong........................... 47 Vice President John P. Finneran, Jr...................... 41 Vice President G. Gary Garcia............................ 34 Vice President and Treasurer
Described below are the principal occupations and business activities of our managers and executive officers for the past five years in addition to their positions indicated above. GEORGIA R. NELSON has been Senior Vice President of Edison Mission Energy since January 1996 and has been Manager and President of Midwest Generation since May 1999. From January 1996 until June 1999, Ms. Nelson was Senior Vice President, Worldwide Operations of Edison Mission Energy. Ms. Nelson was Division President of Edison Mission Energy's Americas region from January 1996 to January 1998. Prior to joining Edison Mission Energy, Ms. Nelson served as Senior Vice President of Southern California Edison from June 1995 until December 1995 and Vice President of Southern California Edison from June 1993 until May 1995. RAYMOND W. VICKERS has been Senior Vice President and General Counsel of Edison Mission Energy since March 1999. Mr. Vickers has been Manager of Midwest Generation since July 1999. Prior to joining Edison Mission Energy, Mr. Vickers was a partner with the law firm Skadden, Arps, Slate, Meagher & Flom LLP since 1989. KEVIN M. SMITH has been Senior Vice President and Chief Financial Officer of Edison Mission Energy since May 1999. Mr. Smith has been Manager and Vice President of Midwest Generation since July 1999. Mr. Smith served as Treasurer of Edison Mission Energy from September 1992 to February 2000 and was elected a Vice President in 1994. During March 1998 until September 1999, Mr. Smith also held the position of Regional Vice President, Americas region of Edison Mission Energy. FRED W. MCCLUSKEY has been Vice President, Business Management of Edison Mission Energy since August 2000. Mr. McCluskey has been Vice President of Midwest Generation since July 1999. From November 1998 to August 2000, Mr. McCluskey was Regional Vice President, Business Development. From February 1997 to November 1998, Mr. McCluskey was Director of Business Development. Mr. McCluskey was Manager of Operations from January 1995 to February 1997. PAUL C. GRACEY, JR. has been Vice President of Edison Mission Energy and Vice President and General Counsel of Midwest Generation since January 2000. Mr. Gracey served as Vice President, Legal of Edison Mission Energy from May 1998 to January 2000. Mr. Gracey was Director of Legal from May 1995 to May 1998. JOHN K. DESHONG has been Vice President, Tax of Edison Mission Energy since June 2000. Mr. Deshong has been Vice President of Midwest Generation since July 1999. Mr. Deshong served as Regional Vice President of Tax, Americas Region of Edison Mission Energy from November 1998 to 85 June 2000. From April 1997 to November 1998, Mr. Deshong served as Director, Tax Planning and Special Projects. JOHN P. FINNERAN, JR. has been Vice President and Regional Chief Financial Officer, Americas Region of Edison Mission Energy and Vice President of Midwest Generation since September 1999. From September 1998 to September 1999 Mr. Finneran was Senior Vice President of Finance and Treasurer of Richfood Holdings. From January 1996 to September 1998, Mr. Finneran served as Chief Financial Officer and Treasurer of Dominion Energy. From May 1987 to December 1995, Mr. Finneran served as Vice President and Treasurer of Potomac Capital Investment Corporation. G. GARY GARCIA has been Treasurer of Edison Mission Energy and Vice President and Treasurer of Midwest Generation since February 2000. From October 1999 to February 2000, Mr. Garcia was Director of Finance, Americas of Edison Mission Energy. From April 1998 to October 1999, Mr. Garcia served as Manager of Finance, Americas. Mr. Garcia was Asset Manager from October 1995 to April 1998. EXECUTIVE COMPENSATION Our officers receive compensation from Edison Mission Energy and Midwest Generation EME, LLC and receive no compensation from us. For information concerning the compensation of the Chief Executive Officer and four most highly paid executive officers, other than the Chief Executive Officer, of Edison Mission Energy, see Edison Mission Energy's Form 10-K for the year ended December 31, 2000, which is incorporated by reference in this prospectus. For information concerning the benefit plans maintained by Edison Mission Energy for our officers and employees, see Edison Mission Energy's Form 10-K for the year ended December 31, 2000, which is incorporated by reference in this prospectus. MANAGERS' COMPENSATION Our managers receive no compensation for their services as managers. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. 86 INTERCOMPANY RELATIONSHIPS AND RELATED TRANSACTIONS THE FOLLOWING IS A SUMMARY OF THE INTERCOMPANY RELATIONSHIPS AND RELATED TRANSACTIONS REGARDING US, EDISON MISSION MIDWEST HOLDINGS AND EDISON MISSION ENERGY. THE TERMS OF THESE TRANSACTIONS ARE NO MORE FAVORABLE THAN THOSE THAT WOULD HAVE BEEN AGREED UPON BY THIRD PARTIES ON AN ARM'S LENGTH BASIS. OUR RELATIONSHIP WITH EDISON MISSION ENERGY We are wholly-owned by Edison Mission Midwest Holdings, which in turn is wholly-owned by Midwest Generation EME, LLC, a Delaware limited liability corporation. Midwest Generation EME, LLC is a wholly-owned subsidiary of Edison Mission Energy. We have been organized and operated as a legal entity separate and apart from Edison Mission Energy, Edison International and any other affiliates of Edison Mission Energy or Edison International. As a consequence, our assets will not be generally available to satisfy the obligations of Edison Mission Energy, Edison International, or any other affiliates of Edison Mission Energy or Edison International. However, our unrestricted cash or other assets which are available for distribution may, subject to applicable law and the terms of financing arrangements of these parties, be advanced, loaned, paid as dividends or otherwise distributed or contributed to Edison International, Edison Mission Energy, Edison Mission Midwest Holdings or any of their affiliates. Edison Mission Energy and Edison International are not obligated to make any payments under the certificates or lessor notes, except for the guarantees provided by Edison Mission Energy to make payments under the leases to the owner trusts if we do not make those lease payments. See "Description of the Leases and Other Lease Documents--The Intercompany Notes and the Edison Mission Energy Guarantees." THE INTERCOMPANY LOANS AND GUARANTEES ARISING IN CONNECTION WITH THE ACQUISITION OF THE POWER GENERATION ASSETS FROM COMMONWEALTH EDISON IN DECEMBER 1999 AND THE COLLINS LEVERAGE LEASE TRANSACTION - EDISON MISSION MIDWEST HOLDINGS GUARANTEE. Edison Mission Midwest Holdings guarantees both the obligations of Collins Holdings EME, LLC as lessee and our obligations as sublessee, in connection with the leveraged lease financing of the Collins Station. - MIDWEST GENERATION GUARANTEE. Edison Mission Midwest Holdings entered into $1.83 billion credit facilities in December 1999. The amount of these credit facilities was increased to $1.9 billion in December 2000. We guarantee the obligations of Edison Mission Midwest Holdings as borrower under these credit facilities. - EDISON MISSION MIDWEST HOLDINGS INTERCOMPANY LOAN AGREEMENTS. Edison Mission Midwest Holdings contributed $1.68 billion of the $1.83 billion it borrowed under its credit facilities described above to Edison Mission Overseas Co., a wholly-owned subsidiary of Edison Mission Midwest Holdings. Edison Mission Overseas loaned this amount to us under two subordinated loan agreements. Our obligations to Edison Mission Overseas under these loan agreements are subordinated to our obligations under the Midwest Generation Guarantee described above. - EDISON MISSION MIDWEST HOLDINGS PLEDGE AND EDISON MISSION OVERSEAS PLEDGE. In support of the obligations of Edison Mission Midwest Holdings as borrower under the $1.9 billion Edison Mission Midwest Holdings credit facilities, Midwest Generation EME, LLC pledged its ownership interest in Edison Mission Midwest Holdings. Also, Edison Mission Midwest Holdings pledged its ownership interest in Edison Mission Overseas. Edison Mission Overseas pledged our intercompany notes. 87 ARISING IN CONNECTION WITH THE PEAKER UNITS SALE-LEASEBACK TRANSACTION IN JULY 2000 We entered into a sale-leaseback of equipment, primarily our peaker power units, in July 2000 to a third party lessor for $300 million. Under the terms of the 5-year lease, we have an option at the end of five years to purchase the equipment at a fixed price of $300 million. In connection with the sale-leaseback, a subsidiary of Edison Mission Energy purchased $255 million of the $300 million of notes and certificates issued by the lessor. The notes are due and payable in five years. - INTERCOMPANY NOTE. As part of the transaction, we loaned to Edison Mission Energy the $300 million we received from the sale of the equipment in exchange for a $300 million intercompany note. Edison Mission Energy is obligated to repay the principal on the note on July 9, 2010 at the latest and will periodically pay interest on the note at a fluctuating rate. - EDISON MISSION ENERGY GUARANTEE. Edison Mission Energy guarantees the monthly payments under the lease. ARISING IN CONNECTION WITH THE POWERTON/JOLIET SALE-LEASEBACK TRANSACTION IN AUGUST 2000 In August 2000, we entered into a sale-leaseback transaction with respect to the Powerton Station and Joliet Station as described in this prospectus. - INTERCOMPANY NOTES. Proceeds from the sale of the assets were used by us to make a loan to Edison Mission Energy. The loan is evidenced by four intercompany notes. Edison Mission Energy is obligated to repay the principal on the notes in a series of installments on the dates and in the amounts set forth on a schedule to each note. Edison Mission Energy has paid and will pay interest on the notes on each January 2 and July 2 at a 8.30% fixed interest rate. All amounts due under the notes shall be repaid in full on January 2, 2016. - EDISON MISSION ENERGY GUARANTEES. Edison Mission Energy guarantees our payments under the leases. ARISING IN CONNECTION WITH RISK MANAGEMENT ACTIVITIES We engage in some energy trading and risk management transactions through Edison Mission Marketing & Trading, including purchases and sales of electricity, fuel, and emissions credits, and financial transactions for the purpose of hedging price risk on those commodities. - EDISON MISSION MIDWEST HOLDINGS CO. GUARANTEES. Edison Mission Midwest Holdings has guaranteed the obligations of Edison Mission Marketing & Trading to various counterparties in connection with these transactions, and has also guaranteed some of our obligations with respect to gas purchase and transportation. - EDISON MISSION ENERGY EQUITY CONTRIBUTION AGREEMENT. Edison Mission Energy is required to contribute or cause to be contributed a cash capital contribution or any other cash payment of up to $300 million to Edison Mission Marketing & Trading from time to time as requested under the agreement. SERVICES AGREEMENTS Administrative services such as payroll, employee benefits programs and information technology, all performed by Edison International or Edison Mission Energy, are shared among all affiliates of Edison International, and the costs of these corporate support services are allocated to all affiliates, including us. Costs are allocated based on one of the following formulas: percentage of time worked, equity in investment and advances, number of employees, or multi-factor, including operating revenues, operating expenses, total assets and number of employees. In addition, we sometimes directly request services of Edison International or Edison Mission Energy, and those services are performed for our 88 benefit. Labor and expenses of these directly requested services are specifically identified and billed at cost. We made reimbursements for the costs of these programs and other services, which amounted to $149.4 million for the year ended December 31, 2000. SUPPORT SERVICES AGREEMENT We entered into an agreement with Midwest Generation EME to provide support services, including construction and construction management, operations and maintenance management, technical services and training, environmental, health and safety services, administrative and IT support, and other managerial and technical services needed to operate and maintain electric power facilities. Under the terms of our agreement, we reimburse Midwest Generation EME for actual costs incurred by functional area in providing support services, or in the case of specific tasks we request, the amount negotiated for the task. Actual costs billable under this agreement for the year ended December 31, 2000 were $8.3 million. ENERGY PURCHASE AND SALES AGREEMENT We entered into an agreement with Edison Mission Marketing & Trading for the purchase and sale of energy. Under the terms of our agreement, Edison Mission Marketing & Trading pays us for the actual price of energy contracted with third parties, less $.02/megawatt-hour. The amount paid or payable to them under this agreement for the year ended December 31, 2000 was $0.7 million. SERVICES AGREEMENT (NATURAL GAS) We entered into an agreement with Edison Mission Marketing & Trading to provide services related to purchasing, transportation and storage of natural gas. Under the terms of our agreement, we pay Edison Mission Marketing & Trading a service fee of $0.02 for each MMBtu of natural gas delivered to us, plus the actual cost of the gas. The amount billable under this agreement for the year ended December 31, 2000 was $0.8 million. FUEL SERVICES AGREEMENTS We entered into agreements with Edison Mission Energy Services, Inc. to provide fuel and transportation services related to coal and fuel oil. Under the terms of these agreements, we pay Edison Mission Energy Services a service fee of $0.06 for each ton of coal delivered to us and $0.05 for each barrel of fuel oil delivered to us, plus the actual cost of the commodities. The amount billable under this agreement for the year ended December 31, 2000 was $1.0 million. 89 DESCRIPTION OF THE CERTIFICATES THE FORM AND TERMS OF THE EXCHANGE CERTIFICATES AND THE ORIGINAL CERTIFICATES ARE IDENTICAL IN ALL MATERIAL RESPECTS, EXCEPT THAT TRANSFER RESTRICTIONS AND REGISTRATION RIGHTS APPLICABLE TO THE ORIGINAL CERTIFICATES DO NOT APPLY TO THE EXCHANGE CERTIFICATES. THE FOLLOWING IS A SUMMARY OF MATERIAL PROVISIONS OF THE CERTIFICATES OFFERED IN THIS PROSPECTUS. THE STATEMENTS UNDER THIS CAPTION ARE A SUMMARY ONLY AND DO NOT PURPORT TO BE COMPLETE. THE SUMMARY MAKES USE OF TERMS DEFINED IN AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ALL THE PROVISIONS OF THE CERTIFICATES, THE PARTICIPATION AGREEMENTS, THE LEASES, THE SITE LEASES, THE SITE SUBLEASES, THE LEASE INDENTURES, THE LESSOR NOTES AND THE PASS-THROUGH TRUST AGREEMENTS IN RESPECT OF EACH OF THE LEASE TRANSACTIONS, COLLECTIVELY REFERRED TO BELOW AS THE OPERATIVE DOCUMENTS. SEE "DESCRIPTION OF THE LESSOR NOTES" AND "DESCRIPTION OF THE LEASES AND OTHER LEASE DOCUMENTS." GENERAL We issued the original Series A pass-through certificates in an aggregate principal amount of $333,500,000 and the original Series B pass-through certificates in an aggregate principal amount of $813,500,000. We issued the original certificates and will issue the exchange certificates according to two separate pass-through trust agreements between us and the pass-through trustees. Except as otherwise indicated, the following summaries relate to each of the two pass-through trust agreements, the pass-through trusts formed by the pass-through trust agreements and the certificates issued by each pass-through trust. The original certificates were, and the exchange certificates will be, issued in fully registered form without coupons. Each original certificate represents, and each exchange certificate will represent, a fractional undivided interest in the pass-through trust created by the pass-through trust agreement according to which each certificate is issued. The property of each pass-through trust consists solely of: - the lessor notes held by the pass-through trust, - all monies at any time paid on the related lessor notes, - all monies due and to become due under the related lessor notes, - funds from time to time deposited with the pass-through trustee in accounts relating to the pass-through trust, and - proceeds from the sale by the pass-through trustee of a lessor note. Each certificate corresponds to a pro rata share of the outstanding principal amount of the lessor notes held in the related pass-through trust and is issuable in minimum denominations of $100,000 or integral multiples of $1,000 in excess of $100,000. The certificates represent interests in the respective pass-through trusts and do not represent an interest in or obligation of us, Edison Mission Energy, the pass-through trustee or the owner trusts, or any of their affiliates. The pass-through trustees make distributions to the certificateholders solely from the property of the related pass-through trust. By accepting a certificate, each certificateholder agrees to look only to the income and proceeds of the property of the related pass-through trust insofar as that income and those proceeds are available for distribution. The certificates are subject to prepayment when and to the extent that the related lessor notes are redeemed, prepaid or purchased. See "Description of the Lessor Notes--Redemption of Lessor Notes" and "Description of the Lessor Notes--Assumption of Lessor Notes." FORM OF CERTIFICATES No person acquiring a beneficial interest in the certificates, also referred to as a "certificate owner," will be entitled to receive a definitive certificate representing that person's interest in the 90 exchange certificates, except as set forth below under "Book-Entry; Delivery and Form." A "definitive certificate" is a physical certificate in fully registered form without interest coupons. Unless and until definitive certificates are issued under the limited circumstances described in this prospectus, all references to actions by registered certificateholders refer to actions taken by The Depository Trust Company upon instructions from any organization that is a participant in The Depository Trust Company system, and all references in this prospectus to distributions, notices, reports and statements to certificateholders refer, as the case may be, to distributions, notices, reports and statements to The Depository Trust Company or its nominee, Cede & Co., as the registered certificateholder, or to any organization that is a participant in The Depository Trust Company system for distribution to certificate owners in accordance with The Depository Trust Company procedures. See "Book-Entry; Delivery and Form." SAME-DAY SETTLEMENT AND PAYMENT All payments made by us under the leases to the lease indenture trustees, as assignees of the owner trusts, and subsequently to the pass-through trustees are in immediately available funds and are passed through to The Depository Trust Company in immediately available funds. Secondary trading in long-term notes and debentures of corporate issuers is generally settled in clearinghouse or next-day funds. In contrast, secondary trading in pass-through certificates, such as the certificates offered in this prospectus, is generally settled in immediately available funds. The certificates trade in The Depository Trust Company's same-day funds settlement system until maturity, and secondary market trading activity in the certificates is consequently required by The Depository Trust Company to settle in immediately available funds. No assurance can be given as to the effect, if any, of settlement in immediately available funds on trading activity in the certificates. PAYMENTS AND DISTRIBUTIONS Scheduled payments of principal and interest on the lessor notes are referred to in this prospectus as "scheduled payments," and each January 2 and July 2 of each year are referred to in this prospectus as "regular distribution dates." Each certificateholder is entitled to receive a pro rata share of any distribution in respect of scheduled payments of principal and interest made on the lessor notes. All scheduled payments of principal and interest on the lessor notes held in each pass-through trust received by the related pass-through trustee will be distributed by the pass-through trustee to certificateholders on the date that receipt is confirmed. INTEREST. Payments of interest on the unpaid principal amount of the lessor notes held in the pass-through trusts are scheduled to be received by the pass-through trustees on each January 2 and July 2 of each year, commencing January 2, 2001, at the annual rate for the pass-through trust of 8.30% for the Series A pass-through certificates and 8.56% for the Series B pass-through certificates, until the final distribution date for the pass-through trust. Interest will be passed through to certificateholders of each of the pass-through trusts at the applicable annual rate, calculated on the basis of a 360-day year of twelve 30-day months. PRINCIPAL. The initial principal amount of the certificates is as follows: Series A.................................................... $333,500,000 Series B.................................................... $813,500,000
91 Scheduled principal payments on the lessor notes commence on July 2, 2006 for the Series A and July 2, 2005 for the Series B pass-through certificates and are as follows (rounded to the first decimal place): DEBT AMORTIZATION SCHEDULE
PERCENTAGE OF INITIAL PERCENTAGE OF INITIAL BALANCE OF SERIES A BALANCE OF SERIES B REGULAR DISTRIBUTION DATES CERTIFICATES CERTIFICATES - -------------------------- --------------------- --------------------- 2 July 2005............................... 0.0 5.4 2 January 2006............................ 0.0 5.6 2 July 2006............................... 0.8 5.5 2 January 2007............................ 14.9 0.0 2 July 2007............................... 15.5 0.0 2 January 2008............................ 16.2 0.0 2 July 2008............................... 16.8 0.0 2 January 2009............................ 17.5 0.0 2 July 2009............................... 18.3 0.0 2 January 2010............................ 0.0 7.3 2 July 2010............................... 0.0 6.7 2 January 2011............................ 0.0 6.3 2 July 2011............................... 0.0 6.6 2 January 2012............................ 0.0 6.9 2 July 2012............................... 0.0 7.2 2 January 2013............................ 0.0 7.5 2 July 2013............................... 0.0 7.8 2 January 2014............................ 0.0 8.1 2 July 2014............................... 0.0 8.5 2 January 2015............................ 0.0 4.6 2 July 2015............................... 0.0 2.9 2 January 2016............................ 0.0 3.1 Totals.................................. 100.0 100.0
GENERAL. Certificateholders of record receive all scheduled payments on each regular distribution date if the pass-through trustees receive the scheduled payments due on that date by 1:00 p.m. New York time. If a scheduled payment is received after 1:00 p.m. New York time, it is distributed on the next business day. The record date for each distribution of scheduled payments is the fifteenth day preceding the regular distribution date, subject to specified exceptions. If a scheduled payment is not received by the pass-through trustees on a regular distribution date but is received within five days thereafter, it is distributed on the date received to the certificateholders of record, if received by the pass-through trustees by 1:00 p.m. New York time on that date. If it is received after the five-day period, it is treated as a special payment (as defined below) and distributed as described below. The pass-through trust agreements require that the related pass-through trustee establish and maintain with itself, for the related pass-through trust and for the benefit of the certificateholders, one or more non-interest bearing accounts for the deposit of payments representing scheduled payments on the lessor notes held in the related pass-through trust. These accounts are called certificate accounts. The pass-through trust agreements also require that the related pass-through trustee establish and maintain with itself, for the related pass-through trust and for the benefit of the certificateholders, one or more accounts for the deposit of payments representing special payments. These accounts are called special payments accounts. Under the pass-through trust agreements, the related pass-through trustee is required to immediately deposit any scheduled payments received by it in the certificate account and to 92 immediately deposit any special payments so received by it in the special payments account. All amounts so deposited are distributed by the pass-through trustee on a regular distribution date or a special distribution date (as defined below), as appropriate. Each certificateholder receives its proportionate share of the aggregate amount in the certificate account or special payments account, as applicable. This proportionate share is based on the aggregate fractional undivided interest that the certificateholder holds. In addition to scheduled payments with respect to principal, the lessor notes (and, consequently, the certificates) are subject to partial or full prepayment under specific circumstances. See "Description of the Lessor Notes--Redemption of Lessor Notes." Payments of principal, premium, if any, and interest received by a pass-through trustee on account of a partial or full prepayment, if any, of the lessor notes held in the related pass-through trust, and payments received by a pass-through trustee following a default in respect of the lessor notes held in the related pass-through trust (including, but not limited to, payments received on account of the sale of the lessor notes by the pass-through trustee, which we refer to as special payments), are distributed on the second day of a month, unless the special payment is with respect to the prepayment of lessor notes, in which case the distribution will be the date the prepayment is scheduled to occur under the terms of the lease indenture (which we refer to as a special distribution date) so long as payment is received by the pass-through trustee by 1:00 p.m. New York time on the scheduled prepayment date. If the special payment is received after 1:00 p.m. New York time, it is distributed on the next business day. The pass-through trustees mail notice of each special payment to the related certificateholders of record and certificate owners of the following: - the special distribution date and record date for the special distribution date; - the amount of the special payment per $1,000 of face amount of certificates and the extent to which it constitutes principal, premium, if any, and interest; - the reason for the special payment; and - if the special distribution date is the same as a regular distribution date, the total amount to be received on that date per $1,000 of face amount of certificates. The record date for each distribution of a special payment on a special distribution date for each pass-through trust will be the fifteenth day preceding that special distribution date. See "--Rights Upon an Event of Default" and "Description of the Lessor Notes--Redemption of Lessor Notes." Distributions by the pass-through trustees from the certificate account or the special payments account of the related pass-through trust on a regular distribution date or a special distribution date are made: - by wire transfer in immediately available funds to an account maintained by the certificateholder with a bank if: The Depository Trust Company is the certificateholder of record, a certificateholder holds certificates in an aggregate amount greater than $10 million, or any certificateholder that holds certificates in an aggregate amount greater than $1 million requests that the distributions be made by wire transfer; or - if none of the above apply, by check mailed to each certificateholder of record on the applicable record date at its address appearing in the register maintained for the related pass-through trust. The final distribution for each pass-through trust, however, will be made only upon presentation and surrender of the certificates at the office or agency of the pass-through trustees specified in the notice given by the pass-through trustees of the final distribution. The pass-through trustees will mail the notice of the final distribution (at maturity, redemption or otherwise) to the related certificateholders of record no earlier than 60 days and no later than 20 days preceding the final distribution, specifying, among other things, the date set for the final distribution and the amount of the distribution. See "--Termination of the Pass-Through Trusts." 93 If any regular distribution date or special distribution date is not a business day, distributions scheduled to be made on a regular distribution date or special distribution date may be made on the next succeeding business day without any additional interest accruing during the intervening period. REPORTS TO CERTIFICATEHOLDERS On each regular distribution date and special distribution date, if any, each pass-through trustee includes with each distribution of a scheduled payment or special payment, if any, to certificateholders of record and, upon request, to certificate owners of the related pass-through trust, a statement giving effect to the distribution to be made on that regular distribution date or special distribution date, as the case may be, setting forth the following information (per $1,000 in aggregate principal amount of certificates, as to (a) and (b) below): (a) the amount of the distribution allocable to principal and the amount allocable to premium, if any, and (b) the amount of the distribution allocable to interest. In addition, within a reasonable time after the end of each calendar year, the pass-through trustees furnish to each certificateholder who at any time during the year was a certificateholder of record and, upon request, each related certificate owner at any time during the preceding calendar year, a report specifying the sum of the amounts determined according to clauses (a) and (b) above with respect to the related pass-through trust for the applicable calendar year or, in the event that person was a certificateholder of record or certificate owner during a portion of the calendar year, for the applicable portion of that calendar year, and other items as are readily available to the pass-through trustee and which a certificateholder or certificate owner shall reasonably request as necessary for the purpose of the certificateholder's or certificate owner's preparation of its federal income tax returns. Reports and related items are prepared on the basis of information supplied to the pass-through trustees by participants in The Depository Trust Company system and the certificate owners. The pass-through trustees notify certificateholders of all events of default (as defined below) under the pass-through trust agreements known to the pass-through trustees within 90 days after the occurrence of a default. However, the pass-through trustees are protected if they withhold notice from the certificateholders of an event of default other than a failure to pay principal of, premium, if any, or interest on any lessor note, so long as the board of directors, the executive committee or a trust committee of directors or specified responsible officers of the pass-through trustee in good faith determine that the withholding of notice is in the interests of the certificateholders and the certificate owners. As long as any certificates remain outstanding, we will furnish to the pass-through trustees our unaudited quarterly financial statements, as well as audited annual financial statements of Edison Mission Midwest Holdings, with the accompanying footnotes and audit report. We will also cause Edison Mission Energy to provide, within 60 days after the end of each of the first three fiscal quarters of each fiscal year of Edison Mission Energy, unaudited quarterly financial statements to the pass-through trustees. Unaudited quarterly financial statements will be furnished to the pass-through trustees within 60 days following the end of our first three fiscal quarters during each fiscal year and audited annual financial statements of Edison Mission Midwest Holdings (with the accompanying footnotes and audit report) will be furnished to the pass-through trustees within 120 days following the end of the fiscal year of Edison Mission Midwest Holdings. We will also cause Edison Mission Energy to deliver to the pass-through trustee, within 120 days after the end of each fiscal year of Edison Mission Energy, a copy of the audited annual financial statements of Edison Mission Energy. When we generate audited annual financial statements, we will provide them to the pass-through trustee instead of audited annual financial statements of Edison Mission Midwest Holdings, within 120 days following the end of our fiscal year. In addition, we will be required to furnish to the pass-through trustees notice of specific material events related to us within 20 days after they occur. We will also furnish to 94 certificateholders and certificate owners upon request any information required to be delivered according to Rule 144A(d)(4) under the Securities Act so long as the certificates held by them are not freely transferable under the Securities Act. In addition, following the effectiveness of any registration statement under the registration rights agreement, whether or not required by the rules and regulations of the SEC, we and Edison Mission Energy will maintain our status as reporting companies under the Exchange Act, and file copies of all information and reports with the SEC for public availability (unless the SEC will not accept the filings) within the time periods specified in the SEC's rules and regulations and make this information available to securities analysts and investors upon request. If we or Edison Mission Energy fail to maintain our status as a reporting company, the interest rate on the lessor notes and correspondingly, the certificates, will be increased by 0.50% on an annual basis. However, there will be no increase in the interest rate if the SEC does not accept the filing of the applicable reports. The pass-through trustees will, upon request, which may include a request to receive this information for subsequent financial reporting periods on an ongoing basis, furnish all the information and any other information required to be delivered to the pass-through trustees, including with respect to Edison Mission Energy, directly to certificateholders and certificate owners and to prospective purchasers of certificates designated by the certificateholders or certificate owners. VOTING OF LESSOR NOTES The pass-through trustee of each pass-through trust, as holder of the lessor notes in the pass-through trust, has the right under specified circumstances under the lease indentures to vote and give consents and waivers in respect of the lessor notes held in that pass-through trust. Each pass-through trust agreement sets forth the circumstances in which the pass-through trustee shall direct any action or cast any vote as the holder of the lessor notes at its own discretion and the circumstances in which the pass-through trustee shall seek instructions from the certificateholders. Prior to an event of default with respect to any pass-through trust, the principal amount of the lessor notes held in the pass-through trust directing any action or being voted for or against any proposal shall be in proportion to the principal amount of certificates held by the certificateholders taking the corresponding position. COVENANTS We and Edison Mission Energy are subject to the following covenants contained in each of the participation agreements. OUR MERGER OR CONSOLIDATION; SALE OF SUBSTANTIALLY ALL OUR ASSETS We may not consolidate with or merge with or into any other person (unless we are the surviving entity), or sell, assign, convey, lease, transfer or otherwise dispose of, all or substantially all our properties or assets to any person or persons in one or a series of transactions, unless: - no lease event of default under the related lease has occurred and is continuing, both prior to and after giving effect to the transaction, - the surviving entity is: a corporate entity organized under the laws of the United States, any state of the United States or the District of Columbia, and expressly assumes all our obligations under the related operative documents, - after giving effect to the transaction, while the certificates are outstanding, the ratings of the certificates are equal to or greater than the ratings of the certificates immediately prior to consummating the transaction, - for so long as the Edison Mission Energy guarantees are in effect, Edison Mission Energy has affirmed its obligations under the guarantees, 95 - we provide to the related owner participant a legal opinion from nationally recognized tax counsel to the effect that the consolidation, merger or sale of assets would not result in any material indemnified, or any unindemnified, incremental tax risk to the owner participant. In addition to the foregoing conditions, we may not sell more than 50% of our assets without the prior written consent of each owner trust and, for as long as the lessor notes are outstanding, the lease indenture trustee and the pass-through trustees. However, this consent shall not be required in connection with the sale or disposition if (1) the certificates are rated at least Baa3 by Moody's and BBB- by Standard & Poor's, taking into account the sale of assets or (2) if the certificates are no longer outstanding, our long-term senior unsecured indebtedness is rated at least Baa3 by Moody's and BBB- by Standard & Poor's, taking into account the sale of assets. ADDITIONAL MIDWEST GENERATION COVENANTS Subject to specific exceptions and qualifications, we have agreed to do, among other things, the following: - maintain our corporate existence, subject to the provisions described above relating to mergers and consolidations; - comply with all laws applicable to us or to either facility; and - pay our taxes when due, except when we are contesting the taxes in good faith. RESTRICTIONS ON EDISON MISSION ENERGY'S ABILITY TO INCUR LIENS Edison Mission Energy has agreed not to pledge, mortgage, hypothecate or permit to exist any mortgage, pledge or other lien upon any property at any time directly owned by Edison Mission Energy to secure any indebtedness for money borrowed which is incurred, issued, assumed or guaranteed by Edison Mission Energy (which we refer to as Edison Mission Energy indebtedness), without providing for the Edison Mission Energy guarantees and the reimbursement agreement to be equally and ratably secured with any and all Edison Mission Energy indebtedness and with any other Edison Mission Energy indebtedness similarly entitled to be equally and ratably secured. However, this restriction will not apply to, or prevent the creation or existence of: (1) liens existing at the original date of issuance of the Edison Mission Energy guarantees; (2) purchase money liens which do not exceed the cost or value of the purchased property; (3) other liens not to exceed 10% of Edison Mission Energy's Consolidated Net Tangible Assets; and (4) liens granted in connection with extending, renewing, replacing or refinancing in whole or in part the Edison Mission Energy indebtedness (including, without limitation, increasing the principal amount of the Edison Mission Energy indebtedness) secured by liens described in clauses (1) through (3) above. "CONSOLIDATED NET TANGIBLE ASSETS" means, as of any date of determination, the total amount of all of Edison Mission Energy's assets, determined on a consolidated basis in accordance with generally accepted accounting principles as of the date of determination, less the sum of: - Edison Mission Energy's consolidated current liabilities, determined in accordance with generally accepted accounting principles, and - Edison Mission Energy's assets that are properly classified as intangible assets in accordance with generally accepted accounting principles, except for any intangible assets which are distribution or related contracts with an assignable value. 96 If Edison Mission Energy proposes to pledge, mortgage or hypothecate any property at any time directly owned by it to secure any Edison Mission Energy indebtedness, other than as permitted by clauses (1) through (4) of the second previous paragraph, Edison Mission Energy has agreed to give prior written notice of the proposal to the owner trust, the owner participant, the lease indenture trustees and the pass-through trustees and Edison Mission Energy has further agreed, prior to or simultaneously with the pledge, mortgage or hypothecation, effectively to secure the Edison Mission Energy guarantees and the reimbursement agreement equally and ratably with the Edison Mission Energy indebtedness. This covenant does not restrict the ability of Edison Mission Energy's subsidiaries and affiliates to pledge, mortgage, hypothecate or permit to exist any mortgage, pledge or lien upon their assets, in connection with project financings or otherwise. MERGER OR CONSOLIDATION OF EDISON MISSION ENERGY; SALE, LEASE OR CONVEYANCE OF EDISON MISSION ENERGY'S ASSETS Edison Mission Energy has agreed not to merge or consolidate with or into any other person and Edison Mission Energy has agreed not to sell, lease or convey all or substantially all its assets to any person, unless: - Edison Mission Energy is the continuing corporation, or the successor corporation or the person that acquires all or substantially all of Edison Mission Energy's assets is a corporation organized and existing under the laws of the United States or a state of the United States or the District of Columbia and expressly assumes all of Edison Mission Energy's obligations under the Edison Mission Energy guarantees, the participation agreements and the other operative documents to which Edison Mission Energy is a party, - immediately after the merger, consolidation, sale, lease or conveyance, there is no default or lease event of default, - if, as a result of the merger, consolidation, sale, lease or conveyance, any or all of Edison Mission Energy's property would become the subject of a lien that would not be permitted by the participation agreements, Edison Mission Energy secures the Edison Mission Energy guarantees and the reimbursement agreements equally and ratably with the obligations secured by that lien, and - Edison Mission Energy delivers or causes to be delivered to the owner trust, the owner participant, the pass-through trustee and lease indenture trustee an officers' certificate and opinion of counsel in a form reasonably acceptable to the recipients, each stating that the merger, consolidation, sale, lease or conveyance complies with the participation agreement. The meaning of the term "all or substantially all the assets" has not been definitely established and is likely to be interpreted by reference to applicable state law if and at the time the issue arises and will be dependent on the facts and circumstances existing at the time. Except for a sale of all or substantially all its assets as described above, and other than assets that Edison Mission Energy is required to sell to conform with governmental regulations, Edison Mission Energy may not sell or otherwise dispose of any assets (other than short-term, readily marketable investments purchased for cash management purposes with funds not representing the proceeds of other asset sales) if, on a pro forma basis, the aggregate net book value of all these sales during the most recent 12-month period would exceed 10% of Edison Mission Energy's Consolidated Net Tangible Assets (as defined above) computed as of the end of the most recent quarter preceding the sale. However, any sales shall be disregarded for purposes of this 10% limitation if the proceeds are invested in assets in similar or related lines of Edison Mission Energy's business. Furthermore, Edison Mission Energy may sell or otherwise dispose of assets in excess of this 10% limitation if Edison Mission Energy retains the proceeds from the sales or dispositions, which are not reinvested as provided above, 97 as cash or cash equivalents or if Edison Mission Energy uses the proceeds from the sales to purchase and retire indebtedness incurred by it ranking equal in right of payment to the Edison Mission Energy guarantees and the reimbursement agreements or indebtedness of its subsidiaries. AMENDMENT, WAIVER OF POWER PURCHASE AGREEMENTS AND FACILITIES, EASEMENT AND INTERCONNECTION AGREEMENTS Without the prior written consent of the owner trust and the lease indenture trustee, Edison Mission Energy may not and may not permit us or any of its other subsidiaries to amend, supplement or otherwise modify its power purchase agreements with Exelon Generation relating to the facilities or any of the facilities, easement and interconnection agreements relating to the facilities in any materially adverse manner with respect to their term, offtake requirement or payment provisions or in a manner which would limit the owner trusts', or for as long as the lessor notes are outstanding, the lease indenture trustee's interest and rights in the facility. ADDITIONAL EDISON MISSION ENERGY COVENANTS Following the effectiveness of any registration statement filed by Edison Mission Energy according to the registration rights agreement, Edison Mission Energy must maintain its status as a reporting company under the Exchange Act, unless the SEC will not permit filing of the applicable reports or we pay an additional interest rate on the lessor notes and satisfy other specified conditions. COMPLIANCE WITH COVENANTS AND CONDITIONS PRECEDENT If we, an owner trust or a lease indenture trustee request the pass-through trustee to take any action under any provision, we or the other party seeking action must furnish to the pass-through trustee an officer's certificate and, if necessary, a legal opinion stating that all conditions precedent, if any, relating to the proposed action have been met. Every certificate or opinion with respect to compliance with a condition or covenant shall include: - a statement that each individual signing the certificate or opinion has read the covenant or condition, including any definitions relating to it in the agreement; - a brief statement as to the nature and scope of the examination or investigation upon which the opinions contained in the certificate or opinion are based; - a statement that, in the opinion of the individual, he has made the examination or investigation as is necessary to enable him to express an informed opinion as to the compliance with a covenant or condition; and - a statement as to whether, in the opinion of the individual, the condition or covenant has been complied with. EVENTS OF DEFAULT An event of default under any of the lease indentures is referred to as a lease indenture event of default. An event of default under the pass-through trust agreements is referred to simply as an event of default and is defined as the occurrence and continuance of a lease indenture event of default. For a description of the lease indenture events of default, see "Description of the Lessor Notes--General." RIGHTS UPON AN EVENT OF DEFAULT Under each lease indenture, the owner trust and the owner participant have the right under specified circumstances to cure lease indenture events of default that result from the occurrence of an event of default under the related lease. These events of default under the leases are referred to as lease events of default. If the owner trust or the owner participant chooses to exercise the cure right, 98 the events of default under the leases and consequently the lease indenture events of default will be deemed to be cured. See "Description of the Leases and Other Lease Documents." Each pass-through trust agreement provides that, as long as a lease indenture event of default shall have occurred and be continuing, the pass-through trustee may vote all the lessor notes that are held in the related pass-through trust, and upon the direction of the holders of certificates evidencing fractional undivided interests aggregating at least a majority in interest of the related pass-through trust, the pass-through trustee shall vote a corresponding majority of the lessor notes in favor of directing the indenture trustee to declare the unpaid principal amount of all those lessor notes then outstanding and any accrued and unpaid interest on those lessor notes to be due and payable. Each pass-through trust agreement in addition provides that, if a lease indenture event of default has occurred and is continuing, the pass-through trustee may, and upon the direction of the holders of certificates evidencing fractional undivided interests aggregating not less than a majority in interest of the related pass-through trust must, vote all the lessor notes that are held in the pass-through trust in favor of directing the indenture trustee regarding the exercise of remedies provided in the lease indenture and consistent with the terms of the lease indenture. Each lease indenture provides that, if a lease indenture event of default occurs and is continuing under the lease indenture, the indenture trustee will declare the unpaid principal amount of the lessor notes issued under the lease indenture to be due and payable, together with any accrued and unpaid interest on these lessor notes, upon the instructions of the holders of a majority in aggregate principal amount of the lessor notes outstanding. Each lease indenture further provides that, if a lease indenture event of default shall occur and be continuing under the lease indenture, the holders of a majority in aggregate principal amount of the lessor notes issued under the lease indenture outstanding may direct the indenture trustee with respect to the exercise of remedies under the lease indenture. See "Description of the Lessor Notes--Remedies." Accordingly, the ability of the holders of the certificates issued by one pass-through trust to cause the lease indenture trustee to accelerate the lessor notes issued under the applicable lease indenture or to exercise remedies applicable under the lease indenture will depend, in part, upon the proportion between the aggregate principal amount of the lessor notes issued under the lease indenture and held in the pass-through trust and the aggregate principal amount of all lessor notes issued under the other lease indentures. Each pass-through trust holds lessor notes with different terms from the lessor notes held in the other pass-through trust and so the certificateholders of one pass-through trust may have divergent or conflicting interests from those of the certificateholders of the other pass-through trust. In addition, so long as the same institution acts as pass-through trustee of each pass-through trust, in the absence of instructions from the certificateholders of any pass-through trust, the pass-through trustee could be faced with a potential conflict of interest upon a lease indenture event of default. As an additional remedy, if a lease indenture event of default has occurred and is continuing, the pass-through trust agreements provide that the pass-through trustee may, and upon the direction of the certificateholders evidencing fractional undivided interests aggregating not less than a majority in interest of the related pass-through trust must, sell all or part of the lessor notes that are held in the pass-through trust for cash to any person. In addition, if the owner trust, owner participant or a guarantor of an owner participant's obligations, whom we refer to as the owner participant guarantor, elect to purchase or redeem the lessor notes upon the occurrence and continuance of a lease indenture event of default, the pass-through trustee must sell the lessor notes held in the related pass-through trust to the owner trust, owner participant or an owner participant guarantor at a price equal to the unpaid principal amount of the lessor notes held in the pass-through trust, together with accrued but unpaid interest and all other sums then due and payable, but without premium, to the pass-through trustee as holder of the lessor notes. Any proceeds received by the pass-through trustee upon this sale must be deposited in the special payments account with respect to the pass-through trust and must be distributed to the certificateholders with respect to the pass-through trust on a special distribution date. 99 Any amount distributed to the pass-through trustee by the lease indenture trustee on account of the lessor notes held in the related pass-through trust following a lease indenture event of default must be deposited in the special payments account with respect to the pass-through trust and must be distributed to the certificateholders of this trust on a special distribution date. In addition, if, following a lease indenture event of default, any owner trust or any owner participant exercises its option to purchase the outstanding lessor notes held in the related pass-through trust, the purchase price paid by the owner trust or the owner participant to the pass-through trustee must be deposited in the special payments account with respect to the pass-through trust and must be distributed to the relevant certificateholders on a special distribution date. Any payments received on account of partial or full prepayment on the lessor notes with respect to any lessor notes in default that are held in a pass-through trust, or the proceeds from the sale by the pass-through trustee of any lessor notes held in the special payments account for that pass-through trust must, to the extent practicable, be invested by the pass-through trustee in permitted government investments pending the distribution of these funds on a special distribution date. Permitted government investments are obligations of the United States maturing in not more than 60 days or in lesser time as is required for the distribution of any of these funds on a special distribution date. The pass-through trustee is prohibited from selling any permitted government investment prior to its maturity. Each pass-through trust agreement provides that, at any time that the certificates become subject to the Trust Indenture Act of 1939, the pass-through trustee must, within 90 days after the occurrence of a default (as defined below), give to the certificateholders, us, the owner trust and the lease indenture trustee notice of all uncured or unwaived defaults under the related pass-through trust agreement actually known to a responsible officer of the pass-through trustee. In connection with the offering made by this prospectus, the pass-through trust agreements are being qualified under the Trust Indenture Act of 1939, and as a result, the certificates become subject to that Act for purposes of the pass-through trust agreements. In the case of default in the payment of principal, premium, if any, or interest on any of the lessor notes held in the pass-through trust, the pass-through trustee will be protected in withholding this notice if it in good faith determines that withholding this notice is in the interests of the related certificateholders. The term "default," for the purpose of the provision described in this paragraph only, means the occurrence of any event of default under the related pass-through trust agreement, except that in determining whether any event of default has occurred, any grace period or notice in connection with the event of default is disregarded. Each pass-through trust agreement contains a provision entitling the pass-through trustee, subject to the duty to act with the required standard of care, to be indemnified by the certificateholders before exercising any right or power under the pass-through trust agreement at the request of these certificateholders. In specific cases, certificateholders of a pass-through trust, aggregating not less than a majority in interest of the pass-through trust, may on behalf of all certificateholders of that pass-through trust waive any past default or event of default and thus annul any direction given by these certificateholders to the indenture trustee with respect to the past default or event of default, except: - a default in the deposit of any scheduled payment or special payment or in the distribution of any scheduled payment or special payment, - a default in payment of the principal of, premium, if any, or interest on, any of the lessor notes, or - a default in respect of any covenant or provision of the pass-through trust agreement that cannot be modified or amended without the consent of each affected certificateholder. 100 The lease indentures provide that, with specified exceptions, the holders of a majority in aggregate unpaid principal amount of the lessor notes may on behalf of all those holders waive any past default or lease indenture event of default. MODIFICATION OF THE PASS-THROUGH TRUST AGREEMENTS Each pass-through trust agreement contains provisions permitting us and the pass-through trustee to enter into a supplemental trust agreement, without the consent of any certificateholders, among other things, - to evidence the succession of another corporation to us and the assumption by any the successor of our obligations under the pass-through trust agreement or the registration rights agreement, - to add to our covenants for the protection of the certificateholders under the pass-through trust agreement or the registration rights agreement, - to cure any ambiguity in, or to correct or supplement any defective or inconsistent provision of, the pass-through trust agreement or the registration rights agreement or to make any other provisions with respect to matters or questions arising under the pass-through trust agreement, provided these actions do not adversely affect the interests of the certificateholders, - to add, eliminate, or change any provision under the pass-through trust agreement that does not adversely affect the interests of the certificateholders, - to surrender any right or power conferred upon us in the pass-through trust agreement or in the registration rights agreement, - to correct or amplify the description of property that constitutes trust property or the conveyance of property that constitutes trust property to the pass-through trustee, - to evidence and provide for a successor to the pass-though trustee, - at any time that the certificates are subject to the Trust Indenture Act, to modify, eliminate or add to the provisions of the pass-through agreement to the extent necessary to qualify the pass-through trust agreement under the Trust Indenture Act, - to modify any provision in the pass-through trust agreement to reflect changes relating to the conversion of an owner trust from a Delaware business trust to a Delaware limited liability company or the assumption and substitution of a lessor note under a lease indenture, - to comply with any requirement of the SEC, any applicable law, rules or regulations of any exchange or quotation system on which the certificates are listed, any regulatory body or the registration rights agreement to effectuate the exchange offer, or - to modify or eliminate provisions relating to the transfer or exchange of exchange certificates or the initial certificates upon consummation of the exchange offer or effectiveness of the shelf registration statement or the exchange offer registration statement. Each pass-through trust agreement also contains provisions permitting us and the pass-through trustee, with the consent of the certificateholders evidencing fractional undivided interests aggregating not less than a majority in interest of the related pass-through trust, and with the consent of the owner trust (this consent may not be unreasonably withheld), to execute supplemental trust agreements adding provisions to or changing or eliminating any of the provisions of the pass-through trust agreements and/ or the registration rights agreement or modifying the rights of the certificateholders, except that no supplemental trust agreements may, without the consent of each affected certificateholder: - reduce in any manner the amount of, or delay the timing of any receipt by the pass-through trustees of payments on the lessor notes held in the pass-through trust, or change the date or place of payment of distributions in respect of any certificate, or make distributions payable in 101 coin or currency other than that provided for in the certificates, or impair the right of any certificateholder to institute suit for the enforcement of any of these payments when due, - permit the disposition of any lessor note held in the related pass-through trust, permit the creation of a lien on the pass-through trust or otherwise deprive any certificateholder of the benefit of ownership of the lessor notes, except as provided in the applicable pass-through trust agreement, - reduce the percentage of the aggregate fractional undivided interest of the related pass-through trust provided for in the pass-through trust agreement that is required to approve the supplemental trust agreement or reduce the percentage required for any waiver provided for in the pass-through trust agreement, or - cause the pass-through trust to become taxable as an "association" or to fail to qualify as a trust for federal income tax purposes. TERMINATION OF THE PASS-THROUGH TRUSTS Our obligations and the obligations of the pass-through trustees under the pass-through trust agreements, and the pass-through trusts, will terminate upon the distribution to certificateholders of all amounts required to be distributed to them according to the pass-through trust agreements and the disposition of all property held in the pass-through trusts. The pass-through trustees will mail to each related certificateholder of record notice of the termination of the related pass-through trust, the amount of the proposed final payment and the proposed date for the distribution of the final payment for the pass-through trust. The final distribution to any certificateholder will be made only upon surrender of the certificateholder's certificates at the office or agency of the pass-through trustee specified in the notice of termination. THE PASS-THROUGH TRUSTEES United States Trust Company of New York is the pass-through trustee for each pass-through trust. The pass-through trustee and any of its affiliates may hold certificates in their own names. With some exceptions, the pass-through trustee makes no representations as to the validity or sufficiency of the pass-through trust agreements, the certificates, the lessor notes, the lease indentures, the leases or other related documents. United States Trust Company of New York is also the lease indenture trustee for the lessor notes issued with respect to each undivided interest under the lease indentures. The pass-through trustee may resign with respect to any or all the pass-through trusts at any time, in which event we will be obligated to appoint a successor trustee. If the pass-through trustee ceases to be eligible to continue as a pass-through trustee under the pass-through trust agreements or becomes insolvent, we may remove the pass-through trustee, or any certificateholder which has held a certificate for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the pass-through trustee and the appointment of a successor trustee. Any resignation or removal of the pass-through trustee and appointment of a successor trustee for a pass-through trust does not become effective until acceptance of the appointment by the successor trustee. Each pass-through trust agreement provides that we will pay the pass-through trustee's fees and expenses. Each pass-through trust agreement further provides that the pass-through trustee will be entitled to indemnification by us, in its individual and trustee capacities, for any out-of-pocket expenses, disbursements and advances arising out of or in connection with the acceptance or administration of the pass-through trust and, solely in its individual capacity, for any expense or tax (other than any tax attributable to the pass-through trustee's compensation for serving as a pass-through trustee) incurred without gross negligence, willful misconduct or bad faith, on its part, arising out of or in connection with the acceptance or administration of the pass-through trust. 102 DESCRIPTION OF THE LESSOR NOTES THE FOLLOWING IS A DESCRIPTION OF MATERIAL PROVISIONS OF THE LESSOR NOTES. THE FOLLOWING INFORMATION IS NOT A COMPLETE DESCRIPTION OF THE LESSOR NOTES AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY, REFERENCE TO THE LESSOR NOTES AND THE LEASE INDENTURES, INCLUDING THE DEFINITIONS OF TERMS USED IN THE LESSOR NOTES AND THE LEASE INDENTURES. GENERAL The initial lessor notes were issued in two series under four separate lease indentures between an owner trust and United States Trust Company of New York, as indenture trustee. Each owner trust leases its respective undivided ownership interest in the respective facility and ownership interest in the land to us under the lease, the site lease and the site sublease to which it is a party. We are obligated to make rental and other payments to each owner trust under each lease in amounts that are sufficient to pay the principal of, premium, if any, and interest on the related lessor notes when and as due and payable, except for principal and interest payable upon a lease indenture event of default that is not caused by a lease event of default. However, except in some circumstances described in this prospectus where we may assume the obligations of the applicable owner trust under the lessor notes, the lessor notes are not obligations of, or guaranteed by, us. Payments under each lease in excess of the amounts required to make required payments on the applicable lessor notes are paid by the indenture trustees to the applicable owner trust for distribution by it in accordance with the terms of its respective trust agreement except in specific cases upon the occurrence of a lease indenture event of default. Our lease payment obligations under the leases and the other operative documents to which we are a party are our general obligations. A "LEASE INDENTURE EVENT OF DEFAULT" under a lease indenture occurs upon: (a) the occurrence and continuance of a lease event of default, other than as a result of non-payment with respect to customary excepted payments reserved to the trust company, the owner trustee or the owner participant, (b) the owner trust's failure to pay principal, interest or any premium when due under the lessor notes that continues unremedied for five business days or the owner trust's failure to pay other amounts due under any lessor note or the lease indenture that continues unremedied for thirty business days after receipt of written demand from the lease indenture trustee or any certificateholder, (c) any material representation or warranty made by the owner participant or the owner trust in the lease indenture or in any other operative document to which it is a party, or by any owner participant guarantor in its owner participant guaranty, proves to have been incorrect when made or when deemed made in any material respect and continues to be material and unremedied for a period of 30 days after receipt by the party of written notice of the misrepresentation or breach of warranty; however, if the misrepresentation or breach of warranty can be remedied, this period may be extended up to 90 days in total so long as the party commences the remedy within the 30-day period and diligently pursues the remedy and so long as the continuation of the misrepresentation or breach of warranty beyond the initial 30-day period would not have a material adverse effect on the owner participant or the owner trust, (d) failure by the owner trust to observe or perform any material covenant contained in the lease indenture or in any operative document to which it is a party or failure of the owner participant to observe or perform any material covenant contained in any operative document to which it is a party, or failure of any owner participant guarantor to observe or perform any material covenant or obligation of the owner participant guarantor contained in any owner participant guaranty, which failure remains unremedied for a period of 30 days after written notice 103 of the failure; however, if the failure is capable of being remedied, this period is extended up to 120 days in total, so long as the party commences the remedy within the 30-day period and diligently pursues the remedy, and so long as the continuation of the failure beyond the initial 30-day period would not have a material adverse effect on the owner participant or the owner trust, and (e) customary events of bankruptcy and insolvency, whether voluntary or involuntary, with respect to the owner participant, any owner participant guarantor or the owner trust under the applicable lease indenture, but only if the event commenced involuntarily, are continuing 60 days after the commencement of the event. "MATERIAL ADVERSE EFFECT" means, with respect to any person, any event, development or circumstance that has had or could reasonably be expected to have a material adverse effect on the following: - the business, assets, property, financial condition or operations of that person and its subsidiaries since the closing date of the lease transactions, - the ability of that person to perform or comply with its obligations under any of the operative documents, or - the validity and enforceability of the operative documents, the liens granted under the operative documents or the rights and remedies to the operative documents. REMEDIES Each lease indenture provides that the related lease indenture trustee may exercise specified remedies and all remedies available to it at law including acceleration of the lessor notes if a lease indenture event of default has occurred and is continuing. These specified remedies include, in circumstances where a lease event of default under the related lease has occurred, remedies with respect to the applicable ownership interest in the facility and the interest in the land afforded to the applicable owner trust by the lease for lease events of default under the lease. These remedies may be exercised by the lease indenture trustee to the exclusion of the applicable owner trust, the applicable owner participant, and us. A sale of the applicable ownership interest in the facility and the interest in the land upon the exercise of these remedies will be free and clear of any right of those parties (other than, in some cases, rights of redemption provided by law), including our rights under the lease. Under no circumstances may the lease indenture trustee sell any of the ownership interest or the interest in the land or exercise other remedies against the ownership interest or the interest in the land seeking to deprive the owner trust or the owner participant of their respective interests in the ownership interest or the interest in the land unless the lessor notes have been accelerated. Upon the occurrence of a lease indenture event of default arising out of a lease event of default, if the lease indenture trustee, acting at the instruction of the required holders of the lessor notes, exercises any remedy under the applicable lease indenture which could or would divest the owner trust or the owner participant of their respective ownership interest or their respective interest in the land subject to the lease indenture, the lease indenture trustee shall at the same time, if it is then entitled to do so under the lease and is not then stayed or otherwise prevented from doing so by operation of law, exercise one or more of the remedies to dispossess us of the applicable ownership interest. However, if the lease indenture trustee is prevented by operation of law from exercising remedies for a continuous period of 180 days following the commencement of the stay, the lease indenture trustee may, upon expiration of the 180-day period, exercise any remedy available to it under the lease indenture. 104 REDEMPTION OF LESSOR NOTES The lessor notes are subject to redemption under the circumstances described below. The pass-through trustee will make distributions to the certificateholders of each pass-through trust related to the lessor notes being redeemed on the date and in the amount paid in respect of the redemption of the lessor notes. PURCHASE OF LESSOR NOTES All lessor notes outstanding under a lease indenture or all the lessor notes outstanding and not held by us or our affiliates may be purchased by the owner trust, owner participant or owner participant guarantor, in whole but not in part, at a price equal to the principal amount of the lessor notes, together with interest accrued to and unpaid on the date of the purchase, but excluding any make-whole premium (defined below), upon the occurrence of any of the following events: - a continuing lease event of default; - the lessor notes becoming due prior to their stated maturity as the result of a lease indenture event of default; or - the lease indenture trustee commencing the exercise of material remedies under the lease indenture. Upon the purchase, the owner trust, owner participant or owner participant guarantor will assume the certificateholders' obligations under the relevant participation agreement and lease indenture. MANDATORY PREPAYMENT WITH MAKE-WHOLE PREMIUM All lessor notes outstanding under a lease indenture will be prepaid, in whole but not in part, at the principal amount of the lessor notes, together with interest accrued to and unpaid on the prepayment date plus, under any circumstances, a make-whole premium (as defined below), upon the occurrence of any of the following events: (a) our termination of a lease in circumstances where a facility has become obsolete as a result of a change in the markets for wholesale purchases and/or sales of energy or as a result of a material abrogation of power purchase agreements; (b) our termination of a lease in circumstances where an event has occurred which, in our good faith judgment, will cause the facility to become obsolete; (c) the facility is surplus to our needs or is no longer useful in our business; or (d) the obligations represented by the lessor notes are refinanced in whole but not in part. "MAKE-WHOLE PREMIUM" means an amount equal to the discounted present value calculated for any lessor note subject to mandatory prepayment according to any lease indenture less the unpaid principal amount of the lessor note. However, the make-whole premium must not be less than zero. For purposes of this definition, the "discounted present value" of any lessor note subject to mandatory prepayment according to any lease indenture is equal to the discounted present value, as of the date of mandatory prepayment or acceleration, of all principal and interest payments scheduled to become due in respect of the lessor note after the date of the mandatory prepayment, calculated using a discount rate equal to the sum of (1) the yield to maturity on the U.S. Treasury security having an average life equal to the remaining average life of the lessor note and trading in the secondary market at the price closest to par, and (2) fifty (50) basis points (0.50%). However, if there is no U.S. Treasury security having an average life equal to the remaining average life of the lessor note, the discount rate will be calculated using a yield to maturity interpolated or extrapolated on a straight-line basis (rounding to the nearest calendar month, if necessary) from the yields to maturity for two U.S. Treasury securities 105 having average lives most closely corresponding to the remaining life of the lessor note and trading in the secondary market at the price closest to par. MANDATORY PREPAYMENT WITHOUT PREMIUM Each series of lessor notes outstanding under a lease indenture will be redeemed by the owner trust, in whole, at the principal amount of the lessor notes, together with the interest accrued to and unpaid on the prepayment date but without any premium, upon the earliest of: (1) our termination of a lease upon the occurrence of an event of loss under the lease, except a regulatory event of loss under circumstances in which we acquire the applicable ownership interest in the facility and assume the applicable lessor notes; (2) our termination of a lease, if the relevant facility becomes economically or technologically obsolete, as determined by our board of managers in good faith, as a result of (A) a change in law, regulation or tariff of general application or (B) imposition by the Federal Energy Regulatory Commission or any other governmental entity having or claiming jurisdiction over us or the facilities of any conditions or requirements (including, without limitation, requiring significant capital improvement of the facilities) upon the continued effectiveness or renewal of any license or permit required for the operation or ownership of the facility; (3) our termination of a lease, if a change in law causes it to become illegal for us to continue the lease or to make payments under the lease and the other related operative documents and the transactions contemplated by the operative documents cannot be restructured to comply with the change in law; or (4) our termination of a lease as a result of our becoming obligated to pay an indemnity under the related operative documents in an amount in excess of 2.5 percent of the aggregate purchase price for the relevant facility. We will, prior to any termination under clause (2) above, deliver to the owner trust a certificate of our board of managers setting forth in reasonable detail the basis on which we are exercising the termination right. In the event of an early termination under clause (2) above, we will, as non-exclusive agent for the owner trusts, use commercially reasonable efforts to obtain bids and sell the owner trusts' interests in the relevant facility and the relevant site, all the proceeds of which will be for the account of the owner trusts and none of which will be for our account. The purchaser of these interests may not be us or any of our affiliates or any third party with whom we or our affiliates have an arrangement to use or operate the Joliet facility or Powerton facility to generate power for our own benefit or the benefit of the affiliate after the termination of the leases. OWNER TRUST'S OR OWNER PARTICIPANT'S RIGHT TO CURE Each owner trust and owner participant may, but is not obligated to, pay an amount equal to all (but not less than all) of the outstanding principal, accrued interest and other amounts payable with respect to the outstanding lessor notes if a lease default or lease event of default in the payment of any installment of basic lease rent due under the lease has occurred and no more than 10 business days have passed since the earlier of (1) receipt by the owner trust of notice of or (2) the owner trust acquiring actual knowledge of the occurrence of the lease default or lease event of default. If any other lease default or lease event of default occurs and the owner trust has been furnished by the owner participant with all funds necessary for remedying the lease default or lease event of default, the owner participant may within 10 business days of the earlier of (a) receipt by the owner trust of notice of or (b) the owner trust acquiring actual knowledge of the lease default or lease event of default, instruct the owner trust to exercise the owner trust's right to perform payment obligations on our behalf as provided in the lease. 106 In determining whether a lease indenture event of default has occurred, payment by the owner participant or the owner trust in accordance with the preceding paragraph will be deemed to remedy any lease default or lease event of default in the payment of installments of basic lease rent and to remedy any default by the owner trust in the payment of any amount due and payable under the lessor notes or the lease indenture. Furthermore, any performance by the owner trust of any obligation of ours as provided in the lease will be deemed to remedy the lease default or lease event of default to the extent like performance by us would have done so. If a lease default or lease event of default has been remedied by either of these specified bases, then any determination that a lease default or lease event of default exists or any acceleration of the lessor notes or any declaration that a lease indenture default or lease indenture event of default exists will be deemed to be rescinded, and the owner participant will be subrogated to the rights of certificateholders under the lease indenture to receive payment of rent from us and will be entitled to receive and retain the payment from us so long as no other lease indenture default or lease indenture event of default has occurred. The owner participant may not, so long as the lease indenture has not been terminated, attempt to recover amounts paid by it on our behalf except by demanding payment of the amount from us or by commencing an action at law and obtaining a judgment against us. The owner participant may not, so long as the lease indenture has not been terminated, obtain any lien on any part of the indenture estate on account of the payment, nor will any claim of the owner participant against us or any other party for the repayment impair the right and security interest of the lease indenture trustee and the certificateholders in and to the indenture estate. The right of the owner trust or the owner participant to purchase the lessor notes will not apply with respect to any cure of any default in the payment of basic lease rent if the cure has been exercised with respect to four consecutive payments of basic lease rent immediately preceding the date of the default, or more than eight payments in total of basic lease rent. ASSUMPTION OF LESSOR NOTES Upon the occurrence of (1) an event of loss under a lease due to burdensome governmental regulations (a "Midwest assumption event"), we may elect to assume the applicable lessor notes and (2) a lease event of default or the termination of the lease due to the obsolescence of the facility and, in the case of a termination, the owner participant's election to retain its ownership interest in the facility (an "owner participant assumption event"), the owner participant may elect to assume the applicable lessor notes. Both assumptions are subject to the satisfaction of the conditions to assumption listed below. If the conditions to assumption are satisfied, all obligations and liabilities of an owner trust under the respective lease indenture and each lessor note will be assumed by an eligible successor, and, in the case of a Midwest assumption event, the owner trust will be released and discharged from its obligations and liability under the applicable lease indenture and lessor notes. If either we or the owner participant elect to assume the lessor notes, neither the lease indenture trustee nor any holder shall be entitled to exercise specific remedies under the applicable lease indenture or the lease provision relating to the event giving rise to the assumption of the lessor notes until 30 days from notice to the lease indenture trustee of our intention to assume the lessor notes or until the notes are assumed by our or the owner participant's eligible successor, whichever occurs first. ELIGIBLE SUCCESSOR. In the case of a Midwest assumption event, an eligible successor is our designee and is a direct or indirect wholly-owned subsidiary of Edison Mission Energy (but not us) or another person acceptable to the holders, in their sole discretion. In the case of an owner participant assumption event, an eligible successor must be a direct or indirect wholly-owned subsidiary of Public Service Enterprise Group, Inc. or Associates First Capital Corporation, as the case may be, or another person acceptable to the holders, in their sole discretion. In either case, the eligible successor must meet specific requirements under the Internal Revenue Code of 1986, the Investment Company Act of 1940 and the Public Utility Holding Company Act of 1935. 107 CONDITIONS TO ASSUMPTION. Any assumption of the lessor notes is subject to the following conditions: - the eligible successor must execute an assumption agreement, under which the eligible successor assumes unconditionally all obligations of the owner trust under applicable lessor notes and applicable lease indenture, - the delivery of an opinion of counsel to the eligible successor addressed to the lease indenture trustee and the holders of the lessor notes and all governmental approvals referred to in the opinion and a certificate of an authorized officer of the eligible successor, - the execution of a supplement to the applicable lease indenture fulfilling the requirements specified in the lease indenture, and - the ratings of the long-term senior unsecured indebtedness of the eligible successor being at least BBB and Baa2 by Standard & Poor's and Moody's, respectively, or if not, the delivery of ratings letters from Moody's and Standard & Poor's stating that after the assumption of the lessor notes, the ratings of the indebtedness will be at least BBB and Baa2 by Standard & Poor's and Moody's, respectively. In the case of an owner participant assumption event, if the indebtedness of the eligible successor is not rated or it has not delivered ratings letters reflecting the assumption of the lessor notes, the rating confirmation must be delivered within 60 days following the date of assumption. Until the rating is delivered, the interest rate with respect to the assumed lessor notes will increase by 0.50% on an annual basis. Failure to deliver the required ratings within 60 days of the date of assumption will result in a lease indenture event of default. Notice of any assumption of the lessor notes will be given by the lease indenture trustee to the holders as promptly as practicable after the lease indenture trustee has received written notice of the intent to assume the lessor notes as required by the applicable lease indenture. MODIFICATION OF LEVERAGED LEASE AGREEMENTS A lease indenture trustee may, if so directed by holders of 50.1% or more of the lessor notes, who we refer to as the required holders, execute a supplement to the lease indenture for the purpose of adding provisions to, or changing or eliminating provisions of, the lease indenture as specified in the required holders' request. Except with respect to excepted payments, the lease indenture trustee, if so directed by a majority of the required holders, may enter into a written amendment of or supplement to any indenture estate documents as may be specified in the required holders' directive. However, without the consent of each required holder, except with respect to excepted payments, no amendment of or supplement to any indenture estate document, and no waiver or modification of the terms of any indenture estate document, may, except to the extent pertaining to excepted payments: - modify specified provisions of the lease indenture, participation agreements or leases; - modify specified definitions in the lease indenture documents; - change the amount or the time of payment of any amount owing or payable under any related lessor note or change the rate or manner of calculation of interest payable on any related lessor note; - alter or modify the provisions with respect to the manner of payment or the order of priorities in which distributions under the indenture estate document shall be made as between the holders of the related lessor notes and the related owner trust; - reduce, modify or amend any indemnities or other payment provisions resulting in supplemental lease rent in favor of any certificateholders; 108 - reduce the amount (except to any amount as is sufficient to pay the aggregate principal of and interest on all the related lessor notes) or extend the time of payment of rent or termination value except as expressly provided in the related lease, or change any of the circumstances under which rent or termination value is payable; - modify, amend or supplement the leases with respect to, or consent to any assignment of the lease, releasing us from our obligations to pay basic rent or termination value or any other amounts under the related lease other than excepted payments or altering the absolute and unconditional character of these obligations or change any of the circumstances under which termination value is payable, or - take any action which would reduce or extend the term of the leases. Notwithstanding the foregoing, without the consent of the indenture trustees (acting with the consent of the related pass-through trustee), no supplement, waiver or modification of a lease indenture or any other related operative document may permit the creation of any lien on the related indenture estate or any part of the related indenture estate, or deprive the lease indenture trustee or any holder of the related lessor notes of the benefit of the lien created under the related lease indenture. In the event that the pass-through trustee, as the holder of the lessor notes in trust for the benefit of the certificateholders, receives a request for its consent to any amendment, modification, waiver or supplement under any lease indenture or lessor note related document that requires the consent of the holder of the lessor note, the pass-through trustee shall mail a notice of the proposed amendment, modification, waiver or supplement to each certificateholder of the pass-through trust of record as of the date of the notice. The pass-through trustee will request from the certificateholders of the relevant pass-through trust directions as to: - whether or not to direct the lease indenture trustee to take or refrain from taking any action which a holder of the lessor note has the option to direct, - whether or not to give or execute any waivers, consents, amendments, modifications or supplements as a holder of the lessor note, and - how to vote any lessor note if a vote has been called for with respect to the lessor note. The pass-through trustee will vote or consent with respect to the lessor notes held in the related pass-through trust in the same proportion as the certificates were actually voted by the certificateholders of the pass-through trust by the date specified in the notice. Notwithstanding the foregoing, if an event of default under the pass-through trust agreement has occurred and is continuing, the pass-through trustee, subject to the voting instructions referred to under "Description of the Certificates--Rights Upon an Event of Default," may in its own discretion consent to the amendment, modification, waiver or supplement, and may so notify the lease indenture trustee. On the written request of the owner participant, the owner trust and the lease indenture trustee may enter into a supplement to the lease indenture at any time without the consent of the holders of the lessor notes or the required holders for one or more of the following purposes: - to convey, transfer, assign, mortgage or pledge any property or assets to the lease indenture trustee as security for the lessor notes; - to evidence the succession of another corporation to the trust company, and the assumption by the successor corporation of the covenants, agreements and obligations of the owner trust; - to add to the covenants of the owner trust for the benefit of the holders of all or any series of lessor notes and to make a default in complying with any additional covenant, restriction, condition or provision a lease indenture event of default permitting the enforcement of all or 109 any of the remedies provided in the lease indenture (see "--Remedies"). In respect of any additional covenant, the supplement may provide for a particular period of grace after default, may provide for an immediate enforcement upon the lease indenture event of default, may limit the remedies available to the lease indenture trustee upon the lease indenture event of default or may limit the right of the holders of a majority in aggregate principal amount of the lessor notes of the relevant series to waive the lease indenture event of default; - to cure any ambiguity or to correct or supplement any provision contained in the lease indenture or in any supplement which may be defective or inconsistent with another provision of the lease indenture or of any supplement, or to make any other provisions for matters or questions arising under the lease indenture that the owner trust deems necessary or desirable, but only if this action does not adversely affect the interests of the holders of the lessor notes of any series; - to establish the form and terms of the lessor notes of any series; - to effect the assumption of the lessor notes in accordance with the terms of the lease indenture (see "--Assumption of Lessor Notes"); - to evidence and provide for the acceptance of appointment of a successor lease indenture trustee with respect to the lessor notes and to add to or change any of the provisions of the lease indenture that are necessary to provide for the administration of the trusts by more than one trustee; and - subject to the restrictions listed above with respect to specified provisions and definitions of the indenture estate documents, to effect any amendment, modification, supplement, waiver or consent with respect to any indenture estate document, but this action shall not, in the judgment of the lease indenture trustee, materially and adversely affect the interest of the holders of any of the lessor notes of any series. SECURITY The lessor notes issued by each owner trust will be secured by a first priority security interest in, and mortgage lien on, specified property or other collateral granted to the applicable lease indenture trustee, which we refer to as the indenture estate. The indenture estate includes the following: - the owner trust's interest in the applicable ownership interest and interest in the land and its rights under the related lease, including the right to receive payments of any kind under the lease, - the site sublease and the interest in the land under the site sublease and all payments of any kind under the site sublease, - the fixtures, - the facility deed, - the facility bill of sale, - specific other agreements related to the operation of the facility and the ownership interest in the facility, and - all and any interest in any property now or hereafter granted to the owner trust according to any provision of the site lease, facility lease or the facility site sublease, the Edison Mission Energy guarantee and each other operative document (other than the tax indemnity agreement, the reimbursement agreement and the Edison Mission Energy owner participant guaranty) to which the owner trust is a party. 110 An owner trust may not assign, pledge or grant a lien or security interest in any of its estate, right, title or interest in, to or under, the indenture estate to anyone other than a lease indenture trustee. So long as no lease indenture event of default has occurred and is continuing under a lease indenture, the applicable owner trust is entitled to exercise all the rights of the owner trust under the operative documents, subject to specific exceptions (including with respect to amendments, waivers, modifications and consents under specified provisions of some of the operative documents). The owner trust's rights, however, do not include the right to receive payments of rent and specific other amounts due under the leases, which payments will be made directly to the lease indenture trustee. The assignment by the owner trust to the lease indenture trustee of its rights under the documents constituting the indenture estate also excludes specific rights of the owner trust, including rights relating to indemnification by us or Edison Mission Energy for specific matters and insurance proceeds payable to the owner trusts under liability insurance maintained by us under the leases. Funds, if any, held from time to time by the lease indenture trustee according to the lease indentures will be invested and reinvested by the lease indenture trustee, at the direction and at the expense of each owner trust, in permitted investments. The lease indenture trustee will not be liable for any loss resulting from any investment required to be made by it according to the terms of the lease indenture other than by reason of its willful misconduct or gross negligence. DISPOSITION OF LESSOR NOTES. (See "Description of the Certificates--Modification of the Pass-Through Trust Agreements"). LIMITATION OF LIABILITY The lessor notes are not obligations of, or guaranteed by, us, the owner participants, a guarantor of the owner participant or the owner trustee. None of the owner trustee, the owner participants, a guarantor of the owner participant or the lease indenture trustee, or any of their respective affiliates, are personally liable to any holder of a lessor note or, in the case of the owner trustee, any owner participant or a guarantor of any owner participant, to the lease indenture trustee for any amounts payable under any lessor notes or, except as provided in the applicable lease indenture, for any liability under the lease indenture. All payments of principal of, premium, if any, and interest on the lessor notes (other than payments made in connection with an optional redemption or purchase by the applicable owner trust or owner participant) will be made only from the assets subject to the lien of the related lease indenture or the income and proceeds received by the lease indenture trustee therefrom (including basic lease rent payable by us under the related lease). Except as otherwise provided in the lease indenture, neither the owner trustee nor the owner participant nor a guarantor of the owner participant will be answerable or accountable under any lease indenture or lessor notes under any circumstances except for: - its own willful misconduct or gross negligence not caused by a breach of warranty, covenant or representation in any operative document by us or our affiliates; - misrepresentation or breach of warranty in any operative document or breach of covenant in any operative document insofar as not attributable to a breach of any covenant, representation or warranty by us or our affiliates, contained in any operative document; and - specific other limited acts or omissions. 111 DESCRIPTION OF THE LEASES AND OTHER LEASE DOCUMENTS THE FOLLOWING IS A SUMMARY OF SELECTED PROVISIONS OF THE PRINCIPAL AGREEMENTS CONSTITUTING THE LEVERAGED LEASE TRANSACTIONS, AND IS NOT TO BE CONSIDERED TO BE A FULL STATEMENT OF THE TERMS OF THESE AGREEMENTS. ACCORDINGLY, THE FOLLOWING SUMMARIES OF THESE AGREEMENTS ARE QUALIFIED BY REFERENCE TO EACH AGREEMENT AND ARE SUBJECT TO THE TERMS OF THE FULL TEXT OF EACH AGREEMENT. UNLESS OTHERWISE STATED, ANY REFERENCE IN THIS PROSPECTUS TO ANY AGREEMENT SHALL MEAN THAT AGREEMENT AND ALL SCHEDULES, EXHIBITS AND ATTACHMENTS TO THAT AGREEMENT AS AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED AND IN EFFECT AS OF THE DATE OF THIS PROSPECTUS. THE LEASES, THE SITE LEASES AND THE SITE SUBLEASES We entered into two leases that relate to the Powerton facility and two leases that relate to the Joliet facility. Under these four leases, we are leasing from the owner trusts the Powerton facility and Joliet facility. We are also leasing the property on which the facilities are located, called the facility site, to the owner trusts, who are then sub-leasing this property back to us. We have also granted some easements to the owner trusts necessary to the operation and maintenance of the facilities. TERM AND RENT The term of each lease, which we refer to as the basic lease term, commenced on the closing of the lease transactions. The basic lease term of each lease of an ownership interest in the Powerton facility will continue for a period of 33.75 years following August 24, 2000. The basic lease term of each lease of an ownership interest in the Joliet facility will continue for a period of 30 years following August 24, 2000. We have the right to renew each lease for one or more renewal lease terms. We refer to the basic lease term plus all renewal lease terms for each lease as its facility lease term. Rent payable under each lease consists of basic rent, which is payable with respect to the basic lease term, renewal rent, which is payable with respect to any renewal lease term, and supplemental rent. Supplemental rent includes our payment obligations arising out of the operative documents, other than basic rent and renewal rent, to the owner trust or any other person. During the facility lease term, rent is paid in advance and/or arrears on each January 2 and July 2, which we refer to as rent payment dates. Supplemental rent is payable when due and owing, or if there is no due date specified, promptly after demand by the person entitled to the payment. USE AND MAINTENANCE We covenant that we will: - maintain the leased facilities, at our own expense, in as good condition, repair and working order as when delivered on the closing date of the lease transaction, ordinary wear and tear excepted, without discrimination as compared to other facilities of similar type owned or operated by us or any of our affiliates, and in any event, in all material respects (1) in accordance with prudent industry practice, (2) in compliance with all requirements of law, including without limitation, all environmental laws and (3) in accordance with the terms of all insurance policies required to be maintained according to each lease agreement, and - cause to be made all repairs, renewals, replacements, betterments and improvements to the facilities, all as in our reasonable judgment may be necessary to operate the facilities in accordance with the operative documents. 112 In the ordinary course of maintenance, service, repair or testing of a leased facility or any component of a leased facility, we, at no cost to the owner trusts, may remove or cause to be removed from the leased facility any component of the leased facility, so long as: - we cause the component to be replaced by a replacement component which is free and clear of all liens, other than lease permitted liens, and is in as good an operating condition as that of the component replaced, assuming that the component replaced was maintained in accordance with the terms of the lease, and - the replacement does not diminish, other than in an immaterial respect, the current and residual value, remaining useful life or utility of the facility as measured immediately prior to the replacement, assuming the facility is then in the condition required to have been maintained by the terms of the lease, or cause the facility to become "limited use" property. "PRUDENT INDUSTRY PRACTICE" means, at a particular time, (1) any of the practices, methods and acts engaged in or approved by a significant portion of the competitive electric generating industry operating in the United States at that time, or (2) with respect to any matter to which clause (1) 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. IMPROVEMENTS TO THE FACILITIES REQUIRED IMPROVEMENTS Without expense to the owner trusts and without the consent of any other party to the operative lease financing documents, whom we will refer to as the lease financing parties, we are required to make or cause to be made any modification, alteration, addition or improvement to the facilities as is required: - by requirements of law or any governmental authority, - by any insurance policy required to be maintained by us under any operative document, - by the terms of the operative documents, or - to meet return acceptance tests as included in the leases. These improvements are called required improvements. We may, in good faith and by appropriate proceedings, diligently contest the validity or application of any requirement of law in any reasonable manner and according to the terms of the leases. OPTIONAL IMPROVEMENTS At any time we may, without expense to the owner trusts and without the consent of any other lease financing party, make or cause to be made any modification, alteration, addition or improvement to the facilities as we consider necessary or desirable in the proper conduct of our business. These improvements are called optional improvements. However, no optional improvement to the facilities may, other than in an immaterial respect, diminish the current or residual value, remaining useful life or utility of the applicable facility below the current or residual value, remaining useful life or utility of the facility immediately before the optional improvement, assuming the facility is then in the condition 113 required to have been maintained by the terms of the lease, or cause the ownership interest in the facility to become "limited use" property. Improvements that can be removed without causing material irreparable damage to the facilities are called severable improvements. All severable improvements, except for severable improvements that are also required improvements or severable improvements that are financed through the leases (as described in the next paragraph), remain our property. We may finance improvements other than through the leases, if this financing does not result in a lien on the facility or the facility site. All required improvements, non-severable improvements and improvements that are financed through the leases automatically become the property of the owner trusts and are subject to the leases and the lease indentures upon being affixed to the facilities. If we elect to finance optional improvements through the leases or to finance required improvements, the applicable owner participant will be given the opportunity, and will consider in its sole discretion, to finance the improvements in whole or in part with additional equity. We are not obligated to accept, nor will an owner participant be obligated to provide, any additional equity financing. Notwithstanding the foregoing, however, at our request, each owner trust, the lease indenture trustee and the pass-through trustees will be obligated to finance improvements through the issuance of additional lessor notes under the lease indenture, subject to the following conditions: - there may be no more than one financing of this kind in any calendar year, - the improvement is a required improvement, - the additional debt will have a final maturity date no later than the expiration date of the basic lease term or any renewal term then in effect or already elected by us and will be fully repaid out of additional basic lease rent or renewal rent and termination value as adjusted according to the operative documents, - appropriate adjustments to basic lease rent and termination value (determined without regard to any tax benefits associated with the improvements, unless the owner participant is financing the improvements with additional equity) will be made to protect the owner participant's expected return, - Edison Mission Energy has paid, on an after-tax basis, all reasonable out-of-pocket costs and expenses of the lease financing parties, including the reasonable fees and expenses of counsel, in connection with the financing of an improvement, - no lease event of default has occurred and is continuing, unless the improvements to be constructed with the financing will cure the default and the improvements will be made in compliance with the applicable operative documents, - the aggregate of all the financing to construct improvements to either facility under both leases pertaining to the applicable facility is in an amount not less than $20 million, nor greater than 100% of the costs of the improvements being financed, but only if the aggregate outstanding balance of all lessor notes issued in respect of the facility never exceeds 90% of the lesser of (1) the fair market value of the relevant facility taking into account the improvements, as determined according to the appraisal procedure and (2) the sum of (a) the price paid by the owner trusts for the facility (which we refer to as the "Purchase Price") and (b) the cost of the improvement being financed, - the aggregate cost of the improvement to the applicable facility and previous improvements financed with additional lessor notes is not greater than 25% than of the Purchase Price, unless we have received confirmation that the related lease debt rating will not fall below BBB- or Baa3 from Standard & Poor's and Moody's, respectively, as a result of financing the improvement, 114 - the owner participant has received from tax counsel reasonably acceptable to Edison Mission Energy, a favorable opinion reasonably satisfactory to us to the effect that the financing creates no material indemnified, or any unindemnified, incremental tax risk to the owner participant, - the owner participant will suffer no material adverse accounting effects under generally accepted accounting principles as a result of providing the additional financing, - we and Edison Mission Energy will have made or delivered representations, warranties, covenants, opinions or certificates as the applicable owner participant may reasonably request, and - the additional lessor notes issued to finance the improvements are issued in accordance with the requirements of the lease indenture, and both we and Edison Mission Energy have delivered certificates, reports and other documents and have taken all other actions required to be delivered or taken by us according to the lease indenture. SUBLEASE We may sublease either or both of the ownership interests in a facility without the consent of the applicable owner trust, owner participant, lease indenture trustee or pass-through trustee, under the following conditions: - the Edison Mission Energy guarantee, the reimbursement agreement between us and Edison Mission Energy (see "--Reimbursement Agreement") and the Edison Mission Energy owner participant guaranty remain in full force and effect, - the sublessee (1) is a solvent corporation, partnership, business trust, limited liability company or other entity (but not an individual) not subject to bankruptcy proceedings, (2) is not involved in material litigation with the applicable owner participant, and (3) is, or its obligations under the sublease are guaranteed by or contracted to be performed by, an experienced, reputable operator of similar electric generating assets, - the sublease does not extend beyond the scheduled expiration of the applicable lease term then in effect or elected by us (and may be terminated upon early termination of the lease) and is expressly subject and subordinate to the applicable lease, - all terms and conditions of the applicable lease and related operative documents remain in effect and we remain fully and primarily liable for our obligations under the lease and operative documents but subject to the subordination of claims against us, - no lease event of default under the applicable lease has occurred and is continuing, - the sublease prohibits further assignment or subletting, - the sublease requires the sublessee to operate and maintain the ownership interest in a manner not less favorable than required under the applicable lease and operative documents, - the sublessee does not cause the facility to become "tax exempt use property" within the meaning of Section 168(h) of the Internal Revenue Code of 1986, unless we make a payment to the applicable owner participant at the time of the execution of the sublease that in the reasonable judgment of the owner participant compensates the owner participant for the adverse tax consequences resulting from the classification of the property as "tax-exempt use property," - the applicable owner trust, and so long as lessor notes are outstanding, the pass-through trustee and lease indenture trustee, receive an opinion of counsel, which opinion and counsel are satisfactory to each recipient, to the effect that all regulatory approvals relating to the facility sublease have been obtained, 115 - the sublessee pays all reasonable documented out-of-pocket expenses incurred by the applicable lease financing parties in connection with the sublease, and - the owner participant receives a reasonably satisfactory opinion of tax counsel reasonably acceptable to us to the effect that the sublease would not result in any material indemnified or any unindemnified incremental tax risk to the owner participant. It is a condition precedent to any subleasing that we provide the owner trust, the owner participant and, so long as lessor notes are outstanding the lease indenture trustee and pass-through trustees, with all documentation related to the sublease and an opinion of counsel reasonably satisfactory to the recipients to the effect that the sublease complies with the above requirements. ASSIGNMENT We may not, without the consent of the lease financing parties, assign the leases or any other operative document, or any interest in any lease or operative document; except that, so long as the assignment does not result in the owner trust or owner participant becoming regulated as a "public utility" or "public utility holding company" we may assign: - to an entity whose long term senior unsecured indebtedness is rated equal to or higher than (1) BBB+ from Standard & Poor's and Baa1 from Moody's, or (2) if higher, the rating by Standard & Poor's and Moody's of Edison Mission Energy's long term senior unsecured indebtedness (but not to exceed A- by Standard & Poor's or A3 by Moody's); upon the entity's assumption of Edison Mission Energy's and our obligations, we and Edison Mission Energy will have no further liability or obligation under the relevant lease or the related operative documents, and - to any other entity, provided we remain secondarily liable under the leases and other operative documents such that we would be directly obligated to pay or perform any obligation not paid or performed by the assignee when due, and the Edison Mission Energy guaranty, the reimbursement agreement and the Edison Mission Energy owner participant guaranty shall remain in full force and effect. However, we may not assign our lease obligations unless each of Standard & Poor's and Moody's confirms that the assignment and assumption will not result in a downgrade of the then-existing credit rating of the certificates. Assignment of the leases, the operative documents or any interest in an operative document also is subject to satisfaction of the following requirements: - the applicable owner trust and owner participant, and so long as lessor notes are outstanding, the lease indenture trustee and pass-through trustees, has received an opinion of counsel, which opinion and counsel are reasonably satisfactory to the recipients, to the effect that all regulatory approvals required in connection with the transfer or necessary to assume our obligations under the applicable lease and the related operative documents have been obtained; - the transfer will be according to an assignment and assumption agreement in form and substance satisfactory to the applicable owner participant, and so long as the lessor notes are outstanding, the lease indenture trustee and the pass-through trustees; - the applicable owner trust and owner participant, and so long as the lessor notes are outstanding, the lease indenture trustee and the pass-through trustees, have received an opinion of counsel, which opinion and counsel are reasonably satisfactory to the recipients, as to the validity and enforceability of the assignment and assumption agreement; 116 - the owner participant has received a reasonably satisfactory opinion of its tax counsel reasonably acceptable to us to the effect that the transfer would not result in any material indemnified or any unindemnified incremental tax risk to the owner participant; - no material lease default and no lease event of default has occurred and is continuing; - the transfer does not result in a regulatory event of loss; - the transferee is not involved in material litigation with the applicable owner participant; - we will pay all reasonable documented out-of-pocket expenses of the applicable owner trust, owner participant, lease indenture trustee and pass-through trustee in connection with the assignment; and - the transferee, or the operator of the facility retained by the transferee, is experienced in operating similar facilities. TERMINATION FOR BURDENSOME EVENTS We have the option, by giving notice to the applicable owner trust and owner participant no later than 12 months after the date we receive notice or actual knowledge of the change in law described below and no later than 24 months after we receive notice or actual knowledge of the indemnity event described below, to purchase an owner trust's ownership interest in the facility and terminate the applicable lease if: (1) a change in law causes it to become illegal for us to continue the lease or for us to make payments under the lease or other documents relating to the lease, and the transactions cannot be restructured to comply with the change in law in a manner reasonably acceptable to the lease financing parties; or (2) (A) one or more events outside our control has occurred which will, or can reasonably be expected to, give rise to an obligation by us to pay or indemnify in respect of general indemnity or tax indemnity payments under the applicable lease documents, (B) the indemnity obligation and the underlying cost or tax can be avoided in whole or in part by the purchase of the owner trust's ownership interest in the facility, and (C) the amount of the avoided payments would exceed (on a present value basis, discounted at the discount rate, compounded on an annual basis to the date of the termination) 2.5% of the owner trust's purchase price. The related owner participant may waive its right to indemnity payments in excess of 2.5% of the purchase price payments or arrange for its own account the payment of the indemnity payments. If, in connection with the termination of the lease with respect to one or more facilities under the circumstances described above, we purchase the owner trust's interest in the facility, execute an assumption agreement and satisfy specific other conditions contained in the applicable lease indenture, we may, so long as no material lease default or lease event of default has occurred and is continuing after giving affect to the assumption, assume the applicable lessor notes. No termination of a lease under the circumstances described above will be effective, regardless of whether the owner trust elects to sell or retain its interest in the leased assets in connection with the termination, unless and until either we assume the related lessor notes in accordance with the provisions of the related lease indenture or the applicable owner trust has paid all outstanding principal and accrued interest on the lessor notes and all other amounts due under the lease indenture on the proposed date of termination. Under the participation agreements, we also have the option of purchasing the beneficial interest of the applicable owner participant under the circumstances and keeping the lease in place. We may, so long as no lease event of default has occurred and is continuing, terminate a lease in whole or with respect to any facility at any time on or after the seventh anniversary of the closing date 117 and within 180 days of notice (as described below) if our board of managers determines in good faith that: (1) the facility is economically or technologically obsolete as a result of a change in applicable law, regulation, or tariff of general application or imposition by the Federal Energy Regulatory Commission or any other governmental entity having or claiming jurisdiction over us or the facility of any conditions or requirements, including without limitation, requiring significant capital improvements to the facility upon the initial issuance, continued effectiveness or renewal of any license or permit required for the operation or ownership of the facility, (2) the facility is otherwise economically or technologically obsolete or surplus to our needs or no longer useful in our trade or business, including without limitation, as a result of a change in the markets for the wholesale purchase and/or sale of energy or any material abrogation of power purchase agreements, or (3) an event has occurred that, in our good faith judgment, will cause the facility to become obsolete. In order to exercise the termination option, we must give the applicable owner trust six months' prior notice, containing a certification by our board of managers as to the basis of exercising an option to terminate. The owner trust may elect to retain rather than sell the ownership interest in the facility by providing notice to us 90 days prior to the proposed termination date, in which case we will pay to owner trust on the termination date all rent and other amounts then owing, and the lease will terminate. Notwithstanding the foregoing, so long as the related lessor notes are outstanding, we will not terminate a lease with respect to any facility according to the foregoing, unless all the leases for which we are the lessee related to the obsolete, surplus or unusable facility are also terminated. In the event of an early termination as described immediately above, we will, as non-exclusive agent for the applicable owner trusts, use commercially reasonable efforts to obtain bids and sell the applicable owner trust's interest in the obsolete, surplus or unusable facility on the termination date, all the proceeds of which will be for the account of the owner trusts. However, so long as the lessor notes are outstanding, the proceeds of the sale shall be paid directly to the lease indenture trustee. The purchaser of the interest in the facility will not be us, any of our affiliates or any third party with whom we, or any of our affiliates has an arrangement to use or operate the affected facility to generate power for our benefit, or the benefit of our affiliates, along with its interest in land on which the facility is located, after termination of the applicable lease. On the termination date, the owner trust will sell the facility to the highest bidder, and we shall pay or cause Edison Mission Energy to pay the owner trust the excess of the termination value over the proceeds of the sale, plus specified additional amounts. However, if the proceeds of the sale exceed the termination value, the owner trust will reimburse us for the amount, if any, we had paid as termination value. Unless the applicable owner trust elects to retain its interest in the facility, we may, not more than 30 days prior to the proposed termination date, revoke our notice of termination, but we may not reissue the notice of termination more than once in any five-year period. In the event of a revocation of a termination notice, the applicable lease will continue in effect. LIENS We will not, directly or indirectly, create, incur, assume or suffer to exist any liens or other encumbrances on the facilities or our interest in any operative document, except for liens expressly permitted as described above in the section titled "Description of the Certificates." 118 INSURANCE We will, at our own cost and expense, maintain (1) all risk property insurance customarily carried by prudent operators of coal-fired and oil/gas fired facilities of comparable size and risk to the facilities and in an amount equal to the probable maximum loss of the facilities and (2) liability insurance and contractual liability coverage, insuring against claims for bodily injury (including death) and property damage to third parties arising out of the ownership, operation, maintenance, condition and use of the facilities and the facility sites, with limits of not less than $35 million per occurrence if the insurance covers more than one facility, or $25 million per occurrence if the insurance only covers one facility and facility site, subject to the availability of the foregoing on commercially reasonable terms. Any liability insurance policy maintained by us or on our behalf will name each of the owner participant, the equity investor, the owner trust, the owner trustee, the lease indenture trustee and the pass-through trustees as additional insureds. All insurance proceeds up to $5 million on account of any damage to or destruction of the facilities or any part of the facilities will be paid to or retained by us for application in repair or replacement of the affected property unless a material lease default or lease event of default has occurred and is continuing. If the insurance proceeds exceed $5 million but are less than $25 million, they will be paid to or retained by us for application in repair or replacement of the affected property for so long as Edison Mission Energy's long-term unsecured indebtedness is rated at least BBB- and Baa3 by Standard & Poor's and Moody's, respectively. All insurance proceeds in excess of $25 million on account of any damage to the facilities or any part of the facilities will be paid to the owner trust, or, if the lien of the lease indentures has not been terminated or discharged, will be paid to the lease indenture trustee for application in accordance with the terms of leases. If any insurance required to be maintained by us ceases to be available on a commercially reasonable basis at the time of renewal, we will enter into good faith negotiations with each owner trust in order to obtain an alternative to the insurance. EVENTS OF LOSS Any of the following events, by themselves, are events of loss under the leases: (a) the loss of any facility or use of the facility due to destruction or damage to the facility or facility site rendering repair uneconomic or rendering the facility permanently unfit for normal use, (b) any damage to any facility that results in an insurance settlement on the basis of a total loss or an agreed constructive or a compromised total loss of the facility, (c) seizure, condemnation, confiscation or taking of, or requisition of title to or use of, any facility or any facility site by any governmental authority that results in loss by the owner trust of title to or use of the ownership interest in the facility or the interest in the land on which the facility is located, or (d) if elected by the owner participant (only in circumstances where the termination of the lease and transfer of the facility to us removes the basis of the regulation described below), subjection of (1) the owner participant's interest in the facility, the lease or the trust estate to any rate-of-return regulation by a governmental authority, or (2) the owner participant or the owner trust to any public utility regulation which in the reasonable opinion of the owner participant is burdensome, in either case by reason of our participation or the owner trust's or the owner participant's participation in the transactions contemplated by the operative documents. If we elect to terminate the lease following the occurrence of an event of loss described in clauses (a) or (b) above, or upon the occurrence of any other event of loss described in clauses (c) and (d) above, we will purchase the facility from the owner trust by paying the termination value plus 119 specified other amounts, and the owner trust will prepay the outstanding principal of and accrued interest on the related lessor notes, whereupon the lease will terminate. For so long as we remain liable under the leases, we may purchase the owner participant's beneficial interest in lieu of purchasing the ownership interest in the facility and keep the lease in place. Notwithstanding the foregoing, in the case of a regulatory event of loss, if we assume the applicable lessor notes in accordance with the provisions of the lease indenture, and so long as no material lease default or lease event of default has occurred and is continuing and specific other conditions are satisfied, our obligation to pay the applicable termination value will be reduced by the outstanding principal amount of the lessor notes we assume, it being understood that by assuming these notes we will acquire the ownership interest in the facility subject to the lien of the lease indenture. Our right to rebuild the facilities is subject to the satisfaction of the following, among other things: - no material lease default or lease event of default has occurred or is continuing; - the owner participant has received reasonably satisfactory legal opinions from tax counsel reasonably acceptable to us (1) to the effect that the proposed rebuilding will not result in any material indemnified or any unindemnified incremental tax risk, or (2) to the effect that the rebuilding is more likely than not to have this tax effect, in which case the owner participant has received collateral or other security for indemnification obligations with respect to this incremental tax risk; - we deliver a report of an independent engineer to the effect that the rebuilding of the facilities is technologically feasible and economically viable and that the rebuilding can be completed at least 36 months before the end of the basic lease term or any renewal lease term then in effect or elected by us; - we deliver an appraisal of an independent appraiser to the effect that the rebuilt facilities will have at least the same value, residual value, utility and useful life as the facilities immediately prior to the event of loss; - we demonstrate that we possess adequate financial resources, from insurance proceeds or otherwise, to complete the rebuilding of the facilities and to pay basic lease rent while the facilities are being rebuilt; and - we commence the rebuilding as soon as practicable after we notify the owner trust and the lease indenture trustee of our intent and, in any event, within 18 months of the occurrence of the event that caused the event of loss and will cause work on the rebuilding to proceed diligently thereafter; and - upon completion of the rebuilding, we deliver to the owner trust and the owner participant, and so long as lessor notes are outstanding, the lease indenture trustee and pass-through trustees, the lease supplements, recordings, filing and other documentation evidencing the subjection of the rebuilt facility to the lease indenture, along with an opinion of counsel to the effect that the documents effectively accomplish the subjection. We will also deliver an appraisal by an independent appraiser certifying that the facility as rebuilt has a residual value, remaining useful life and utility at least equal to those values immediately prior to the rebuilding, and a report of an independent engineer certifying that the facility as rebuilt is in the state of repair required by the leases. In addition, there may be no material adverse accounting effect as a result of this rebuilding. Any proceeds received by us or the owner trust from a governmental authority or from insurance proceeds related to an event of loss will be paid to the owner trust, except we may retain any amounts up to the amount we were to pay to owner trust to terminate the lease or purchase the facility upon the event of loss. The remainder of these proceeds will be divided between us and the owner trust in 120 accordance with our respective interests in the facility. Notwithstanding the foregoing, if we have elected to rebuild the facilities, these proceeds will be applied as outlined above in "--Insurance." If any portion of the facilities or facility sites are requisitioned or otherwise taken by a governmental authority under power of eminent domain or otherwise in a manner which does not constitute an event of loss, our obligation to pay rent will continue, but we will be entitled to receive and retain any amounts payable as compensation for the taking. However, if at the time of the requisition or taking, a material lease default or lease event of default has occurred and is continuing, these amounts will be held by the owner trusts, or if lessor notes are outstanding the lease indenture trustee, as security for our obligations until the default has been cured. LEASE EVENTS OF DEFAULT The occurrence of any of the following events constitutes an event of default under each lease: (a) our failure to make any payment when due, and we do not cure the failure within five business days of the failure, of any category of rent, termination value, make-whole premium or other costs (but in no event interest or principal), or fees and expenses associated with the lessor notes, other than costs, fees and expenses incurred as a result of a lessor loan event of default which is not a lease event of default, (b) our or Edison Mission Energy's failure to make any other payment under a lease or any other operative document other than payments under the reimbursement agreement, including excepted payments with respect to which the owner participant has declared a default, when due, if we or Edison Mission Energy fail to cure the failure within 30 days after receiving written notice of the failure, (c) our failure to maintain insurance in the amounts and on the terms described in the operative documents, and we do not cure the failure for 10 business days after receiving written notice of the failure, (d) our failure to perform or observe any other material covenant described in the leases or any covenant described in the participation agreement or in any other operative document and the failure is not cured within 30 days after receiving written notice of the failure; however, if the failure cannot be remedied within this 30-day period, then we will have up to an additional 180 days to cure, so long as we diligently pursue this remedy, the failure is reasonably capable of being remedied within the additional 180-day period, and the continuation of the failure during the period of extension would not have a material adverse effect on us or on Edison Mission Energy. However, in the case of our obligation to maintain the facilities, to the extent we are contesting in good faith such non-compliance, and the contest extends no longer than 36 months beyond the scheduled lease term expiration, our failure to comply with the requirements of the obligation will not constitute a lease event of default so long as our contest does not expose any facility to risk of forfeiture or loss, or expose any lease financing party to criminal liability, regulation as a public utility, or other material adverse effects. If noncompliance relating to maintenance of the facilities is not a type that can be immediately remedied, our failure to comply will not be a lease event of default if we are taking all reasonable action to remedy the noncompliance and if, but only if, the noncompliance shall not involve any of the risks to the facilities or lease financing parties just described, (e) any of our or Edison Mission Energy's representations or warranties in the lease financing documents, other than a tax representation described in the tax indemnity agreement, prove to have been incorrect in any material respect when made and the facts or circumstances upon which the breach of representation or warranty is based continue to be material and unremedied for a period of 30 days after we receive written notice of the breach. However, if this 121 condition cannot be remedied within 30 days but could be remedied within 60 additional days, the continuation of the condition would not have a material adverse effect on us or on Edison Mission Energy, and we diligently pursue a remedy during that time, then the cure period will be extended up to an additional 60 days, (f) either we or Edison Mission Energy voluntarily commence or have instituted against us bankruptcy cases, or consent to any similar relief or the appointment of or taking possession by any governmental official in any voluntary case or other proceeding commenced against us, or if we file an answer admitting the material allegations of a petition filed against us in any proceeding of the kind, or if we make a general assignment for the benefit of creditors, or either we or Edison Mission Energy are wound up or dissolved, or, in the instance of involuntary proceedings, the case remains undismissed for 90 days, (g) we or Edison Mission Energy default under any bond, debenture, note or other evidence of Indebtedness (but excluding obligations arising under the lease financing documents and non-recourse Indebtedness) for money borrowed by us or Edison Mission Energy under any mortgage, indenture or instrument, whether the Indebtedness now exists or shall hereafter be created, which Indebtedness is in an aggregate principal amount exceeding $20 million at all other times and which default has resulted in the Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without the Indebtedness having been discharged, or the acceleration having been rescinded or annulled, (h) our failure to comply in all material respects with the restrictions on transfer under "--Sublease" and "--Assignment" above, (i) any of the operative documents, including the lease indenture, to which we or Edison Mission Energy are party are declared unenforceable, are terminated, or fail to constitute valid and perfected first priority security interests (in each case, other than in accordance with their terms) or either we or Edison Mission Energy fail to comply with our respective obligations to take all further acts as are necessary to preserve the first priority lien intended to be created by one lease indenture or the ownership interests in the facilities and the interests in the land on which the facilities are located, (j) judgments or orders for the payment of money against us or Edison Mission Energy, which judgments or orders, as the case may be, are in excess of $20 million in the aggregate (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without reservation) and which are not vacated, discharged or effectively stayed or bonded within 60 days from the entry of the judgment or order, as the case may be, (k) Edison Mission Energy fails to make any payment under the Edison Mission Energy guarantee, the Edison Mission Energy owner participant guaranty or any other operative document (other than the reimbursement agreements and other than excepted payments) when due, and the failure shall continue unremedied for five business days after receipt by Edison Mission Energy of written notice of the failure, (l) regulatory violation with respect to us, (m) specified events occur with respect to ERISA, (n) Edison Mission Energy's failure to perform or observe any other material covenant described in the operative documents (other than any Edison Mission Energy owner participant guaranty) and the failure is not cured within 30 days after receiving notice of the failure; however, if the failure cannot be remedied within this 30-day period, then Edison Mission Energy will have up to an additional 180 days to cure, so long as (1) Edison Mission Energy diligently pursues the remedy, (2) the failure is reasonably capable of being remedied within the additional 180-day 122 period and (3) the continuation of the failure during the period of extension would not have a material adverse effect on Edison Mission Energy, or (o) Edison Mission Energy's failure to perform or observe any other material covenant described in any Edison Mission Energy owner participant guaranty, if the applicable owner trust has declared a default under the Edison Mission Energy owner participant guaranty with respect to the failure and the failure is not cured within 30 days after receiving notice of the failure; however, if the failure cannot be remedied within this 30-day period, then Edison Mission Energy will have up to an additional 180 days to cure, so long as Edison Mission Energy diligently pursues the remedy, the failure is reasonably capable of being remedied within the additional 180-day period and the continuation of the failure during the period of extension would not have a material adverse effect on Edison Mission Energy. The circumstances described in clauses (a), (b) and (f) above are referred to in this section as material lease defaults. Upon the occurrence and continuance of any lease event of default, the applicable owner trust may declare the lease to be in default. Except as provided below, the owner trust may, at any time thereafter, so long as we have not cured all outstanding lease events of default, exercise one or more of the remedies described in the relevant lease, including: - seeking performance of our obligations under the lease and the other applicable lease documents by appropriate court actions, either at law or equity, or recover damages for breach of these documents, - terminating the lease, whereupon we will be required to return possession of the owner trust's ownership interest in the facility, and our right to the possession and use of the applicable interest under the lease will absolutely cease and terminate, but we will remain liable as provided in the lease, - selling the applicable ownership interest in the facility and interest in the land on which the facility is located at public or private sale, free and clear of our rights, and - holding, keeping idle or leasing to others the applicable ownership interest in the facility and interest in the land on which the facility is located, free and clear of the our rights under the lease. Upon the occurrence and continuance of any lease event of default, whether or not the applicable owner trust has sold its interest in the applicable ownership interest and interest in the land, such owner trust may require us to pay any unpaid basic lease rent due and payable as of the termination date specified in a termination notice, plus as liquidated damages for loss of a bargain and not as a penalty (in lieu of the basic lease rent due after the termination date specified in the notice), (1) an amount equal to the excess, if any, of the termination value plus make-whole premium, if any, in each case over the fair market value of the applicable ownership interest and interest in the land, as of the termination date; (2) an amount equal to the excess, if any, of the termination value computed as of the termination date over the present value of the fair market rental value of the owner trust's interest in the ownership interest and interest in the land during the fixed lease term or the then current renewal lease term; or (3) an amount equal to the termination value computed as of the termination date (which, together with the other amounts payable in connection therewith, will be at least sufficient to pay the outstanding principal of and accrued interest on the applicable lessor notes). Upon payment of the amount referred to in clause (3), the owner trust will then convey its interests in the applicable ownership interest and interest in the land to us. Upon the occurrence and continuance of any lease event of default and if the applicable owner trust has sold its interest in the applicable ownership interest and interest in the land, the owner trust 123 may require us to pay as liquidated damages for loss of a bargain and not as a penalty (in lieu of the basic lease rent due for any period after the sale) an amount equal to (1) any unpaid basic lease rent due before the date of the sale, plus (2) if that date is a rent payment date, the basic lease rent due on that date, plus (3) the amount, if any, by which the termination value computed as of the termination date next preceding the date of the sale or, if the sale occurs on a rent payment date or a termination date then computed as of that date, exceeds the net proceeds of the sale. Upon payment of this amount, the facility lease and our obligation to pay periodic rent for any periods subsequent to the date of the payment shall terminate. If we were to become the subject of a bankruptcy case, all the foregoing remedies may be stayed or limited by the bankruptcy court. See "Risk Factors--Bankruptcy law considerations could limit claims against us, Edison Mission Energy or the owner trusts." OWNER TRUST'S RIGHT TO PERFORM If we fail to make any payment under a lease or perform or comply with any other obligations under a lease and this failure continues for 10 days after notice of the failure, the applicable owner trust or owner participant may itself make the payment or perform or comply with the obligation, and amounts so paid shall be deemed supplemental lease rent payable by us to the owner trust on demand. However, the owner participant or owner trust may not exercise a cure right with respect to defaults in payments of basic lease rent for more than four consecutive payments of basic lease rent or more than eight payments in total. THE INTERCOMPANY NOTES AND THE EDISON MISSION ENERGY GUARANTEES We have loaned the aggregate proceeds from the sale of the facilities to Edison Mission Energy, for which Edison Mission Energy executed promissory notes in our favor evidencing the indebtedness and promised to repay the principal amount in semi-annual installments. We refer to this transaction as the intercompany loan. In consideration of the intercompany loan, Edison Mission Energy issued a guaranty in favor of each of the four owner trusts by which Edison Mission Energy guarantees the payment by us of all rent obligations under the leases. The guarantees are not subject to the limitation on claims against us found in the other lease financing documents. See "--Subordination of Claims." However, for as long as the intercompany loan is outstanding, Edison Mission Energy's obligations under the guarantees with respect to termination value may be limited to the difference between termination value and projected fair market value of the facility if: (1) an event of default occurs under any lease, and (2) either the owner trust or the lease indenture trustee, as the case may be, (a) terminates the applicable lease and takes possession of the facilities, (b) sells its interest in the facilities at public or private sale, or (c) holds, keeps idle or leases to others its interest in the facilities, without first providing to us and Edison Mission Energy a written demand for payment of termination value. SUBORDINATION OF CLAIMS Claims are permitted against us for any amounts of rent or termination value in excess of the amount equal to free cash flow, but these claims are subordinate to the prior payment of, and junior in the right of payment of, the claims of holders of some of our and Edison Mission Midwest Holdings' other indebtedness, which we refer to as "senior debt." For more detailed discussion of free cash flow, see "Risk Factors--Claims against us for nonpayment of our obligations under each lease are limited." 124 The owner trusts and the owner participants have entered into a subordination agreement with the holders of the senior debt and have agreed that, until the senior debt obligations have been paid in full: (1) we will not make any payment of rent or our other obligations under the lease in excess of free cash flow amount; (2) the owner trusts and the owner participants will not demand from us any payment or collateral in respect of claims for rent or our other obligations under the lease in excess of free cash flow amount; (3) the owner trusts and the owner participants will not take, any other action to enforce the payment or collection of their claims against us under the lease documents in excess of free cash flow amount; and (4) the owner trusts and the owner participants will not, nor will they allow us to, otherwise take any action prejudicial to the priority position of the holders of senior debt, other than termination of the facility lease and the facility site lease. This limitation of claims against us will not limit in any way the rights of the owner trusts and the owner participants to give notice necessary to cause any default, breach, failure or misrepresentation to become a lease event of default, to declare the facility lease to be in default, to elect to exercise any remedy arising out of or in connection with a lease event of default and to exercise any other right or remedy in the operative documents with respect to any claim not limited as described above. Notwithstanding this limitation on claims against us, Edison Mission Energy is liable under the Edison Mission Energy guarantees for any and all rent, termination value or other amounts payable to the lease financing parties, subject to the limitations described above in "The Intercompany Notes and the Edison Mission Energy Guarantees." REIMBURSEMENT AGREEMENT Edison Mission Energy has agreed to pay us, within five business days following the end of each fiscal quarter, an amount equal to the excess of rent and other payments made by us in connection with each lease according to the operative documents during that fiscal quarter over the free cash flow amount attributable to that fiscal quarter. The base free cash flow amount for that fiscal quarter is zero if the conditions to distributions by us or Edison Mission Midwest Holdings described in the credit agreement entered into by Edison Mission Midwest Holdings in connection with the acquisition of the power generation assets from Commonwealth Edison and in the participation agreements entered into by us and Edison Mission Midwest Holdings in connection with the Collins sale/leaseback transaction, or the correlative conditions set forth in any credit facility that refinances or replaces these agreements, have not been satisfied at the end of that fiscal quarter. 125 BOOK-ENTRY; DELIVERY AND FORM The exchange certificates will be issued in fully registered form. Except as described below, the exchange certificates initially will be represented by one or more global certificates, in definitive, fully-registered form without interest coupons. The exchange certificates will be deposited with the pass-through trustee as custodian for The Depository Trust Company and registered in the name of Cede & Co. or another nominee as The Depository Trust Company may designate. The Depository Trust Company has advised us as follows: - The Depository Trust Company is a limited purpose company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered according to the provision of Section 17A of the Exchange Act. - The Depository Trust Company was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thus eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and specific other organizations. Indirect access to The Depository Trust Company system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. - Upon the issuance of the global certificates, The Depository Trust Company or its custodian will credit, on its internal system, the respective principal amount of the individual beneficial interests represented by these global certificates to the accounts of persons who have accounts with The Depository Trust Company. Ownership of beneficial interests in the global certificates will be limited to persons who have accounts with The Depository Trust Company, who we refer to as participants, or persons who hold interests through participants. Ownership of beneficial interests in the global certificates will be shown on, and the transfer of that ownership will be effected only through, records maintained by The Depository Trust Company or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). The laws of some states require that some purchasers of securities take physical delivery of the securities. These limits and laws may limit the market for beneficial interests in the global certificates. Qualified institutional buyers may hold their interests in the global certificates directly through The Depository Trust Company if they are participants in such system, or indirectly through organizations which are participants in such system. So long as The Depository Trust Company or its nominee is the registered owner or holder of the global certificates, The Depository Trust Company or such nominee, as the case may be, will be considered the sole record owner or holder of the exchange certificates represented by such global certificates for all purposes under the related pass-through trust agreements. No beneficial owner of an interest in the global certificates will be able to transfer that interest except in accordance with The Depository Trust Company's applicable procedures, in addition to those provided for under the pass-through trust agreements. Owners of beneficial interests in the global certificates will not: - be entitled to have the exchange certificates represented by the global certificates registered in their names; 126 - receive or be entitled to receive physical delivery of certificated certificates in definitive form, and - be considered to be the owners or holders of any exchange certificates under the global certificates. Accordingly, each person owning a beneficial interest in the global certificates must rely on the procedures of The Depository Trust Company and, if a person is not a participant, on the procedures of the participant through which that person owns its interests, to exercise any right of a holder of exchange certificates under the global certificates. We understand that under existing industry practice, in the event an owner of a beneficial interest in the global certificates desires to take any action that The Depository Trust Company, as the holder of the global certificates, is entitled to take, The Depository Trust Company would authorize participants to take that action, and that the participants would authorize beneficial owners owning through the participants to take that action or would otherwise act upon the instructions of beneficial owners owning through them. Payments of the principal of, premium, if any, and interest on the exchange certificates represented by the global certificates will be made to The Depository Trust Company or its nominee, as the case may be, as the registered owner of the global certificates. Neither we, the pass-through trustees, nor any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global certificates or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests. We expect that The Depository Trust Company or its nominee, upon receipt of any payment of principal of, premium, if any, or interest on the global certificates will credit participants' accounts with payments in amounts proportionate to their respective beneficial ownership interests in the principal amount of such global certificates, as shown on the records of The Depository Trust Company or its nominee. We also expect that payments by participants to owners of beneficial interests in the global certificates held by these participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for these customers. These payments will be the responsibility of these participants. Neither we nor the pass-through trustees will have any responsibility for the performance by The Depository Trust Company or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Transfer between participants in The Depository Trust Company will be effected in the ordinary way in accordance with The Depository Trust Company rules. If a holder requires physical delivery of certificates in certificated form for any reason, including to sell certificates to persons in states which require the delivery of the certificates or to pledge the certificates, a holder must transfer its interest in the global certificates in accordance with the normal procedures of The Depository Trust Company and the procedures described in the lease indentures. Unless and until they are exchanged in whole or in part for certificated exchange certificates in definitive form, the global certificates may not be transferred except as a whole by The Depository Trust Company to a nominee of The Depository Trust Company or by a nominee of The Depository Trust Company to The Depository Trust Company or another nominee of The Depository Trust Company. Beneficial owners of exchange certificates registered in the name of The Depository Trust Company or its nominee will be entitled to be issued, upon request, exchange certificates in definitive certificated form. The Depository Trust Company has advised us that The Depository Trust Company will take any action permitted to be taken by a holder of certificates, including the presentation of certificates for 127 exchange as described below, only at the direction of one or more participants to whose account The Depository Trust Company interests in the global certificates are credited. Further, The Depository Trust Company will take any action permitted to be taken by a holder of certificates only in respect of that portion of the aggregate principal amount of certificates as to which the participant or participants has or have given that direction. Although The Depository Trust Company has agreed to these procedures in order to facilitate transfers of interests in the global certificates among participants of The Depository Trust Company, it is under no obligation to perform these procedures, and may discontinue them at any time. Neither we nor the pass-through trustees will have any responsibility for the performance by The Depository Trust Company or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Subject to specified conditions, any person having a beneficial interest in the global certificates may, upon request to the pass-through trustees, exchange the beneficial interest for exchange certificates in the form of certificated certificates. Upon any issuance of certificated certificates, the pass-through trustees are required to register the certificated certificates in the name of, and cause the same to be delivered to, the person or persons, or the nominee of these persons. In addition, if The Depository Trust Company is at any time unwilling or unable to continue as a depositary for the global certificates, and a successor depositary is not appointed by us within 90 days, the pass-through trusts will issue definitive certificates in exchange for the global certificates. 128 EXCHANGE OFFER; REGISTRATION RIGHTS As part of the sale of the original certificates, under a registration rights agreement, dated as of August 17, 2000, we and Edison Mission Energy agreed with the initial purchasers in the offering of the original certificates, for the benefit of the certificateholders, to file with the SEC an exchange offer registration statement or, if applicable, within a specified time period, a shelf registration statement unless we were to determine in good faith that applicable SEC policy or applicable law did not permit us to effect this exchange offer. Under the registration rights agreement, we and Edison Mission Energy agreed to use our best efforts to consummate an exchange offer to exchange the original certificates for a like amount of the exchange certificates that are identical in all material respects to the restricted original certificates. Edison Mission Energy agreed to bear all expenses incurred in connection with Edison Mission Energy's and our obligations under the registration rights agreement. Once this registration statement is declared effective, the pass-through trusts will offer the exchange certificates in return for surrender of the original certificates. This offer will remain open for no less than the shorter of 30 days after the date notice of the exchange offer is mailed to the original certificate holders and the period ending when the last remaining original certificate is tendered into the exchange offer. For each original certificate surrendered to us under the exchange offer, the original certificate holder will receive exchange certificates in an equal principal amount. Interest on each exchange certificate will accrue from the last date on which interest was paid on the original certificate so surrendered. In the event that we and Edison Mission Energy reasonably determine in good faith that (1) the exchange certificates would not be tradeable, upon receipt in the exchange offer, without restriction, (2) the SEC is unlikely to permit the exchange offer registration statement to become effective prior to the 270th day after the date of original issue of the certificates or (3) the exchange offer may not be made in compliance with applicable laws, we and Edison Mission Energy will use our reasonable best efforts, subject to customary representations and agreements of the certificateholders, to have a shelf registration statement covering the resale of the original certificates declared effective and kept effective until August 23, 2002, subject to specified exceptions. We will, in the event of a shelf registration, provide to each certificateholder copies of the prospectus, notify each certificateholder when a registration statement for the certificates has become effective and take other actions as are appropriate to permit resale of the certificates. In the event that this exchange offer is not completed on or prior to the 270th day after the date of original issue of the certificates, the annual interest rates on the lessor notes (and, correspondingly, the certificates of each trust) will be increased by 0.50% per annum from and after that date to, but excluding, the date the exchange offer is consummated or the date on which all the certificates otherwise become transferable by certificateholders (other than affiliates or former affiliates of Edison Mission Energy or us) without further registration under the Securities Act. In the event that a registration statement is required to be filed with the SEC and becomes effective and later ceases to be effective at any time during the period specified by the registration rights agreement, the annual interest rate on the lessor notes (and, correspondingly, the certificates) will be increased by 0.50% per annum from and after the date such registration statement ceases to be effective to, but excluding, such date when the registration statement again becomes effective (or, if earlier, the end of such period specified by the registration rights agreement). Such additional interest will be paid to certificateholders of each pass-through trust on a regular distribution date. The interest rate on the lessor notes (and, correspondingly, the certificates) will be increased by 0.50% per annum if we or Edison Mission Energy cease to maintain our status as reporting companies under the Exchange Act whether or not the SEC rules and regulations require us to maintain that status (unless the SEC will not accept the filing of the applicable reports). In the event that more than one of the aforementioned events occurs at the same time, the maximum increase in the interest rate applicable to the certificates shall be 0.50% per annum. 129 Each certificateholder, other than specified holders, who wishes to exchange its original certificates for exchange certificates in the exchange offer will be required to represent that: - it is not our affiliate nor an affiliate of Edison Mission Energy, - any exchange certificates to be acquired by it will be acquired in the ordinary course of business and - that at the time of the completion of the exchange offer it will have no arrangement with any person to participate in the distribution, within the meaning of the Securities Act, of the exchange certificates. A certificateholder that sells its certificates under a shelf registration generally: - would be required to be named as a selling certificateholder in the related prospectus and to deliver a prospectus to purchasers, - will be subject to several of the civil liability provisions under the Securities Act in connection with this sale and - will be required to agree in writing to be bound by the provisions of the registration rights agreement which are applicable to the selling certificateholder, including specified indemnification obligations. 130 MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES The following is a summary of material U.S. federal income tax consequences associated with the exchange of original certificates for exchange certificates, and the ownership and disposition of exchange certificates by certificateholders who acquire exchange certificates in the exchange offer. The discussion is based upon the Internal Revenue Code of 1986, as amended, Treasury Regulations, judicial authorities, published positions of the Internal Revenue Service (the "IRS") and other applicable authorities, all as in effect on the date hereof and all of which are subject to change or differing interpretations (possibly with retroactive effect). The discussion does not address all the tax consequences that may be relevant to a particular holder or to holders subject to special treatment under federal income tax laws (including banks and some other financial institutions, insurance companies, tax-exempt organizations, persons whose functional currency is not the U.S. dollar, foreign persons, dealers in securities or foreign currency, and persons holding certificates that are a hedge against, or that are hedged against, currency risk or that are part of a straddle, constructive sale or conversion transaction). This discussion is limited to persons who acquire exchange certificates in the exchange offer and who hold their certificates as capital assets. No ruling has been or will be sought from the IRS regarding any matter discussed in this section. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax aspects described below. Certificateholders must consult their own tax advisers as to the federal income tax consequences of acquiring, holding and disposing of certificates as well as the effects of state, local and non-U.S. tax laws. For purposes of this discussion, you are a "U.S. certificateholder" if you are a beneficial owner of a certificate and: - a citizen or resident of the United States, - a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision of the United States, - an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of source, or - a trust, if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) the trust was in existence on August 20, 1996 and properly elected to continue to be treated as a U.S. person. Otherwise, you are a "non-U.S. certificateholder." EXCHANGE OF ORIGINAL CERTIFICATES There should be no federal income tax consequences to certificateholders who exchange original certificates for exchange certificates in the exchange offer. Any such certificateholder should have the same tax basis and holding period in the exchange certificates that such certificateholder had in its original certificates immediately before the exchange. TAX TREATMENT OF THE PASS-THROUGH TRUSTS AND CERTIFICATEHOLDERS Each pass-through trust that is operated according to the applicable pass-through trust agreement will not itself be subject to U.S. federal income taxation. Instead, each U.S. certificateholder will be required to report on its federal income tax return its pro rata share of the entire income from the lessor notes and any other property held in the pass-through trust, in accordance with the U.S. certificateholder's method of accounting. Accordingly, each U.S. certificateholder's share of interest paid on the lessor notes will be taxable as ordinary income, as it is paid or accrued, and a U.S. 131 certificateholder's share of any premium paid on redemption of a lessor note will be treated as capital gain. The lessor notes should not be subject to the original issue discount rules due to the possibility that a make-whole premium may be payable, because the likelihood of such premium being paid is remote, and the amount of such premium, if paid, would be incidental. If the proceeds from the sale of certificates are invested with a depositary or held according to an escrow arrangement prior to the purchase of lessor notes by the pass-through trust, each U.S. certificateholder's share of interest paid on the resulting deposits will be taxable as ordinary income as it is paid or accrued in accordance with the holder's method of accounting for U.S. federal income tax purposes. In addition, the deposits may be subject to the original issue discount rules, with the result that a U.S. certificateholder may be required to include any original issue discount in income from a deposit using the accrual method of accounting regardless of its normal method. We urge you to consult your own tax advisor. Each U.S. certificateholder will be entitled to deduct, consistent with its method of accounting, its pro rata share of fees and expenses paid or incurred by the pass-through trust as provided in Section 162 or 212 of the Internal Revenue Code. Although we anticipate that certificateholders will not bear these fees and expenses, these fees and expenses could be treated as constructively received by the pass-through trust, in which event a U.S. certificateholder could be required to include in income and be entitled to deduct its pro rata share of the fees and expenses. If a U.S. certificateholder is an individual, estate or trust, the deduction for the certificateholder's share of fees or expenses will be allowed only to the extent that all the certificateholder's miscellaneous itemized deductions, including the certificateholder's share of fees and expenses, exceed 2% of the certificateholder's adjusted gross income. In addition, in the case of U.S. certificateholders who are individuals, some otherwise allowable itemized deductions will generally be subject to additional limitations on itemized deductions under applicable provisions of the Internal Revenue Code. SALE OR OTHER DISPOSITION OF THE EXCHANGE CERTIFICATES Upon the sale, exchange or other disposition of an exchange certificate, a U.S. certificateholder will generally recognize capital gain or loss equal to the difference between the amount realized on the sale or exchange (other than any amount attributable to accrued but unpaid interest that the U.S. certificateholder has not included in gross income previously, which will be taxable as ordinary income) and the U.S. certificateholder's allocable share of tax basis in the trust's property attributable to such exchange certificate. Any gain or loss will be long-term capital gain or loss, to the extent (1) the certificateholder held its exchange certificate for more than one year, and (2) the property to which the gain or loss is allocable was held by the pass-through trust for more than one year. In the case of individuals, estates, and trusts, the maximum U.S. federal income tax rate on long-term capital gains generally is 20%. If the owner participant assumes the lessor notes, as described above in "Description of the Lessor Notes--Assumption of Lessor Notes," such assumption may, depending on facts and circumstances existing at the time, constitute a "recapitalization" under the Code, in which case such assumption should generally have no material federal income tax consequences to a U.S. certificateholder. If, however, the assumption by the owner participant does not qualify as a recapitalization, or if we assume the lessor notes, as described above in "Assumption of Lessor Notes," the assumption would constitute a deemed exchange for federal income tax purposes, and the consequences described in the preceding paragraph would generally apply to a U.S. certificateholder. The foregoing discussion of U.S. federal income tax consequences assumes that each pass-through trust is properly classified under the Internal Revenue Code as a grantor trust. If, however, a pass-through trust were not classified as a grantor trust, it would be classified as a partnership and not as an association or publicly traded partnership taxable as a corporation; the consequences described above would generally apply to a U.S. certificateholder, except that (1) items of income, gain, loss or deduction from the assets held by the pass-through trust would generally be determined at the pass-through trust level, (2) a U.S. certificateholder would be required to report its share of items of 132 income, gain, loss and deduction of the pass-through trust on its tax return for the taxable year within which the pass-through trust's taxable year ends and (3) income, gain, loss and deduction would be reported on an accrual basis even if the U.S. certificateholder otherwise uses the cash method of accounting. NON-U.S. CERTIFICATEHOLDERS Assuming specified certification requirements are satisfied (which include identification of the beneficial owner of a certificate), and subject to the discussion of backup withholding below: - interest paid (including any original issue discount) on an exchange certificate to, or on behalf of, any non-U.S. certificateholder will not be subject to U.S. federal income tax or withholding tax, but only if (1) the non-U.S. certificateholder does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of an owner investor, (2) the non-U.S. certificateholder is not (A) a bank receiving interest according to a loan agreement entered into in the ordinary course of its trade or business, or (B) a controlled foreign corporation for U.S. tax purposes that is related to an owner investor, and (3) the interest payments are not effectively connected with the non-U.S. certificateholder's conduct of a U.S. trade or business; and - a non-U.S. certificateholder will not be subject to U.S. federal income tax on any capital gain realized on the sale, exchange or other disposition of a certificate, unless (1) the non-U.S. certificateholder is an individual who is present in the United States for 183 days or more during the taxable year of the sale or exchange and specific other requirements are met or (2) the gain is effectively connected with the non-U.S. certificateholder's conduct of a U.S. trade or business. The certification referred to above may be made on an IRS Form W-8 BEN (or any successor form prescribed by the IRS) or substantially similar substitute form. INFORMATION REPORTING AND BACKUP WITHHOLDING In general, information reporting requirements will apply to some payments within the United States of principal, interest, original issue discount and premium on the exchange certificates, and to payments of the proceeds of some sales of exchange certificates made to U.S. certificateholders other than specified "exempt recipients" (such as corporations). A 31% backup withholding tax may apply to the payments if the holder fails or has failed to provide an accurate taxpayer identification number in the manner required by the Treasury Regulations (generally on IRS Form W-9) or otherwise establish an exemption or fails to report in full interest income. With respect to non-U.S. certificateholders, payments made on an exchange certificate and proceeds from the sale of an exchange certificate owned by a non-U.S. certificateholder will generally not be subject to information reporting requirements or the backup withholding tax if the non-U.S. certificateholder provides the required certification of its non-U.S. status or otherwise establishes an exemption. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against the certificateholder's U.S. federal income tax liability, if any, provided the required information is furnished to the IRS. THE FOREGOING DISCUSSION IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OR ANY OTHER CONSEQUENCES OF ACQUIRING, HOLDING OR DISPOSING OF CERTIFICATES. THUS, HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF CERTIFICATES, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS. 133 ERISA CONSIDERATIONS In this prospectus, we will refer to the Employee Retirement Income Security Act of 1974 as "ERISA." If you intend to use plan assets (as discussed below) to purchase certificates, you should consult your counsel about the potential consequences of such investment under the fiduciary responsibility provisions of ERISA and the prohibited transactions provisions of ERISA and the Internal Revenue Code. For the purposes of this discussion, we will refer to employee benefit plans, specific other retirement plans and arrangements, including individual retirement accounts and annuities, and any entity holding the assets of any such plan, account, or annuity, such as a bank common investment fund or an insurance company general or separate account, as the "plans." Generally, a person who exercises discretionary authority or control over the assets of a plan will be considered a fiduciary of the plan under ERISA. Before investing in a certificate, a plan fiduciary should determine whether such investment: - is permitted under the plan documents and the instruments governing the plan and - is appropriate for the plan in view of its overall investment policy and the composition and diversification of its portfolio, taking into account the limited liquidity of the certificates. ERISA and the Internal Revenue Code prohibit a wide range of transactions involving plan assets and persons who have specified relationships to the plan. These persons are called "parties in interest" under ERISA and are called "disqualified persons" under the Internal Revenue Code. The transactions prohibited by ERISA and the Internal Revenue Code are called "prohibited transactions." As a result, anyone considering using plan assets to invest in the certificates should determine whether the investment might constitute or give rise to a non-exempt prohibited transaction under ERISA and/or the Internal Revenue Code. Further, an investment in the certificates by a plan might result in the lessor notes of the related pass-through trust being deemed to constitute "plan assets." If the assets of a pass-through trust are deemed to be plan assets, the operation of the pass-through trust might give rise to one or more non-exempt prohibited transactions under ERISA and/or the Internal Revenue Code. Moreover, the plan fiduciary might be deemed to have improperly delegated its investment management responsibilities with respect to those assets of the pass-through trust deemed to be plan assets to the pass-through trustee. Neither ERISA nor the Internal Revenue Code defines the term "plan assets." According to Section 2510.3-101 of the United States Department of Labor regulations, when a plan acquires an equity interest in an entity, and such interest does not represent a "publicly offered security" or a security issued by an investment company registered under the Investment Company Act of 1940, the plan's assets include both the equity interest and the undivided interest in each of the underlying assets of the entity, unless it is established that either the entity is an "operating company" or plan equity participation in the entity is not "significant." In general, Department of Labor regulations define an "equity interest" as any interest in an entity that is not treated as indebtedness under applicable local law and that has no substantial equity features. We and Edison Mission Energy believe that Department of Labor regulations will treat the certificates as equity interests in the pass-through trusts. Plans' equity participation in the certificates would not be "significant" if less than 25% of the value of the certificates is held by benefit plan investors immediately after the most recent acquisition of a certificate, as determined under Department of Labor regulations. Benefit plan investors include plans subject to ERISA, specific other plans not subject to ERISA (for example, governmental plans, foreign plans, individual retirement accounts and entities whose assets are treated as plan assets under Department of Labor regulations), and entities deemed to be holding the assets of any plan. Neither we nor Edison Mission Energy restrict or monitor investment in or transfer of the certificates with respect to this 25% limit. Plans and other benefit plan investors may hold 25% or more of the 134 certificates during the term of the certificates. Accordingly, under Department of Labor regulations, a plan investment in the certificates during such period would, in effect, be considered an investment in the corresponding lessor notes and an ongoing loan to the owner trusts for purposes of the fiduciary responsibility provisions of ERISA and the prohibited transaction provisions of ERISA and the Internal Revenue Code. As a result, if any assets of a pass-through trust are considered plan assets, a plan's investment in the certificates could result in a prohibited transaction or an impermissible delegation of fiduciary authority. Further, we, Edison Mission Energy, the pass-through trustee, or any of our or their respective affiliates may be a party in interest or a disqualified person with respect to the plan acquiring, holding or disposing of the certificates. In such case, acquisition, holding or disposition of the certificates could give rise to a direct or indirect prohibited transaction, regardless of whether the assets of a pass-through trust are considered plan assets. A prohibited transaction may be exempt under ERISA and the Internal Revenue Code if the certificates are acquired, held or disposed of according to and in accordance with one or more statutory or administrative exemptions. Among the administrative prohibited transaction class exemptions or "PTCEs" are: 1. PTCE 75-1 exempts specific transactions involving employee benefit plans and registered broker-dealers, such as reporting dealers and banks, 2. PTCE 84-14 exempts specific transactions determined by an independent qualified professional asset manager, 3. PTCE 90-1 exempts specific transactions involving insurance company pooled separate accounts, 4. PTCE 91-38 exempts specific transactions involving bank collective investment funds, 5. PTCE 95-60 exempts specific transactions involving insurance company general accounts, and 6. PTCE 96-23 exempts specific transactions determined by a qualified in-house asset manager. Some of the exemptions, however, do not afford relief from the prohibitions on self-dealing contained in Section 406(b) of ERISA and Section 4975(c)(1)(E)-(F) of the Internal Revenue Code. In addition, there can be no assurance that any of these administrative exemptions will be available with respect to any particular transaction involving the certificates. Thus, a plan fiduciary considering an investment in the certificates should consider whether the acquisition, the continued holding, or the disposition of a certificate might constitute or give rise to a non-exempt prohibited transaction. ERISA also prohibits a plan fiduciary from maintaining the indicia of ownership of any plan assets outside the jurisdiction of the district courts of the United States, except under specific circumstances. Before investing in a certificate, a plan fiduciary should consider whether its acquisition, holding or disposition of a certificate would satisfy such indicia of ownership rules. Each person who acquires or accepts a certificate or an interest in a certificate will be deemed by such acquisition or acceptance to have represented and warranted that either: - no plan assets have been used to acquire such certificate or an interest in a certificate; or - the acquisition and holding of such certificate or interest in a certificate do not constitute a prohibited transaction under ERISA and the Internal Revenue Code or are exempt from the prohibited transaction restrictions of ERISA and the Internal Revenue Code according to one or more prohibited transaction class exemptions. A plan fiduciary and each fiduciary for a governmental or church plan subject to rules similar to those imposed on plans under ERISA considering the purchase of certificates should consult its tax and/or legal advisors regarding the circumstances under which the assets of a pass-through trust would be considered plan assets, the availability, if any, of exemptions from any potential prohibited transaction and other fiduciary issues and their potential consequences. 135 PLAN OF DISTRIBUTION Each broker-dealer that receives exchange certificates for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange certificates. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange certificates received in exchange for original certificates where the original certificates were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration date of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any resale. In addition, until - , 2001, all dealers effecting transactions in the exchange certificates may be required to deliver a prospectus. We will not receive any proceeds from any sale of exchange certificates by broker-dealers. Exchange certificates received by broker-dealers for their own account in the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange certificates or a combination of these methods of resale. These resales may be made at market prices prevailing at the time of resale, at prices related to these prevailing market prices or negotiated prices. Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any broker-dealer or the purchasers of any of the exchange certificates. Any broker-dealer that resells exchange certificates that were received by it for its own account in the exchange offer and any broker or dealer that participates in a distribution of the exchange certificates may be deemed to be an underwriter within the meaning of the Securities Act, and any profit on the resale of exchange certificates and any commission or concessions received by those persons may be deemed to be underwriting compensation under the Securities Act. Any broker-dealer that resells certificates that were received by it for its own account in the exchange offer and any broker-dealer that participates in a distribution of those certificates may be deemed to be an underwriter within the meaning of the Securities Act and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, including the delivery of a prospectus that contains information with respect to any selling holder required by the Securities Act in connection with any resale of the exchange certificates. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker- dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act. Furthermore, any broker-dealer that acquired any of its outstanding certificates directly from us: - may not rely on the applicable interpretation of the staff of the SEC's position contained in Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan, Stanley & Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1983) and - must also be named as a selling certificateholder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction. For a period of 180 days after the expiration date of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests these documents in the letter of transmittal. Edison Mission Energy has agreed to pay all expenses incident to the exchange offer, including the expenses of one counsel for the holders of the certificates, other than commissions or concessions of any brokers or dealers. Edison Mission Energy will indemnify the holders of the certificates, including any broker-dealers, against various liabilities, including liabilities under the Securities Act. 136 LEGAL MATTERS The legality of the exchange certificates and the related Edison Mission Energy guarantees will be passed upon for Edison Mission Energy by Skadden, Arps, Slate, Meagher & Flom LLP. EXPERTS The financial statements of Midwest Generation, LLC as of December 31, 2000 and 1999 and for the year ended December 31, 2000 and the period from inception (July 12, 1999) to December 31, 1999, which are included in this prospectus, and the consolidated financial statements of Edison Mission Energy and subsidiaries included in Edison Mission Energy's Annual Report on Form 10-K for the year ended December 31, 2000, which are incorporated by reference in this prospectus, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. 137 INDEX TO FINANCIAL STATEMENTS MIDWEST GENERATION, LLC--2000 AND 1999 FINANCIAL STATEMENTS Report of Independent Public Accountants.................... F-2 Balance Sheets--December 31, 2000 and December 31, 1999..... F-3 Statements of Operations--For the Year ended December 31, 2000 and for the Period from Inception (July 12, 1999) to December 31, 1999......................................... F-4 Statements of Changes in Member's Equity--For the Year ended December 31, 2000 and for the Period from Inception (July 12, 1999) to December 31, 1999...................... F-5 Statements of Cash Flows--For the Year ended December 31, 2000 and for the Period from Inception (July 12, 1999) to December 31, 1999......................................... F-6 Notes to Financial Statements............................... F-7
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Managers of Midwest Generation, LLC: We have audited the accompanying balance sheets of Midwest Generation, LLC (a Delaware limited liability company) as of December 31, 2000 and 1999, and the related statements of operations, changes in member's equity, and cash flows for the year ended December 31, 2000 and the period from inception (July 12, 1999) to December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Midwest Generation, LLC as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the year ended December 31, 2000 and the period from inception (July 12, 1999) to December 31, 1999, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Orange County, California March 28, 2001 F-2 MIDWEST GENERATION, LLC BALANCE SHEETS--DECEMBER 31, 2000 AND 1999 (IN THOUSANDS)
2000 1999 ---------- ---------- ASSETS Current assets Cash and cash equivalents................................. $ 15,699 $ 72 Due from Edison Mission Energy and affiliates............. 199,889 32,168 Fuel inventory............................................ 38,677 74,991 Spare parts inventory..................................... 15,452 14,166 Interest receivable from affiliate........................ 16,864 -- Other current assets...................................... 12,000 799 ---------- ---------- Total current assets.................................. 298,581 122,196 ---------- ---------- Operating facility and equipment Property, plant and equipment............................. 4,902,549 5,067,333 Accumulated depreciation and amortization................. (137,748) (5,665) ---------- ---------- Net property, plant and equipment........................... 4,764,801 5,061,668 Notes receivable from affiliate............................. 1,667,000 -- ---------- ---------- Total assets.......................................... $6,730,382 $5,183,864 ========== ========== LIABILITIES AND MEMBER'S EQUITY Current liabilities Accounts payable.......................................... $ 14,600 $ 4,162 Accrued liabilities....................................... 139,345 29,667 Due to affiliates......................................... 3,821 1,092 Interest payable.......................................... 56,242 2,192 Interest payable to affiliates............................ 25,455 12,143 Current portion of lease financing........................ 20,967 -- ---------- ---------- Total current liabilities............................. 260,430 49,256 ---------- ---------- Subordinated revolving line of credit with affiliate........ 1,942,239 1,742,999 Subordinated long term debt with affiliate.................. 1,576,456 1,679,000 Lease financing, net of current portion..................... 2,188,821 860,000 Deferred taxes.............................................. 12,837 6,868 Deferred coal and transportation costs...................... 100,949 126,282 Benefit plans and other..................................... 98,750 81,000 ---------- ---------- Total liabilities..................................... 6,180,482 4,545,405 ---------- ---------- Commitments and contingencies (note 8) Member's equity Membership interests, no par value; 100 units authorized, issued and outstanding.................... -- -- Additional paid-in capital.............................. 658,631 650,816 Accumulated deficit..................................... (108,731) (12,357) ---------- ---------- Total member's equity................................. 549,900 638,459 ---------- ---------- Total liabilities and member's equity................. $6,730,382 $5,183,864 ========== ==========
The accompanying notes are an integral part of these financial statements. F-3 MIDWEST GENERATION, LLC STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 AND FOR THE PERIOD FROM INCEPTION (JULY 12, 1999) TO DECEMBER 31, 1999 (IN THOUSANDS)
PERIOD FROM INCEPTION (JULY 12, 1999) TO DECEMBER 31, 2000 1999 ---------- --------------------- OPERATING REVENUES FROM MARKETING AFFILIATE Energy revenues........................................... $ 507,498 $ 15,727 Capacity revenues......................................... 576,052 7,972 ---------- -------- Total operating revenues................................ 1,083,550 23,699 ---------- -------- OPERATING EXPENSES Fuel...................................................... 404,020 14,881 Plant operations.......................................... 341,915 7,553 Depreciation and amortization............................. 167,686 5,665 Administrative and general................................ 22,396 1,351 ---------- -------- Total operating expenses................................ 936,017 29,450 ---------- -------- Income (loss) from operations............................... 147,533 (5,751) OTHER INCOME (EXPENSE) Interest expense.......................................... (361,203) (14,335) Interest income and other................................. 55,599 -- ---------- -------- Loss before income taxes.................................... (158,071) (20,086) Benefit for income taxes.................................... (61,697) (7,729) ---------- -------- Net loss................................................ $ (96,374) $(12,357) ========== ========
The accompanying notes are an integral part of these financial statements. F-4 MIDWEST GENERATION, LLC STATEMENTS OF CHANGES IN MEMBER'S EQUITY FOR THE YEAR ENDED DECEMBER 31, 2000 AND FOR THE PERIOD FROM INCEPTION (JULY 12, 1999) TO DECEMBER 31, 1999 (IN THOUSANDS)
MEMBERSHIP ADDITIONAL ACCUMULATED MEMBER'S INTERESTS PAID DEFICIT EQUITY ---------- ---------- ----------- -------- Balance at Inception (July 12, 1999)............. $ -- $ -- $ -- $ -- Cash contribution.............................. -- 650,000 -- 650,000 Non-cash contribution of services.............. -- 816 -- 816 Net loss....................................... -- -- (12,357) (12,357) --------- -------- --------- -------- Balance at December 31, 1999..................... -- 650,816 (12,357) 638,459 Non-cash contribution of services.............. -- 7,815 -- 7,815 Net loss....................................... -- -- (96,374) (96,374) --------- -------- --------- -------- Balance at December 31, 2000..................... $ -- $658,631 $(108,731) $549,900 ========= ======== ========= ========
The accompanying notes are an integral part of these financial statements. F-5 MIDWEST GENERATION, LLC STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2000 AND FOR THE PERIOD FROM INCEPTION (JULY 12, 1999) TO DECEMBER 31, 1999 (IN THOUSANDS)
PERIOD FROM INCEPTION (JULY 12, 1999) TO DECEMBER 31, 2000 1999 ---------- --------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss.................................................. $ (96,374) $ (12,357) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization......................... 167,686 5,665 Non-cash contribution of services..................... 7,815 816 Loss on asset disposal................................ 982 -- Deferred tax provision................................ 5,969 6,868 Changes in operating assets and liabilities: Increase in due to/from affiliates.................. (164,992) (16,963) Decrease (increase) in inventory.................... 35,028 (19,387) Increase in prepaid and other....................... (11,201) (799) Increase in accounts payable........................ 10,438 4,162 Increase in accrued liabilities..................... 109,678 19,693 Increase in interest payable........................ 67,362 14,335 Increase in interest receivable from affiliate...... (16,864) -- Decrease in other liabilities....................... (22,382) -- ---------- ---------- Net cash provided by operating activities............. 93,145 2,033 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of facilities.................................... (16,895) (4,064,006) Capital expenditures...................................... (140,139) (9,954) Loan to affiliate......................................... (1,667,000) -- Sale of equipment......................................... 300,032 -- ---------- ---------- Net cash used in investing activities................. (1,524,002) (4,073,960) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of subordinated debt with affiliate............................................... 71,000 1,679,000 Repayment of subordinated debt with affiliate............. (173,544) -- Borrowings from subordinated revolving line of credit with affiliate............................................... 351,674 1,742,999 Repayments of subordinated revolving line of credit with affiliate............................................... (152,434) -- Capital contribution from parent.......................... -- 650,000 Capital lease obligation.................................. 1,367,000 -- Repayment of capital lease obligation..................... (17,212) -- ---------- ---------- Net cash provided by financing activities............. 1,446,484 4,071,999 ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS................... 15,627 72 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 72 -- ---------- ---------- CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 15,699 $ 72 ========== ==========
The accompanying notes are an integral part of these financial statements. F-6 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 1. GENERAL Midwest Generation, LLC (the "Company"), a wholly-owned subsidiary of Edison Mission Midwest Holdings Co. ("Midwest Holdings"), an indirect wholly-owned subsidiary of Edison Mission Energy ("Edison Mission"), an indirect wholly-owned subsidiary of Edison International ("EIX"), is a Delaware limited liability company formed on July 12, 1999 for the purpose of obtaining financing and acquiring, owning and operating multiple fossil-fuel electric generating units (collectively, the "Illinois Plants"), located within the state of Illinois for the purpose of producing electric energy. On December 15, 1999, the Company completed its acquisition ("the Acquisition") of 100% of the ownership interests in the Illinois Plants and assumed specified liabilities from Commonwealth Edison, a subsidiary of Exelon Corporation. The accompanying financial statements reflect the operations of the Illinois Plants commencing from the date of acquisition. The Acquisition has been accounted for utilizing the purchase method. The purchase price was allocated to the assets acquired and liabilities assumed based upon their respective fair market values. The Acquisition was financed through a capital contribution by Midwest Holdings of approximately $650 million and subordinate debt from another subsidiary of Midwest Holdings of approximately $3.4 billion. Concurrent with the Acquisition, the Company assigned its right to purchase the Collins Station, a 2,698 MW gas and oil-fired generating station located in Illinois, to four third party entities. After this assignment, an affiliate of the Company entered into leases of the Collins Station and the Company entered into subleases of the Collins Station, each with a term of 33.75 years. These subleases have been accounted for as a lease financing for accounting purposes (see note 8). The aggregate MW purchased or leased as a result of this transaction with Commonwealth Edison is approximately 9,539 MW. The Illinois Plants consist of the following: - Six coal-fired generating plants consisting of 5,646 MW, which include the Powerton, Joliet, Will County, Waukegan, Crawford, and Fisk Stations; - Collins gas and oil-fired generating station consisting of 2,698 MW; and - A group of on-site generating peakers consisting of 632 MW and off-site generating peakers consisting of 563 MW. Separate financial statements for our operations are available only from the period since our acquisition of the Commonwealth Edison assets. There are no separate financial statements available with regard to the operations of the Commonwealth Edison assets prior to our taking ownership because their operations were fully integrated with, and their results of operations were consolidated into, the former owners of the Commonwealth Edison assets. In addition, the electric output of the Commonwealth Edison assets were sold based on rates set by regulatory authorities. As a result of these factors and because electricity rates will now be set under the Commonwealth Edison power purchase agreements or by market forces, historical financial data with respect to the Commonwealth Edison assets are not meaningful or are not indicative of our future results. The Company's future results of operations will depend primarily on revenues from the sale of energy, capacity and other related products, and the level of the Company's operating expenses. F-7 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES IN FINANCIAL STATEMENTS The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NEW ACCOUNTING STANDARD Effective January 1, 2001, Edison Mission adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. For derivatives that qualify for hedge accounting, depending on the nature of the hedge, changes in fair value are either offset by changes in the fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings. Upon adoption of SFAS No. 133, the Company will record all derivatives associated with its risk management activities at fair value unless the derivatives qualify for the normal sales and purchases exceptions. The Company expects that a portion of its risk management activities related to forward physical purchases or sales will qualify for this exception. For derivatives that do not qualify as normal sales and purchases, the Company expects its financial instruments will qualify as a cash flow hedge with appropriate adjustments made to other comprehensive income. The cumulative effect on prior periods' income resulting from the change in accounting for derivatives in accordance with SFAS No. 133 is not expected to be material. CASH AND CASH EQUIVALENTS The Company considers cash and cash equivalents to include cash and short-term investments with original maturities of three months or less. INVENTORY Inventory consists of spare parts, natural gas, coal and fuel oil and is stated at the lower of weighted average cost or market. F-8 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation is computed on a straight-line basis over the following estimated useful lives: Power plant facilities..................................... 20 to 40 years Emission allowances........................................ 40 years 30 to Capitalized leased equipment............................... 33.75 years Furniture, office equipment and vehicles................... 3 to 7 years
At December 31, 2000 and 1999, property, plant and equipment consisted of the following:
2000 1999 ---------- ---------- (IN THOUSANDS) Land................................................. $ 34,949 $ 34,981 Power plant facilities............................... 1,710,398 3,289,840 Emission allowances.................................. 867,350 872,830 Construction in progress............................. 56,442 3,282 Equipment, furniture and fixtures.................... 6,410 6,400 Plant and equipment under lease financing............ 2,227,000 860,000 ---------- ---------- 4,902,549 5,067,333 Accumulated depreciation and amortization............ (137,748) (5,665) ---------- ---------- Property, plant and equipment, net................... $4,764,801 $5,061,668 ========== ==========
Property, plant and equipment includes assets which are capitalized under lease financing. The total consists of $860 million for the Collins station and $1.367 billion for the aggregate purchase of the Powerton and Joilet stations. The Company recorded amortization expense related to the leased facilities of $40.6 million and $1.1 million for 2000 and 1999, respectively. As part of the acquisition of the Illinois Plants, the Company acquired emission allowances under the Environmental Protection Agency's Acid Rain Program. Although the emission allowances granted under this program are freely transferable, the Company intends to use substantially all the emission allowances in the normal course of its business to generate electricity. Accordingly, the Company has classified emission allowances expected to be used to generate power as part of property, plant and equipment. Acquired emission allowances are amortized over the estimated lives of the Illinois Plants on a straight-line basis. DEFERRED COAL AND TRANSPORTATION COSTS In connection with the Acquisition, the Company assumed certain contracts for the future purchase of coal and transportation. The prices for coal and transportation as defined in the contracts exceed the estimated fair market value of coal and transportation in future periods by approximately $101 million as at December 31, 2000. A liability of $126.3 million was initially recorded as at the date of acquisition. This liability is reduced as purchases are made over the term of the contacts. F-9 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REPAIRS AND MAINTENANCE Certain major pieces of the Company's equipment require repairs and maintenance on a periodic basis. These costs, including major maintenance costs, are expensed as incurred. REVENUE RECOGNITION AND RELATED COSTS Revenue and related costs are recorded as electricity is generated and sold under energy sales agreements or as services are provided. INCOME TAXES The Company is included in the consolidated Federal income tax and combined state franchise tax returns of EIX. The Company calculates its income tax provision/(benefit) on a separate company basis under a tax sharing arrangement with an affiliate of EIX, which in turn has an agreement with EIX. Tax benefits generated by the Company and used in the EIX consolidated tax return are recognized by the Company without regard to separate company limitations. The Company accounts for income taxes using the asset-and-liabilities method, wherein deferred tax assets and liabilities are recognized for future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities using enacted rates. RECLASSIFICATIONS Certain amounts in the prior period have been reclassified to conform to the current year's presentation. 3. LONG-TERM DEBT The Company entered into a subordinated loan agreement ("Subordinated Loan Agreement") with another subsidiary of Midwest Holdings, Edison Mission Overseas Co. ("Mission Overseas"), with terms matching those of a credit agreement as described further below under Parent Company Credit Agreement. Under the terms of the subordinated loan agreement, the Company is required to make payments to Mission Overseas similar to those payments made by Midwest Holdings under the Credit Agreement. In December 1999, the Company also entered into a subordinated revolving loan agreement (the "Subordinated Revolving Line of Credit") with Mission Overseas for up to $2 billion. Amounts outstanding under the Subordinated Revolving Line of Credit bear interest at 8.0 percent with payments due quarterly. The outstanding principal balance is due in 2034. As of December 31, 2000 and 1999, total draws under the Subordinated Revolving Line of Credit were approximately $1.9 billion and $1.7 billion, respectively. For the periods ended December 31, 2000 and 1999, under the Subordinated Revolving Line of Credit and the Subordinated Loan Agreement, the Company incurred and accrued interest charges of approximately $272.6 million and $12.1 million, respectively. F-10 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 3. LONG-TERM DEBT (CONTINUED) At December 31, 2000, the future maturities of the debt are as follows:
YEAR ENDING DECEMBER 31, (IN THOUSANDS) - ------------------------ -------------- 2001........................................................ $ -- 2002........................................................ 768,148 2003........................................................ 808,308 2004........................................................ -- 2005........................................................ -- Thereafter.................................................. 1,942,239 ---------- Total................................................... $3,518,695 ==========
PARENT COMPANY CREDIT AGREEMENT In December 1999, Midwest Holdings entered into a credit agreement (the "Credit Agreement") with a number of commercial lending institutions for a combination of loans and lines of credit aggregating $1.8 billion. The financing consisted of (i) an $840 million revolving credit facility due 2002, commonly referred to as Tranche A, (ii) an $839 million revolving credit facility due 2004, commonly referred to as Tranche B, and (iii) a $150 million working capital facility due 2004, commonly referred to as Tranche C. On or about February 3, 2000, Midwest Holdings issued commercial paper in the aggregate amount of $1.679 billion. The Tranche A and B loans were repaid with the proceeds of the commercial paper issuance. The Tranche A and Tranche B facilities were used to backstop the commercial paper issuance. On May 9, 2000, Midwest Holdings entered into a Capex facility (the "Capex Facility") with a number of commercial lending institutions for a line of credit aggregating $71 million. At that time, the commercial paper program was increased to $1.75 billion and the Capex Facility backstopped the additional issuance. On December 13, 2000, the Capex Facility expired. Midwest Holdings increased the Tranche A commitment to $911 million to pay off the Capex Facility and extended the Tranche A maturity to December 31, 2003. As of December 31, 2000, the Tranche B commitment amount was reduced to $816 million. At December 31, 1999, there were no draws under the Tranche C facility. As of December 31, 2000, Midwest Holdings had borrowed $143 million under Tranche C to buy back some of its commercial paper. Amounts outstanding under the Credit Agreement bear interest at variable Eurodollar rates or Base rates as defined in the Credit Agreement, at the option of the Midwest Holdings. If Midwest Holdings elects to pay Eurodollar rates, interest costs include a margin of 0.80% to 2.25% on Tranche A and 0.75% to 2.00% on Tranches B and C depending on Midwest Holdings' debt rating. At December 31, 2000 and 1999, the margin was 1.00% on Tranche A and 0.95% on each of Tranches B and C. Additionally, Midwest Holdings pays a facility fee of 0.20% to 1.00% on Tranche A and 0.25% to 1.25% on each of Tranches B and C, depending on Midwest Holdings' current debt rating, on the total outstanding commitment irrespective of usage. The effective interest rate was 7.47% on Tranche A and 7.42% on Tranche B at both December 31, 2000 and December 31, 1999. At December 31, 2000 and 1999, the facility fee was 0.25% on Tranche A and 0.30% on each of Tranches B and C. Midwest F-11 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 3. LONG-TERM DEBT (CONTINUED) Holdings also pays an agent bank fee of $50,000 per year. Midwest Holdings used the proceeds from the Credit Agreement to make a loan to Mission Overseas, which in turn loaned the funds to the Company. Each of the subsidiaries of Midwest Holdings (including the Company) has executed full and unconditional guarantees in support of the borrowings under the Credit Agreement on a joint and several basis. Midwest Holdings has no material assets apart from investments in its subsidiaries. The collateral for any borrowings under the Credit Agreement are secured by all of the assets of the Company, including a mortgage on real property and a security interest in all bank accounts, insurance policies and other intangible assets whether now owned or thereafter acquired. Midwest Holdings has financial and non-financial debt covenants associated with its debt. Midwest Holdings, in order to make distributions, must maintain a specified debt service coverage ratio as follows: net cash flows over the aggregate of principal, interest, and fixed charges for a specified period exceeding 1.75 to 1.0. The fair market value of the long-term debt approximates the carrying value due primarily to the frequent repricing of interest rates. 4. PRICE RISK MANAGEMENT ACTIVITIES The Company's risk management policy allows for the use of derivative financial instruments through its marketing affiliate to limit financial exposure to energy prices for non-trading purposes. The Company's marketing affiliate's risk management activities give rise to commodity price risk, which represents the potential loss that can be caused by a change in the market value of a particular commodity. Commodity price risks are actively monitored to ensure compliance with the Company's risk management policies. Policies are in place which limit the amount of total net exposure the Company may enter into at any point in time. Procedures exist which allow for monitoring of all commitments and positions with daily reporting to senior management. The Company's marketing affiliate performs a "value at risk" analysis in the Company's daily business to measure, monitor and control its overall market risk exposure. The use of value at risk allows management to aggregate overall risk, compare risk on a consistent basis and identify the drivers of the risk. Value at risk measures the worst expected loss over a given time interval, under normal market conditions, at a given confidence level. Given the inherent limitations of value at risk and relying on a single risk measurement tool, the Company's marketing affiliate supplements this approach with industry "best practice" techniques including the use of stress testing and worst-case scenario analysis, as well as stop limits and counterparty credit exposure limits. F-12 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 4. PRICE RISK MANAGEMENT ACTIVITIES (CONTINUED) The Company's marketing affiliate has the following commodity price hedges outstanding on the dates presented:
DECEMBER 31, ------------------------------------------ 2000 1999 -------------------- ------------------- NOTIONAL CONTRACT NOTIONAL CONTRACT AMOUNT EXPIRES AMOUNT EXPIRES --------- -------- -------- -------- (IN THOUSANDS) COMMODITY CONTRACTS Forward contracts....................... $ 1,663 2001 -- -- Futures contracts....................... (95,575) 2001 -- -- Swap agreements......................... (179,778) 2001 -- --
The following table summarizes the fair values for outstanding financial instruments used for price risk management activities by instrument type:
DECEMBER 31, ----------------------------------------- 2000 1999 ------------------- ------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- -------- -------- -------- (IN THOUSANDS) COMMODITY CONTRACTS Forward contracts........................... -- $ 1,689 -- -- Futures contracts........................... -- (8,189) -- -- Swap agreements............................. -- 93 -- --
5. RELATED-PARTY TRANSACTIONS The Company has an energy sales agreement with its marketing affiliate for the sale of energy and capacity at a price equal to (i) the price which a third party purchaser of the capacity or energy has agreed to pay, less (ii) $.02 per MWh of capacity and energy. Payment is due and payable within thirty days from billing, which is rendered on a monthly basis. For the periods ended December 31, 2000 and 1999, the amount due from the marketing affiliate was $123.5 million and $18.1 million, respectively. The yearly net fees earned by the marketing affiliate were $1.5 million and $0.2 million for December 31, 2000 and 1999, respectively. Proceeds arising from the Powerton/Joliet sale-leaseback transaction (see note 8) were used by the Company to make a loan to Edison Mission. The loan is evidenced by four intercompany notes amounting to $1.367 billion. Edison Mission is obligated to repay the principal on the notes in a series of installments on the dates and in the amounts set forth on a schedule to each note. Edison Mission has paid and is required to pay interest on the notes on each January 2 and July 2 at a 8.30% fixed interest rate. All amounts due under the notes are due to be repaid in full on January 2, 2016. In addition to the four intercompany notes above relating to the Powerton/Joliet sale-leaseback, the Company loaned Edison Mission $300 million from the sale-leaseback of the peaker power units (see note 8). Edison Mission is obligated to repay the principal on the note on July 9, 2010 at the latest and will periodically pay interest on the note at a fluctuating rate. F-13 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 5. RELATED-PARTY TRANSACTIONS (CONTINUED) Certain administrative services, such as payroll, employee benefit programs, insurance and information technology are shared among all affiliates of EIX, and the costs of these corporate support services are allocated to all affiliates. The cost of services provided by EIX, including those related to the Company, are allocated to Edison Mission based on one of the following formulas: percentage of the time worked, equity in investment and advances, number of employees, or multi-factor (operating revenues, operating expenses, total assets and total employees). In addition, EIX bills Edison Mission for any direct labor and out-of-pocket expenses for services directly requested for the benefit of the Company. All charges from EIX related to the Company are billed to Edison Mission. The Company receives administrative services under an agreement with Edison Mission which provides for: (1) reimbursement of any charges from EIX directly for the benefit of the Company, (2) reimbursement of any payments made to third parties for goods and services for the sole benefit of the Company, (3) labor and expenses of EIX and Edison Mission personnel providing services requested by the Company, and (4) a corporate allocation. Several of the officers of the Company are also officers of Edison Mission. Compensation of common officers is paid for by Edison Mission and is considered part of the corporate allocation under (4) above. Management believes the allocation methodologies utilized are reasonable. Costs incurred for these programs during the year ended December 31, 2000 were $0.8 million. Costs incurred during the period ended December 31, 1999 were not significant. The Company has recorded a receivable from Edison Mission of $76.4 million and $14.1 million at December 31, 2000 and December 31, 1999, respectively. At both dates, this relates to tax due under the tax sharing agreement with Edison Mission. See Note 2 for the further discussion of the tax sharing agreement. Midwest Generation EME, LLC is the Company's parent company in Illinois and provides executive management, legal, human resources, accounting and other administrative services in Chicago on the Company's behalf without charge. In connection with regulations of the Securities and Exchange Commission, the costs of these services must be recorded as part of the Company's financial results, although the Company does not have a cash obligation to pay for these activities. The costs of these services, after tax, were $7.8 million and $0.8 million for the periods ended December 31, 2000 and 1999, respectively. The Company has reflected these activities as a non-cash contribution of services by its Parent in the accompanying financial statements. F-14 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 6. INCOME TAXES Income tax expense includes the current tax benefit from the operating loss and the change in deferred income taxes during the year. The components of the net accumulated deferred income tax liability were:
2000 1999 -------- -------- (IN THOUSANDS) DEFERRED TAX ASSETS Price risk management......................... $ 16,793 $ -- Lease financing............................... 9,203 -- Net operating losses.......................... 4,852 -- -------- -------- Deferred tax assets............................. 30,848 -- DEFERRED TAX LIABILITIES Accumulated depreciation difference........... 40,557 6,525 State tax benefit............................. 3,128 343 -------- -------- Deferred tax liability.......................... 43,685 6,868 -------- -------- Deferred tax liability, net..................... $ 12,837 $ 6,868 ======== ========
The Company has $265.9 million of loss carryforwards at December 31, 2000 from Illinois state tax losses which expire beginning in 2019. The benefit for income taxes is comprised of the following:
PERIOD FROM INCEPTION (JULY 12, 1999) TO 2000 DECEMBER 31, 1999 -------- --------------------- (IN THOUSANDS) CURRENT Federal....................................... $(60,029) $(13,061) State......................................... (7,637) (1,536) -------- -------- Total current................................... (67,666) (14,597) -------- -------- DEFERRED Federal....................................... 8,489 6,407 State......................................... (2,520) 461 -------- -------- Total deferred.................................. 5,969 6,868 -------- -------- Benefit for income taxes........................ $(61,697) $ (7,729) ======== ========
F-15 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 6. INCOME TAXES (CONTINUED) The components of the deferred tax provision, which arise from timing differences between financial and tax reporting, are presented below:
2000 1999 -------- -------- (IN THOUSANDS) Accumulated depreciation difference............. $ 34,032 $ 6,525 State tax benefit............................... 2,785 343 Price risk management........................... (16,793) -- Lease financing................................. (9,203) -- Net operating losses............................ (4,852) -- -------- -------- Total deferred provision........................ 5,969 6,868 ======== ========
Variations from the 35% federal statutory rate are as follows:
PERIOD FROM INCEPTION (JULY 12, 1999) TO 2000 DECEMBER 31, 1999 -------- --------------------- (IN THOUSANDS) Expected benefit for federal income taxes....... $(55,325) $(7,030) Decrease in taxes from: State tax--net of federal benefit............. (6,372) (699) -------- ------- Benefit for income taxes........................ $(61,697) $(7,729) ======== ======= Effective tax rate.............................. 39.0% 38.5% ======== =======
7. EMPLOYEE BENEFITS PLANS Employees of the Company are eligible for various benefit plans of EIX. PENSION PLANS The Company maintains a pension plan specifically for the benefit of its union employees. The Company's non-union employees participate in the EIX pension plan. Both plans are noncontributory, defined benefit pension plans and cover employees who fulfill minimum service requirements. There F-16 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 7. EMPLOYEE BENEFITS PLANS (CONTINUED) are no prior service costs for the plans. Information on plan assets and benefit obligations is shown below:
2000 1999 ------------------------- ------------------------- UNION PLAN NON-UNION UNION PLAN NON-UNION ---------- ------------ ---------- ------------ (IN THOUSANDS) CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of period................................... $ 209 $ 3,251 $ -- $ -- Benefit obligation acquired................ -- -- -- 3,251 Service cost............................... 6,642 1,025 209 -- Interest cost.............................. 30 257 -- -- Actuarial loss............................. 911 274 -- -- Benefits paid.............................. (2) -- -- -- ------- ------- ----- ------- Benefit obligation at end of period........ 7,790 4,807 209 3,251 ------- ------- ----- ------- CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of period................................... -- -- -- -- Actual return on plan assets............... (227) -- -- -- Employer contributions..................... 5,805 -- -- -- Benefits paid.............................. (2) -- -- -- ------- ------- ----- ------- Fair value of plan assets at end of period................................... 5,576 -- -- -- ------- ------- ----- ------- Funded status.............................. (2,214) (4,807) (209) (3,251) Unrecognized net loss (gain)............... 1,335 274 -- -- ------- ------- ----- ------- Recorded liability......................... $ (879) $(4,533) $(209) $(3,251) ======= ======= ===== ======= Discount rate.............................. 7.25% 7.25% 7.75% 7.75% Rate of compensation increase.............. 5.00% 5.00% 5.00% 5.00% Expected return on plan assets............. 8.50% 8.50% 7.50% 7.50%
Components of pension expense were:
PERIOD FROM INCEPTION (JULY 12, 1999) TO 2000 DECEMBER 31, 1999 ---------------------- ---------------------- UNION PLAN NON-UNION UNION PLAN NON-UNION ---------- --------- ---------- --------- (IN THOUSANDS) Service cost....................................... $6,642 $1,025 $209 $ -- Interest cost obligation........................... 30 257 -- -- Expected return on plan assets..................... (206) -- -- -- Recognized net actuarial loss...................... 9 -- -- -- ------ ------ ---- --------- Total pension expense.............................. $6,475 $1,282 $209 $ -- ====== ====== ==== =========
F-17 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 7. EMPLOYEE BENEFITS PLANS (CONTINUED) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company's employees retiring at or after age 55 with at least 10 years' of service are eligible for postretirement health care, dental, life insurance and other benefits. Information on plan assets and benefit obligations is shown below:
2000 1999 ---------------------- ---------------------- UNION PLAN NON-UNION UNION PLAN NON-UNION ---------- --------- ---------- --------- (IN THOUSANDS) CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of period.......... $ 47,813 $ 10,308 $ -- $ -- Benefit obligation acquired........................ -- -- 60,000 10,308 Service cost....................................... 3,530 527 83 -- Interest cost...................................... 4,982 882 159 -- Actuarial loss (gain).............................. 23,140 2,102 (12,429) -- Benefits paid...................................... -- (1) -- -- -------- -------- -------- -------- Benefit obligation at end of period................ 79,465 13,818 47,813 10,308 -------- -------- -------- -------- Fair value of plan assets at beginning of period... -- -- -- -- Employer contributions............................. -- 1 -- -- Benefits paid...................................... -- (1) -- -- -------- -------- -------- -------- Fair value of plan assets at end of period......... -- -- -- -- -------- -------- -------- -------- Funded status...................................... (79,465) (13,818) (47,813) (10,308) Unrecognized net loss (gain)....................... 10,711 2,102 (12,437) -- -------- -------- -------- -------- Recorded liability................................. $(68,754) $(11,716) $(60,250) $(10,308) ======== ======== ======== ======== Discount Rate...................................... 7.50% 7.50% 8.00% 8.00%
The components of postretirement benefits other than pension expense were:
PERIOD FROM INCEPTION (JULY 12, 1999) TO 2000 DECEMBER 31, 1999 ---------------------- ---------------------- UNION PLAN NON-UNION UNION PLAN NON-UNION ---------- --------- ---------- --------- (IN THOUSANDS) Service cost....................................... $3,530 $ 527 $ 83 $ -- Interest cost...................................... 4,982 882 159 -- ------ ------ ---- --------- Total expense...................................... $8,512 $1,409 $242 $ -- ====== ====== ==== =========
For the non-union plan, the assumed rate of future increases in the per-capita cost of health care benefits is 11% for 2001, gradually decreasing to 5.00% for 2008 and beyond. Increasing the health care cost trend rate by one percentage point would increase the accumulated obligation as of December 31, 2000 by $3.5 million. The effect on the annual aggregate service and interest costs would be $0.4 million. Decreasing the health care cost trend rate by one percentage point would decrease the F-18 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 7. EMPLOYEE BENEFITS PLANS (CONTINUED) accumulated obligation as of December 31, 2000 by $2.8 million. The effect on the annual aggregate service and interest costs would be $0.3 million. For the union plan, the assumed rate of future increases in the per-capita cost of health care benefits is 11% for 2001, gradually decreasing to 5.00% for 2008 and beyond. Increasing the health care cost trend rate by one percentage point would increase the accumulated obligation as of December 31, 2000 by $22.3 million. The effect on annual aggregate service and interest costs would be $2.4 million. Decreasing the health care cost trend rate by one percentage point would decrease the accumulated obligation as of December 31, 2000 by $16.7 million. The effect on annual aggregate service and interest costs would be $1.8 million. EMPLOYEE STOCK PLANS A 401(k) plan is maintained to supplement eligible employees' retirement income. The Company matches 100% of non-union employee contributions, up to 6% of such employees' annual compensation. The Company also matches 75% of contributions made by union employees, up to 6% of annual compensation. Employer contributions vest 20% per year. Contribution expense for the year ended December 31, 2000 was $2.2 million. Contribution expense incurred in 1999 was not material. 8. COMMITMENTS AND CONTINGENCIES POWER PURCHASE AGREEMENTS Electric power generated at the Illinois Plants is sold under power purchase agreements with Exelon Generation Company, in which Exelon Generation purchases capacity and has the right to purchase energy generated by the Illinois Plants. The agreements, which began on December 15, 1999, and have a term of up to five years, provide for capacity and energy payments. Exelon Generation is obligated to make a capacity payment for the Illinois Plants under contract and an energy payment for the electricity produced by these Plants. The capacity payment provides the Illinois Plants revenue for fixed charges, and the energy payment compensates the Illinois Plants for variable costs of production. If Exelon Generation does not fully dispatch the Illinois Plants under contract, the Illinois Plants may sell, subject to specified conditions, the excess energy at market prices to neighboring utilities, municipalities, third party electric retailers, large consumers and power marketers on a spot basis. A bilateral trading infrastructure already exists with access to the Mid-America Interconnected Network and the East Central Area Reliability Council. Pursuant to the acquisition documents for the purchase of the generating assets from Commonwealth Edison, the Company committed to install one or more gas-fired power plants having an additional gross dependable capacity of 500 MWs at an existing or adjacent power plant site in Chicago. The acquisition documents require that commercial operations of this project be completed by December 15, 2003. The estimated cost to complete the construction of this 500 MW gas-fired power plant is approximately $250 million. FUEL CONTRACTS COMMITMENT At December 31, 2000, the Company had contractual commitments to purchase and/or transport coal and fuel oil. Based on the contract provisions, which consist of fixed prices subject to adjustment, F-19 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 8. COMMITMENTS AND CONTINGENCIES (CONTINUED) the minimum commitments are currently estimated to aggregate $664 million over the next five years summarized as follows: 2001--$252 million; 2002--$181 million; 2003--$108 million; 2004--$61 million; and 2005--$62 million. ENVIRONMENTAL MATTERS OR REGULATIONS The Company is subject to environmental regulation by federal, state, and local authorities. The Company believes that as of December 31, 2000, the Company is in substantial compliance with environmental regulatory requirements. The Company has had informal voluntary discussions with the Environmental Protection Agency relating to these facilities. The Company cannot assure a satisfactory agreement or that these facilities will not be subject to proceedings in the future. Depending on the outcome of the proceedings, the Company could be required to invest in additional pollution control requirements, over and above the upgrades the Company is planning to install, and could be subject to fines and penalties. The Company expects that the implementation of Clean Air Act Amendments will result in increased capital expenditures and operating expenses. For example, the Company anticipates upgrades to environmental controls at the Illinois Plants to control nitrogen oxide emissions and expects to spend approximately $61 million, $67 million, $130 million, $123 million and $57 million for 2001, 2002, 2003, 2004 and 2005, respectively. POWERTON/JOLIET FACILITIES SALE--LEASEBACK On August 24, 2000, the Company entered into a sale-leaseback transaction with respect to the Powerton and Joliet power facilities located in Illinois to third party lessors for an aggregate purchase price of $1.367 billion. Under the terms of the leases (33.75 years for Powerton and 30 years for Joliet), the Company makes semi-annual lease payments on each January 2 and July 2, beginning January 2, 2001. If a lessor intends to sell its interest in the Powerton or Joliet power facility, the Company has a first right of refusal to acquire the interest at fair market value. Under the terms of each lease, the Company may request a lessor, at its option, to refinance the lessor debt, which if completed would affect the base lease rent. The lessor debt of $1.147 billion was obtained from the issuance by the Company of Pass-Through Certificates with terms ranging from nine to sixteen years with fixed interest rates ranging from 8.30% to 8.56%. The gain on the sale of the power facilities has been deferred and is being amortized over the term of the leases. F-20 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 8. COMMITMENTS AND CONTINGENCIES (CONTINUED) At December 31, 2000, future lease payments were as follows:
YEAR ENDED DECEMBER 31, (IN THOUSANDS) - ----------------------- -------------- 2001........................................................ $ 83,259 2002........................................................ 97,316 2003........................................................ 97,316 2004........................................................ 97,316 2005........................................................ 141,126 Thereafter.................................................. 1,848,147 ----------- Future minimum lease payments............................... 2,364,480 Less amount representing interest........................... (1,014,692) ----------- Present value of future Lease payments...................... $ 1,349,788 ===========
ILLINOIS PEAKER SALE--LEASEBACK On July 10, 2000, the Company entered into a sale-leaseback of equipment, primarily Illinois peaker power units, to a third party lessor for $300 million. Under the terms of the five year lease, the Company has a fixed price purchase option at the end of the lease term of $300 million. The Company guarantees the monthly payments under the lease. In connection with the sale-leaseback, the Company purchased the $255 million notes issued by the lessor which accrue interest at Libor plus 0.65% to 0.95% depending on Edison Mission Energy's credit rating. The notes are due and payable in five years. Minimum lease payments during the next four years are $21.1 million in 2001; $21.0 million in 2002; $21.0 million in 2003; and $21.0 million in 2004. There are no minimum lease payments required beyond 2004. The gain on the sale of equipment has been deferred and is being amortized over the term of the operating lease. COLLINS OPERATING STATION LEASE In connection with the acquisition of the Illinois Plants, the Company assigned the right to purchase the Collins gas and oil-fired power plant to four third party entities. The third parties purchased the Collins Station for $860 million and entered into leases of the plant with an affiliate of the Company. The affiliate entered into subleases of the plant with the Company. The subleases, which are being accounted for as a lease financing, each have an initial term of 33.75 years, with payments due on a quarterly basis. The base sublease rent includes both a fixed and variable component; the variable component is impacted by movements in defined short-term interest rate indexes and the determination of such index as provided for under the related agreements. Under the terms of the subleases, the Company may request a lessor, at its option, to refinance the lessor's debt, which if completed would impact the base sublease rent. If a lessor intends to sell its interest in the Collins Station, the Company has a first right of refusal to acquire the interest at fair market value. F-21 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 8. COMMITMENTS AND CONTINGENCIES (CONTINUED) At December 31, 2000, future lease payments were as follows:
YEAR ENDED DECEMBER 31, (IN THOUSANDS) - ----------------------- -------------- 2001........................................................ $ 42,302 2002........................................................ 50,262 2003........................................................ 50,262 2004........................................................ 50,339 2005........................................................ 50,262 Thereafter.................................................. 1,249,161 ---------- Future minimum lease payments............................... 1,492,588 Less amount representing interest........................... (632,588) ---------- Present value of future lease payments...................... $ 860,000 ==========
COLLECTIVE BARGAINING AGREEMENT The term of the collective bargaining agreement covering the Company's employees at the Illinois Plants is currently in dispute, with the union maintaining that the agreement's terms expired March 31, 2001, and the Company maintains that the agreement remains in effect until June 2002. The dispute will be heard by an administrative law judge with the National Labor Relations Board. While no strike has been authorized or strike vote taken, the union has indicated that is one possibility. The Company has operational plans in place and intends to operate the Illinois Plants in the event of a strike if the current dispute is not resolved. EQUIPMENT LEASES At December 31, 2000, the Company had several operating leases in place, primarily relating to leased barges and railcars. At December 31, 2000, the future operating lease commitments were as follows:
YEAR ENDED DECEMBER 31, (IN THOUSANDS) - ----------------------- -------------- 2001........................................................ $ 14,870 2002........................................................ 14,270 2003........................................................ 14,265 2004........................................................ 14,017 2005........................................................ 14,192 Thereafter.................................................. 163,560 -------- Total....................................................... $235,174 ========
INTERCONNECTION AGREEMENT The Company has entered into interconnection agreements with Commonwealth Edison to provide interconnection services necessary to connect the Illinois Plants with Commonwealth Edison's transmission systems. Unless terminated earlier in accordance with the terms thereof, the F-22 MIDWEST GENERATION, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 8. COMMITMENTS AND CONTINGENCIES (CONTINUED) Interconnection Agreements will terminate on a date mutually agreed to by the Company and Commonwealth Edison. This date may not exceed the retirement date of the Illinois Plants. The Company is required to compensate Commonwealth Edison for all reasonable costs associated with any modifications, additions or replacements made to the interconnection facilities or transmission systems in connection with any modification, addition or upgrade to the Illinois Plants. 9. SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION
2000 1999 ---------- ---------- (IN THOUSANDS) CASH PAID Interest........................................... $ 293,841 $ -- Income taxes (receipts)............................ -- -- DETAILS OF FACILITY ACQUISITION Fair value of assets acquired...................... 16,895 4,288,054 Liabilities assumed................................ -- 217,256 ---------- ---------- Net cash paid for acquisition.................... $ 16,895 $4,070,798 ========== ========== Assets acquired under lease financing................ $1,367,000 $ 860,000 ========== ==========
EVENT SUBSEQUENT TO DATE OF AUDITOR'S REPORT (UNAUDITED) On April 18, 2001, Unit 6 at the Joliet Station (314 MW) was taken off line after a coal-dust explosion occurred in the building housing the unit. We are undertaking a review of the cause of the explosion, and the extent of damage and will prepare a plan to return the unit to commercial operations on an expedited basis. The cost to repair the unit and the schedule to complete the repairs cannot be estimated at this time. F-23 APPENDIX A GLOSSARY ADJUSTMENT FACTOR: A factor used to determine monthly payments for energy under the power purchase agreements. ACCESS: The ability to use transmission/distribution facilities that are owned or controlled by a third party. AVAILABILITY: The condition of a unit or major piece of equipment of being capable of service whether or not it is actually in service. AVAILABILITY BONUS THRESHOLD: The point at which all the capacity payment is reached. AVAILABILITY FACTOR: The percentage of total time in a specified period that a unit was available to operate (at any load). BARREL: A volumetric unit of measure for crude oil and petroleum products equivalent to 42 U.S. gallons. BTU (BRITISH THERMAL UNIT): The amount of heat energy necessary to raise the temperature of one pound of water one degree Fahrenheit. CALL OPTIONS: The right under the Coal Generating Stations Power Purchase Agreement to reserve generating capacity for units that are optional under the agreement. CAPACITY: The real power output rating of a generator or system, typically in megawatts, measured on an instantaneous basis. The amount of electric power delivered or required for which a generator, turbine, transformer, transmission circuit, station, or system is rated by the manufacturer. CONTINUOUS EMISSIONS MONITORING: Equipment providing for continuous monitoring of air emissions. COGENERATION: The simultaneous production of both useable heat or steam and electricity from a common fuel source. COMBUSTION TURBINE: A fuel-fired turbine engine used to drive an electric generator. Because of their generally rapid firing time, combustion turbines are used to meet short-term peak demand placed on power systems. CONTRACTS FOR DIFFERENCES: Electricity rate swap agreements, related to either the selling or purchasing of power. DECOMMISSIONING: The close of operations of a facility, including demolition, equipment removal, and site cleanup. DERATING: Conditions, both planned and unexpected, during which a power system facility is limited to a performance level less than its gross maximum capacity. DISPATCH: The monitoring and regulation of an electrical system to provide coordinated operation; the sequence in which generating resources are called upon to generate power to serve fluctuating loads. DISTRIBUTION: The system of lines, transformers and switches that connect between the transmission network and customer load. The transport of electricity to ultimate use points such as homes and A-1 businesses. The portion of an electric system that is dedicated to delivering electric energy to an end user at relatively low voltages. DISTRIBUTION SYSTEM: The portion of an electric system that is dedicated to delivering electric energy to an end user. EAST CENTRAL AREA RELIABILITY COUNCIL (ECAR): The ECAR is one of the largest regional electricity markets in the United States. The ECAR region is comprised of electric utility systems covering part or all of seven states. ENERGY: The capacity for doing work as measured by the capability of doing work (potential energy) or the conversion of this capability to motion (kinetic energy). Energy has several forms, some of which are easily convertible and can be changed to another form that is useful for work. Most of the world's convertible energy comes from fossil fuels that are burned to produce heat that is then used as a transfer medium to mechanical or other means in order to accomplish tasks. Electrical energy is usually measured in kilowatt-hours, while heat energy is usually measured in British Thermal Units. EQUIVALENT AVAILABILITY: The fraction of maximum generation that a generating unit could provide if limited only by outages, overhauls and de-ratings. EQUIVALENT FORCED OUTAGE RATE: A rate that describes all forced, unplanned or unscheduled de-ratings in a given period of time, typically a month but up to a year. EXEMPT WHOLESALE GENERATOR (EWG): A class of generators defined by the Energy Policy Act of 1992 that includes persons determined by the Federal Energy Regulatory Commission to be exclusively in the business of being owners and/or operators of facilities used to generate electricity exclusively for sale at wholesale or used for the generation of electric energy and leased to one or more public utility companies and selling electric energy at wholesale. FOSSIL FUEL: Any naturally occurring organic fuel, such as coal, oil and natural gas. FORWARD ENERGY SALES CONTRACTS: Bilateral contracts for the sale of energy and capacity, for an agreed price, for delivery at a future date or dates. GENERATING UNIT: Any combination of physically connected generator(s), reactor(s), boiler(s), combustion turbines(s), or other similar equipment operated together to produce electric power. GENERATION (ELECTRICITY): The process of producing electric energy by transforming other forms of energy; also, the amount of energy produced, expressed in watt-hours (Wh). GEOTHERMAL ENERGY: Thermal energy contained in the earth's crust. GROUP EQUIVALENT AVAILABILITY FACTOR: The equivalent availability of a group of reserved units under the power purchase agreements subject to adjustments as indicated in the agreements. HEAT RATE: The measure of efficiency in converting input fuel to electricity. Heat rate is expressed as the number of Btu's of fuel (such as coal) per kilowatt-hour (Btu/kWh). The heat rate for power plants depends on the individual plant design, its operating conditions, and level of electric power output. The lower the heat rate, the more efficient the plant. HYDROELECTRIC PLANT: A plant in which the turbine generators are driven by falling water. INDEPENDENT SYSTEM OPERATOR (ISO): A neutral operator responsible for maintaining an instantaneous balance of the electric system. The ISO performs its function by controlling the dispatch of flexible plants to ensure that loads match resources available to the system. A-2 INTEGRATED UTILITY: An electric company that owns and operates all means of production and distribution, including generating units, transmission lines and distribution facilities. INTERCONNECTION POINT: The point of linkage of transmission lines between two utilities, enabling power to be moved in either direction. INTERCONNECTION SERVICE: Services to interconnect power generation facilities with transmission systems. INTERCONNECTION SYSTEM: Equipment used to interconnect power generation facilities with transmission systems. KILOWATT-HOUR (KWH): A unit of electrical energy which is equivalent to one thousand watts of power used for one hour. An average household will use between 800 - 1300 kWh per month depending upon geographical area. LOAD: The amount of electric power delivered or required at any specific point or points on a system. The requirement originates at the energy-consuming equipment of the consumers. The load of an electric utility system is affected by many factors and on a daily, seasonal and annual basis, typically following a pattern. System load is usually measured in megawatts (MW). MEGAWATT (MW): One million watts. MEGAWATT-HOUR (MWH): A unit of electrical energy which is equivalent to one million watts of power used for one hour. One megawatt-hour is equal to 1,000,000 watt-hours. MID-AMERICA INTERCONNECTED NETWORK (MAIN): The MAIN region includes Illinois and parts of Missouri, Wisconsin and Michigan. MAIN represents Midwest Generation's primary market and serves four states within the upper Midwest region of the United States. NORTH AMERICAN ELECTRIC RELIABILITY COUNCIL (NERC): A voluntary organization formed by electric utilities in 1968 to promote the reliability of the electricity supply for North America. OFF-PEAK: A period of relatively low demand for electrical energy, such as the middle of the night. OPACITY: An indicator of combustion efficiency. OPTIONAL CAPACITY: With respect to a particular year under a service agreement, the capacity generated by units that are optional under that agreement. OUTAGE: Periods, both planned and unexpected, during which power system facilities (generation unit, transmission line, or other facilities) cease to provide generation, transmission or the distribution of power. PEAKER OR PEAKER POWER UNIT: A plant usually housing low-efficiency, quick response steam units, gas turbines, or pumped-storage hydroelectric equipment normally used during maximum load periods. PEAKING UNITS: See definition for "Peaker or Peaker Power Unit." POWER MARKETER: Any firm that buys and resells power but does not own transmission facilities. Power marketers must file with the Federal Energy Regulatory Commission to obtain authority to conduct business if they sell power at wholesale in interstate commerce (in other words, using the Federal Energy Regulatory Commission regulated transmission grid). PRECIPITATOR: A device used to remove dust from the gasses that are produced in the boiler during the combustion process. A-3 PRECIPITATOR PERFORMANCE: The ability of the precipitator to remove dust from the gas as it passes through the precipitator. PUBLIC UTILITY COMMISSIONS (PUCS): State PUCs have broad jurisdiction over non-qualified facility independent power projects (including exempt wholesale generators), which are considered public utilities in many states. That jurisdiction often includes the issuance of certificates of public convenience and necessity and/or other certifications to construct, own and operate a facility, as well as regulation of organizational, accounting, financial and other corporate matters on an ongoing basis. PUMPED-STORAGE HYDROELECTRIC STATION: A plant that usually generates electric energy during peak-load periods by using water previously pumped into an elevated storage reservoir during off-peak periods when excess generating capacity is available to do so. When additional generating capacity is needed, the water can be released from the reservoir through a conduit to turbine generators located in a power plant at a lower level. RESERVED CAPACITY: The aggregate megawatts of generating capacity from the contracted and the optional generating units under the Coal Generating Station Power Purchase Agreement Reservoir: A structure that stores water for later use in the production of electricity. RETAIL WHEELING: The sale of electricity by a utility or other supplier to a customer in another utility service territory. Refers to the use of the local utility's transmission and distribution facilities to deliver the power from a wholesale supplier to a retail customer by a third party. SET-OFF: The method by which one party can reduce its obligation to another party by the amount that the other party owes it. STORAGE RESERVOIR: A reservoir that has space for retaining water from springtime snowmelts. Stored water is released as necessary for purposes such as power generation, fish passage and irrigation. TRANSMISSION FACILITIES: Equipment used to deliver electric power at higher voltages in bulk quantity, from generating facilities to lower voltage local distribution facilities, for ultimate retail use. TRANSMISSION SYSTEM (ELECTRIC): An interconnected group of electric transmission lines and associated equipment for moving or transferring electric energy in bulk between points of supply and points at which it is transformed for delivery over the distribution system lines to consumers, or is delivered to other electric systems. TURBINE: A machine for generating rotary mechanical power from the energy of a stream of fluid (such as water, steam or hot gas). Turbines convert the kinetic energy of fluids to mechanical energy through the principles of impulse and reaction, or a mixture of the two. VOLT: The unit of measurement of electromotive force. It is equivalent to the force required to produce a current of one ampere through a resistance of one ohm, the unit of measure for electrical potential. Generally measured in Kilovolts or kV. Typical transmission level voltages are 115kV, 230kV and 500kV. WATT: A measure of real power production or usage. An electric unit of power or a rate of doing work. WATT-HOUR (WH): An electrical energy unit of measure equal to one watt of power supplied to, or taken from, an electric circuit steadily for one hour. WHEELING: The use of the transmission facilities of one system to transmit power for another electric system. Wheeling can apply to either wholesale or retail service. WHOLESALE SALES: Energy supplied to other electric utilities, cooperatives, municipalities, and federal and state electric agencies for resale to ultimate consumers. A-4 We have not authorized any dealer, salesperson or other person to give any information or represent anything not contained in this prospectus. You must not rely on unauthorized information. This prospectus does not offer to sell or buy any certificates in any jurisdiction where it is unlawful. The information in this prospectus is current as of - , 2001. However, you should realize that our affairs and the affairs of Edison Mission Energy may have changed since the date of this prospectus. Until - , 2001, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. (GRAPHIC EDISON MISSION ENERGY/MIDWEST GENERATION, LLC) $1,147,000,000 8.30% SERIES A PASS-THROUGH CERTIFICATES DUE 2009 8.56% SERIES B PASS-THROUGH CERTIFICATES DUE 2016 ------------------------ PROSPECTUS APRIL - , 2001 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS I. EDISON MISSION ENERGY Edison Mission Energy is a California corporation. Article VI of Edison Mission Energy's Bylaws provides, in effect, that, to the extent and under the circumstances permitted by Section 317 of the California Corporations Code, Edison Mission Energy shall indemnify any person who was or is a party or is threatened to be made a party to any action, suit or proceeding of the type described in that section by reason of the fact that he or she is or was Edison Mission Energy's director or officer. Section 317 of the California Corporations Code empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than in certain actions by or in the right of the corporation as described below, by reason of the fact that he or she is or was a director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee or agent of a corporation that was a predecessor corporation of the corporation or of another enterprise at the request of the predecessor corporation, against expenses, including attorneys' fees, judgments, fines, settlements and other amounts actually or reasonably incurred by this person in connection with this action, suit or proceeding if this person acted in good faith and in a manner he or she reasonably believed to be in the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful. In the case of an action by or in the right of the corporation, no indemnification shall be made in respect to any claim, issue or matter as to which this person shall have been adjudged to be liable to the corporation in the performance of his or her duty to the corporation and its shareholders unless and only to the extent that the court in which this action or suit is or was pending shall determine that, in view of all of the circumstances of the case, this person is fairly and reasonably entitled to indemnity for these expenses which the court shall deem proper. Section 317 further provides that to the extent that this director, officer, employee or agent of a corporation has been successful on the merits in defense of any action, suit or proceeding referred to above or in the defense of any claim, issue or matter, this person shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred by him or her in connection therewith. Article IV of Edison Mission Energy's Certificate of Incorporation relieves its directors from monetary damages to Edison Mission Energy or its shareholders for any breach of this director's fiduciary duty as a director to the extent permitted by the California Corporations Code. Under Section 204(a)(10) of the California Corporations Code, a corporation may relieve its directors from personal liability to such corporation or its shareholders for monetary damages for any breach of their fiduciary duty as directors except: (1) for acts or omissions that show a reckless disregard for the director's duty to the corporation or its shareholders in circumstances in which the director was unaware, or should have been aware, in the ordinary course of performing his or her duties, of a risk of serious injury to the corporation or its shareholders, (2) for any act or omission not in good faith or that a director believes to be contrary to the best interests of the corporation or its shareholders, (3) for any intentional misconduct or knowing and culpable violation of law, II-1 (4) for any willful or negligent violation of certain provisions of the California Corporations Code imposing certain requirements with respect to the making of loans or guarantees and the payment of dividends, (5) for any transaction from which the director derived an improper personal benefit, or (6) for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the director's duty to the corporation or its shareholders. II. MIDWEST GENERATION, LLC Midwest Generation, LLC is a limited liability company organized under the laws of the State of Delaware. Section 18-108 of the Limited Liability Company Act of Delaware empowers a limited liability company, subject to such standards and restrictions, if any, as are set forth in its limited liability company agreement, to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever. Section 11.1 of the Limited Liability Company Agreement of Midwest Generation provides that notwithstanding any other provisions of the Agreement, whether express or implied, or obligation or duty at law or in equity, none of Edison Mission Midwest Holdings Co., as the member of Midwest Generation, or any Managers (as defined in the Agreement), officers, directors, stockholders, partners, employees, representatives or agents of any of the foregoing, nor any Manager, officer, employee, representative or agent of Midwest Generation or any of its affiliates (individually, a "Covered Person" and, collectively, the "Covered Persons") shall be liable to Midwest Generation or any other person for any act or omission (in relation to Midwest Generation, the Agreement, any related document or any transaction or investment contemplated by the Agreement or such document, transaction or investment) taken or omitted by a Covered Person in the reasonable belief that such act or omission is in or is not contrary to the best interests of Midwest Generation and is within the scope of authority granted to such Covered Person by the Agreement, provided such act or omission does not constitute fraud, willful misconduct, bad faith, or gross negligence. Section 11.2 of the Agreement also provides that, to the fullest extent permitted by law, Midwest Generation shall indemnify and hold harmless each Covered Person from and against any and all losses, claims, demands, liabilities, expenses, judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative ("Claims"), in which the Covered Person may be involved, or threatened to be involved, as a party or otherwise, by reason of its management of the affairs of Midwest Generation or which relates to or arises out of Midwest Generation or its property, business or affairs. A Covered Person shall not be entitled to indemnification under Section 11.2 of the Agreement with respect to: (i) any Claim with respect to which such Covered Person has engaged in fraud, willful misconduct, bad faith or gross negligence, or (ii) any Claim initiated by such Covered Person unless such Claim (or part thereof) (A) was brought to enforce such Covered Person's rights to indemnification under the Agreement or (B) was authorized or consented to by the board of managers of Midwest Generation. Expenses incurred by a Covered Person in defending any Claim shall be paid by Midwest Generation in advance of the final disposition of such Claim upon receipt by Midwest Generation of an undertaking by or on behalf of such Covered Person to repay such amount if it shall be ultimately determined that such Covered Person is not entitled to be indemnified by Midwest Generation as authorized by Section 11.2 of the Agreement. II-2 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 1.1 Purchase Agreement, dated as of August 17, 2000, among Midwest Generation, LLC, Edison Mission Energy and Credit Suisse First Boston Corporation and Lehman Brothers Inc. as representatives of the Initial Purchasers.* 2.1 Agreement for the sale and purchase of shares in First Hydro Limited, dated December 21, 1995, between PSB Holding Limited and First Hydro Finance Plc, incorporated by reference to Exhibit 2.1 to Edison Mission Energy's Form 8-K dated December 21, 1995. 2.2 Transaction Implementation Agreement, dated March 29, 1997, between The State Electricity Commission of Victoria, Edison Mission Energy Australia Limited, Loy Yang B Power Station Pty Ltd, Loy Yang Power Limited, The Honorable Alan Robert Stockdale, Leanne Power Pty Ltd and Edison Mission Energy, incorporated by reference to Exhibit 2.2 to Edison Mission Energy's Form 8-K dated May 22, 1997. 2.3 Stock Purchase and Assignment Agreement, dated December 23, 1998, between KES Puerto Rico, L.P., KENETECH Energy Systems, Inc., KES Bermuda, Inc. and Edison Mission Energy del Caribe for the (i) sale and purchase of KES Puerto Rico, L.P.'s shares in EcoElectrica Holdings Ltd.; (ii) assignment of KENETECH Energy Systems' rights and interests in that certain Project Note from the Partnership; and (iii) assignment of KES Bermuda, Inc.'s rights and interests in that certain Administrative Services Agreement dated October 31 1997, incorporated by reference to Exhibit 2.3 to Edison Mission Energy's 10-K for the year ended December 31, 1998. 2.4 Asset Purchase Agreement, dated August 1, 1998, between Pennsylvania Electric Company, NGE Generation, Inc., New York State Electric & Gas Corporation and Mission Energy Westside, Inc., incorporated by reference to Exhibit 2.4 to Edison Mission Energy's 10-K for the year ended December 31, 1998. 2.5 Asset Sale Agreement, dated March 22, 1999, between Commonwealth Edison Company and Edison Mission Energy as to the Fossil Generating Assets, incorporated by reference to Exhibit 2.5 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 2.6 Agreement for the Sale and Purchase of Shares in Contact Energy Limited, dated March 10, 1999, between Her Majesty the Queen in Right of New Zealand, Edison Mission Energy Taupo Limited and Edison Mission Energy, incorporated herein by reference to Exhibit 2.6 to the Edison Mission Energy's Form 10-Q for the quarter ended March 31, 1999. 2.7 Sale, Purchase and Leasing Agreement between PowerGen UK plc and Edison First Power Limited for the purchase of the Ferrybridge C Power Station, incorporated by reference to Exhibit 2.7 to Edison Mission Energy's Form 8-K/A dated July 19, 1999. 2.8 Sale, Purchase and Leasing Agreement between PowerGen UK plc and Edison First Power Limited for the purchase of the Fiddler's Ferry Power Station, incorporated by reference to Exhibit 2.8 to Edison Mission Energy's Form 8-K/A, dated July 19, 1999. 2.9 Purchase and Sale Agreement, dated May 10, 2000, between Edison Mission Energy, P & L Coal Holdings Corporation and Gold Fields Mining Corporation, incorporated by reference to Exhibit 2.9 to Edison Mission Energy's 10-Q for the quarter ended September 30, 2000. 2.10 Asset Purchase Agreement, dated 3 March 2000, between MEC International B.V. and UPC International Partnership CV II, incorporated by reference to Exhibit 10.80 to Edison Mission Energy's Form 10-Q for the quarter ended March 31, 2000.
II-3
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 2.11 Stock Purchase Agreement, dated November 17, 2000, between Mission Del Sol, LLC and Texaco Inc., incorporated by reference to Exhibit 2.11 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.1 First Amended and Restated Articles of Incorporation of Edison Mission Energy. Originally filed with Edison Mission Energy's Registration Statement on Form 10 to the Securities and Exchange Commission on September 30, 1994 and amended by Amendment No. 1 thereto dated November 19, 1994 and Amendment No. 2 thereto dated November 21, 1994 (as so amended, the "Form 10"), incorporated by reference to Exhibit 3.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.1.1 Certificate of Amendment of Articles of Incorporation of Edison Mission Energy dated October 18, 1988, originally filed with Edison Mission Energy's Form 10, incorporated by reference to Exhibit 3.1.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.1.2 Certificate of Amendment of Articles of Incorporation of Edison Mission Energy dated January 17, 2001, incorporated by reference to Exhibit 3.1.2 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.2 By-Laws of Edison Mission Energy as amended to and including January 1, 2000, incorporated by reference to Exhibit 3.2 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.2.1 Amendment to By-Laws of Edison Mission Energy dated January 15, 2001, incorporated by reference to Exhibit 3.2.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.3 Limited Liability Company Agreement of Midwest Generation, LLC effective as of July 12, 1999.* 3.4 Certificate of Formation of Midwest Generation, LLC, dated as of July 9, 1999.* 4.1 Pass-Through Trust Agreement A, dated as of August 17, 2000, between Midwest Generation, LLC and United States Trust Company of New York, as Pass-Through Trustee, made with respect to the formation of the Midwest Generation Series A Pass-Through Trust, and the issuance of 8.30% Pass-Through Certificates, Series A.* 4.2 Pass-Through Trust Agreement B, dated as of August 17, 2000, between Midwest Generation, LLC and United States Trust Company of New York, as Pass-Through Trustee, made with respect to the formation of the Midwest Generation Series B Pass-Through Trust, and the issuance of 8.56% Pass-Through Certificates, Series B.* 4.3 Form of 8.30% Pass-Through Certificate, Series A (included in Exhibit 4.1).* 4.4 Form of 8.56% Pass-Through Certificate, Series B (included in Exhibit 4.2).* 4.5 Indenture of Trust, Mortgage and Security Agreement (T1), dated as of August 17, 2000, between Powerton Trust I and United States Trust Company of New York, as Lease Indenture Trustee.* 4.5.1 Schedule identifying substantially identical agreement to Indenture of Trust, Mortgage and Security Agreement constituting Exhibit 4.5 hereto.* 4.6 Indenture of Trust, Mortgage and Security Agreement (T1), dated as of August 17, 2000, between Joliet Trust I and United States Trust Company of New York, as Lease Indenture Trustee.* 4.6.1 Schedule identifying substantially identical agreement to Indenture of Trust, Mortgage and Security Agreement constituting Exhibit 4.6 hereto.*
II-4
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 4.7 Facility Lease Agreement (T1), dated as of August 17, 2000, by and between, Powerton Trust I, as Owner Lessor, and Midwest Generation, LLC, as Facility Lessee.* 4.7.1 Schedule identifying substantially identical agreement to Facility Lease Agreement constituting Exhibit 4.7 hereto.* 4.8 Facility Lease Agreement (T1), dated as of August 17, 2000, by and between, Joliet Trust I, as Owner Lessor, and Midwest Generation, LLC, as Facility Lessee.* 4.8.1 Schedule identifying substantially identical agreement to Facility Lease Agreement constituting Exhibit 4.8 hereto.* 4.9 Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Powerton Trust I, as Owner Lessor.* 4.9.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.9 hereto.* 4.10 Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Joliet Trust I, as Owner Lessor.* 4.10.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.10 hereto.* 4.11 Registration Rights Agreement, dated as of August 17, 2000, among Edison Mission Energy, Midwest Generation, LLC and Credit Suisse First Boston Corporation and Lehman Brothers Inc., as representatives of the Initial Purchasers.* 4.12 Participation Agreement (T1), dated as of August 17, 2000, by and among, Midwest Generation, LLC, Powerton Trust I, as the Owner Lessor, Wilmington Trust Company, as the Owner Trustee, Powerton Generation I, LLC, as the Owner Participant, Edison Mission Energy, United States Trust Company of New York, as the Lease Indenture Trustee, and United States Trust Company of New York, as the Pass Through Trustees.* 4.12.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.12 hereto.* 4.13 Participation Agreement (T1), dated as of August 17, 2000, by and among, Midwest Generation, LLC, Joliet Trust I, as the Owner Lessor, Wilmington Trust Company, as the Owner Trustee, Joliet Generation I, LLC, as the Owner Participant, Edison Mission Energy, United States Trust Company of New York, as the Lease Indenture Trustee and United States Trust Company of New York, as the Pass Through Trustees.* 4.13.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.13.1 hereto.* 4.14 Copy of the Global Debenture representing Edison Mission Energy's 9 7/8% Junior Subordinated Deferrable Interest Debentures, Series A, Due 2024, incorporated by reference to Exhibit 4.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 4.15 Conformed copy of the Indenture, dated as of November 30, 1994, between Edison Mission Energy and The First National Bank of Chicago, as Trustee, incorporated by reference to Exhibit 4.2 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 4.15.1 First Supplemental Indenture, dated as of November 30, 1994, to Indenture dated as of November 30, 1994 between Edison Mission Energy and The First National Bank of Chicago, as Trustee, incorporated by reference to Exhibit 4.2.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994.
II-5
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 4.16 Indenture, dated as of June 28, 1999, between Edison Mission Energy and The Bank of New York, as Trustee, incorporated by reference to Exhibit 4.1 to Edison Mission Energy's Registration Statement on Form S-4 to the Securities and Exchange Commission on February 18, 2000. 4.16.1 First Supplemental Indenture, dated as of June 28, 1999, to Indenture dated as of June 28, 1999, between Edison Mission Energy and The Bank of New York, as Trustee, incorporated by reference to Exhibit 4.2 to Edison Mission Energy's Registration Statement on Form S-4 to the Securities and Exchange Commission on February 18, 2000. 4.17 Copy of the Security representing Edison Mission Energy's 8 1/8% Senior Notes Due 2002, incorporated by reference to Exhibit 4.4 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.18 Promissory Note ($499,450,800), dated as of August 24, 2000, by Edison Mission Energy in favor of Midwest Generation, LLC, incorporated by reference to Exhibit 4.5 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.18.1 Schedule identifying substantially identical agreements to Promissory Note constituting Exhibit 4.18 hereto, incorporated by reference to Exhibit 4.5.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.19 Promissory Note, dated as of June 23, 2000, by Edison Mission Energy in favor of Midwest Generation, LLC, incorporated by reference to Exhibit 4.6 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.20 Indenture, dated as of April 5, 2001, between Edison Mission Energy and United States Trust Company of New York as Trustee.* 5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to Edison Mission Energy and Midwest Generation, LLC, as to the legality of the Pass-Through Certificates and the Guarantees being registered hereby.* 10.1 Registration Rights Agreement, dated as of June 23, 1999, between Edison Mission Energy and the Initial Purchasers specified therein, incorporated by reference to Exhibit 10.1 to Edison Mission Energy's Registration Statement on Form S-4 to the Securities and Exchange Commission on February 18, 2000. 10.2 Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated March 8, 1985, incorporated by reference to Exhibit 10.2 to Edison Mission Energy's Form 10. 10.2.1 Amendment to Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated July 29, 1985, incorporated by reference to Exhibit 10.2.1 to Edison Mission Energy's Form 10. 10.2.2 Amendment No. 2 to Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated October 29, 1985, incorporated by reference to Exhibit 10.2.2 to Edison Mission Energy's Form 10. 10.4 Power Purchase Contract between Southern California Edison Company and Imperial Energy Company, dated February 22, 1984, incorporated by reference to Exhibit 10.4 Edison Mission Energy's Form 10. 10.4.1 Amendment to Power Purchase Contract between Southern California Edison Company and Imperial Energy Company, dated November 13, 1984, incorporated by reference to Exhibit 10.4.1 to Edison Mission Energy's Form 10.
II-6
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 10.6 Power Purchase Contract between Southern California Edison Company and Imperial Energy Company Niland No. 2, dated April 16, 1985, incorporated by reference to Exhibit 10.6 to Edison Mission Energy's Form 10. 10.7 Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 9, 1984, incorporated by reference to Exhibit 10.7 to Edison Mission Energy's Form 10. 10.7.1 Amendment No. 1 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated March 29, 1985, incorporated by reference to Exhibit 10.7.1 to Edison Mission Energy's Form 10. 10.7.2 Amendment No. 2 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 21, 1985, incorporated by reference to Exhibit 10.7.2 to Edison Mission Energy's Form 10. 10.7.3 Amendment No. 3 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 21, 1985, incorporated by reference to Exhibit 10.7.3 to Edison Mission Energy's Form 10. 10.8 Power Purchase Contract between Southern California Edison Company and Arco Petroleum Products Company (Watson Refinery), incorporated by reference to Exhibit 10.8 to Edison Mission Energy's Form 10. 10.9 Power Supply Agreement between State Electricity Commission of Victoria, Loy Yang B Power Station Pty. Ltd. and the Company Australia Pty. Ltd., as managing partner of the Latrobe Power Partnership, dated December 31, 1992, incorporated by reference to Exhibit 10.9 to Edison Mission Energy's Form 10. 10.10 Power Purchase Agreement between P.T. Paiton Energy Company as Seller and Perusahaan Umum Listrik Negara as Buyer, dated February 12, 1994, incorporated by reference to Exhibit 10.10 to Edison Mission Energy's Form 10. 10.11 Amended and Restated Power Purchase Contract between Southern California Energy Company and Midway-Sunset Cogeneration Company, dated May 5, 1988, incorporated by reference to Exhibit 10.11 to Edison Mission Energy's Form 10. 10.12 Parallel Generation Agreement between Kern River Cogeneration Company and Southern California Energy Company, dated January 6, 1984, incorporated by reference to Exhibit 10.12 to Edison Mission Energy's Form 10. 10.13 Parallel Generation Agreement between Kern River Cogeneration (Sycamore Project) Company and Southern California Energy Company, dated December 18, 1984, incorporated by reference to Exhibit 10.13 to Edison Mission Energy's Form 10. 10.15 Conformed copy of the Second Amended and Restated U.S. $500 million Bank of America National Trust and Savings Association Credit Agreement, dated as of October 11, 1996, incorporated by reference to Exhibit 10.15.3 to Edison Mission Energy's Form 10-K for the year ended December 31, 1996. 10.15.1 Amendment One to Second Amended and Restated U.S. $500 million Bank of America National Trust and Savings Association Credit Agreement, dated as of August 17, 2000, incorporated by reference to Exhibit 10.15.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.16 Amended and Restated Ground Lease Agreement between Texaco Refining and Marketing Inc. and March Point Cogeneration Company, dated August 21, 1992, incorporated by reference to Exhibit 10.16 to Edison Mission Energy's Form 10.
II-7
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 10.16.1 Amendment No. 1 to Amended and Restated Ground Lease Agreement between Texaco Refining and Marketing Inc. and March Point Cogeneration Company, dated August 21, 1992, incorporated by reference to Exhibit 10.16 to Edison Mission Energy's Form 10. 10.17 Memorandum of Agreement between Atlantic Richfield Company and Products Cogeneration Company, dated September 17, 1987, incorporated by reference to Exhibit 10.17 to Edison Mission Energy's Form 10. 10.18 Memorandum of Ground Lease between Texaco Producing Inc. and Sycamore Cogeneration Company, dated January 19, 1987, incorporated by reference to Exhibit 10.18 to Edison Mission Energy's Form 10. 10.19 Amended and Restated Memorandum of Ground Lease between Getty Oil Company and Kern River Cogeneration Company, dated November 14, 1984, incorporated by reference to Exhibit 10.19 to Edison Mission Energy's Form 10. 10.20 Memorandum of Lease between Sun Operating Limited Partnership and Midway-Sunset Cogeneration Company, incorporated by reference to Exhibit 10.20 to Edison Mission Energy's Form 10. 10.21 Executive Supplemental Benefit Program, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-2313). 10.22 1981 Deferred Compensation Agreement, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-2313). 10.23 1985 Deferred Compensation Agreement for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-2313). 10.24 1987 Deferred Compensation Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-2313). 10.25 1988 Deferred Compensation Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1- 2313). 10.26 1989 Deferred Compensation Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-9936). 10.27 1990 Deferred Compensation Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-9936). 10.28 Annual Deferred Compensation Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-9936). 10.29 Executive Retirement Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-2313). 10.31 Estate and Financial Planning Program for Executive Officers, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (Fi1e No 1-9936). 10.32 Letter Agreement with Edward R. Muller, incorporated by reference to Exhibit 10.32 to Edison Mission Energy's Form 10. 10.33 Agreement with James S. Pignatelli, incorporated by reference to Exhibit 10.33 to Edison Mission Energy's Form 10. 10.34 Conformed copy of the Guarantee Agreement dated as of November 30, 1994, incorporated by reference to Exhibit 10.34 to Edison Mission Energy's Form 10.
II-8
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 10.35 Indenture of Lease between Brooklyn Navy Yard Development Corporation and Cogeneration Technologies, Inc., dated as of December 18, 1989, incorporated by reference to Exhibit 10.35 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.35.1 First Amendment to Indenture of Lease between Brooklyn Navy Yard Development Corporation and Cogeneration Technologies, Inc., dated November 1, 1991, incorporated by reference to Exhibit 10.35.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.35.2 Second Amendment to Indenture of Lease between Brooklyn Navy Yard Development Corporation and Cogeneration Technologies, Inc., dated June 3, 1994, incorporated by reference to Exhibit 10.35.2 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.35.3 Third Amendment to Indenture of Lease between Brooklyn Navy Yard Development Corporation and Cogeneration Technologies, Inc., dated December 12, 1994, incorporated by reference to Exhibit 10.35.3 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.37 Amended and Restated Limited Partnership Agreement of Mission Capital, L.P., dated as of November 30, 1994, incorporated by reference to Exhibit 10.37 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.38 Action of General Partner of Mission Capital, L.P. creating the 9 7/8% Cumulative Monthly Income Preferred Securities, Series A, dated as of November 30, 1994, incorporated by reference to Exhibit 10.38 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.39 Action of General Partner of Mission Capital, L.P., creating the 8 1/2% Cumulative Monthly Income Preferred Securities, Series B, dated as of August 8, 1995, incorporated by reference to Exhibit 10.39 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 1995. 10.40 Power Purchase Contract between ISAB Energy, S.r.l. as Seller and Enel, S.p.A. as Buyer, dated June 9, 1995, incorporated by reference to Exhibit 10.40 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 1995. 10.41 400 million sterling pounds Barclays Bank Plc Credit Agreement, dated December 18, 1995, incorporated by reference to Exhibit 10.41 to Edison Mission Energy's Form 8-K, dated December 21, 1995. 10.44 Guarantee by Edison Mission Energy, dated December 20, 1996, in favor of The Fuji Bank, Limited, Los Angeles Agency, to secure Camino Energy Company's payments pursuant to Camino Energy Company's Credit Agreement and Defeasance Agreement, incorporated by reference to Exhibit 10.44 to Edison Mission Energy's Form 10-K for the year ended December 31, 1996. 10.45 Power Purchase Agreement between National Power Corporation and San Pascual Cogeneration Company International B.V., dated September 10, 1997, incorporated by reference to Exhibit 10.45 to Edison Mission Energy's Form 10-K for the year ended December 31, 1997. 10.46 Power Purchase Agreement between Gulf Power Generation Co., LTD., and Electricity Generating Authority of Thailand, dated December 22, 1997, incorporated by reference to Exhibit 10.46 to Edison Mission Energy's Form 10-K for the year ended December 31, 1997.
II-9
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 10.49 Equity Support Guarantee by Edison Mission Energy, dated December 23, 1998, in favor of ABN AMRO Bank N.V., and the Chase Manhattan Bank to guarantee certain equity funding obligations of EcoElectrica Ltd. and EcoElectrica Holdings Ltd. pursuant to EcoElectrica Ltd.'s Credit Agreement dated as of October 31, 1997, incorporated by reference to Exhibit 10.49 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.50 Master Guarantee and Support Instrument by Edison Mission Energy, dated December 23, 1998, in favor of ABN AMRO Bank N.V., and the Chase Manhattan Bank to guarantee the availability of funds to purchase fuel for the EcoElectrica project pursuant to EcoElectrica Ltd.'s Credit Agreement dated as of October 31, 1997 and Intercreditor Agreement dated as of October 31, 1997, incorporated by reference to Exhibit 10.50 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.51 Guarantee Assumption Agreement from Edison Mission Energy, dated December 23, 1998, under which Edison Mission Energy assumed all of the obligations of KENETECH Energy Systems, Inc. to Union Carbide Caribe Inc., under the certain Guaranty dated November 25, 1997, incorporated by reference to Exhibit 10.51 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.52 Transition Power Purchase Agreement, dated August 1, 1998, between New York State Electric & Gas Corporation and Mission Energy Westside, Inc, incorporated by reference to Exhibit 10.52 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.53 Transition Power Purchase Agreement, dated August 1, 1998, between Pennsylvania Electric Company and Mission Energy Westside, Inc., incorporated by reference to Exhibit 10.53 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.54 Guarantee, dated August 1, 1998, between Edison Mission Energy, Pennsylvania Electric Company, NGE Generation, Inc. and New York State Electric & Gas Corporation, incorporated by reference to Exhibit 10.54 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.55 Credit Agreement, dated March 18, 1999, among Edison Mission Holdings Co. and Certain Commercial Lending Institutions, and Citicorp USA, Inc., incorporated by reference to Exhibit 10.55 to Edison Mission Energy's Form 8-K dated March 18, 1999. 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 City Generation L.P. and Edison Mission Energy in favor of United States Trust Company of New York, dated as of March 18, 1999, incorporated by reference to Exhibit 10.56 to Edison Mission Energy's Form 8-K dated March 18, 1999. 10.56.1 Amendment No. 1 to the Guarantee and Collateral Agreement, dated May 27, 1999, between Edison Mission Holdings, Edison Mission Finance Co., Homer City Property Holdings, Inc., Chestnut Ridge Energy Company, Mission Energy Westside, Inc., EME Homer City Generation L.P. and Edison Mission Energy in favor of United States Trust Company of New York, incorporated by reference to Exhibit 10.56.1 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000.
II-10
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 10.56.2 Open-End Mortgage, Security Agreement and Assignment of Leases and Rents, dated March 18, 1999 from EME Homer City Generation L.P. to United States Trust Company of New York, incorporated by reference to Exhibit 10.56.2 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000. 10.56.3 Amendment No. 1 to the Open-End Mortgage, Security Agreement and Assignment of Leases and Rents, dated May 27, 1999, from EME Homer City Generation L.P. to United States Trust Company of New York, incorporated by reference to Exhibit 10.56.3 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000. 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, incorporated by reference to Exhibit 10.57 to Edison Mission Energy's Form 8-K dated 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, incorporated by reference to Exhibit 10.58 to Edison Mission Energy's Form 8-K dated March 18, 1999. 10.58.1 Amendment No. 1 to the Security Deposit Agreement, dated May 27, 1999, between Edison Mission Holdings, Edison Mission Finance Co., Homer City Property Holdings, Inc., Chestnut Ridge Energy Company, Mission Energy Westside, Inc., EME Homer City Generation L.P. and United States Trust Company of New York, as Collateral Agent, incorporated by reference to Exhibit 10.58.1 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000. 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, incorporated by reference to Exhibit 10.59 to Edison Mission Energy's Form 8-K dated March 18, 1999. 10.59.1 Amendment No. 1 to the Credit Support Guarantee, dated May 27, 1999, made by Edison Mission Energy in favor of United States Trust Company of New York, incorporated by reference to Exhibit 10.59.1 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000. 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., incorporated by reference to Exhibit 10.60 to Edison Mission Energy's Form 8-K dated March 18, 1999. 10.60.1 Amendment No. 1 to the Debt Service Reserve Guarantee, dated May 27, 1999, made by Edison Mission Energy in favor of United States Trust Company of New York, incorporated by reference to Exhibit 10.60.1 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000.
II-11
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 10.60.2 Amendment No. 2, dated as of March 18, 2001, to the 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.* 10.60.3 Intercompany Loan Subordination Agreement, dated March 18, 1999, 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, incorporated by reference to Exhibit 10.60.3 to Amendment No. 2 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 29, 2000. 10.60.4 Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of March 30, 2001, among Edison Mission Holdings Co., Westdeutsche Landesbank Girozentrale, New York Branch and the Banks named therein.* 10.61 Credit Agreement, dated March 18, 1999, among Edison Mission Energy and Certain Commercial Lending Institutions, and Citicorp USA, Inc., incorporated by reference to Exhibit 10.61 to Edison Mission Energy's Form 8-K dated March 18, 1999. 10.61.1 Amendment One to Credit Agreement, dated as of August 17, 2000, by and among Edison Mission Energy, Certain Commercial Lending Institutions, and Citicorp USA, Inc., as Administrative Agent, incorporated by reference to Exhibit 10.61.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.62 Edison Power Limited L1,150,000,000 Guaranteed Secured Variable Rate Bonds due 2019 Guaranteed by Maplekey UK Limited, incorporated by reference to Exhibit 10.62 to Edison Mission Energy's Form 8-K, dated Ju1y 19, 1999. 10.64 Coal and Capex Facility Agreement, dated July 16, 1999 between EME Finance UK Limited, Barclay's Capital and Credit Suisse First Boston, The Financial Institutions named as Banks, and Barclays Bank PLC as Facility Agent, incorporated by reference to Exhibit 10.64 to Edison Mission Energy's Form 10-Q for the quarter ended September 30, 1999. 10.65 Guarantee by Edison Mission Energy dated July 16, 1999 supporting the Coal and Capex Facility Agreement (Facility Agreement) issued by Barclays Bank PLC to secure EME Finance UK Limited obligations pursuant to the Facility Agreement, incorporated by reference to Exhibit 10.65 to Edison Mission Energy's Form 10-Q for the quarter ended September 30, 1999. 10.65.1 Amendment One to Guarantee by Edison Mission Energy supporting the Facility Agreement, dated as of August 17, 2000, incorporated by reference to Exhibit 10.65.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.66 Debt Service Reserve Guarantee, dated as of July 16, 1999, made by Edison Mission Energy in favor of Bank of America National Trust and Savings Association, incorporated by reference to Exhibit 10.66 to Edison Mission Energy's Annual Report on Form 10-K for the year ended December 31, 1999. 10.71 Indenture, dated as of May 27, 1999, between Edison Mission Holdings Co. and United States Trust Company of New York, as Trustee, incorporated by reference to Exhibit 4.1 to Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on December 3, 1999.
II-12
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 10.75 Exchange and Registration Rights Agreement, dated as of May 27, 1999, by and among the Initial Purchasers named therein, the Guarantors named therein and Edison Mission Holdings Co., incorporated by reference to Exhibit 10.1 to Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on December 3, 1999. 10.76 Agreement among Edward R. Muller, Edison International and Edison Mission Energy concerning the terms of Mr. Muller's employment separation, incorporated by reference to Exhibit 10.76 to Edison Mission Energy's Form 10-Q for the quarter ended March 31, 2000. 10.77 Agreement By and Between S. Linn Williams and Edison Mission Energy dated February 5, 2000, incorporated by reference to Exhibit 10.77 to Edison Mission Energy's Form 10-Q for the quarter ended March 31, 2000. 10.78 Form of Agreement for 2000 Employee Awards under the Equity Compensation Plan, incorporated by reference to Exhibit 10.78 to Edison Mission Energy's Form 10-Q for the quarter ended March 31, 2000. 10.79 Resolution regarding the computation of disability and survivor benefits prior to age 55 for Alan J. Fohrer, incorporated by reference to Exhibit 10.79 to Edison Mission Energy's Form 10-Q for the quarter ended March 31, 2000. 10.81 Edison International 2000 Equity Plan, incorporated by reference to Exhibit 10.1 to Edison International's Form 10-Q for the quarter ended June 30, 2000. (File No. 1-9936). 10.82 Form of Agreement for 2000 Employee Awards under the 2000 Equity Plan, incorporated by reference to Exhibit 10.2 to Edison International's Form 10-Q for the quarter ended June 30, 2000. (File No. 1-9936). 10.83 Amendment No. 1 to the Edison International Equity Compensation Plan (as restated January 1, 1998), incorporated by reference to Exhibit 10.4 to Edison International's Form 10-Q for the quarter ended June 30, 2000. (File No. 1-9936). 10.84 Credit Agreement, dated May 30, 2000, among Edison Mission Energy, Certain Commercial Lending Institutions and Bank of America, N.A., incorporated by reference to Exhibit 10.84 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2000. 10.84.1 Amendment One to Credit Agreement, dated as of August 17, 2000, by and among Edison Mission Energy, Certain Commercial Lending Institutions and Bank of America, N.A. as Administrative Agent, incorporated by reference to Exhibit 10.84.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.85 Guarantee, dated as of June 23, 2000, in favor of EME/CDL Trust and Midwest Generation, LLC made by Edison Mission Energy, incorporated by reference to Exhibit 10.85 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.86 Power Purchase Agreement (Crawford, Fisk, Waukegan, Will County, Joliet and Powerton Generating Stations), dated as of December 15, 1999, between Commonwealth Edison Company and Midwest Generation, LLC, incorporated by reference to Exhibit 10.86 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.87 Power Purchase Agreement (Collins Generating Station), dated as of December 15, 1999, between Commonwealth Edison Company and Midwest Generation, LLC, incorporated by reference to Exhibit 10.87 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000.
II-13
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 10.87.1 Amendment No. 1 to the Power Purchase Agreement, dated July 12, 2000, between Commonwealth Edison Company and Midwest Generation, LLC, incorporated by reference to Exhibit 10.87.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.87.2 Amended and Restated Power Purchase Agreement (Collins Generating Station), dated as of September 13, 2000, between Commonwealth Edison Company and Midwest Generation, LLC, incorporated by reference to Exhibit 10.87.2 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.88 Power Purchase Agreement (Crawford, Fisk, Waukegan, Calumet, Joliet, Bloom, Electric Junction, Sabrooke and Lombard Peaking Units), dated as of December 15, 1999, between Commonwealth Edison Company and Midwest Generation, LLC, incorporated by reference to Exhibit 10.88 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.89 Participation Agreement, dated as of June 23, 2000, among Midwest Generation, LLC, Edison Mission Energy, EME/CDL Trust, the Investor party to the Trust Agreement, Wilmington Trust Company, the Persons listed as Noteholders on Schedule I thereto, Citicorp North America, Inc. and Citicorp North America, Inc., incorporated by reference to Exhibit 10.89 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.89.1 Amendment One, dated as of August 17, 2000, by and among Midwest Generation, LLC, Edison Mission Energy, EME/CDL Trust, Citicorp Del-Lease, Inc., Wilmington Trust Company, Certain Noteholders Party Thereto, Citicorp North America, Inc. and Citicorp North America, Inc., incorporated by reference to Exhibit 10.89.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.90 Reimbursement Agreement, dated as of August 17, 2000, between Edison Mission Energy and Midwest Generation, LLC, incorporated by reference to Exhibit 10.90 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.91 Instrument of Assumption, dated as of December 15, 1999, by Midwest Generation, LLC in favor of Commonwealth Edison Company and Unicom Investment Inc.* 10.92 Subordination Agreement, dated as of December 15, 1999, among Midwest Generation, LLC, Edison Mission Overseas Co., and Citibank, N.A.* 10.93 Subordinated Loan Agreement, dated as of December 15, 1999, among Midwest Generation, LLC and Edison Mission Overseas Co.* 10.94 Subordinated Revolving Loan Agreement, dated as of December 15, 1999, among Midwest Generation, LLC and Edison Mission Overseas Co.* 10.95 Facility Lease Agreement (T1), dated as of December 15, 1999, between Collins Trust I and Collins Holdings EME, LLC.* 10.95.1 Schedule identifying substantially identical agreements to the Facility Lease Agreement constituting Exhibit 10.95 hereto.* 10.96 Amendment One, dated as of June 23, 2000, by and between Collins Trust I and Collins Holdings EME.* 10.96.1 Schedule identifying substantially identical agreements to the Amendment One constituting Exhibit 10.96 hereto.* 10.96.2 Amendment Two, dated as of August 17, 2000, by and between Collins Trust I and Collins Holdings EME LLC.*
II-14
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 10.96.3 Schedule identifying substantially identical agreements to the Amendment Two constituting Exhibit 10.96.2 hereto.* 10.97 Facility Sublease Agreement (T1), dated as of December 15, 1999, by and among Collins Holdings EME, LLC, Midwest Generation, LLC and Collins Trust I.* 10.97.1 Schedule identifying substantially identical agreements to the Facility Sublease Agreement constituting Exhibit 10.97 hereto.* 10.98 Participation Agreement (T1), dated as of December 15, 1999, among Midwest Generation, LLC, Collins Holdings EME, LLC, Collins Trust I, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A.* 10.98.1 Schedule identifying substantially identical agreements to the Participation Agreement constituting Exhibit 10.98 hereto.* 10.99 Amendment One, dated as of May 9, 2000, by and among Collins Holdings EME, LLC, Collins Trust I, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A.* 10.99.1 Schedule identifying substantially identical agreements to the Amendment One constituting Exhibit 10.99 hereto.* 10.100 Amendment Two, dated as of June 23, 2000, by and among Collins Holdings EME, LLC, Collins Trust I, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A.* 10.100.1 Schedule identifying substantially identical agreements to the Amendment Two constituting Exhibit 10.100 hereto.* 10.101 Amendment Three, dated as of August 17, 2000, by and among Collins Holdings EME, LLC, Collins Trust I, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A.* 10.101.1 Schedule identifying substantially identical agreements to the Amendment Three constituting Exhibit 10.101 hereto.* 10.102 Guarantee by Midwest Generation, LLC in favor of the Administrative Agent, dated as of December 15, 1999.* 10.103 Midwest OP Lease Guaranty made by Midwest Generation, LLC, dated as of December 15, 1999.* 10.103.1 Schedule identifying substantially identical agreements to the Midwest OP Lease Guaranty constituting Exhibit 10.103 hereto.* 10.104 Midwest Lessor Lease Guaranty (T1) made by Midwest Generation, LLC, dated as of December 15, 1999.* 10.104.1 Schedule identifying substantially identical agreements to the Midwest Lessor Lease Guaranty constituting Exhibit 10.104 hereto.* 10.105 Pledge Agreement, dated as of August 17, 2000, between Midwest Generation, LLC and Citibank, N.A.*
II-15
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------ 10.105.1 Schedule identifying substantially identical agreements to the Pledge Agreement constituting Exhibit 10.105 hereto.* 10.106 Lease Agreement, dated as of June 23, 2000, between Midwest Generation, LLC and EME/ CDL Trust.* 10.107 Reimbursement Agreement I, dated as of December 15, 1999 entered into between Bayerische Landesbank International S.A. and Midwest Generation, LLC.* 10.107.1 Schedule identifying substantially identical agreements to the Reimbursement Agreement I constituting Exhibit 10.107 hereto.* 10.108 Credit Agreement, dated as of December 15, 1999, among Edison Mission Midwest Holdings Co., Certain Commercial Lending Institutions, and The Chase Manhattan Bank.* 10.108.1 Amendment One, dated as of May 9, 2000, by and among Edison Mission Midwest Holdings Co. and each of certain commercial lending institutions party thereto.* 10.108.2 Amendment Two, dated as of June 23, 2000, by and among Edison Mission Midwest Holdings Co., The Chase Manhattan Bank and each of certain commercial lending institutions party thereto.* 10.108.3 Amendment Three, dated as of August 17, 2000, by and among Edison Mission Midwest Holdings Co., The Chase Manhattan Bank and each of certain commercial lending institutions party thereto.* 10.108.4 Amendment Four, dated as of December 12, 2000, by and among Edison Mission Midwest Holdings Co., The Chase Manhattan Bank and each of certain commercial lending institutions party thereto.* 12.1 Statement regarding the computation of ratio of earnings to fixed charges for Edison Mission Energy.* 12.2 Statement regarding the computation of ratio of earnings to fixed charges for Midwest Generation, LLC.* 21.1 List of Subsidiaries of Edison Mission Energy, incorporated by reference to Exhibit 21 to Edison Mission Energy's Annual Report on Form 10-K for the year ended December 31, 2000. 23.1 Consent of Arthur Andersen LLP.* 23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1).* 25.1 Statement of Eligibility and Qualification on Form T-1 of United States Trust Company of New York for the 8.30% Pass-Through Certificates, Series A and the 8.56% Pass-Through Certificates, Series B.* 99.1 Form of Letter of Transmittal.* 99.2 Form of Notice of Guaranteed Delivery.* 99.3 Form of Letter to Clients.* 99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.*
- ------------------------ * Filed herewith. II-16 ITEM 22. UNDERTAKINGS (a) The undersigned Registrants hereby undertake: Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933. (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned Registrants hereby undertake that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new II-17 registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (3) For purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (b) The undersigned Registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (c) The undersigned Registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (d) The undersigned Registrants hereby undertake to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report, to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. II-18 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Irvine, State of California and the City of Chicago, State of Illinois, on the 20th day of April, 2001. MIDWEST GENERATION, LLC (Registrant) By: /s/ MICHELLE J. JOHNSON ----------------------------------------- Michelle J. Johnson Secretary
SIGNATURE TITLE DATE --------- ----- ---- /s/ GEORGIA R. NELSON Manager and President ------------------------------------------- (Principal Executive Officer) April 20, 2001 Georgia R. Nelson /s/ RAYMOND W. VICKERS Manager and Vice President ------------------------------------------- April 20, 2001 Raymond W. Vickers /s/ G. GARY GARCIA Vice President and Treasurer ------------------------------------------- (Principal Financial Officer) April 20, 2001 G. Gary Garcia /s/ KEVIN M. SMITH Manager ------------------------------------------- April 20, 2001 Kevin M. Smith
II-19 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Irvine, State of California, on the 20th day of April, 2001. EDISON MISSION ENERGY (Registrant) By: /s/ MICHELLE J. JOHNSON ----------------------------------------- Michelle J. Johnson Corporate Secretary Pro Tem
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALAN J. FOHRER Director, Chief Executive ------------------------------------------- Officer and President April 20, 2001 Alan J. Fohrer (Principal Executive Officer) /s/ KEVIN M. SMITH Senior Vice President and ------------------------------------------- Chief Financial Officer April 20, 2001 Kevin M. Smith (Principal Financial and Accounting Officer) /s/ JOHN E. BRYSON Director and Chairman of ------------------------------------------- the Board April 20, 2001 John E. Bryson /s/ BRYANT C. DANNER Director ------------------------------------------- April 20, 2001 Bryant C. Danner /s/ THEODORE F. CRAVER, JR. Director ------------------------------------------- April 20, 2001 Theodore F. Craver, Jr.
II-20 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- 1.1 Purchase Agreement, dated as of August 17, 2000, among Midwest Generation, LLC, Edison Mission Energy and Credit Suisse First Boston Corporation and Lehman Brothers Inc. as representatives of the Initial Purchasers.* 2.1 Agreement for the sale and purchase of shares in First Hydro Limited, dated December 21, 1995, between PSB Holding Limited and First Hydro Finance Plc, incorporated by reference to Exhibit 2.1 to Edison Mission Energy's Form 8-K, dated December 21, 1995. 2.2 Transaction Implementation Agreement, dated March 29, 1997, between The State Electricity Commission of Victoria, Edison Mission Energy Australia Limited, Loy Yang B Power Station Pty Ltd, Loy Yang Power Limited, The Honorable Alan Robert Stockdale, Leanne Power Pty Ltd and Edison Mission Energy, incorporated by reference to Exhibit 2.2 to Edison Mission Energy's Form 8-K, dated May 22, 1997. 2.3 Stock Purchase and Assignment Agreement, dated December 23, 1998, between KES Puerto Rico, L.P., KENETECH Energy Systems, Inc., KES Bermuda, Inc. and Edison Mission Energy del Caribe for the (i) sale and purchase of KES Puerto Rico, L.P.'s shares in EcoElectrica Holdings Ltd.; (ii) assignment of KENETECH Energy Systems' rights and interests in that certain Project Note from the Partnership; and (iii) assignment of KES Bermuda, Inc.'s rights and interests in that certain Administrative Services Agreement dated October 31 1997, incorporated by reference to Exhibit 2.3 to Edison Mission Energy's 10-K for the year ended December 31, 1998. 2.4 Asset Purchase Agreement, dated August 1, 1998, between Pennsylvania Electric Company, NGE Generation, Inc., New York State Electric & Gas Corporation and Mission Energy Westside, Inc., incorporated by reference to Exhibit 2.4 to Edison Mission Energy's 10-K for the year ended December 31, 1998. 2.5 Asset Sale Agreement, dated March 22, 1999, between Commonwealth Edison Company and Edison Mission Energy as to the Fossil Generating Assets, incorporated by reference to Exhibit 2.5 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 2.6 Agreement for the Sale and Purchase of Shares in Contact Energy Limited, dated March 10, 1999, between Her Majesty the Queen in Right of New Zealand, Edison Mission Energy Taupo Limited and Edison Mission Energy, incorporated herein by reference to Exhibit 2.6 to the Edison Mission Energy's Form 10-Q for the quarter ended March 31, 1999. 2.7 Sale, Purchase and Leasing Agreement between PowerGen UK plc and Edison First Power Limited for the purchase of the Ferrybridge C Power Station, incorporated by reference to Exhibit 2.7 to Edison Mission Energy's Form 8-K/A dated July 19, 1999. 2.8 Sale, Purchase and Leasing Agreement between PowerGen UK plc and Edison First Power Limited for the purchase of the Fiddler's Ferry Power Station, incorporated by reference to Exhibit 2.8 to Edison Mission Energy's Form 8-K/A, dated July 19, 1999. 2.9 Purchase and Sale Agreement, dated May 10, 2000, between Edison Mission Energy, P & L Coal Holdings Corporation and Gold Fields Mining Corporation, incorporated by reference to Exhibit 2.9 to Edison Mission Energy's 10-Q for the quarter ended September 30, 2000. 2.10 Asset Purchase Agreement, dated 3 March 2000, between MEC International B.V. and UPC International Partnership CV II, incorporated by reference to Exhibit 10.80 to Edison Mission Energy's Form 10-Q for the quarter ended March 31, 2000.
EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.11 Stock Purchase Agreement, dated November 17, 2000, between Mission Del Sol, LLC and Texaco Inc., incorporated by reference to Exhibit 2.11 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.1 First Amended and Restated Articles of Incorporation of Edison Mission Energy. Originally filed with Edison Mission Energy's Registration Statement on Form 10 to the Securities and Exchange Commission on September 30, 1994 and amended by Amendment No. 1 thereto dated November 19, 1994 and Amendment No. 2 thereto dated November 21, 1994 (as so amended, the "Form 10"), incorporated by reference to Exhibit 3.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.1.1 Certificate of Amendment of Articles of Incorporation of Edison Mission Energy dated October 18, 1988, originally filed with Edison Mission Energy's Form 10, incorporated by reference to Exhibit 3.1.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.1.2 Certificate of Amendment of Articles of Incorporation of Edison Mission Energy dated January 17, 2001, incorporated by reference to Exhibit 3.1.2 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.2 By-Laws of Edison Mission Energy as amended to and including January 1, 2000, incorporated by reference to Exhibit 3.2 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.2.1 Amendment to By-Laws of Edison Mission Energy dated January 15, 2001, incorporated by reference to Exhibit 3.2.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 3.3 Limited Liability Company Agreement of Midwest Generation, LLC effective as of July 12, 1999.* 3.4 Certificate of Formation of Midwest Generation, LLC, dated as of July 9, 1999.* 4.1 Pass-Through Trust Agreement A, dated as of August 17, 2000, between Midwest Generation, LLC and United States Trust Company of New York, as Pass-Through Trustee, made with respect to the formation of the Midwest Generation Series A Pass-Through Trust, and the issuance of 8.30% Pass-Through Certificates, Series A.* 4.2 Pass-Through Trust Agreement B, dated as of August 17, 2000, between Midwest Generation, LLC and United States Trust Company of New York, as Pass-Through Trustee, made with respect to the formation of the Midwest Generation Series B Pass-Through Trust, and the issuance of 8.56% Pass-Through Certificates, Series B.* 4.3 Form of 8.30% Pass-Through Certificate, Series A (included in Exhibit 4.1).* 4.4 Form of 8.56% Pass-Through Certificate, Series B (included in Exhibit 4.2).* 4.5 Indenture of Trust, Mortgage and Security Agreement (T1), dated as of August 17, 2000, between Powerton Trust I and United States Trust Company of New York, as Lease Indenture Trustee.* 4.5.1 Schedule identifying substantially identical agreement to Indenture of Trust, Mortgage and Security Agreement constituting Exhibit 4.5 hereto.* 4.6 Indenture of Trust, Mortgage and Security Agreement (T1), dated as of August 17, 2000, between Joliet Trust I and United States Trust Company of New York, as Lease Indenture Trustee.* 4.6.1 Schedule identifying substantially identical agreement to Indenture of Trust, Mortgage and Security Agreement constituting Exhibit 4.6 hereto.*
EXHIBIT NO. DESCRIPTION - ----------- ----------- 4.7 Facility Lease Agreement (T1), dated as of August 17, 2000, by and between, Powerton Trust I, as Owner Lessor, and Midwest Generation, LLC, as Facility Lessee.* 4.7.1 Schedule identifying substantially identical agreement to Facility Lease Agreement constituting Exhibit 4.7 hereto.* 4.8 Facility Lease Agreement (T1), dated as of August 17, 2000, by and between, Joliet Trust I, as Owner Lessor, and Midwest Generation, LLC, as Facility Lessee.* 4.8.1 Schedule identifying substantially identical agreement to Facility Lease Agreement constituting Exhibit 4.8 hereto.* 4.9 Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Powerton Trust I, as Owner Lessor.* 4.9.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.9 hereto.* 4.10 Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Joliet Trust I, as Owner Lessor.* 4.10.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.10 hereto.* 4.11 Registration Rights Agreement, dated as of August 17, 2000, among Edison Mission Energy, Midwest Generation, LLC and Credit Suisse First Boston Corporation and Lehman Brothers Inc., as representatives of the Initial Purchasers.* 4.12 Participation Agreement (T1), dated as of August 17, 2000, by and among, Midwest Generation, LLC, Powerton Trust I, as the Owner Lessor, Wilmington Trust Company, as the Owner Trustee, Powerton Generation I, LLC, as the Owner Participant, Edison Mission Energy, United States Trust Company of New York, as the Lease Indenture Trustee, and United States Trust Company of New York, as the Pass Through Trustees.* 4.12.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.12 hereto.* 4.13 Participation Agreement (T1), dated as of August 17, 2000, by and among, Midwest Generation, LLC, Joliet Trust I, as the Owner Lessor, Wilmington Trust Company, as the Owner Trustee, Joliet Generation I, LLC, as the Owner Participant, Edison Mission Energy, United States Trust Company of New York, as the Lease Indenture Trustee and United States Trust Company of New York, as the Pass Through Trustees.* 4.13.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.13.1 hereto.* 4.14 Copy of the Global Debenture representing Edison Mission Energy's 9 7/8% Junior Subordinated Deferrable Interest Debentures, Series A, Due 2024, incorporated by reference to Exhibit 4.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 4.15 Conformed copy of the Indenture, dated as of November 30, 1994, between Edison Mission Energy and The First National Bank of Chicago, as Trustee, incorporated by reference to Exhibit 4.2 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 4.15.1 First Supplemental Indenture, dated as of November 30, 1994, to Indenture dated as of November 30, 1994 between Edison Mission Energy and The First National Bank of Chicago, as Trustee, incorporated by reference to Exhibit 4.2.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994.
EXHIBIT NO. DESCRIPTION - ----------- ----------- 4.16 Indenture, dated as of June 28, 1999, between Edison Mission Energy and The Bank of New York, as Trustee, incorporated by reference to Exhibit 4.1 to Edison Mission Energy's Registration Statement on Form S-4 to the Securities and Exchange Commission on February 18, 2000. 4.16.1 First Supplemental Indenture, dated as of June 28, 1999, to Indenture dated as of June 28, 1999, between Edison Mission Energy and The Bank of New York, as Trustee, incorporated by reference to Exhibit 4.2 to Edison Mission Energy's Registration Statement on Form S-4 to the Securities and Exchange Commission on February 18, 2000. 4.17 Copy of the Security representing Edison Mission Energy's 8 1/8% Senior Notes Due 2002, incorporated by reference to Exhibit 4.4 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.18 Promissory Note ($499,450,800), dated as of August 24, 2000, by Edison Mission Energy in favor of Midwest Generation, LLC, incorporated by reference to Exhibit 4.5 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.18.1 Schedule identifying substantially identical agreements to Promissory Note constituting Exhibit 4.18 hereto, incorporated by reference to Exhibit 4.5.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.19 Promissory Note, dated as of June 23, 2000, by Edison Mission Energy in favor of Midwest Generation, LLC, incorporated by reference to Exhibit 4.6 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.20 Indenture, dated as of April 5, 2001, between Edison Mission Energy and United States Trust Company of New York as Trustee.* 5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to Edison Mission Energy and Midwest Generation, LLC, as to the legality of the Pass-Through Certificates and the Guarantees being registered hereby.* 10.1 Registration Rights Agreement, dated as of June 23, 1999, between Edison Mission Energy and the Initial Purchasers specified therein, incorporated by reference to Exhibit 10.1 to Edison Mission Energy's Registration Statement on Form S-4 to the Securities and Exchange Commission on February 18, 2000. 10.2 Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated March 8, 1985, incorporated by reference to Exhibit 10.2 to Edison Mission Energy's Form 10. 10.2.1 Amendment to Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated July 29, 1985, incorporated by reference to Exhibit 10.2.1 to Edison Mission Energy's Form 10. 10.2.2 Amendment No. 2 to Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated October 29, 1985, incorporated by reference to Exhibit 10.2.2 to Edison Mission Energy's Form 10. 10.4 Power Purchase Contract between Southern California Edison Company and Imperial Energy Company, dated February 22, 1984, incorporated by reference to Exhibit 10.4 Edison Mission Energy's Form 10. 10.4.1 Amendment to Power Purchase Contract between Southern California Edison Company and Imperial Energy Company, dated November 13, 1984, incorporated by reference to Exhibit 10.4.1 to Edison Mission Energy's Form 10.
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.6 Power Purchase Contract between Southern California Edison Company and Imperial Energy Company Niland No. 2, dated April 16, 1985, incorporated by reference to Exhibit 10.6 to Edison Mission Energy's Form 10. 10.7 Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 9, 1984, incorporated by reference to Exhibit 10.7 to Edison Mission Energy's Form 10. 10.7.1 Amendment No. 1 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated March 29, 1985, incorporated by reference to Exhibit 10.7.1 to Edison Mission Energy's Form 10. 10.7.2 Amendment No. 2 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 21, 1985, incorporated by reference to Exhibit 10.7.2 to Edison Mission Energy's Form 10. 10.7.3 Amendment No. 3 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 21, 1985, incorporated by reference to Exhibit 10.7.3 to Edison Mission Energy's Form 10. 10.8 Power Purchase Contract between Southern California Edison Company and Arco Petroleum Products Company (Watson Refinery), incorporated by reference to Exhibit 10.8 to Edison Mission Energy's Form 10. 10.9 Power Supply Agreement between State Electricity Commission of Victoria, Loy Yang B Power Station Pty. Ltd. and the Company Australia Pty. Ltd., as managing partner of the Latrobe Power Partnership, dated December 31, 1992, incorporated by reference to Exhibit 10.9 to Edison Mission Energy's Form 10. 10.10 Power Purchase Agreement between P.T. Paiton Energy Company as Seller and Perusahaan Umum Listrik Negara as Buyer, dated February 12, 1994, incorporated by reference to Exhibit 10.10 to Edison Mission Energy's Form 10. 10.11 Amended and Restated Power Purchase Contract between Southern California Energy Company and Midway-Sunset Cogeneration Company, dated May 5, 1988, incorporated by reference to Exhibit 10.11 to Edison Mission Energy's Form 10. 10.12 Parallel Generation Agreement between Kern River Cogeneration Company and Southern California Energy Company, dated January 6, 1984, incorporated by reference to Exhibit 10.12 to Edison Mission Energy's Form 10. 10.13 Parallel Generation Agreement between Kern River Cogeneration (Sycamore Project) Company and Southern California Energy Company, dated December 18, 1984, incorporated by reference to Exhibit 10.13 to Edison Mission Energy's Form 10. 10.15 Conformed copy of the Second Amended and Restated U.S. $500 million Bank of America National Trust and Savings Association Credit Agreement, dated as of October 11, 1996, incorporated by reference to Exhibit 10.15.3 to Edison Mission Energy's Form 10-K for the year ended December 31, 1996. 10.15.1 Amendment One to Second Amended and Restated U.S. $500 million Bank of America National Trust and Savings Association Credit Agreement, dated as of August 17, 2000, incorporated by reference to Exhibit 10.15.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.16 Amended and Restated Ground Lease Agreement between Texaco Refining and Marketing Inc. and March Point Cogeneration Company, dated August 21, 1992, incorporated by reference to Exhibit 10.16 to Edison Mission Energy's Form 10.
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.16.1 Amendment No. 1 to Amended and Restated Ground Lease Agreement between Texaco Refining and Marketing Inc. and March Point Cogeneration Company, dated August 21, 1992, incorporated by reference to Exhibit 10.16 to Edison Mission Energy's Form 10. 10.17 Memorandum of Agreement between Atlantic Richfield Company and Products Cogeneration Company, dated September 17, 1987, incorporated by reference to Exhibit 10.17 to Edison Mission Energy's Form 10. 10.18 Memorandum of Ground Lease between Texaco Producing Inc. and Sycamore Cogeneration Company, dated January 19, 1987, incorporated by reference to Exhibit 10.18 to Edison Mission Energy's Form 10. 10.19 Amended and Restated Memorandum of Ground Lease between Getty Oil Company and Kern River Cogeneration Company, dated November 14, 1984, incorporated by reference to Exhibit 10.19 to Edison Mission Energy's Form 10. 10.20 Memorandum of Lease between Sun Operating Limited Partnership and Midway-Sunset Cogeneration Company, incorporated by reference to Exhibit 10.20 to Edison Mission Energy's Form 10. 10.21 Executive Supplemental Benefit Program, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-2313). 10.22 1981 Deferred Compensation Agreement, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-2313). 10.23 1985 Deferred Compensation Agreement for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-2313). 10.24 1987 Deferred Compensation Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-2313). 10.25 1988 Deferred Compensation Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1- 2313). 10.26 1989 Deferred Compensation Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-9936). 10.27 1990 Deferred Compensation Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-9936). 10.28 Annual Deferred Compensation Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-9936). 10.29 Executive Retirement Plan for Executives, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (File No. 1-2313). 10.31 Estate and Financial Planning Program for Executive Officers, incorporated by reference to Exhibits to Forms 10-K filed by SCEcorp (Fi1e No 1-9936). 10.32 Letter Agreement with Edward R. Muller, incorporated by reference to Exhibit 10.32 to Edison Mission Energy's Form 10. 10.33 Agreement with James S. Pignatelli, incorporated by reference to Exhibit 10.33 to Edison Mission Energy's Form 10. 10.34 Conformed copy of the Guarantee Agreement dated as of November 30, 1994, incorporated by reference to Exhibit 10.34 to Edison Mission Energy's Form 10.
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.35 Indenture of Lease between Brooklyn Navy Yard Development Corporation and Cogeneration Technologies, Inc., dated as of December 18, 1989, incorporated by reference to Exhibit 10.35 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.35.1 First Amendment to Indenture of Lease between Brooklyn Navy Yard Development Corporation and Cogeneration Technologies, Inc., dated November 1, 1991, incorporated by reference to Exhibit 10.35.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.35.2 Second Amendment to Indenture of Lease between Brooklyn Navy Yard Development Corporation and Cogeneration Technologies, Inc., dated June 3, 1994, incorporated by reference to Exhibit 10.35.2 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.35.3 Third Amendment to Indenture of Lease between Brooklyn Navy Yard Development Corporation and Cogeneration Technologies, Inc., dated December 12, 1994, incorporated by reference to Exhibit 10.35.3 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.37 Amended and Restated Limited Partnership Agreement of Mission Capital, L.P., dated as of November 30, 1994, incorporated by reference to Exhibit 10.37 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.38 Action of General Partner of Mission Capital, L.P. creating the 9 7/8% Cumulative Monthly Income Preferred Securities, Series A, dated as of November 30, 1994, incorporated by reference to Exhibit 10.38 to Edison Mission Energy's Form 10-K for the year ended December 31, 1994. 10.39 Action of General Partner of Mission Capital, L.P., creating the 8 1/2% Cumulative Monthly Income Preferred Securities, Series B, dated as of August 8, 1995, incorporated by reference to Exhibit 10.39 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 1995. 10.40 Power Purchase Contract between ISAB Energy, S.r.l. as Seller and Enel, S.p.A. as Buyer, dated June 9, 1995, incorporated by reference to Exhibit 10.40 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 1995. 10.41 400 million sterling pounds Barclays Bank Plc Credit Agreement, dated December 18, 1995, incorporated by reference to Exhibit 10.41 to Edison Mission Energy's Form 8-K, dated December 21, 1995. 10.44 Guarantee by Edison Mission Energy, dated December 20, 1996, in favor of The Fuji Bank, Limited, Los Angeles Agency, to secure Camino Energy Company's payments pursuant to Camino Energy Company's Credit Agreement and Defeasance Agreement, incorporated by reference to Exhibit 10.44 to Edison Mission Energy's Form 10-K for the year ended December 31, 1996. 10.45 Power Purchase Agreement between National Power Corporation and San Pascual Cogeneration Company International B.V., dated September 10, 1997, incorporated by reference to Exhibit 10.45 to Edison Mission Energy's Form 10-K for the year ended December 31, 1997. 10.46 Power Purchase Agreement between Gulf Power Generation Co., LTD., and Electricity Generating Authority of Thailand, dated December 22, 1997, incorporated by reference to Exhibit 10.46 to Edison Mission Energy's Form 10-K for the year ended December 31, 1997.
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.49 Equity Support Guarantee by Edison Mission Energy, dated December 23, 1998, in favor of ABN AMRO Bank N.V., and the Chase Manhattan Bank to guarantee certain equity funding obligations of EcoElectrica Ltd. and EcoElectrica Holdings Ltd. pursuant to EcoElectrica Ltd.'s Credit Agreement dated as of October 31, 1997, incorporated by reference to Exhibit 10.49 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.50 Master Guarantee and Support Instrument by Edison Mission Energy, dated December 23, 1998, in favor of ABN AMRO Bank N.V., and the Chase Manhattan Bank to guarantee the availability of funds to purchase fuel for the EcoElectrica project pursuant to EcoElectrica Ltd.'s Credit Agreement dated as of October 31, 1997 and Intercreditor Agreement dated as of October 31, 1997, incorporated by reference to Exhibit 10.50 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.51 Guarantee Assumption Agreement from Edison Mission Energy, dated December 23, 1998, under which Edison Mission Energy assumed all of the obligations of KENETECH Energy Systems, Inc. to Union Carbide Caribe Inc., under the certain Guaranty dated November 25, 1997, incorporated by reference to Exhibit 10.51 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.52 Transition Power Purchase Agreement, dated August 1, 1998, between New York State Electric & Gas Corporation and Mission Energy Westside, Inc, incorporated by reference to Exhibit 10.52 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.53 Transition Power Purchase Agreement, dated August 1, 1998, between Pennsylvania Electric Company and Mission Energy Westside, Inc., incorporated by reference to Exhibit 10.53 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.54 Guarantee, dated August 1, 1998, between Edison Mission Energy, Pennsylvania Electric Company, NGE Generation, Inc. and New York State Electric & Gas Corporation, incorporated by reference to Exhibit 10.54 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998. 10.55 Credit Agreement, dated March 18, 1999, among Edison Mission Holdings Co. and Certain Commercial Lending Institutions, and Citicorp USA, Inc., incorporated by reference to Exhibit 10.55 to Edison Mission Energy's Form 8-K dated March 18, 1999. 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 City Generation L.P. and Edison Mission Energy in favor of United States Trust Company of New York, dated as of March 18, 1999, incorporated by reference to Exhibit 10.56 to Edison Mission Energy's Form 8-K dated March 18, 1999. 10.56.1 Amendment No. 1 to the Guarantee and Collateral Agreement, dated May 27, 1999, between Edison Mission Holdings, Edison Mission Finance Co., Homer City Property Holdings, Inc., Chestnut Ridge Energy Company, Mission Energy Westside, Inc., EME Homer City Generation L.P. and Edison Mission Energy in favor of United States Trust Company of New York, incorporated by reference to Exhibit 10.56.1 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000.
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.56.2 Open-End Mortgage, Security Agreement and Assignment of Leases and Rents, dated March 18, 1999 from EME Homer City Generation L.P. to United States Trust Company of New York, incorporated by reference to Exhibit 10.56.2 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000. 10.56.3 Amendment No. 1 to the Open-End Mortgage, Security Agreement and Assignment of Leases and Rents, dated May 27, 1999, from EME Homer City Generation L.P. to United States Trust Company of New York, incorporated by reference to Exhibit 10.56.3 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000. 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, incorporated by reference to Exhibit 10.57 to Edison Mission Energy's Form 8-K dated 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, incorporated by reference to Exhibit 10.58 to Edison Mission Energy's Form 8-K dated March 18, 1999. 10.58.1 Amendment No. 1 to the Security Deposit Agreement, dated May 27, 1999, between Edison Mission Holdings, Edison Mission Finance Co., Homer City Property Holdings, Inc., Chestnut Ridge Energy Company, Mission Energy Westside, Inc., EME Homer City Generation L.P. and United States Trust Company of New York, as Collateral Agent, incorporated by reference to Exhibit 10.58.1 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000. 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, incorporated by reference to Exhibit 10.59 to Edison Mission Energy's Form 8-K dated March 18, 1999. 10.59.1 Amendment No. 1 to the Credit Support Guarantee, dated May 27, 1999, made by Edison Mission Energy in favor of United States Trust Company of New York, incorporated by reference to Exhibit 10.59.1 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000. 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., incorporated by reference to Exhibit 10.60 to Edison Mission Energy's Form 8-K dated March 18, 1999. 10.60.1 Amendment No. 1 to the Debt Service Reserve Guarantee, dated May 27, 1999, made by Edison Mission Energy in favor of United States Trust Company of New York, incorporated by reference to Exhibit 10.60.1 to Amendment No. 1 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000.
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.60.2 Amendment No. 2, dated as of March 18, 2001, to the 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.* 10.60.3 Intercompany Loan Subordination Agreement, dated March 18, 1999, 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, incorporated by reference to Exhibit 10.60.3 to Amendment No. 2 of Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 29, 2000. 10.60.4 Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of March 30, 2001, among Edison Mission Holdings Co., Westdeutsche Landesbank Girozentrale, New York Branch and the Banks named therein.* 10.61 Credit Agreement, dated March 18, 1999, among Edison Mission Energy and Certain Commercial Lending Institutions, and Citicorp USA, Inc., incorporated by reference to Exhibit 10.61 to Edison Mission Energy's Form 8-K dated March 18, 1999. 10.61.1 Amendment One to Credit Agreement, dated as of August 17, 2000, by and among Edison Mission Energy, Certain Commercial Lending Institutions, and Citicorp USA, Inc., as Administrative Agent, incorporated by reference to Exhibit 10.61.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.62 Edison Power Limited L1,150,000,000 Guaranteed Secured Variable Rate Bonds due 2019 Guaranteed by Maplekey UK Limited, incorporated by reference to Exhibit 10.62 to Edison Mission Energy's Form 8-K, dated Ju1y 19, 1999. 10.64 Coal and Capex Facility Agreement, dated July 16, 1999 between EME Finance UK Limited, Barclay's Capital and Credit Suisse First Boston, The Financial Institutions named as Banks, and Barclays Bank PLC as Facility Agent, incorporated by reference to Exhibit 10.64 to Edison Mission Energy's Form 10-Q for the quarter ended September 30, 1999. 10.65 Guarantee by Edison Mission Energy dated July 16, 1999 supporting the Coal and Capex Facility Agreement (Facility Agreement) issued by Barclays Bank PLC to secure EME Finance UK Limited obligations pursuant to the Facility Agreement, incorporated by reference to Exhibit 10.65 to Edison Mission Energy's Form 10-Q for the quarter ended September 30, 1999. 10.65.1 Amendment One to Guarantee by Edison Mission Energy supporting the Facility Agreement, dated as of August 17, 2000, incorporated by reference to Exhibit 10.65.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.66 Debt Service Reserve Guarantee, dated as of July 16, 1999, made by Edison Mission Energy in favor of Bank of America National Trust and Savings Association, incorporated by reference to Exhibit 10.66 to Edison Mission Energy's Annual Report on Form 10-K for the year ended December 31, 1999. 10.71 Indenture, dated as of May 27, 1999, between Edison Mission Holdings Co. and United States Trust Company of New York, as Trustee, incorporated by reference to Exhibit 4.1 to Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on December 3, 1999.
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.75 Exchange and Registration Rights Agreement, dated as of May 27, 1999, by and among the Initial Purchasers named therein, the Guarantors named therein and Edison Mission Holdings Co., incorporated by reference to Exhibit 10.1 to Edison Mission Holdings Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on December 3, 1999. 10.76 Agreement among Edward R. Muller, Edison International and Edison Mission Energy concerning the terms of Mr. Muller's employment separation, incorporated by reference to Exhibit 10.76 to Edison Mission Energy's Form 10-Q for the quarter ended March 31, 2000. 10.77 Agreement By and Between S. Linn Williams and Edison Mission Energy dated February 5, 2000, incorporated by reference to Exhibit 10.77 to Edison Mission Energy's Form 10-Q for the quarter ended March 31, 2000. 10.78 Form of Agreement for 2000 Employee Awards under the Equity Compensation Plan, incorporated by reference to Exhibit 10.78 to Edison Mission Energy's Form 10-Q for the quarter ended March 31, 2000. 10.79 Resolution regarding the computation of disability and survivor benefits prior to age 55 for Alan J. Fohrer, incorporated by reference to Exhibit 10.79 to Edison Mission Energy's Form 10-Q for the quarter ended March 31, 2000. 10.81 Edison International 2000 Equity Plan, incorporated by reference to Exhibit 10.1 to Edison International's Form 10-Q for the quarter ended June 30, 2000. (File No. 1-9936). 10.82 Form of Agreement for 2000 Employee Awards under the 2000 Equity Plan, incorporated by reference to Exhibit 10.2 to Edison International's Form 10-Q for the quarter ended June 30, 2000. (File No. 1-9936). 10.83 Amendment No. 1 to the Edison International Equity Compensation Plan (as restated January 1, 1998), incorporated by reference to Exhibit 10.4 to Edison International's Form 10-Q for the quarter ended June 30, 2000. (File No. 1-9936). 10.84 Credit Agreement, dated May 30, 2000, among Edison Mission Energy, Certain Commercial Lending Institutions and Bank of America, N.A., incorporated by reference to Exhibit 10.84 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2000. 10.84.1 Amendment One to Credit Agreement, dated as of August 17, 2000, by and among Edison Mission Energy, Certain Commercial Lending Institutions and Bank of America, N.A. as Administrative Agent, incorporated by reference to Exhibit 10.84.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.85 Guarantee, dated as of June 23, 2000, in favor of EME/CDL Trust and Midwest Generation, LLC made by Edison Mission Energy, incorporated by reference to Exhibit 10.85 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.86 Power Purchase Agreement (Crawford, Fisk, Waukegan, Will County, Joliet and Powerton Generating Stations), dated as of December 15, 1999, between Commonwealth Edison Company and Midwest Generation, LLC, incorporated by reference to Exhibit 10.86 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.87 Power Purchase Agreement (Collins Generating Station), dated as of December 15, 1999, between Commonwealth Edison Company and Midwest Generation, LLC, incorporated by reference to Exhibit 10.87 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000.
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.87.1 Amendment No. 1 to the Power Purchase Agreement, dated July 12, 2000, between Commonwealth Edison Company and Midwest Generation, LLC, incorporated by reference to Exhibit 10.87.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.87.2 Amended and Restated Power Purchase Agreement (Collins Generating Station), dated as of September 13, 2000, between Commonwealth Edison Company and Midwest Generation, LLC, incorporated by reference to Exhibit 10.87.2 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.88 Power Purchase Agreement (Crawford, Fisk, Waukegan, Calumet, Joliet, Bloom, Electric Junction, Sabrooke and Lombard Peaking Units), dated as of December 15, 1999, between Commonwealth Edison Company and Midwest Generation, LLC, incorporated by reference to Exhibit 10.88 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.89 Participation Agreement, dated as of June 23, 2000, among Midwest Generation, LLC, Edison Mission Energy, EME/CDL Trust, the Investor party to the Trust Agreement, Wilmington Trust Company, the Persons listed as Noteholders on Schedule I thereto, Citicorp North America, Inc. and Citicorp North America, Inc., incorporated by reference to Exhibit 10.89 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.89.1 Amendment One, dated as of August 17, 2000, by and among Midwest Generation, LLC, Edison Mission Energy, EME/CDL Trust, Citicorp Del-Lease, Inc., Wilmington Trust Company, Certain Noteholders Party Thereto, Citicorp North America, Inc. and Citicorp North America, Inc., incorporated by reference to Exhibit 10.89.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.90 Reimbursement Agreement, dated as of August 17, 2000, between Edison Mission Energy and Midwest Generation, LLC, incorporated by reference to Exhibit 10.90 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 10.91 Instrument of Assumption, dated as of December 15, 1999, by Midwest Generation, LLC in favor of Commonwealth Edison Company and Unicom Investment Inc.* 10.92 Subordination Agreement, dated as of December 15, 1999, among Midwest Generation, LLC, Edison Mission Overseas Co., and Citibank, N.A.* 10.93 Subordinated Loan Agreement, dated as of December 15, 1999, among Midwest Generation, LLC and Edison Mission Overseas Co.* 10.94 Subordinated Revolving Loan Agreement, dated as of December 15, 1999, among Midwest Generation, LLC and Edison Mission Overseas Co.* 10.95 Facility Lease Agreement (T1), dated as of December 15, 1999, between Collins Trust I and Collins Holdings EME, LLC.* 10.95.1 Schedule identifying substantially identical agreements to the Facility Lease Agreement constituting Exhibit 10.95 hereto.* 10.96 Amendment One, dated as of June 23, 2000, by and between Collins Trust I and Collins Holdings EME.* 10.96.1 Schedule identifying substantially identical agreements to the Amendment One constituting Exhibit 10.96 hereto.* 10.96.2 Amendment Two, dated as of August 17, 2000, by and between Collins Trust I and Collins Holdings EME LLC.*
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.96.3 Schedule identifying substantially identical agreements to the Amendment Two constituting Exhibit 10.96.2 hereto.* 10.97 Facility Sublease Agreement (T1), dated as of December 15, 1999, by and among Collins Holdings EME, LLC, Midwest Generation, LLC and Collins Trust I.* 10.97.1 Schedule identifying substantially identical agreements to the Facility Sublease Agreement constituting Exhibit 10.97 hereto.* 10.98 Participation Agreement (T1), dated as of December 15, 1999, among Midwest Generation, LLC, Collins Holdings EME, LLC, Collins Trust I, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A.* 10.98.1 Schedule identifying substantially identical agreements to the Participation Agreement constituting Exhibit 10.98 hereto.* 10.99 Amendment One, dated as of May 9, 2000, by and among Collins Holdings EME, LLC, Collins Trust I, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A.* 10.99.1 Schedule identifying substantially identical agreements to the Amendment One constituting Exhibit 10.99 hereto.* 10.100 Amendment Two, dated as of June 23, 2000, by and among Collins Holdings EME, LLC, Collins Trust I, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A.* 10.100.1 Schedule identifying substantially identical agreements to the Amendment Two constituting Exhibit 10.100 hereto.* 10.101 Amendment Three, dated as of August 17, 2000, by and among Collins Holdings EME, LLC, Collins Trust I, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A.* 10.101.1 Schedule identifying substantially identical agreements to the Amendment Three constituting Exhibit 10.101 hereto.* 10.102 Guarantee by Midwest Generation, LLC in favor of the Administrative Agent, dated as of December 15, 1999.* 10.103 Midwest OP Lease Guaranty made by Midwest Generation, LLC, dated as of December 15, 1999.* 10.103.1 Schedule identifying substantially identical agreements to the Midwest OP Lease Guaranty constituting Exhibit 10.103 hereto.* 10.104 Midwest Lessor Lease Guaranty (T1) made by Midwest Generation, LLC, dated as of December 15, 1999.* 10.104.1 Schedule identifying substantially identical agreements to the Midwest Lessor Lease Guaranty constituting Exhibit 10.104 hereto.* 10.105 Pledge Agreement, dated as of August 17, 2000, between Midwest Generation, LLC and Citibank, N.A.*
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.105.1 Schedule identifying substantially identical agreements to the Pledge Agreement constituting Exhibit 10.105 hereto.* 10.106 Lease Agreement, dated as of June 23, 2000, between Midwest Generation, LLC and EME/ CDL Trust.* 10.107 Reimbursement Agreement I, dated as of December 15, 1999 entered into between Bayerische Landesbank International S.A. and Midwest Generation, LLC.* 10.107.1 Schedule identifying substantially identical agreements to the Reimbursement Agreement I constituting Exhibit 10.107 hereto.* 10.108 Credit Agreement, dated as of December 15, 1999, among Edison Mission Midwest Holdings Co., Certain Commercial Lending Institutions, and The Chase Manhattan Bank.* 10.108.1 Amendment One, dated as of May 9, 2000, by and among Edison Mission Midwest Holdings Co. and each of certain commercial lending institutions party thereto.* 10.108.2 Amendment Two, dated as of June 23, 2000, by and among Edison Mission Midwest Holdings Co., The Chase Manhattan Bank and each of certain commercial lending institutions party thereto.* 10.108.3 Amendment Three, dated as of August 17, 2000, by and among Edison Mission Midwest Holdings Co., The Chase Manhattan Bank and each of certain commercial lending institutions party thereto.* 10.108.4 Amendment Four, dated as of December 12, 2000, by and among Edison Mission Midwest Holdings Co., The Chase Manhattan Bank and each of certain commercial lending institutions party thereto.* 12.1 Statement regarding the computation of ratio of earnings to fixed charges for Edison Mission Energy.* 12.2 Statement regarding the computation of ratio of earnings to fixed charges for Midwest Generation, LLC.* 21.1 List of Subsidiaries of Edison Mission Energy, incorporated by reference to Exhibit 21 to Edison Mission Energy's Annual Report on Form 10-K for the year ended December 31, 2000. 23.1 Consent of Arthur Andersen LLP.* 23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1).* 25.1 Statement of Eligibility and Qualification on Form T-1 of United States Trust Company of New York for the 8.30% Pass-Through Certificates, Series A and the 8.56% Pass-Through Certificates, Series B.* 99.1 Form of Letter of Transmittal.* 99.2 Form of Notice of Guaranteed Delivery.* 99.3 Form of Letter to Clients.* 99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.*
- ------------------------ * Filed herewith. EX-1.1 2 a2031364zex-1_1.txt EXHIBIT 1.1 EXHIBIT 1.1 MIDWEST GENERATION PASS THROUGH TRUSTS $1,147,000,000 PASS THROUGH CERTIFICATES, SERIES A AND SERIES B PURCHASE AGREEMENT August 17, 2000 CREDIT SUISSE FIRST BOSTON CORPORATION LEHMAN BROTHERS INC., as representatives of the several Purchasers c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue New York, NY 10010-3629 c/o Lehman Brothers Inc. Three World Financial Center New York, NY 10285 Dear Sirs: 1. INTRODUCTORY. Edison Mission Energy, a California corporation ("EME"), and its indirect wholly-owned subsidiary Midwest Generation, LLC, a Delaware limited liability company (the "COMPANY"), propose, subject to the terms and conditions stated herein, that United States Trust Company of New York, acting not in its individual capacity but solely as trustee (in its individual capacity, "US TRUST" and in its capacity as such trustee, the "PASS THROUGH TRUSTEE") under each of the Pass Through Trust Agreements (the "PASS THROUGH TRUST AGREEMENTS"), dated as of August 24, 2000, among the Company and the Pass Through Trustee, will issue and sell to Credit Suisse First Boston Corporation ("CSFB"), Lehman Brothers Inc. ("LEHMAN"), Chase Securities Inc. ("CSI"), Salomon Smith Barney Inc. ("SSB") and SG Cowen Securities Corp. ("COWEN" and, together with CSFB, Lehman, CSI and SSB, the several "PURCHASERS") 8.30% Midwest Generation Pass Through Certificates, Series A in the aggregate amount of $333,500,000 and 8.56% Midwest Generation Pass Through Certificates, Series B in the aggregate amount of $813,500,000 (such Pass Through Certificates are herein referred to as the "OFFERED SECURITIES"), which will represent fractional undivided interests in the Midwest Generation Series A Pass Through Trust and the Midwest Generation Series B Pass Through Trust, respectively (collectively, the "PASS THROUGH TRUSTS") for resale by you in reliance upon Rule 144A (as such term is defined below) as described herein. Each such Pass Through Trust will be formed pursuant to a separate Pass Through Trust Agreement, in each case among the Company and the Pass Through Trustee. The term "you" shall mean CSFB and Lehman as representatives of the several Purchasers. The United States Securities Act of 1933 is herein referred to as the "SECURITIES ACT." The property of the Pass Through Trusts will initially consist of secured notes (the "LESSOR NOTES") which will be issued on a nonrecourse basis by Wilmington Trust Company, a Delaware banking corporation, acting not in its individual capacity but solely as owner trustee (with respect to each owner trust hereinafter referred to, the "OWNER TRUSTEE") of each of four separate owner trusts (collectively, the "OWNER TRUSTS"). The Lessor Notes are to be issued under four separate lease indentures (as amended or supplemented, the "INDENTURES"), each dated as of August 17, 2000, between each Owner Trust and US Trust, as indenture trustee (in such capacity, the "INDENTURE TRUSTEE"). The proceeds from the sale of the Lessor Notes will be used to finance a portion of the purchase price paid by the Owner Trusts for the purchase of interests in the Powerton electric generating facility and Unit No. 7 and Unit No. 8 of the Joliet electric generating facility in accordance with the provisions of four separate Participation Agreements, each dated as of August 17, 2000 (collectively, the "PARTICIPATION AGREEMENTS"). Pursuant to the Guarantees each dated as of August 17, 2000 (collectively, the "EME GUARANTEES") made by EME with respect to each related lease agreement, EME has unconditionally guaranteed the payment when due of each and every obligation for the payment of money to each Owner Trust under the related Lease (as such term is defined in each EME Guarantee). Unless otherwise defined in this Agreement, capitalized terms have the meanings specified or referred to in the Pass Through Trust Agreements or the Participation Agreements, whether expressly referred to therein or by reference to another document. The Company and EME each hereby agree with the several Purchasers as follows: 2. REPRESENTATIONS AND WARRANTIES OF EME AND THE COMPANY. EME and the Company jointly and severally represent and warrant to, and agree with, the several Purchasers that: (a) A preliminary offering circular dated August 9, 2000 (the "PRELIMINARY OFFERING CIRCULAR") and an offering circular dated August 17, 2000 (the "OFFERING CIRCULAR") relating to the Offered Securities to be offered by the Purchasers have been prepared by the Company. For purposes of this Agreement the Preliminary Offering Circular and Offering Circular shall include any documents or portions thereof incorporated by reference therein as set forth under "Incorporation of Documents by Reference" included therein. Copies of the Preliminary Offering Circular and the Offering Circular have been delivered by the Company to the Purchasers. The Preliminary Offering Circular was on the date thereof accurate in all material respects and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Offering Circular is as of its date (and any amendment or supplement thereto will be as of its date) accurate in all material respects and does not (and, as of the Closing Date (as defined below), will not) contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; PROVIDED that neither the Company nor EME makes any representation or warranty as to information in or omissions from the Offering Circular in reliance upon and in conformity with written information furnished to the Company or EME by any Purchaser through you specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(b) hereof. Except as disclosed in the Offering Circular, on the date of this Agreement, EME's Annual Report on Form 10-K most recently filed with the Securities and Exchange Commission (the "COMMISSION") and all subsequent reports (collectively, the "EXCHANGE ACT REPORTS") which have been filed by EME with the Commission or sent to shareholders pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") do not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Such documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder. (b) EME has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of California, is duly qualified to do business as a foreign corporation, and is a corporation in good standing in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification (except where the failure to so qualify would not have a material adverse effect on the condition (financial or other), business, properties or results of operations of EME and its subsidiaries, taken as a whole, or on the ability of EME or the Company to perform its obligations under each of the Operative Documents (as defined in each Participation Agreement) to which it is or will be a 2 party (a "MATERIAL ADVERSE EFFECT"). Each subsidiary of EME has been duly organized and is validly existing as a corporation, general partnership, limited partnership, limited liability company or other entity, as the case may be, in good standing under the laws of the jurisdiction of its organization, is duly qualified to do business as a foreign corporation, general partnership, limited partnership, limited liability company or other entity, as the case may be, and is a corporation, general partnership, limited partnership, limited liability company or other entity, as the case may be, in good standing in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to so qualify would not have a Material Adverse Effect. EME and each subsidiary of EME have all necessary power and authority (corporate and other) to own or lease their respective properties and to conduct the respective businesses in which they are engaged as described in the Offering Circular. All of the outstanding shares of capital stock of EME have been duly authorized and validly issued and are fully paid and nonassessable. All of the issued and outstanding capital stock of each subsidiary of EME has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each subsidiary owned by EME, directly or through subsidiaries, is owned free and clear from liens, encumbrances and defects. (c) The Company has been duly organized and is an existing limited liability company in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own or lease its properties and conduct its business as described in the Offering Circular; and the Company is duly qualified to do business as a foreign limited liability company in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification. (d) Each of EME and the Company has all power and authority necessary to execute and deliver this Agreement, the Registration Rights Agreement and, as of the Closing Date, each of the other Operative Documents to which it is or will be a party and to perform its obligations hereunder and thereunder. The execution, delivery and performance by each of EME and the Company of this Agreement and the other Operative Documents to which it is or will be a party and its compliance with the provisions hereof and thereof will not breach or (except as contemplated by the Operative Documents) result in the creation or imposition of any lien, charge or encumbrance upon any material asset of EME or the Company or any subsidiary thereof (a "MATERIAL ASSET") pursuant to the terms of, or constitute a breach of, or default under, the corporate charter, limited liability company agreement or by-laws of EME or the Company or similar organizational documents of any subsidiary thereof or as of the Closing Date any agreement, indenture or other instrument to which EME or the Company or any subsidiary thereof is a party or by which EME or the Company or any subsidiary thereof is bound (in each case which is material to EME or the Company or any subsidiary thereof) or to which any Material Asset is subject in each case as amended as of the Closing Date, or any law, order, rule, regulation, judgment or decree of any court or governmental agency domestic or foreign having jurisdiction over EME or the Company or any subsidiary thereof or any Material Asset of EME or the Company or any subsidiary thereof; and, except as completed on or prior to the Closing Date or as required by applicable state securities laws, no consent, authorization or order of, or filing or registration by EME or the Company with, any court, governmental agency or body or third party is required in connection with the issuance and sale of the Offered Securities or the execution, delivery and performance by EME or the Company of this Agreement or the other Operative Documents to which either is a party, except for the order of the Commission declaring the Exchange Offer Registration Statement or the Shelf Registration Statement (each as defined in the Registration Rights Agreement) effective. (e) Neither EME nor the Company nor any subsidiary thereof is in violation of its corporate charter, by-laws or other organizational documents. None of EME or the Company or any of their subsidiaries (i) is in default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance and observance of any material term, representation, covenant or condition contained in any material lease, license, indenture, mortgage, deed of trust, note, bank loan or other evidence of indebtedness or any other agreement, understanding or instrument to which EME or the Company or any of their subsidiaries is a party or by which EME or the Company or any of their subsidiaries or any Material Asset may be bound or affected, which default would have a Material Adverse Effect, or (ii) is in violation of any law, ordinance, governmental rule or regulation or court decree to which it may be subject, which violation would have a Material Adverse Effect. 3 (f) Except as described in or contemplated by the Offering Circular, each of EME and its subsidiaries and the Company (i) has properly obtained each consent, license, approval, registration, permit, certification, determination or other authorization of any governmental authority (each a "GOVERNMENTAL APPROVAL") necessary to the ownership of its property or to the conduct of its business as described in the Offering Circular, and (ii) is in compliance with all terms and conditions of each such Governmental Approval and has not received any notice of any proceedings relating to the revocation or modification thereof except (x) in either case where the failure to do so would not have a Material Adverse Effect and (y) such as may be required for operating activities which are ordinarily deemed to be ministerial in nature and which are anticipated to be obtained in the ordinary course. (g) Except as described in or contemplated by the Offering Circular, each of EME and its subsidiaries and the Company holds, as applicable, good, legal and valid title to, or valid and enforceable leasehold or contractual interests in, all items of real and personal property and all other properties and assets owned by them which are material to the business of EME and its subsidiaries taken as a whole, or the Company, free and clear of all liens, encumbrances and claims which would materially interfere with the conduct of the business of EME and its subsidiaries taken as a whole, or the Company, as described in the Offering Circular. Each of EME and its subsidiaries and the Company is presently conducting its businesses as described in the Offering Circular and in compliance with all applicable rules, regulations and laws, except where such failure would not result in a Material Adverse Effect. Each of EME and its subsidiaries and the Company carries insurance in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties and which is consistent with what is customarily carried by similar companies engaged in similar businesses. Each of such insurance policies is valid and in full force and effect. (h) Arthur Andersen LLP, whose report is included in or incorporated by reference into the Offering Circular, is and was, during the period covered by its report, independent with respect to EME and its subsidiaries and the Company within the meaning of the Exchange Act. (i) The Registration Rights Agreement has been validly authorized by each of EME and the Company and, when executed by the proper officers of EME and the Company (assuming the due authorization, execution and delivery thereof by the other parties thereto) and delivered by EME and the Company, will constitute the legal, valid and binding obligation of each of EME and the Company, enforceable in accordance with its terms, (x) except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and (ii) by general equitable principles, including without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether in a proceeding in equity or at law and (y) subject to the unenforceability in certain circumstances under law or court decisions of provisions for indemnification or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy. (j) This Agreement has been duly authorized, executed and delivered by each of EME and the Company and, assuming due authorization, execution and delivery by the Purchasers, constitutes the legal, valid and binding obligation of each of EME and the Company, enforceable against each of EME and the Company in accordance with its terms, (x) except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and (ii) by general equitable principles, including without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether in a proceeding in equity or at law and (y) subject to the unenforceability in certain circumstances under law or court decisions of provisions for indemnification or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy. (k) At the time the Offered Securities are delivered pursuant to each Pass Through Trust Agreement, each Pass Through Trust Agreement will be duly executed and delivered by the Company and, assuming due authorization, execution and delivery by the Pass-Through Trustee and assuming the representations of the Pass-Through Trustee in the Participation Agreements are true and correct, will constitute the legal, valid and binding agreement of the Company; each Offered Security, when duly executed, authenticated and delivered by the Pass Through Trustee in accordance with the terms of the 4 related Pass Through Trust Agreement, will be duly issued under the related Pass Through Trust Agreement and, when sold to the several Purchasers in accordance with the terms of this Agreement, will, assuming due authentication, execution and delivery by the Pass Through Trustee, constitute a legal, valid and binding obligation of the Pass Through Trustee on behalf of the related Pass Through Trust; and the holder of each Offered Security will be entitled to the benefits of the related Pass Through Trust Agreement. (l) Each Lessor Note, when duly executed and delivered by the Owner Trustee, and when duly authenticated by the Indenture Trustee, all in accordance with the terms of the related Indenture will be duly issued under such related Indenture and, when sold to the Pass Through Trustee in accordance with the terms of the applicable Pass Through Trust Agreement and the applicable Participation Agreement, will constitute a legal, valid and binding obligation of the Owner Trustee on behalf of the related Owner Trust; and the holder of each such Lessor Note will be entitled to the benefits of the related Indenture (assuming the due execution and delivery thereof by the Indenture Trustee and the Owner Trustee and assuming the accuracy of the representations of the Owner Trust in the Participation Agreements). (m) Except as described in the Offering Circular, there is no litigation, or investigation pending before or by any court or governmental agency or any arbitrator or otherwise or, to the knowledge of EME and the Company, threatened, against EME or any of its subsidiaries or the Company or to which any of their Material Assets is subject, including, without limitation, any audit by the Internal Revenue Service, which, if an adverse decision were reached, would be reasonably likely to have a Material Adverse Effect. (n) The consolidated financial statements (including the related notes) of EME included in the Offering Circular or incorporated by reference therein present fairly in all material respects the financial condition, results of operations and changes in financial position of EME, at the dates and for the periods indicated, and, except as otherwise described in the Offering Circular, have been prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis throughout the periods involved; the capitalization of EME, as set forth in the column labeled "Actual" under the caption "Capitalization" in the Offering Circular, is accurately described as of the date presented therein. (o) The financial statements of the Company included in the Offering Circular present fairly the financial position of the Company at the dates shown and its results of operations and cash flows for the periods shown, and, except as otherwise disclosed in the Offering Circular, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis. (p) Except as disclosed in the Offering Circular, since the date of the latest audited financial statements of EME or the Company included in the Offering Circular or incorporated by reference therein, there has been no Material Adverse Effect, nor, to EME's or the Company's knowledge, any development or event involving a prospective Material Adverse Effect, and, except as disclosed in or contemplated by the Offering Circular, since the date of such financial statements there has been no dividend or distribution of any kind declared, paid or made by EME or the Company on any class of its equity capital. (q) Neither EME nor the Company nor any of their affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act) nor (assuming the accuracy of the representations of the Purchasers set forth herein) any person acting on EME's or the Company's behalf has made offers or sales of securities under circumstances that would require the registration of the Offered Securities under the Securities Act. (r) Neither EME nor the Company nor, assuming the accuracy of the representations of the Pass-Through Trusts in the Participation Agreements, any of the Pass Through Trusts is an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the United States Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT"), nor is either EME, the Company or any of the Pass Through Trusts a closed-end investment company required to be registered, but not registered thereunder, and none of EME, the Company nor, assuming the accuracy of the representations of the Pass-Through Trusts in the Participation Agreements, any of the Pass Through Trusts is and, after giving effect to the offering and sale of Offered 5 Securities and the application of the proceeds thereof as described in the Offering Circular under the caption "Use of Proceeds", will be an investment company as defined in the Investment Company Act. (s) No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed on any national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation System. (t) Assuming (i) the accuracy of the representations and warranties of the Purchasers set forth herein, (ii) the compliance by the Purchasers with their agreements herein and (iii) the Offered Securities are offered and sold in the manner contemplated by the Offering Circular, the offer and sale of the Offered Securities in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof and Regulation S thereunder; and it is not necessary to qualify the Pass Through Trust Agreements or an indenture in respect of the Offered Securities under the Trust Indenture Act of 1939, as amended (the "TRUST INDENTURE ACT"). (u) Neither EME or the Company nor any of their affiliates, nor (assuming the accuracy of the representations and warranties of the Purchasers set forth herein) any person acting on behalf of EME or the Company (i) has, within the six-month period prior to the date hereof, offered or sold in the United States or to any U.S. person (as such terms are defined in Regulation S under the Securities Act ("REGULATION S")) the Offered Securities or any security of the same class or series as the Offered Securities or (ii) has offered or will offer or sell the Offered Securities (A) in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act or (B) with respect to any such securities sold in reliance on Rule 903 of Regulation S by means of any directed selling efforts within the meaning of Rule 902(b) of Regulation S. Each of EME and the Company, their affiliates and (assuming the accuracy of the representations and warranties of the Purchasers set forth herein) any person acting on their behalf have complied and will comply with the offering restriction requirements of Regulation S in connection with the offering of Offered Securities outside the United States. Neither EME nor the Company has entered or will enter into any contractual relationship with respect to the distribution of the Offered Securities except for this Agreement. (v) The proceeds to EME and the Company from the sale of the Offered Securities will not be used in a manner which would violate Regulations T, U or X of the Federal Reserve Board. (w) HOLDING COMPANY ACT. (i) The Company is an "exempt wholesale generator" under the Public Utility Holding Company Act of 1935 ("PUHCA"), is interconnected with the high voltage network and has access to transmission services and ancillary services to sell wholesale electric power, and has the authority to sell wholesale electric power at market-based rates. (ii) The Company is not subject to (A) regulation as a "holding company", a "public utility company" or a "subsidiary company" or an "affiliate" of a "holding company" required to register under PUHCA or (B) public utility regulation or regulation as an alternative retail electric supplier under the laws of the State of Illinois. (iii) EME is not subject to regulation as a "holding company", a "public utility company", or a "subsidiary company" or an "affiliate" of a "holding company" required to register under PUHCA except that it 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. (iv) In addition, none of the Purchasers will, solely as a result of purchasing and/or reselling the Offered Securities pursuant to this Agreement, be a "public utility," an "electric utility," a "gas utility," a "holding company," a "subsidiary" or an "affiliate" under PUHCA, or otherwise subject to regulation under PUHCA or the Federal Power Act of 1920. 6 (x) (i) All tax returns, declarations of estimated tax and tax reports (collectively, the "TAX RETURNS") required to be filed on or before (after consideration of any allowable extensions of time to file) the Closing Date with respect to all federal, state or local income, gross receipts, severance, property, productions, sales, use, license, excise, franchise, employment, withholding or similar taxes, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties (collectively, the "TAXES") by EME and the Company have been or will be duly filed, (ii) all Taxes due on the Tax Returns referred to in clause (i) that are required to be paid or withheld by EME and the Company (the "COMPANY TAXES") have been or will be paid or withheld in full, (iii) all deficiencies asserted or assessments made against EME and the Company with respect to Tax Returns as a result of an examination of such Tax Returns referred to in clause (i) have been or will be paid in full, (iv) no issues that have been raised with respect to Company Taxes by the relevant taxing authority in connection with an examination of Tax Returns are currently pending and (v) no waivers of statutes of limitations have been given or requested by or with respect to any Company Taxes, except in each case for any Company Taxes which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with U.S. generally accepted accounting principles have been set aside on EME's and the Company's books. (y) Except as disclosed in the Offering Circular, neither the EME nor any of its subsidiaries nor the Company is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "ENVIRONMENTAL LAWS"), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim could individually or in the aggregate reasonably be expected to have a Material Adverse Effect; and neither EME nor the Company has knowledge of any pending investigation which might lend to such a claim. (z) Each of EME and its subsidiaries and the Company own, possess or can acquire on reasonable terms adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS") necessary to conduct the business now operated by them, or presently employed by them and have not received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property Rights that, if determined adversely to EME or any of its subsidiaries or the Company, would individually or in the aggregate have a Material Adverse Effect. (aa) During the consecutive twelve-month period prior to each date as of which the following representations are made or deemed made, (i) no steps have been taken to terminate any "pension plan," as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, together with any successor statute of similar import and together with the regulations thereunder ("ERISA"), to which EME or the Company, any subsidiary thereof or any member of a controlled group of corporations treated as a single employer together with EME or the Company or any subsidiary thereof under Section 414(b) or 414(c) of the Internal Revenue Code of 1986, as amended (the "CODE") or Section 4001 of ERISA (the "CONTROLLED GROUP") sponsors, contributed to or under which any such entity may incur any liability (each a "PENSION PLAN"), (ii) 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 and (iii) 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 EME or the Company, any subsidiary thereof 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 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 EME or the Company, any subsidiary thereof or any member of the Controlled Group: (w) 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 .22, .23, .25, .27 or .28 of Pension Benefit Guaranty Corporation Reg. Section 4043; (x) a complete or partial withdrawal from any "multiemployer plan," as defined in Section 4001(a)(3) of ERISA (the "MULTIEMPLOYER PLAN"), by EME or the Company, any subsidiary thereof or any 7 member of the Controlled Group; (y) any liability of EME or the Company, any subsidiary thereof 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 (z) the "reorganization" (within the meaning of Section 4241 of ERISA) or "insolvency" (within the meaning of Section 4245 of ERISA) or any Multiemployer Plan. None of EME or the Company, any subsidiary thereof or any member of the Controlled Group has any contingent liability with respect to any post-retirement benefit under a "welfare plan" (as defined in Section 3(1) of ERISA) 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. (bb) The proceeds from the sale of Offered Securities will be utilized by EME and the Company as described under the section of the Offering Circular entitled "Use of Proceeds." (cc) All of the representations and warranties of EME and the Company contained in the Participation Agreements are incorporated by reference in this Agreement as if set forth herein, and are true and correct as if made by EME and the Company on and as of the date of such agreements. 3. PURCHASE, SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, upon satisfaction of the conditions precedent in each Pass Through Trust Agreement, the Company agrees to deliver an authentication order pursuant to Section 2.1 of each Pass-Through Trust Agreement and to cause the Pass Through Trustee to sell to the Purchasers, and the Purchasers agree, severally and not jointly, to purchase from the Pass Through Trustee, at a purchase price of 100% of the face amount thereof, 8.30% Midwest Generation Pass-Through Certificates, Series A in the aggregate amount of $333,500,000 and 8.56% Midwest Generation Pass-Through Certificates, Series B in the aggregate amount of $813,500,000 in the respective face amounts of the Offered Securities set forth opposite the names of the several Purchasers in Schedule A hereto. As compensation to the Purchasers for their agreements and obligations hereunder in respect of the Offered Securities, EME shall pay (or cause to be paid), to each Purchaser an amount equal to .650% of the aggregate face amount of the Midwest Generation Pass-Through Certificates, Series A and .875% of the aggregate face amount of the Midwest Generation Pass-Through Certificates, Series B purchased by such Purchaser. Such payment shall be made simultaneously with the payment by the Purchasers of the purchase price of the Offered Securities and shall be made by wire transfer of immediately available funds. The Company will cause the Pass Through Trustee to deliver against payment of the purchase price the Offered Securities in the form of one or more permanent global securities in definitive form (the "GLOBAL SECURITIES") deposited with the Pass Through Trustee as custodian for The Depository Trust Company (the "DTC") and registered in the name of Cede & Co., as nominee for DTC. Interests in any permanent Global Securities will be held only in book-entry form through DTC, except in the limited circumstances described in the Offering Circular. Payment for the Offered Securities shall be made by the Purchasers in Federal (same day) funds by official check or checks or wire transfer to an account at a bank acceptable to you at the office of Skadden, Arps, Slate, Meagher & Flom LLP ("SASMF") at 10:00 A.M. (New York time), on August 24 , 2000 or at such other time not later than seven full business days thereafter as you, EME and the Company determine, such time being herein referred to as the "CLOSING DATE," against delivery to the Pass Through Trustee as custodian for DTC of (i) the Regulation S Global Securities representing all of the Regulation S Securities for the respective accounts of the DTC participants for Euroclear and Clearstream and (ii) the Restricted Global Securities representing all of the 144A Securities. The Regulation S Global Securities and the Restricted Global Securities will be made available for checking at the above office of SASMF at least 24 hours prior to the Closing Date. The Company will cause the Pass Through Trustee to deliver against payment of the purchase price the Offered Securities to be offered and sold by the Purchasers in reliance on Regulation S (the "REGULATION S SECURITIES") in the form of one or more permanent Global Securities in registered form without interest coupons (the "REGULATION S GLOBAL SECURITIES") which will be deposited with the Pass Through Trustee as custodian for DTC for the respective accounts of the DTC participants for Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("EUROCLEAR"), and Clearstream Banking SOCIETE ANONYME ("CLEARSTREAM, LUXEMBOURG") and registered in the name of Cede & Co., as nominee for DTC. The Company will cause the Pass Through Trustee to deliver against payment of the purchase price the Offered Securities to be purchased by each 8 Purchaser hereunder and to be offered and sold by each Purchaser in reliance on Rule 144A under the Securities Act (the "144A SECURITIES") in the form of one permanent global security in definitive form without interest coupons (the "RESTRICTED GLOBAL SECURITIES") deposited with the Pass Through Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC. The Regulation S Global Securities and the Restricted Global Securities shall be assigned separate CUSIP numbers. The Restricted Global Securities shall include the legend regarding restrictions on transfer set forth under "Transfer Restrictions" in the Offering Circular. Until the termination of the restricted period (as defined in Regulation S) with respect to the offering of the Offered Securities, interests in the Regulation S Global Securities may only be held by DTC participants for Euroclear and Clearstream, Luxembourg. Interests in any permanent Global Securities will be held only in book-entry form through Euroclear, Clearstream, Luxembourg or DTC, as the case may be, except in the limited circumstances described in the Offering Circular. Notwithstanding the foregoing, any Offered Securities sold to Institutional Accredited Investors (as hereinafter defined) pursuant to SECTION 4(c) shall be issued in definitive, fully registered form and shall bear the legend relating thereto set forth under the caption "Transfer Restrictions" in the Offering Circular, but shall be paid for in the same manner as any Offered Securities to be purchased by the Purchasers hereunder and to be offered and sold by it in reliance on Rule 144A under the Securities Act. 4. REPRESENTATIONS BY PURCHASERS; RESALE BY PURCHASERS. (a) Each Purchaser severally represents and warrants to EME and the Company that it is an "accredited investor" within the meaning of Regulation D. (b) Each Purchaser severally acknowledges that the Offered Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Each Purchaser severally represents and agrees that it has offered and sold the Offered Securities and will offer and sell the Offered Securities only in accordance with Rule 903 or Rule 144A under the Securities Act ("RULE 144A") or to a limited number of Institutional Accredited Investors (as defined below) in accordance with subsection (c). Accordingly, neither such Purchaser nor its affiliates, nor any persons acting on its or their behalf, have engaged or will engage in any directed selling efforts with respect to the Offered Securities and such Purchaser, its affiliates and all persons acting on its or their behalf have complied and will comply with the offering restrictions requirement of Regulation S and Rule 144A. Terms used in this subsection (b) have the meanings given to them by Regulation S. (c) Each Purchaser severally agrees that it may offer and sell Offered Securities in definitive, fully registered form to a limited number of institutions, each of which is reasonably believed by such Purchaser to be an "accredited investor" within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2) or (3) of Regulation D under the Securities Act (each, an "INSTITUTIONAL ACCREDITED INVESTOR"); PROVIDED that each such Institutional Accredited Investor executes and delivers to such Purchaser and the Company, prior to the consummation of any sale of Offered Securities to such Institutional Accredited Investor, a letter to be delivered by Institutional Accredited Investors in substantially the form included in the Offering Circular as Annex A (a "PURCHASER'S LETTER"). (d) Each Purchaser severally agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for any such arrangements with the other Purchasers or affiliates of the other Purchasers or with the prior written consent of the Company. (e) Each Purchaser severally agrees that it and each of its affiliates will not offer or sell the Offered Securities in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Purchaser severally agrees, with respect to resales made in reliance on Rule 144A of any of the Offered Securities, to deliver either with the confirmation of such resale or otherwise prior to settlement of such 9 resale a notice to the effect that the resale of such Offered Securities has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A. (f) Each of the Purchasers severally represents and agrees that (i) it has not offered or sold and prior to the date six months after the date of issue of the Offered Securities will not offer or sell any Offered Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Offered Securities in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Offered Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on. 5. CERTAIN AGREEMENTS OF EME AND THE COMPANY. Each of EME and the Company jointly and severally agrees with the several Purchasers that: (a) EME and the Company will advise you promptly of any proposal to amend or supplement the Offering Circular and will not effect such amendment or supplementation without your consent. If, at any time prior to the completion of the resale of the Offered Securities by the Purchasers, any event occurs as a result of which in the reasonable judgment of the Company, EME, the Purchasers or counsel to the Purchasers, the Offering Circular as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any such time to amend or supplement the Offering Circular to comply with any applicable law, EME and the Company promptly will notify you of such event and promptly will prepare, at EME's expense, an amendment or supplement which will correct such statement or omission or effect such compliance. Neither your consent to, nor the Purchasers' delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. (b) EME and the Company will furnish to you copies of the Preliminary Offering Circular, the Offering Circular and all amendments and supplements to such documents, in each case as soon as available and in such quantities as you request, and EME and the Company will furnish to you on the date hereof three copies of the Offering Circular certified as being true, complete and correct by a duly authorized officer of each of EME and the Company, together with certified copies of the independent accountants consents with respect to the incorporation by reference of their reports therein. At any time when EME or the Company is not subject to Section 13 or 15(d) of the Exchange Act, and for so long as the sale of the Offered Securities is reliant on Rule 144A, EME and/or the Company, as the case may be, will promptly furnish or cause to be furnished to you (and, upon request, to each of the other Purchasers) and, upon request of holders and prospective purchasers of the Offered Securities, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Offered Securities. EME will pay the expenses of printing and distributing to such holders and the Purchasers all such documents. (c) EME and the Company will arrange for the qualification of the Offered Securities for sale and the determination of their eligibility for investment under the laws of such jurisdictions in the United States and Canada as you designate and will continue such qualifications in effect so long as required for the resale of the Offered Securities by the Purchasers, PROVIDED that neither EME nor the Company will be required to qualify as a foreign corporation in any jurisdiction in which it is not now qualified to file a general consent to service of process in any such jurisdiction. (d) During the period of three years hereafter, each of EME and the Company will furnish to you and, upon request, to each of the other Purchasers, as soon as practicable after the end of each fiscal year, a copy of its annual report to shareholders for such year; and each of EME and the Company will furnish to 10 you and, upon request, to each of the other Purchasers (i) as soon as available, a copy of each report and any definitive proxy statement of EME or the Company filed with the Commission under the Exchange Act or mailed to shareholders, (ii) a copy of any information EME and the Company are required to provide the Pass Through Trustee pursuant to the Pass Through Trust Agreement or the Participation Agreement, and (iii) from time to time, such other information concerning EME and/or the Company as you may reasonably request. (e) During the period of two years after the Closing Date, each of EME and the Company will, upon request, furnish to you, each of the other Purchasers and any holder of Offered Securities a copy of the restrictions on transfer applicable to the Offered Securities. (f) During the period of two years after the Closing Date (or such other period as the Commission may specify for the unrestricted sale of the Offered Securities which constitute "restricted securities" under Rule 144), the Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Offered Securities that have been reacquired by any of them which constitute "restricted securities" under Rule 144. (g) During the period of two years after the Closing Date, neither EME nor the Company will be or become, an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act and neither EME nor the Company is or will become a closed-end investment company required to be registered, but not registered, under the Investment Company Act. (h) EME will pay all expenses incidental to the performance by EME, the Company and the Pass Through Trusts of their obligations under this Agreement, the Pass Through Trust Agreements, the Registration Rights Agreement and the other Operative Documents, including (i) the fees and expenses of the Pass Through Trustee, the Indenture Trustee and their respective counsel; (ii) all expenses in connection with the execution, issue, authentication, packaging and initial delivery of the Offered Securities and, as applicable, the Exchange Securities (as defined in the Registration Rights Agreement), the preparation and printing of this Agreement, the Registration Rights Agreement, the Offered Securities, the Pass Through Trust Agreements, the Offering Circular and amendments and supplements thereto, and any other document relating to the issuance, offer, sale and delivery of the Offered Securities and as applicable, the Exchange Securities; (iii) the cost of any advertising approved by EME or the Company in connection with the issue of the Offered Securities; (iv) for any reasonable expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Offered Securities or the Exchange Securities for sale under the laws of such jurisdictions in the United States and Canada as you designate and the printing of memoranda relating thereto; (v) for any fees charged by investment rating agencies for the rating of the Offered Securities or the Exchange Securities; (vi) for expenses incurred in distributing the Preliminary Offering Circulars and the Offering Circular (including any amendments and supplements thereto) to the Purchasers and (vii) all reasonable fees and expenses of counsel to the Purchasers. EME will also pay or reimburse the Purchasers (to the extent incurred by them) for all reasonable travel expenses of the Purchasers and EME's or the Company's officers and employees and any other reasonable expenses of the Purchasers in connection with the transactions contemplated by this Agreement and the other Operative Documents. (i) In connection with the offering of the Offered Securities, until the earlier of (x) 180 days following the Closing Date and (y) the date you shall have notified the Company and the other Purchasers of the completion of the resale of the Offered Securities, neither EME nor the Company nor any of their affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest in any Offered Securities or attempt to induce any person to purchase any Offered Securities; and neither of them nor any of their affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Offered Securities. (j) For a period of 30 days after the date of the initial offering of the Offered Securities by the Purchasers, neither EME nor the Company without the prior written consent of CSFB and Lehman, which consent shall not be unreasonably withheld, pursuant to Rule 144A, Regulation S or an offering registered under the Securities Act, will offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any United States dollar-denominated debt securities issued or guaranteed by EME or the Company and having a maturity of more than one year from the date of issue. Neither EME nor the Company will at any time offer, sell, contract to sell, pledge or otherwise dispose of, directly or 11 indirectly, any securities under circumstances where such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act or the safe harbor of Regulation S thereunder to cease to be applicable to the offer and sale of the Offered Securities. 6. CONDITIONS OF THE OBLIGATIONS OF THE PURCHASERS. The obligations of the several Purchasers to purchase and pay for the Offered Securities on the Closing Date will be subject to the accuracy of the representations and warranties on the part of EME and the Company herein (except for those representations and warranties expressly stated to relate to an earlier specified date, which must be accurate as of such earlier specified date), to the accuracy of the statements of officers of EME and the Company made pursuant to the provisions hereof, to the performance by EME and the Company of their respective obligations hereunder and to the following additional conditions precedent: (a) The Purchasers shall have received a letter, dated the date of this Agreement, of Arthur Andersen LLP in form and substance satisfactory to the Purchasers concerning the financial information with respect to EME and the Company set forth in the Offering Circular and confirming that they are independent certified public accountants with respect to EME and the Company under Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants and its interpretations and rulings. (b) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) a change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls as, in your judgment, is material and adverse and makes it inadvisable to proceed with completion of the offering or sale of and payment for the Offered Securities as contemplated in the Offering Circular; or (ii) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of EME or its subsidiaries, taken as a whole or the Company which, in the judgment of a majority in interest of the Purchasers including you, materially impairs the investment quality of the Offered Securities or is material and adverse and makes it inadvisable to proceed with completion of the offering or the sale of and payment for the Offered Securities as contemplated in the Offering Circular; (iii) any downgrading in the rating of any debt securities of EME or the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of EME or the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iv) any material suspension or material limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of EME, the Company or Edison International, Inc. on any exchange or in the over-the-counter market; (v) any banking moratorium declared by U.S. Federal or New York State authorities; or (vi) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress of the United States or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Purchasers including you, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale of and payment for the Offered Securities as contemplated in the Offering Circular. (c) The Purchasers shall have received an opinion, dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the Company, addressed to the Purchasers, in form and substance reasonably satisfactory to the Purchasers. (d) The Purchasers shall have received from Milbank, Tweed, Hadley & McCloy LLP, special counsel for the Purchasers, such opinion or opinions, dated the Closing Date, with respect to the validity of the Offered Securities, the Offering Circular, the exemption from registration for the offer and sale of the Offered Securities to the several Purchasers and the resales by the several Purchasers as contemplated hereby and other related matters as you may require, and each of EME and the Company shall have 12 furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters with reference to same in the Offering Circular. (e) The Purchasers shall have received opinions addressed to the Purchasers in form and substance reasonably satisfactory to the Purchasers, from Sonnenschein, Nath and Rosenthal, special Illinois regulatory counsel to the Company, EME Van Ness Feldman, special federal regulatory counsel to the Company and EME; Hunton & Williams, special New York counsel to the Owner Participants and the Equity Investors; Richards, Layton & Finger, P.A., counsel to the Owner Lessors, the Trust Companies and the Owner Trustees; and the in-house counsels to the Owner Participants. (f) In-house counsel to EME and the Company reasonably acceptable to the Purchasers shall have furnished to the Purchasers a written opinion, addressed to the Purchasers and dated as of the Closing Date, in form and substance reasonably satisfactory to the Purchasers. (g) Stadtmauer Bailkin, LLP shall have furnished to the Purchasers its written opinions, both as counsel to the Pass Through Trustees and the Pass Through Companies and as counsel to the Lease Indenture Trustees and the Lease Indenture Companies, addressed to the Purchasers and dated as of the Closing Date, in form and substance reasonably satisfactory to the Purchasers. (h) No Purchaser shall have discovered and disclosed to EME or the Company on or prior to the Closing Date that the Offering Circular or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of Milbank, Tweed, Hadley & McCloy LLP, special counsel for the Purchasers, is material or omits to state a fact which, in the opinion of such counsel, is material and is necessary to make the statements, in light of the circumstances under which they were made, not misleading. (i) EME, the Company and you shall have entered into the Registration Rights Agreement and the Purchasers shall have received counterparts, conformed as executed, thereof and each Operative Document or other document entered into by EME and the Company in connection with the transactions contemplated by this Agreement. (j) Each of EME and the Company shall have furnished to the Purchasers a certificate, dated as of the Closing Date, of its Chief Executive Officer or President and its Chief Financial Officer or Treasurer stating that the representations and warranties of EME or the Company, as the case may be, contained in this Agreement and each Participation Agreement are true and correct as of such Closing Date and after giving effect to the consummation of the transactions contemplated by this Agreement (except representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties are true and correct in all material respects as of such earlier date), EME or the Company, as the case may be, has complied with all its agreements to be performed or satisfied at or prior to the Closing Date contained herein, and the conditions set forth in Section 4 of each Participation Agreement to be performed or satisfied at or prior to the Closing Date have been fulfilled. (k) There shall exist at and as of the Closing Date no conditions that would constitute an Event of Default under any Pass Through Trust Agreement, a Lease Event 13 of Default under any Lease or a Lease Indenture Event of Default under any Lease Indenture (or an event that with notice or the lapse of time, or both, would constitute an Event of Default, Lease Event of Default or Lease Indenture Event of Default) under the Indenture. (l) (i)(A) Moody's Investors Services, Inc. ("MOODY'S") shall have delivered to EME and the Company and the Purchasers a final rating letter, setting forth a rating of Baa1 with respect to the Offered Securities, (B) Standard & Poor's Ratings Services ("S&P") shall have delivered to EME and the Company and the Purchasers a final rating letter, setting forth a rating of A- with respect to the Offered Securities, (ii) each of Moody's and S&P shall have delivered to EME and the Company a letter confirming the ratings with respect to the debt securities of EME and Edison Mission Midwest Holdings Co. ("Midwest Holdings") after giving effect to the transactions contemplated in this Agreement and the Participation Agreements and (iii) neither of Moody's nor S&P shall have announced that it has under surveillance or review, with possible negative implications, its rating of the Offered Securities or the debt securities of EME or Midwest Holdings. (m) The Offered Securities shall have been accepted for settlement through the facilities of DTC, Clearstream, and Euroclear, as applicable. (n) Each of EME and the Company shall have furnished to the Purchasers (i) a copy of the resolutions of its Board of Directors or committees thereof, certified by the Secretary or Assistant Secretary of such entity as of the Closing Date, duly authorizing the execution, delivery and performance of this Agreement and each other Operative Document to which it is or will be a party and any other documents executed by or on behalf of it in connection with the transactions contemplated thereby; (ii) certified copies of its organizational documents; and (iii), if applicable, certified copies of powers-of-attorney, if any, pursuant to which officers of such entity shall execute this Agreement and each other Operative Document to which it is or will be a party and any other documents executed by or on behalf of it in connection with the transactions contemplated thereby. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Purchasers. 7. INDEMNIFICATION AND CONTRIBUTION. (a) EME will indemnify and hold harmless each Purchaser, its partners, directors and officers and each person, if any, who controls such Purchaser within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any breach of any of the representations and warranties of EME or the Company contained herein or any untrue statement or alleged untrue statement of any material fact contained in the Offering Circular, or any amendment or supplement thereto, or any related Preliminary Offering Circular, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, including any losses, claims, damages or liabilities arising out of or based upon EME's or the Company's failure to perform its obligations under Section 5(a) of this Agreement, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with 14 investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; PROVIDED, HOWEVER, that EME will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Purchaser through you specifically for use therein, it being understood and agreed that the only such information consists of the information described as such in subsection (b) below; and PROVIDED FURTHER that, with respect to any untrue statement or omission in the Preliminary Offering Circular, this indemnity agreement shall not inure to the benefit of a Purchaser on account of any loss, claim, damage, liability or action arising from the sale of any Offered Securities to any person by such Purchaser to the extent such sale was an initial resale by such Purchaser, if such Purchaser failed to send or give a copy of the Offering Circular, as the same may be amended or supplemented, to that person and the untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact in the Preliminary Offering Circular was corrected in the Offering Circular and the Offering Circular was made available to such Purchaser prior to the sale of the Offered Securities. (b) Each Purchaser will severally and not jointly indemnify and hold harmless each of EME and the Company, its directors and officers, if any, and each person, if any, who controls EME or the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities to which EME or the Company may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Circular, or any amendment or supplement thereto, or any related Preliminary Offering Circular, or arise out of or are based upon the omission or the alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Purchaser through you specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by EME or the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Purchaser consists of the following information in the Offering Circular furnished on behalf of each Purchaser: under the caption "Plan of Distribution" the third paragraph, the second sentence of the fourth paragraph, the second sentence of the seventh paragraph, the eighth paragraph, the ninth paragraph and the tenth paragraph; PROVIDED, HOWEVER, that the Purchasers shall not be liable for any losses, claims, damages or liabilities arising out of or based upon EME's or the Company's failure to perform its respective obligations under Section 5(a) of this Agreement. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that the indemnified party shall have the right to employ counsel to represent the indemnified party and their respective controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the indemnified party against the indemnifying party under this SECTION 6 (i) if the employment of such counsel shall have been authorized in writing by the indemnifying party in connection with the defense of such action, (ii) if, in the written opinion of counsel to either the indemnified party or the indemnifying party, representation of both parties by the same counsel would be inappropriate due to actual or likely conflicts of interest between them, and in that event the fees and expenses of one firm of separate counsel (in addition to the fees and expenses of local counsel) shall be paid by the indemnifying party, or (iii) if the indemnifying party shall have failed to appoint acceptable counsel within a reasonable period of time. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any 15 settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by EME and the Company on the one hand and the Purchasers on the other from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of EME and the Company on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by EME and the Company on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by EME and the Company (as described in the Offering Circular) bear to the total discounts and commissions received by the Purchasers from EME and the Company under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by EME or the Company or the Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities purchased by it were resold exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Purchasers' obligations in this subsection (d) to contribute are several in proportion to their respective purchase obligations and not joint. (e) The obligations of EME under this Section shall be in addition to any liability which EME and the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Purchasers under this Section shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls EME or the Company within the meaning of the Securities Act or the Exchange Act. 8. DEFAULT OF PURCHASERS. If any Purchaser or Purchasers default in its or their obligations to purchase Offered Securities hereunder and the aggregate principal amount of Offered Securities that such defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed 10% of the total principal amount of Offered Securities, you may make arrangements satisfactory to EME and the Company for the purchase of such Offered Securities by other persons, including any of the Purchasers, but if no such arrangements are made by the Closing Date, the non-defaulting Purchasers shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Purchasers agreed but failed to purchase. If any Purchaser or Purchasers so default and the aggregate principal amount of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total principal amount of Offered Securities and arrangements satisfactory to you, EME and the Company for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Purchaser, EME or the Company, except as provided in Section 9. As used in this Agreement, the term "Purchaser" includes any person substituted for a Purchaser under this Section. Nothing herein will relieve a defaulting Purchaser from liability for its default. 9. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective indemnities, agreements, representations, warranties and other statements of EME and the Company and their respective officers and of the 16 several Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Purchaser, EME, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Purchasers is not consummated, EME and the Company shall remain responsible for the expenses to be paid or reimbursed by them pursuant to Section 5 and the respective obligations of EME, the Company and the Purchasers pursuant to Section 7 shall remain in effect. If the purchase of the Offered Securities by the Purchasers is not consummated for any reason, EME and the Company will reimburse the Purchasers for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 10. NOTICES. All communications hereunder will be in writing and, if sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking Department--Transactions Advisory Group (Fax: 212-325-8278), and c/o Lehman Brothers Inc., Three World Financial Center, New York, New York 10285, Attention: Syndicate Department (Fax: 212-526-6588) and Lehman Brothers Inc., Three World Financial Center, New York, New York 10285, Attention: Steven Berkenfeld, Esq. - Legal Department (Fax: 212-526-2557); or, if sent to EME, will be mailed, delivered or telegraphed and confirmed to it at 18101 Von Karman Avenue, Suite 1700, Irvine, California 92612 (Fax: (949) 752-5624), Attention: Chief Financial Officer, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at One Financial Place, 440 South LaSalle Street, Suite 3410, Chicago, Illinois 60605, (Fax: (312) 583-6111), Attention: President, provided, however, that any notice to a Purchaser pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Purchaser. 11. SUCCESSORS. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder, except that holders of Offered Securities shall be entitled to enforce the agreements for their benefit contained in the second and third sentences of Section 5(b) hereof against EME and the Company as if such holders were parties thereto. 12. REPRESENTATION OF PURCHASERS. You will act for the several Purchasers in connection with this purchase, and any action under this Agreement taken by you jointly or by CSFB or Lehman individually will be binding upon all the Purchasers. 13. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 14. APPLICABLE LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. Each of EME and the Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. 17 If the foregoing is in accordance with the Purchasers' understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement among EME, the Company and the several Purchasers in accordance with its terms. Very truly yours, EDISON MISSION ENERGY By: /s/ Sam Henry ------------------------ Name: Sam Henry Title: Vice President MIDWEST GENERATION, LLC By: /s/ Debbie L. Keller ------------------------ Name: Debbie L. Keller Title: Vice President The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION LEHMAN BROTHERS INC. acting on behalf of themselves and as representatives of the several Purchasers By: CREDIT SUISSE FIRST BOSTON CORPORATION By: /s/ Jennifer L. Powers ----------------------------- Name: Jennifer L. Powers Title: Director By: LEHMAN BROTHERS INC. By: /s/ Joseph Sauvage ----------------------------- Name: Joseph Sauvage Title: Managing Director 18 SCHEDULE A
MANAGER PRINCIPAL AMOUNT OF ------- OFFERED SECURITIES ------------------------------- SERIES A SERIES B -------------- -------------- Credit Suisse First Boston Corporation ........... $ 116,725,000 $ 284,725,000 Lehman Brothers Inc. ............................. 116,725,000 284,725,000 Chase Securities Inc. ............................ 33,350,000 81,350,000 Salomon Smith Barney Inc. ........................ 33,350,000 81,350,000 SG Cowen Securities Corp. ........................ 33,350,000 81,350,000 -------------- -------------- Total .................. $ 333,500,000 $ 813,500,000
EX-3.3 3 a2031364zex-3_3.txt EXHIBIT 3.3 Exhibit 3.3 LIMITED LIABILITY COMPANY AGREEMENT OF MIDWEST GENERATION, LLC EFFECTIVE AS OF JULY 12, 1999 THE MEMBERSHIP INTEREST REPRESENTED BY THIS LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. LIMITED LIABILITY COMPANY AGREEMENT OF MIDWEST GENERATION, LLC THIS LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement") of Midwest Generation LLC (the "Company") dated as of this 12th day of July, 1999, by Edison Mission Midwest Holdings Co. as the sole member of the Company (the "Member"). RECITAL The Member has formed the Company as a limited liability company under the laws of the State of Delaware and desires to enter into a written agreement, in accordance with the provisions of the Delaware Limited Liability Company Act and any successor statute, as amended from time to time (the "Act"), governing the affairs of the Company and the conduct of its business. ARTICLE I -- THE LIMITED LIABILITY COMPANY 1.1 FORMATION. The Member has previously formed the Company as a limited liability company pursuant to the provisions of the Act. A Certificate of Formation for the Company (the "Certificate of Formation") has been filed in the Office of the Secretary of State of the State of Delaware in conformity with the Act. Express authorization is hereby given to Martha A. Spikes for the exclusive purpose of executing the Certificate of Formation of the Company which has been filed in the Office of the Secretary of State of the State of Delaware. 1.2 NAME. The name of the Company shall be "Midwest Genera tion, LLC" and its business shall be carried on in such name with such variations and changes as the Board (as hereinafter defined) shall determine or deem necessary to comply with requirements of the jurisdictions in which the Company's operations are conducted. 1.3 BUSINESS PURPOSE; POWERS. The Company is formed for the purpose of acquiring and holding stocks and engaging in any lawful business, purpose or activity for which limited liability companies may be formed under the Act. The Company shall possess and may exercise all the powers and privileges granted by the Act or by any other law or by this Agreement, together with any powers incidental thereto, so far as such powers and privileges are necessary or convenient to the conduct, promotion or attainment of the business purposes or activities of the Company. 1.4 REGISTERED OFFICE AND AGENT. The location of the registered office of the Company shall be One Financial Place, 440 LaSalle Street, Suite 3500, Chicago, Illinois 60605. The Company's Registered Agent at such address shall be Georgia R. Nelson. 1.5 TERM. Subject to the provisions of Articles 7 and 9 below, the Company shall have perpetual existence. 1.6 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the Company shall be at such location as the Board may, from time to time, select. 1.7 TITLE TO COMPANY PROPERTY. Legal title to all property of the Company shall be held and vested and conveyed in the name of the Company and no real or other property of the Company shall be deemed to be owned by the Member individually. The Common Interests (as hereinafter defined) of the Member shall constitute personal property. 1.8 BUSINESS TRANSACTIONS OF THE MEMBER WITH THE COMPANY. In accordance with Section 18-107 of the Act, the Member may transact business with the Company and, subject to applicable law, shall have the same rights and obliga tions with respect to any such matter as a person who is not a member. 1.9 FISCAL YEAR. The fiscal year of the Company (the "Fiscal Year") for financial statement purposes shall end on December 31 of each year. ARTICLE II -- THE MEMBER 2.1 THE MEMBER. The name and address of the Member is as follows: Name Address - ---- ------- Edison Mission Midwest Holdings Co. 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612 2.2 NO MANAGEMENT BY MEMBER. The management of the business and affairs of the Company shall be vested in whole in the Board in accordance with Article II. Except with respect to the execution and filing of the Certificate of Formation, as otherwise specified provided by this Agreement or required by the Act, the Member shall not be an agent of the Company or have any authority to act for or bind the Company. Except as expressly provided in this Agreement, the Member shall not have voting, approval or consent rights. 2.3 MEMBER MEETINGS. (a) ACTIONS BY THE MEMBER; MEETINGS. The Member may approve a matter or take any action required to be, or which may be, taken by the Member at a meeting or without a meeting by the written consent of the Member pursuant to subparagraph (b) below. Meetings of the Member may be called at any time by the Member. (b) ACTION BY WRITTEN CONSENT. Any action required to be, or which may be, taken by the Member may be taken by the Member without a meeting if authorized by the written consent of the Member. In no instance where action is authorized by written consent of the Member will a meeting of the Member be called or notice be given. However, a copy of the action taken by written consent shall be filed with the records of the Company. 2.4 LIABILITY OF THE MEMBER. All debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Member shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a member. 2.5 ADMISSION OF MEMBERS. New members shall be admitted only upon the approval of the Member. ARTICLE III -- THE BOARD 3.1 MANAGEMENT BY BOARD OF MANAGERS. Subject to such matters which are expressly reserved hereunder or under the Act to the Member for decision, the business and affairs of the Company shall be managed by a board of managers (the "Board"). The Board may delegate the management of the day-to-day operation of the business of the corporation provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the Board shall have the following powers in addition to the other powers enumerated in this Agreement: (a) To select and remove all the other officers, agents and employ ees of the Company, prescribe the powers and duties for them as may not be incon sistent with law, with the Certificate of Formation or this Agreement, fix their compensation and require from them security for faithful service. (b) To conduct, manage and control the affairs and business of the Company and to make such rules and regulations therefor not inconsistent with law, or with the Certificate of Formation or this Agreement, as they may deem best. (c) To adopt, make and use a corporate seal and to alter the form of such seal from time to time as in their judgment they deem best. (d) To authorize the issuance of Common Interest of the Company from time to time, upon such terms and for such consideration as may be lawful. (e) To borrow money and incur indebtedness for the purposes of the Company, and to cause to be executed and delivered therefor, in the Company's name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other evidences of debt and securities therefor. (f) The Board shall consist of one (1) to seven (7) individuals (the "Managers"), the exact number of Managers to be determined from time to time by resolution of the Board. The initial Board shall consist of one manager, who shall be Martha A. Spikes. 3.2 MEETINGS OF THE BOARD. (a) The Board shall meet at such times as may be necessary for the Company's business on at least two (2) days' prior written notice of the time and place of such meeting. A majority of the Managers shall constitute a quorum for the transaction of business by the Board. (b) Notice of any Board meeting may be waived by any Manager before or after such meeting. (c) All actions of the Board shall require the affirmative vote of a majority of the Managers. (d) Meetings of the Board may be conducted in person or by conference telephone facilities and each Manager shall be entitled to participate in any meeting of the Board by telephone. Any action required or permitted to be taken at any meeting of the Board may be taken without a meeting if such number of Managers sufficient to approve such action pursuant to the terms of this Agreement consent thereto in writing. The writing or writings effectuating such written consent must be filed with the minutes of proceedings of the Board. 3.3 POWER TO BIND COMPANY. No Manager (acting in his capacity as such) shall have any authority to bind the Company to any third party with respect to any matter except pursuant to a resolution expressly authorizing such action which resolution is duly adopted by the Board by the affirmative vote required for such matter pursuant to this Agreement. 3.4 OFFICERS AND RELATED PERSONS. Subject to the terms of any employment agreements to which the Company is a party, the Board shall have the authority to appoint and terminate officers of the Company and retain and terminate employees, agents and consultants of the Company and to delegate such duties to any such officers, employees, agents and consultants as the Board deems appropriate, including the power, acting individually or jointly, to represent and bind the Com pany in all matters, in accordance with the scope of their respective duties. ARTICLE IV -- THE OFFICERS 4.1 MANAGEMENT BY OFFICERS. The officers of the Company shall be a President, Vice President, a Controller, a Secretary and a Treasurer. The Company may also have, at the discretion of the Board, a Chairman of the Board, one or more additional Vice Presidents, a Chief Operating Officer, a General Manager, General Counsel, one or more Assistant General Counsels, one or more Assistant Controllers, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 4.5 of this Agreement 4.2 ELECTION. The officers of the Company, except such officers as may be elected or appointed in accordance with the provisions of Section 4.5 or Section 4.6 of this Agreement, shall be chosen annually by, and shall serve at the pleasure of the Board, and shall hold their respective offices until their resignation, removal, or other disqualification from service, or until their respective successors shall be elected. 4.3 ELIGIBILITY OF CHAIRMAN OF THE BOARD OR PRESIDENT. No person shall be eligible for the office of Chairman of the Board, if there shall be such an officer, or President unless such person is a member of the Board of the Company; any other officer may or may not be a member of the Board. 4.4 REMOVAL AND RESIGNATION. Any officer may be removed, either with or without cause, by the Board at any time or by any officer upon whom such power of removal may be conferred by the Board. Any such removal shall be without prejudice to the rights, if any, of the officer under any contract of employment of the officer. Any officer may resign at any time by giving written notice to the Company, but without prejudice to the rights, if any, of the Company under any contract of employment to which the officer is a party. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 4.5 APPOINTMENT OF OTHER OFFICERS. The Board may appoint such other officers as the business of the Company may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in this Agreement or as the Board may from time to time determine. Notwithstanding the job title for such person, no employee or other representative of the Company shall be an officer of the Company unless elected by the Board. 4.6 VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in this Agreement for regular election or appointment to such office. 4.7 SALARIES. The salaries of the Chairman of the Board, if any, President, General Manager, if any, Vice Presidents, Controller, Treasurer and Secretary of the Com pany shall be fixed by the Board. Salaries of all other officers shall be approved from time to time by the chief executive officer. 4.8 CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be such an officer, shall preside at all meetings of the Board, and shall exercise such powers and perform such duties as from time to time may be conferred upon or assigned to him by the Board or this Agreement. 4.9 PRESIDENT. Subject to such supervisory powers, if any, as may be given by the Board to the Chairman of the Board, if there be such an officer, the President shall be the chief executive officer of the Company and has, subject to the control of the Board, general supervision, direction, and control of the business and affairs of the Company. The President shall preside at all meetings of the shareholders and, in the absence of the Chairman of the Board or if there be none, at all meetings of the Board. The President has the general powers and duties of management usually vested in the office of president of a corporation and has such other powers and duties as may be prescribed by the Board or this Agreement. The President may designate from time to time the titles which the employees or other representatives of the Company shall use, including the appointment of agent for service of process. Without limiting the foregoing, the President may designate one or more employees as regional vice-presidents. 4.10 VICE PRESIDENT. In the absence or disability of the President, the Vice Presidents in order of their rank shall perform all the duties of the President and when so acting shall have all the powers of, and be subject to all the restrictions upon the President. The Board may establish the order of rank of the Vice Presidents. In the absence of such ranking, the Vice Presidents shall be ranked as follows: Executive Vice Presi dent (if any), Senior Vice President (if any). Vice Presidents holding identical titles shall be ranked in order of election to that office by the Board. 4.11 CHIEF OPERATING OFFICER. The Chief Operating Officer, if there shall be such an officer, must be a vice president of the Company and shall be subject to the exercise of the general powers of supervision, direction and control of the business and officers of the Company by the President, and supervise the operations of the Company. 4.12 GENERAL MANAGER. The General Manager, if there shall be such an officer, must be a vice president of the Company and, subject to the exercise of the general powers of supervision, direction and control by the President, or the Chief Operating Officer, if any, shall manage the operations of the Company. In the absence of the Chief Operating Officer, the General Manager shall perform all the duties of the Chief Operating Officer and when so acting shall have all the powers of, and be subject to, all the restrictions upon the Chief Operating Officer. 4.13 GENERAL COUNSEL. The General Counsel shall be the chief consulting officer of the Company in all legal matters and, subject to the President, shall have control over all matters of legal import concerning the Company. 4.14 ASSISTANT GENERAL COUNSEL. One or more Assistant General Counsels, if any, shall perform such of the duties of the General Counsel as the General Counsel may designate, and in the absence or disability of the General Counsel, any Assistant General Counsel, in order of election to that office by the Board, shall perform the duties of the General Counsel. 4.15 CONTROLLER. The Controller shall be the chief accounting officer of the corporation and shall have control over all accounting matters concerning the corporation and shall perform such other duties as the President or General Manager shall designate. 4.16 SECRETARY. The Secretary shall keep or cause to be kept, at the principal executive office and such other place as the Board may order, a book of minutes of all meetings of the Members, the Board, and its committees. The Secretary shall give, or cause to be given, notice of all the meetings of the Members and of the Board and any committees thereof required by this Agreement or by law to be given, shall keep the seal of the Company in safe custody, shall from time to time issue such secretarial certificates as may be required for the business and affairs of the Company, and shall have such other general powers and duties of management usually vested in the office of secretary of a corporation and as may be prescribed by the Board, the President or this Agreement. 4.17 ASSISTANT SECRETARY. One or more Assistant Secretaries, if any, shall perform such of the duties of the Secretary as the Secretary shall designate, and in the absence or disabil ity of the Secretary, any Assistant Secretary, in order of election to that office by the Board, shall perform the duties of the Secretary. 4.18 SECRETARY PRO TEMPORE. At any meeting of the Board or of the Member from which the Secretary and Assistant Secretary are absent, a Secretary pro tempore may be appointed by the Board as appropriate and act. 4.19 TREASURER. The Treasurer is the chief financial officer of the Company and shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the Company. The books of account shall at all times be open to inspection by any manager. The Treasurer shall deposit, or cause to be deposited, all moneys and other valuables in the name and to the credit of the Company with such depositories as may be designated by the Board pursuant to Section 5.2. The Treasurer shall disburse or cause to be disbursed, the funds of the Company as may be ordered by the President or the General Manager, shall render to the President, the General Manager or the Board, whenever they request it, an account of all transactions as Treasurer and of the financial condition of the Company, and shall have such other powers and perform such other duties as may be prescribed by the Board, or this Agreement. 4.20 ASSISTANT TREASURER. One or more Assistant Treasurers, if any, shall perform such of the duties of the Treasurer as the Treasurer shall designate, and in the absence or disability of the Treasurer, any Assistant Treasurer, in order of election to that office by the Board, shall perform the duties of the Treasurer. 4.21 PERFORMANCE OF DUTIES. Officers shall perform the duties of their respective offices as stated in this Agreement, and such additional duties as the Board shall designate. ARTICLE V -- CAPITAL STRUCTURE AND CONTRIBUTIONS 5.1 CAPITAL STRUCTURE. The capital structure of the Company shall consist of one class of common interests (the "Common Interests"). All Common Interests shall be identical with each other in every respect. Initially, the Member shall own one hundred (100) Common Interests. 5.2 CAPITAL CONTRIBUTIONS. From time to time, the Board may determine that the Company requires capital and may request the Member to make capital contribution(s) in an amount determined by the Board. A capital account shall be maintained for the Member, to which contributions and profits shall be credited and against which distributions and losses shall be charged. 5.3 CERTIFICATES. (a) GENERAL. The Member shall be entitled to a certificate repre senting its interest in the Company, in such form as may from time to time be prescribed by the Board. Such certificate shall be signed by a Manager or an officer on such Managers behalf, which signature may be a facsimile thereof. In case the Manager or officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be a Manager or an officer, as the case may be, before such certificate is issued by the Company with the same effect as if such person were a Manager or an officer at the time of its issue. (b) APPLICATION OF ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE. The Company hereby irrevocably elects that all membership interest in the Company shall be securities governed by Article 8 of the Uniform Commercial Code in effect in the State of Delaware. Each certificate evidencing membership interest in the Company shall bear the following legend: "This Certificate evidences an interest in Midwest Generation, LLC and shall be a security for purposes of Article 8 of the Uniform Com mercial Code in effect in the State of Delaware." This provision shall not be amended, and no such purported amendment to this provision shall be effective until all outstanding certificates have been surrendered for cancellation. ARTICLE VI -- PROFITS, LOSSES AND DISTRIBUTIONS 6.1 PROFITS AND LOSSES. For financial accounting and tax purposes, the Company's net profits or net losses shall be determined on an annual basis in accordance with the manner in which profit or loss is determined for Federal income tax purposes. In each year, profits and losses shall be allocated entirely to the Member. 6.2 DISTRIBUTIONS. The Board shall determine profits available for distribution and the amount, if any, to be distributed to the Member, and shall authorize and distribute on the Common Interests, the determined amount when, as and if declared by the Board. The distributions of the Company shall be allocated entirely to the Member. 6.3 WITHHOLDING TAXES. The Company is authorized to withhold from distributions to the Member, or with respect to allocations to the Member, and to pay over to a Federal, state or local government, any amounts required to be withheld pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), or any provisions of any other Federal, state or local law. Any amounts so withheld shall be treated as having been distributed to the Member pursuant to this Article 6 for all purposes of this Agreement, and shall be offset against the current or next amounts otherwise distributable to the Member. ARTICLE VII -- ACCOUNTS 7.1 BOOKS. The Board shall cause to be maintained complete and accurate books of account of the Company's affairs at the Company's principal place of business. Such books shall be kept on such method of accounting as the Board shall select. The Company's accounting period shall be as determined by the Board. 7.2 REPORTS. The books of account of the Company shall be closed after the close of each calendar year, and there shall be prepared and sent to the Member a statement of the profits and losses of the Company for that period. 7.3 FEDERAL TAX MATTERS. The Member shall be the Tax Matters Member, who shall be considered the tax matters partner for purposes of Section 231 of the Code. The Tax Matters Member shall cause to be prepared and shall sign all tax returns of the Company and monitor any governmental tax authority in any audit that such authority may conduct of the Company's books and records or other documents. 7.4 TAX TREATMENT. The Company has filed a timely election under Treasury Regulation Section 301 7701-3(c)(1)(i) to be treated as a corporation for income tax purposes. ARTICLE VIII -- EVENTS OF DISSOLUTION 8.1 The Company shall be dissolved upon the occurrence of any of the following events (each, an "Event of Dissolution"): (a) The Member votes for dissolution; or (b) A judicial dissolution of the Company under Section 18-802 of the Act. 8.2 CONTINUATION. No other event, including the withdrawal, insolvency, liquidation, disposal, resignation, expulsion or bankruptcy of the Mem ber shall cause the existence of the Company to terminate. ARTICLE IX -- TRANSFER OF INTERESTS IN THE COMPANY The Member may sell, assign, transfer; convey, gift, exchange or otherwise dispose of any or all of its Common Interests and, upon receipt by the Company of a written agreement by the person or business entity to whom such Common Interests are to be transferred agreeing to be bound by the terms of this Agreement, such person shall be admitted as a member. ARTICLE X -- TERMINATION 10.1 LIQUIDATION. In the event that an Event of Dissolution shall occur, then the Company shall be liquidated and its affairs shall be wound up. All proceeds from such liquidation shall be distributed in accordance with the provisions of Section 18-804 of the Act, and all Common Interests in the Company shall be cancelled. 10.2 FINAL ACCOUNTING. In the event of the dissolution of the Company, prior to any liquidation, a proper accounting shall be made to the Member from the date of the last previous accounting to the date of dissolution. 10.3 DISTRIBUTION IN KIND. All or any portion of the Company's assets may be distributed in kind to the Member in the event the Board determines that it is in the best interest of the Company. 10.4 CANCELLATION OF CERTIFICATE. Upon the completion of the winding up of the Company and the distribution of the Company's assets, the Company shall be terminated and the Member shall cause the Company to execute and file a Certificate of Cancellation in accordance with Section 18-203 of the Act. ARTICLE XI -- EXCULPATION AND INDEMNIFICATION 11.1 EXCULPATION. Notwithstanding any other provisions of this Agreement, whether express or implied, or obligation or duty at law or in equity, none of the Member, or any Managers, officers, directors, stockholders, partners, employees, representatives or agents of any of the foregoing, nor any Manager, officer, employee, representative or agent of the Company or any of its affiliates (individually, a "Covered Person" and, collectively, the "Covered Persons") shall be liable to the Company or any other person for any act or omission (in relation to the Company, this Agreement, any related document or any transaction or investment contemplated hereby or thereby) taken or omitted by a Covered Person in the reasonable belief that such act or omission is in or is not contrary to the best interests of the Company and is within the scope of authority granted to such Covered Person by the Agreement, provided such act or omission does not constitute fraud, willful misconduct, bad faith, or gross negligence. 11.2 INDEMNIFICATION. To the fullest extent permitted by law, the Company shall indemnify and hold harmless each Covered Person from and against any and all losses, claims, demands, liabilities, expenses, judgments, fines, settle ments and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative ("Claims"), in which the Covered Person may be involved, or threatened to be involved, as a party or other wise, by reason of its management of the affairs of the Company or which relates to or arises out of the Company or its property, business or affairs. A Covered Person shall not be entitled to indemnification under this Section 11.2 with respect to (i) any Claim with respect to which such Covered Person has engaged in fraud, willful misconduct, bad faith or gross negligence or (ii) any Claim initiated by such Covered Person unless such Claim (or part thereof) (A) was brought to enforce such Covered Person's rights to indemnification hereunder or (B) was authorized or consented to by the Board. Expenses incurred by a Covered Person in defending any Claim shall be paid by the Company in advance of the final disposition of such Claim upon receipt by the Company of an undertaking by or on behalf of such Covered Person to repay such amount if it shall be ultimately determined that such Covered Person is not entitled to be indemnified by the Company as authorized by this Section 11.2. 11.3 AMENDMENTS. Any repeal or modification of this Article XI by the Member shall not adversely affect any rights of such Covered Person pursuant to this Article XI, including the right to indemnification and to the advancement of expenses of a Covered Person existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification. ARTICLE XII -- AMENDMENT TO AGREEMENT Amendments to this Agreement and to the Certificate of Formation shall be approved in writing by the Member. An amendment shall become effective as of the date specified in the approval of the Member or if none is specified, as of the date of such approval or as otherwise provided in the Act. ARTICLE XIII -- GENERAL PROVISIONS 13.1 NOTICES. Unless otherwise specifically provided in this Agreement, all notices and other communications required or permitted to be given hereunder shall be in writing and shall be (i) delivered by hand, (ii) delivered by a nationally recognized commercial overnight delivery service, (iii) mailed postage prepaid by first class mail in any such case directed or addressed to the address set forth below or (iv) transmitted by facsimile transmitted to: If to the Member, to: Edison Mission Midwest Holdings Co. 18101 Von Karman Avenue, Suite 1700 Irvine, California 92612 Attn: General Counsel Such notices shall be effective: (a) in the case of hand deliveries when received; (b) in the case of an overnight delivery service, on the next business day after being placed in the possession of such delivery service, with delivery charges prepaid; (c) in the case of mail, seven (7) days after deposit in the postal system, first class mail, postage prepaid; and (d) in the case of facsimile notices, when electronic indication of receipt is received. Any party may change its address and telecopy number by written notice to the other given in accordance with this Section 13.1. 13.2 CONSTRUCTION PRINCIPLES. As used in this Agreement words in any gender shall be deemed to include all other genders. The singular shall be deemed to include the plural and vice versa. The captions and article and section headings in this Agreement are inserted for convenience of reference only and are not intended to have significance for the interpretation of or construction of the provi sions of this Agreement. 13.3 SEVERABILITY. If any provision or clause of this Agreement is held to be invalid or unenforceable for any reason, such provision or clause shall be ineffective to the extent of such invalidity or unenforceability; PROVIDED, HOWEVER, that the remaining provisions and clauses will continue in full force without being impaired or invalidated in any way unless such invalid or unenforceable provision or clause shall be so significant as to materially affect the expectations of the Member regarding this Agreement. Otherwise, any invalid or unenforceable provision or clause shall be replaced by the Member with a valid provision or clause which most closely approximates the intent and economic effect of the invalid or unenforceable provision or clause. 13.4 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of laws thereof. 13.5 BINDING EFFECT. This Agreement shall be binding upon, and inure to the benefit of, the Member. 13.6 ADDITIONAL DOCUMENTS AND ACTS. The Member agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions, and conditions of this Agreement and of the transactions contemplated hereby. 13.7 NO THIRD-PARTY BENEFICIARY. This Agreement is made solely for the benefit of the Member and no other person shall have any rights, interest, or claims hereunder or otherwise be entitled to any benefits under or on account of this Agreement as a third-party beneficiary or otherwise. 13.8 LIMITED LIABILITY COMPANY. The Member intends to form a limited liability company and does not intend to form a partnership or joint venture under the laws of the State of Delaware or any other laws, and neither the Member, or Manager nor any officer shall be a partner or joint venturer of the other for any purposes, and this Agreement shall not be construed to the contrary. IN WITNESS WHEREOF, the undersigned has duly executed this Agreement as of the day first above written. EDISON MISSION MIDWEST HOLDINGS CO. By: /s/ Fred McCluskey Name: Fred McCluskey Title: Vice President EX-3.4 4 a2031364zex-3_4.txt EXHIBIT 3.4 Exhibit 3.4 State of Delaware Office of the Secretary of State ---------------------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF FORMATION OF "MIDWEST GENERATION, LLC", FILED IN THIS OFFICE ON THE TWELFTH DAY OF JULY, A.D. 1999, AT 1 O'CLOCK P.M. /s/ Edward J. Freel -------------------------------- [SEAL] Edward J. Freel, Secretary of State 3068234 8100 AUTHENTICATION: 0620718 001413056 DATE: 08-15-00 CERTIFICATE OF FORMATION OF MIDWEST GENERATION, LLC I The name of the limited liability company is Midwest Generation, LLC. II The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. III 1. The liability of members and managers of the limited liability company for monetary damages shall be eliminated to the fullest extent permissible under Delaware law. 2. The limited liability company is authorized to provide indemnification of members, managers and agents, as defined in Section 18-108 of the Delaware Limited Liability Company Act. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation of Midwest Generation, LLC on this 9th day of July, 1999. /s/ Martha A. Spikes --------------------------- Martha A. Spikes Authorized Person EX-4.1 5 a2031364zex-4_1.txt EXHIBIT 4.1 Exhibit 4.1 Reconciliation and tie between Midwest Generation, LLC Pass-Through Trust Agreement A, dated as of August 17, 2000, and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Pass-Through Trust Agreement.
Trust Indenture Act of 1939 Section Pass-Through Trust Agreement Section ----------------------------------- ------------------------------------ 310 (a)(1) 7.8 310 (a)(2) 7.8 311 (a) 7.17 (b) 7.17 312 (a) 7.12 (b); 8.1; 8.2 313 (a) 8.4 (c) 8.4 314 (a)(1) 5.1 (c)(1) 1.2 (e) 1.2 315 (a) 7.1 (a) (b) 7.2 (c) 7.1 (b) (d) 7.1 (c) (e) 6.6 316 (a)(1) 6.4; 6.5 (b) 6.7 (c) 1.4 (e) 317 (a) 6.3 (b) 7.13 318 (a) 12.6
MIDWEST GENERATION, LLC and UNITED STATES TRUST COMPANY OF NEW YORK as Pass-Through Trustee -------------------------------------------------- PASS-THROUGH TRUST AGREEMENT A Dated as of August 17, 2000 -------------------------------------------------- $333,500,000 MIDWEST GENERATION Series A Pass-Through Trust 8.30% Initial Pass-Through Certificates, Series A 8.30% Exchange Pass-Through Certificates, Series A
TABLE OF CONTENTS ARTICLE I DEFINITIONS...........................................................................................2 Section 1.1 Definitions.................................................................................2 Section 1.2 Compliance Certificates and Opinions........................................................8 Section 1.3 Form of Documents Delivered to Pass-Through Trustee.........................................8 Section 1.4 Acts of Holders.............................................................................9 ARTICLE II ACQUISITION OF LESSOR NOTES; ORIGINAL ISSUANCE OF CERTIFICATES......................................10 Section 2.1 (a) Issuance of Certificates; Acquisition of Lessor Notes.................................10 Section 2.2 Acceptance by Pass-Through Trustee.........................................................11 Section 2.3 Limitation of Powers.......................................................................11 ARTICLE III THE CERTIFICATES...................................................................................11 Section 3.1 Form, Denomination and Execution of Certificates...........................................11 Section 3.2 Authentication of Certificates.............................................................12 Section 3.3 Temporary Certificates.....................................................................12 Section 3.4 Registration of Transfer and Exchange of Certificates......................................13 Section 3.5 Mutilated, Destroyed, Lost or Stolen Certificates..........................................15 Section 3.6 Persons Deemed Owners......................................................................15 Section 3.7 Cancellation...............................................................................15 Section 3.8 Limitation of Liability for Payments.......................................................15 Section 3.9 Book Entry and Definitive Certificates.....................................................16 Section 3.10 Form of Certification......................................................................19 ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS.....................................................19 Section 4.1 Certificate Account and Special Payments Account...........................................19 Section 4.2 Distributions from Certificate Account and Special Payments Account........................20 Section 4.3 Statements to Certificateholders...........................................................21 Section 4.4 Investment of Special Payment Moneys.......................................................22 Section 4.5. Adjustment of Interest Rates Applicable to Certificates....................................22 ARTICLE V THE COMPANY..........................................................................................22 Section 5.1 Reports....................................................................................22 ARTICLE VI DEFAULT.............................................................................................23 Section 6.1 Events of Default..........................................................................23 Section 6.2 Incidents of Sale of Lessor Notes..........................................................24 Section 6.3 Judicial Proceedings Instituted by Pass-Through Trustee....................................24 Section 6.4 Control by Certificateholders..............................................................25 Section 6.5 Waiver of Defaults.........................................................................25 Section 6.6 Undertaking to Pay Court Costs.............................................................26 Section 6.7 Right of Certificateholders to Receive Payments Not to Be Impaired.........................26 Section 6.8 Certificateholders May Not Bring Suit Except Under Certain Conditions......................27 Section 6.9 Remedies Cumulative........................................................................27 i ARTICLE VII THE PASS-THROUGH TRUSTEE...........................................................................27 Section 7.1 Certain Duties and Responsibilities........................................................27 Section 7.2 Notice of Defaults.........................................................................28 Section 7.3 Certain Rights of Pass-Through Trustee.....................................................28 Section 7.4 Not Responsible for Recitals; Issuance of Certificates.....................................29 Section 7.5 May Hold Certificates......................................................................30 Section 7.6 Money Held in Pass-Through Trust...........................................................30 Section 7.7 Compensation, Reimbursement and Indemnification............................................30 Section 7.8 Corporate Trustee Required; Eligibility....................................................30 Section 7.9 Resignation and Removal; Appointment of Successor..........................................31 Section 7.10 Acceptance of Appointment by Successor.....................................................32 Section 7.11 Merger, Conversion, Consolidation or Succession to Business................................33 Section 7.12 Maintenance of Agencies....................................................................33 Section 7.13 Money for Certificate Payments to Be Held in Trust.........................................34 Section 7.14 Registration of Lessor Notes in Pass-Through Trustee's Name................................35 Section 7.15 Withholding Taxes; Information Reporting...................................................35 Section 7.16 Pass-Through Trustee's Liens...............................................................35 Section 7.17 Preferential Collection of Claims..........................................................35 ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS.............................................................35 Section 8.1 The Company to Furnish Pass-Through Trustee with Names and Addresses of Certificateholders.........................................................................35 Section 8.2 Preservation of Information................................................................36 Section 8.3 Records by the Company.....................................................................36 Section 8.4 Reports by the Pass-Through Trustee........................................................36 ARTICLE IX SUPPLEMENTAL TRUST AGREEMENTS.......................................................................36 Section 9.1 Supplemental Trust Agreement Without Consent of Certificateholder..........................36 Section 9.2 Supplemental Trust Agreements with Consent of Certificateholders...........................37 Section 9.3 Documents Affecting Immunity or Indemnity..................................................38 Section 9.4 Execution of Supplemental Trust Agreements.................................................38 Section 9.5 Effect of Supplemental Trust Agreements....................................................38 Section 9.6 Reference in Certificates to Supplemental Trust Agreements.................................39 ARTICLE X AMENDMENTS TO LEASE INDENTURES AND OTHER LEASE FINANCING DOCUMENTS..................................39 Section 10.1 Amendments and Supplements to Lease Indenture and Other Lease Financing Documents..........39 ARTICLE XI TERMINATION OF PASS-THROUGH TRUST...................................................................40 Section 11.1 Termination of the Pass-Through Trust......................................................40 ARTICLE XII MISCELLANEOUS PROVISIONS...........................................................................41 Section 12.1 Limitation on Rights of Certificateholders.................................................41 Section 12.2 Certificates Nonassessable and Fully Paid..................................................41 Section 12.3 Notice.....................................................................................41 Section 12.4 Governing Law..............................................................................41 ii Section 12.5 Severability of Provisions.................................................................41 Section 12.6. Trust Indenture Act Controls...............................................................42 Section 12.7 Effect of Headings and Table of Contents...................................................42 Section 12.8 Successors and Assigns.....................................................................42 Section 12.9 Benefits of Pass-Through Trust Agreement...................................................42 Section 12.10 Legal Holidays.............................................................................42 Section 12.11 Counterparts...............................................................................42 SCHEDULE 1 - Participation Agreement EXHIBIT A - Form of Pass-Through Certificate EXHIBIT B - Form of Pass-Through Trustee's Certificate of Authentication EXHIBIT C - Form of Transfer Certificate EXHIBIT D - Form of Purchase Letter for Institutional Accredited Investors
iii PASS-THROUGH TRUST AGREEMENT A, dated as of August 17, 2000, with respect to the formation of the Midwest Generation Series A Pass-Through Trust, between Midwest Generation, LLC, a Delaware limited liability company, and United States Trust Company of New York, a New York banking corporation, as Pass-Through Trustee. W I T N E S S E T H: WHEREAS, each of the Powerton Trusts has purchased a separate Powerton Undivided Interest from the Company and is leasing such interest to the Company pursuant to a Lease Transaction (as such terms and certain other capitalized terms used herein are defined below); WHEREAS, each of the Joliet Trusts has purchased a separate Joliet Undivided Interest from the Company and is leasing such interest to the Company pursuant to a Lease Transaction; WHEREAS, pursuant to each Lease Transaction, each Owner Trust will issue, on a non-recourse basis, Lessor Notes under a Lease Indenture in order to finance and refinance a portion of the purchase price for the related Undivided Interest purchased by such Owner Trust; WHEREAS, pursuant to the terms and conditions of this Pass-Through Trust Agreement and the Participation Agreements relating to the Lease Transactions, Lessor Notes are to be sold to the Pass-Through Trust by each Owner Trust, and the Pass-Through Trust will purchase such Lessor Notes and will hold such Lessor Notes in trust for the benefit of the Certificateholders; WHEREAS, the Pass-Through Trustee, upon the execution and delivery of this Pass-Through Trust Agreement, hereby declares the creation of this Pass-Through Trust for the benefit of the Certificateholders, and the initial Certificateholders as the grantors of the Pass-Through Trust and by their respective acceptances of the Certificates join in the creation of this Pass-Through Trust with the Pass-Through Trustee; and WHEREAS, to facilitate the sale of the Lessor Notes to the Pass-Through Trust and the purchase of the Lessor Notes by the Pass-Through Trust, the Company has duly authorized the execution, delivery and effectiveness of this Pass-Through Trust Agreement as the "issuer", as such term is defined in and solely for purposes of the Securities Act of 1933, as amended (the "Securities Act"), of the Certificates deemed to be issued pursuant hereto and as the "obligor", as such term is defined in and solely for purposes of the Trust Indenture Act of 1939, as amended from time to time (the "Trust Indenture Act"), with respect to all such Certificates and is undertaking to perform certain administrative and ministerial duties hereunder and is also undertaking to pay the fees and expenses of the Pass-Through Trustee. WHEREAS, upon issuance of the Exchange Certificates, if any, or the effectiveness of the Shelf Registration Statement, this Agreement, as amended or supplemented from time to time, will be subject to the provisions of the Trust Indenture Act, and shall, to the extent applicable, be governed by such provisions. 1 NOW, THEREFORE, In consideration of the foregoing premises, the mutual agreements herein contained, and of the other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1 DEFINITIONS. (a) Capitalized terms used in this Pass-Through Trust Agreement, including the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A to the applicable Participation Agreement, unless the context hereof shall otherwise require. The general provisions of Appendix A to such Participation Agreement shall apply to the terms used in this Pass-Through Trust Agreement and specifically defined herein. (b) As used in this Pass-Through Trust Agreement, the following terms shall have the respective meanings assigned thereto as follows: ACT: When used with respect to any Holder, has the meaning specified in Section 1.4. AUTHORIZED AGENT: Means any Paying Agent or Registrar. AVOIDABLE TAX. Has the meaning specified in Section 7.9(e). BOOK-ENTRY CERTIFICATES: Means a beneficial interest in the Certificates, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 3.9. CERTIFICATE: Means any one of the Initial Certificates or Exchange Certificates that are Outstanding as of the Transfer Date and any such Initial Certificates or Exchange Certificates issued in exchange therefor or replacement thereof pursuant to this Pass-Through Trust Agreement. CERTIFICATE ACCOUNT: Means that account or accounts created and maintained pursuant to Section 4.1(a). CERTIFICATE OWNER: Means, when used in Section 3.9, the Person for whom a Clearing Agency Participant acts. CERTIFICATE OWNER REQUEST: Means a request to the Pass-Through Trustee to receive the reports and other information the Company, EME or any other Person is required to furnish to the Pass-Through Trustee pursuant to the Operative Documents, which request certifies that the Person making the request is a Certificateholder or Certificate Owner. Any Certificateholder or Certificate Owner making a Certificate Owner Request may specify its election to receive such information from the Pass-Through Trustee on an ongoing basis. CERTIFICATEHOLDER OR HOLDER: Means the Person in whose name a Certificate is registered in the Register, except that, when used in Section 3.9, such term means the Certificate Owners. CLEARING AGENCY: Means an organization registered as a clearing agency pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. CLEARING AGENCY PARTICIPANT: Means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects, directly or indirectly, book-entry transfers and pledges of securities deposited with the Clearing Agency. 2 CLEARSTREAM, LUXEMBOURG: Has the meaning specified in Section 3.9. CLOSING DATE: Means August 24, 2000. COMMISSION: Means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934 as amended, or any successor body. COMPANY: Means Midwest Generation, LLC, a Delaware limited liability company, or its successor in interest. CONSIDERATION: Has the meaning specified in Section 2.1(a). CORPORATE TRUST OFFICE: With respect to the Pass-Through Trustee, any Owner Trustee and any Lease Indenture Trustee, means the office of such trustee in the city in which at any particular time its corporate trust business shall be principally administered. DEFAULT: Means any event which is or, after notice or lapse of time or both would become, an Event of Default. DEFINITIVE CERTIFICATES: Has the meaning specified in Section 3.9. DIRECTION: Has the meaning specified in Section 1.4(c). DISTRIBUTION DATE: With respect to distributions of Scheduled Payments, means each January 2 and July 2 of each year until payment of all the Scheduled Payments to be made under the applicable Lessor Notes has been made, commencing on January 2, 2001. DTC: Means The Depository Trust Company and any successor that is a Clearing Agency. EFFECTIVE DATE: Has the meaning specified in Section 4.5(b). EME: Means Edison Mission Energy, a California corporation. EUROCLEAR: Has the meaning specified in Section 3.9. EXCHANGE ACT: Has the meaning specified in Section 5.1. EXCHANGE CERTIFICATES: Means the pass-through certificates issued in exchange for the Initial Certificates pursuant to the Registration Rights Agreement and authenticated under the this Pass-Through Trust Agreement. EXCHANGE OFFER: Means the exchange offer which may be made pursuant to the Registration Rights Agreement to exchange Initial Certificates for Exchange Certificates. EXCHANGE OFFER REGISTRATION STATEMENT: Means the registration statement that, pursuant to the Registration Rights Agreement, is filed by the Company and EME with the Commission with respect to the exchange of Initial Certificates for Exchange Certificates and the Other Certificates. EVENT OF DEFAULT: Has the meaning specified in Section 6.1. FACILITY: Means the Joliet Facility or the Powerton Facility, as the context requires. FRACTIONAL UNDIVIDED INTEREST: Means the fractional undivided interest in the Pass-Through Trust that is evidenced by a Certificate. HOLDER: See Certificateholder. ILLIQUIDITY EVENT: Has the meaning specified in the Registration Rights Agreement. INITIAL CERTIFICATES: Means the "Initial Certificates" issued and authenticated under this Pass-Through Trust Agreement, and any certificates issued and authenticated 3 hereunder substantially in the form of Exhibit A thereto, other than the Exchange Certificates. INSTITUTIONAL ACCREDITED INVESTOR: Means an institutional "accredited investor", as such term (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act). JOLIET FACILITY: Means Units No. 7 and No. 8 of the 1,358 MW coal-fired electric generating station in Joliet, Illinois. JOLIET PARTY: Means any owner trust, owner participant or owner lessor in connection with any Lease Transaction related to the Joliet Facility. JOLIET GENERATION I: Means Joliet Generation I, LLC, a Delaware limited liability company, and any successors and assigns permitted by the applicable Participation Agreement. JOLIET GENERATION II: Means Joliet Generation II, LLC, a Delaware limited liability company, and any successors and assigns permitted by the applicable Participation Agreement. JOLIET TRUST: Means one or more as the context may require of Joliet Trust I and Joliet Trust II. JOLIET TRUST I: Means Joliet Trust I, a Delaware business trust. JOLIET TRUST II: Means Joliet Trust II, a Delaware business trust. JOLIET UNDIVIDED INTEREST: Means, as the context may require, the 63.6% undivided ownership interest of Joliet Trust I in the Joliet Facility and the 36.4% undivided ownership interest of Joliet Trust II in the Joliet Facility. LEASE: Means a Facility Lease Agreement between an Owner Trust, as the lessor, and the Company, as the lessee, entered into in connection with a Lease Transaction, as such Lease may be amended or supplemented in accordance with its terms. LEASE EVENT OF DEFAULT: Means any Lease Event of Default (as such term is defined in the applicable Lease). LEASE FINANCING DOCUMENTS: Means, with respect to any Lease Transaction, the Pass-Through Trust Agreements and the applicable Lease Indenture, Lessor Notes, EME Guarantee, Certificates and other agreements, documents and instruments delivered in connection with the Lease Indenture and the Lessor Notes. LEASE INDENTURE: Means (i) an Indenture of Trust, Mortgage and Security Agreement between an Owner Trust and a Lease Indenture Trustee, entered into in connection with a Lease Transaction, as the same may be amended or supplemented in accordance with its terms and (ii) any Indenture of Trust, Mortgage and Security Agreement, or analogous document, between the Company and a Lease Indenture Trustee, entered into in connection with the assumption by the Company of the indebtedness evidenced by any Lessor Note, as the same may be amended or supplemented in accordance with its terms. The term LEASE INDENTURE refers to any one or all of such Lease Indentures, as the context requires. LEASE INDENTURE DEFAULT: Means any event which is, or after notice or lapse of time or both would become, a Lease Indenture Event of Default. LEASE INDENTURE EVENT OF DEFAULT: Means any Lease Indenture Event of Default (as such term is defined in an applicable Lease Indenture). LEASE INDENTURE TRUSTEE: Means a bank or trust company acting as indenture trustee under an applicable Lease Indenture; and any successor to such Lease Indenture Trustee as such trustee. LEASE TRANSACTION: Means a sale-leaseback transaction in respect of an Undivided Interest between the Company and an Owner Trust that is financed in part by the issuance of 4 Lessor Notes to the Pass-Through Trustee, as contemplated by the applicable Participation Agreement and the agreements and instruments referred to therein. LESSOR NOTE: Means any one of the Series A Lessor Notes (as defined in a Lease Indenture) issued under a Lease Indenture, including any lessor note issued under the Lease Indenture in replacement or substitution therefor, held by the Pass-Through Trustee. LETTER OF REPRESENTATIONS: Means the agreement among the Company, the Pass-Through Trustee and the initial Clearing Agency. NON-GLOBAL PURCHASERS: Has the meaning specified in Section 3.9. OPINION OF COUNSEL: Means an opinion in writing signed by legal counsel, who may be counsel designated by the Company, an Owner Trust or a Lease Indenture Trustee, whether or not such counsel is an employee of any of them, and who shall be acceptable to the Pass-Through Trustee in its reasonable discretion. OTHER CERTIFICATES: Means the pass-through trust certificates issued pursuant to the Other Pass-Through Trust Agreement. OTHER PASS-THROUGH TRUSTEE: Means the Pass-Through Trustee pursuant to the Other Pass-Through Trust Agreement. OTHER PASS-THROUGH TRUST AGREEMENT: Means the Pass-Through Trust Agreement B, dated as of August 17, 2000. OUTSTANDING: When used with respect to Certificates, means, as of the date of determination, and subject to Section 1.4(c), all Certificates theretofore authenticated and delivered under this Pass-Through Trust Agreement, except: (i) Certificates theretofore canceled by the Registrar or delivered to the Pass-Through Trustee or the Registrar for cancellation; (ii) Certificates for which money in the full amount has been theretofore deposited with the Pass-Through Trustee or any Paying Agent in trust for the holders of such Certificates as provided in Section 4.1 pending distribution of such money to the Certificateholders pursuant to the final distribution payment to be made pursuant to Section 11.1; and (iii) Certificates in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to this Pass-Through Trust Agreement. OWNER PARTICIPANT: Means one or more, as the context may require, of (i) Powerton Generation I, (ii) Powerton Generation II, (iii) Joliet Generation I and (iv) Joliet Generation II and any successors and assigns permitted by the applicable Participation Agreement. OWNER TRUSTEE: Means, initially, Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity but solely as trustee of each of the Owner Trusts pursuant to the related Trust Agreement; and any successor to such Owner Trustee as such trustee. OWNER TRUSTS: Means one or more as the context may require of the Powerton Trusts and the Joliet Trusts. PARTICIPATION AGREEMENT: Means one or more as the context may require of the related Participation Agreements enumerated in Schedule 1 hereto among the Company, EME, an Owner Participant, an Owner Trust, an Owner Trustee, a Lease Indenture Trustee, and the Pass-Through Trustee, providing for a Lease Transaction. PASS-THROUGH TRUST: Means the trust created by this Pass-Through Trust Agreement, the estate of which consists of the Trust Property. 5 PASS-THROUGH TRUSTEES: Means, collectively, the Pass-Through Trustee and the Other Pass-Through Trustee. PAYING AGENT: Means the paying agent maintained and appointed pursuant to Section 7.12. PERMANENT REGULATION S GLOBAL CERTIFICATE: Has the meaning specified in Section 3.9. PERMITTED GOVERNMENT INVESTMENT: Means obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days or such lesser time as is necessary for payment of any Special Payments on a Special Distribution Date. POWERTON FACILITY: Means the 1,538 MW net coal-fired electric-generating station in Pekin, Illinois. POWERTON GENERATION I: Means Powerton Generation I, LLC, a Delaware limited liability company, and any successors and assigns permitted by the applicable Participation Agreement. POWERTON GENERATION II: Means Powerton Generation II, LLC, a Delaware limited liability company, and any successors and assigns permitted by the applicable Participation Agreement. POWERTON TRUST: Means one or more as the context may require, of Powerton Trust I and Powerton Trust II. POWERTON TRUST I: Means Powerton Trust I, a Delaware business trust. POWERTON TRUST II: Means Powerton Trust II, a Delaware business trust. POWERTON UNDIVIDED INTEREST: Means, as the context may require, the 63.6% undivided ownership interest of Powerton Trust I in the Powerton Facility and the 36.4% undivided ownership interest of Powerton Trust II in the Powerton Facility. PURCHASE AGREEMENT: Means the Purchase Agreement dated August 17, 2000 among the representatives of the Initial Purchasers, the Company and EME, as the same may be implemented, supplemented or otherwise modified from time to time in accordance with its terms. RECORD DATE: Means (i) for Scheduled Payments to be distributed on any Distribution Date, other than the final distribution, the day (whether or not a Business Day) which is 15 days preceding such Distribution Date, and (ii) for Special Payments to be distributed on any Special Distribution Date, other than the final distribution, the day (whether or not a Business Day) which is 15 days preceding such Special Distribution Date. REGISTER AND REGISTRAR: Means the register maintained and the registrar appointed pursuant to Sections 3.4 and 7.12. REGISTRATION RIGHTS AGREEMENT: Means the Exchange and Registration Rights Agreement dated as of August 17, 2000, among the representatives of the Initial Purchasers, the Company and EME, as amended, supplemented or otherwise modified from time to time in accordance with its terms. REGULATION S GLOBAL CERTIFICATE: Has the meaning specified in Section 3.9. REPORTING CESSATION: Has the meaning specified in Section 5.1. REQUEST: Means a request by the Company setting forth the subject matter of the request accompanied by an Officer's Certificate and an Opinion of Counsel as provided in Section 1.2. 6 RESPONSIBLE OFFICER: When used with respect to the initial Pass-Through Trustee, the initial Lease Indenture Trustee or any Owner Trustee, means any officer in the Corporate Trust Office having direct responsibility for the administration of the Operative Documents; when used with respect to any successor Pass-Through Trustee, or successor Lease Indenture Trustee, means the chairman or vice-chairman of the board of directors or trustees, the chairman or vice-chairman of the executive or standing committee of the board of directors or trustees, the president, the chairman of the committee on trust matters, any vice-president, any second vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the comptroller and any assistant comptroller, and, when used with respect to the Pass-Through Trustee and any Lease Indenture Trustee, also means any other officer of the Pass-Through Trustee or any Lease Indenture Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, when used with respect to the Pass-Through Trustee, any Lease Indenture Trustee or any Owner Trustee with respect to a particular corporate trust matter, or any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. RESTRICTED CERTIFICATE: Has the meaning specified in Section 3.1. RESTRICTED GLOBAL CERTIFICATE: Has the meaning specified in Section 3.9. SCHEDULED PAYMENT: With respect to a Distribution Date, means any payment (other than Special Payments) of principal and interest on a Lessor Note, due from the Owner Trust, which payment represents the payment of a regularly scheduled installment of principal then due on such Lessor Note, or the payment of regularly scheduled interest accrued on such Lessor Note. SHELF REGISTRATION STATEMENT: Means the shelf registration statement which may be required to be filed by the Company and EME with the Commission pursuant to the Registration Rights Agreement, other than an Exchange Offer Registration Statement. SPECIAL DISTRIBUTION DATE: Means (i) with respect to the prepayment of any Lessor Notes, the day on which such prepayment is scheduled to occur pursuant to the terms of the applicable Lease Indenture and (ii) with respect to any Special Payment relating to a Lessor Note other than as described in clause (i) of the definition of Special Payment, the earliest second day of a month for which it is practicable for the Pass-Through Trustee to give notice pursuant to Section 4.2(c). SPECIAL PAYMENT: With respect to a Lessor Note, means (i) any payment of principal, premium, if any, and interest on such Lessor Note resulting from the prepayment of such Lessor Note pursuant to the applicable provisions of the applicable Lease Indenture, (ii) any payment of principal and interest (including any interest accruing upon default) on, or any other amount in respect of, such Lessor Note upon a Lease Indenture Event of Default in respect thereof or upon the exercise of remedies under the applicable Lease Indenture, (iii) any Special Payment referred to in clause (i) of this definition or any Scheduled Payment which is not in fact paid within five days of the Special Distribution Date or Distribution Date applicable thereto, or (iv) any proceeds from the sale of any Lessor Note by the Pass-Through Trustee pursuant to Article VI hereof, and SPECIAL PAYMENTS means all of such Special Payments. SPECIAL PAYMENTS ACCOUNT: Means the account or accounts created and maintained pursuant to Section 4.1(b). TEMPORARY REGULATION S GLOBAL CERTIFICATE: Has the meaning specified in Section 3.9. 7 TRANSFER DATE: Means the closing date of the public offering of the Certificates. TRUST INDENTURE ACT: Has the meaning specified in the recitals hereto. TRUST PROPERTY: Means the Lessor Notes held as the property of the Pass-Through Trust created hereby and all monies at any time paid thereon and all monies due and to become due thereunder, funds from time to time deposited in the Certificate Account and the Special Payments Account and any proceeds from the sale by the Pass-Through Trustee pursuant to Article VI hereof of any Lessor Note. UNDIVIDED INTEREST: Means, as the context may require, the Joliet Undivided Interest and/or the Powerton Undivided Interest. Section 1.2 COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company, an Owner Trust or a Lease Indenture Trustee to the Pass-Through Trustee to take any action under any provision of this Pass-Through Trust Agreement, the Company, such Owner Trust or such Lease Indenture Trustee, as the case may be, shall furnish to the Pass-Through Trustee (i) an Officer's Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Pass-Through Trust Agreement relating to the proposed action have been complied with and (ii) as to any legal matters involved, an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Pass-Through Trust Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Pass-Through Trust Agreement (other than a certificate provided pursuant to Section 5.1(b)) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.3 FORM OF DOCUMENTS DELIVERED TO PASS-THROUGH TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Any Opinion of Counsel stated to be based on the opinion of other counsel shall be accompanied by a copy of such other opinion. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Pass-Through Trust Agreement, they may, but need not, be consolidated and form one instrument. 8 Section 1.4 ACTS OF HOLDERS. (a) Any direction, consent, request, demand, authorization, notice, waiver or other action provided by this Pass-Through Trust Agreement in respect of the Certificates to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Pass-Through Trustee and, where it is hereby expressly required, to the Company, any Owner Trust or any Lease Indenture Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Pass-Through Trust Agreement and (subject to Section 7.1) conclusive in favor of the Pass-Through Trustee, the Company, the related Owner Trust and the related Lease Indenture Trustee, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or such other officer and where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Pass-Through Trustee deems sufficient. (c) In determining whether the Holders of the requisite Fractional Undivided Interests of Certificates Outstanding have given any direction, consent, request, demand, authorization, notice or waiver (a "DIRECTION"), under this Pass-Through Trust Agreement, Certificates owned by the Company, EME, any Owner Trust, any Owner Participant or any Affiliate of any such Person shall be disregarded and deemed not to be Outstanding under this Pass-Through Trust Agreement for purposes of any such determination. In determining whether the Pass-Through Trustee shall be protected in relying upon any such Direction, only Certificates which the Pass-Through Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding, such Certificates shall not be so disregarded as aforesaid, and (ii) if any amount of Certificates so owned by any such Person have been pledged in good faith, such Certificates shall not be disregarded as aforesaid if the pledgee establishes to the satisfaction of the Pass-Through Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Company, an Owner Trust, an Owner Participant or any Affiliate of any such Persons. (d) For all purposes of this Pass-Through Trust Agreement, all Initial Certificates and all Exchange Certificates shall vote and take all other actions of Certificateholders together as one class of Certificates. (e) The Company may at its option, by delivery of an Officer's Certificate to the Trustee, set a record date to determine the Certificateholders entitled to give any Direction. Notwithstanding Section 316(c) of the Trust Indenture Act, such record date shall be the record date specified in such Officer's Certificate, which shall be a date not more than 30 days prior to the first solicitation of Certificateholders in connection therewith. If such a record date is fixed, 9 such Direction may be given before or after such record date, but only the Certificateholders of record at the close of business on such record date shall be deemed to be Certificateholders for the purposes of determining whether Certificateholders of the requisite proportion of Outstanding Certificates have authorized or agreed or consented to such Direction, and for that purpose the Outstanding Certificates shall be computed as of such record date; PROVIDED that no such Direction by the Certificateholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Pass-Through Trust Agreement not later than one year after such record date. (f) Any Act by the Holder of any Certificate shall bind the Holder of every Certificate issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of the related Direction is made upon such Certificate. (g) Except as otherwise provided in Section 1.4(c), Certificates owned by or pledged to any Person shall have an equal and proportionate benefit under the provisions of this Pass-Through Trust Agreement, without preference, priority or distinction as among all of the Certificates. ARTICLE II ACQUISITION OF LESSOR NOTES; ORIGINAL ISSUANCE OF CERTIFICATES Section 2.1 (a) ISSUANCE OF CERTIFICATES; ACQUISITION OF LESSOR NOTES. The Pass-Through Trustee, at or promptly following the execution and delivery of this Pass-Through Trust Agreement, shall also execute and deliver Participation Agreements, in the form delivered to the Pass-Through Trustee on or prior to the date of the execution and delivery hereof. On the Transfer Date, upon delivery of an authentication order by the Company and the satisfaction of the closing conditions with respect to any Lessor Notes to be purchased on the Transfer Date, the Pass-Through Trustee shall execute, deliver and authenticate, on behalf of the Pass-Through Trust, Initial Certificates equaling in the aggregate the aggregate principal amount of the Lessor Notes deposited into the Pass-Through Trust on the Transfer Date. The Initial Certificates so executed, delivered and authenticated on the Transfer Date shall evidence the entire ownership of the Pass-Through Trust. The Pass-Through Trust shall issue such Initial Certificates on the Transfer Date, in authorized denominations and in such Fractional Undivided Interests, so as to result in the receipt of consideration (the "CONSIDERATION") in an amount equal to the aggregate principal amount of such Lessor Notes referred to in the second preceding sentence. The Pass-Through Trust shall purchase Lessor Notes on the Transfer Date at an aggregate purchase price equal to the amount of the Consideration so received. Except as provided in Sections 3.4 and 3.5 hereof, the Pass-Through Trustee shall not execute or deliver Initial Certificates in excess of the aggregate amount specified in this paragraph. The aggregate Fractional Undivided Interest of Certificates shall not at any time exceed $333,500,000. (b) ASSUMPTION OF LESSOR NOTES. If an Eligible Successor shall assume the obligations of an Owner Trust under any Lessor Note pursuant to Section 2.12 of the applicable Lease Indenture, (i) if requested by the applicable Lease Indenture Trustee, the Pass-Through Trustee shall surrender the Lessor Notes issued pursuant to Section 2.12 of such Lease Indenture to the applicable Lease Indenture Trustee in exchange for new Lessor Notes of the same aggregate outstanding principal amount as the Lessor Notes so surrendered, bearing interest at the same rate, and having the same maturity and amortization schedule, and otherwise of similar 10 tenor, issued under such Lease Indenture and any new Lease Indenture entered into by such Eligible Successor and the applicable Lease Indenture Trustee in connection with such assumption, and (ii) thereafter each reference to such Lessor Notes in this Pass-Through Trust Agreement shall be deemed to include a reference to such new Lessor Notes or the existing Lessor Notes as assumed by such Eligible Successor. (c) AUTHENTICATION. Any authentication order delivered by the Company hereunder shall be signed by one of its authorized signatories and shall specify the amount at maturity of the Certificates to be authenticated and the date on which the original issue of Certificates is to be authenticated. The Pass-Through Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Certificates. Unless limited by the terms of such appointment, an authenticating agent may authenticate the Certificates whenever the Pass-Through Trustee may do so. Each reference in this Pass-Through Trust Agreement to authentication by the Pass-Through Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. Section 2.2 ACCEPTANCE BY PASS-THROUGH TRUSTEE. The Pass-Through Trustee, upon the execution and delivery of this Pass-Through Trust Agreement, acknowledges its acceptance of all right, title, and interest in and to the Lessor Notes acquired pursuant to Section 2.1 hereof and declares that the Pass-Through Trustee holds and will hold such right, title, and interest, together with all other property constituting the Trust Property, for the benefit of all present and future Certificateholders, upon the trusts herein set forth. By its payment for and acceptance of each Certificate issued to it hereunder, each initial Certificateholder as grantor of the Pass-Through Trust thereby joins in the creation and declaration of the Pass-Through Trust. Section 2.3 LIMITATION OF POWERS. The Pass-Through Trust is constituted solely for the purpose of making the investment in the Lessor Notes, and, except as set forth herein, the Pass-Through Trustee is not authorized or empowered to acquire any other investments or engage in any other activities and, in particular, the Pass-Through Trustee is not authorized or empowered to do anything that would cause the Pass-Through Trust to fail to qualify as a grantor trust for federal income tax purposes (including, as subject to this restriction, acquiring a Facility by bidding the Lessor Notes or otherwise, or taking any action with respect to an Undivided Interest or a Facility once acquired). ARTICLE III THE CERTIFICATES Section 3.1 FORM, DENOMINATION AND EXECUTION OF CERTIFICATES. (a) The Initial Certificates shall be known as the "8.30% INITIAL PASS-THROUGH CERTIFICATES, SERIES A" and the Exchange Certificates shall be known as the "8.30% EXCHANGE PASS-THROUGH CERTIFICATES, SERIES A", in each case, of the Pass-Through Trust. Each Certificate shall represent a fractional undivided interest in the Pass-Through Trust. The Certificates shall be issued in registered form without coupons and shall be substantially in the form attached hereto as Exhibit A, with such omissions, variations and insertions as are permitted by this Pass-Through Trust Agreement, and may have such letters, numbers or other marks of identification and such legends or endorsements printed, lithographed or engraved thereon, as may be required to comply with the rules of any securities exchange on which such Certificates may be listed or to conform to any 11 usage in respect thereof, or as may, consistently herewith, be prescribed by the Pass-Through Trustee or by the officer executing such Certificates, such determination by said officer to be evidenced by such officer signing the Certificates. (b) Except as provided in Section 3.9, definitive Certificates shall be printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Certificates may be listed, all as determined by the officer executing such Certificates, as evidenced by such officer's execution of such Certificates. (c) During the period beginning on the Closing Date and ending on the date two years from the Closing Date, all Initial Certificates issued on the Closing Date, and all Certificates issued upon registration of transfer of, or in exchange for, such Initial Certificates, shall be "RESTRICTED CERTIFICATES" and shall be subject to the restrictions on transfer provided in the legend set forth on the face of the form of certificate in Exhibit A; PROVIDED, HOWEVER, that the term "RESTRICTED CERTIFICATES" shall not include Certificates as to which such restrictions on transfer have been terminated in accordance with Section 3.4. All Restricted Certificates shall bear the legend set forth on the face of the Certificate in Exhibit A. Certificates which are not Restricted Certificates shall not bear such legend. (d) The Initial Certificates shall be issued in minimum denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a different denomination. The Exchange Certificates will be issued in denominations of $1,000 or integral multiples thereof, except that one Certificate may be issued in a different denomination. The Certificates shall be executed on behalf of the Pass-Through Trust by manual or facsimile signature of a Responsible Officer of the Pass-Through Trustee. Certificates bearing the manual or facsimile signature of an individual who was, at the time when such signature was affixed, authorized to sign on behalf of the Pass-Through Trustee shall be valid and binding obligations of the Pass-Through Trustee, notwithstanding that such individual has ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold such office at the date of such Certificates. No Certificate shall be entitled to any benefit under this Pass-Through Trust Agreement, or be valid for any purpose unless there appears on such Certificate a certificate of authentication substantially in the form set forth in Exhibit B hereto executed by the Pass-Through Trustee by manual signature, and such certificate of authentication upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated on the date of their authentication. Section 3.2 AUTHENTICATION OF CERTIFICATES. Upon delivery of an authentication order by the Company, the Pass-Through Trustee on the Transfer Date shall cause to be authenticated and delivered Certificates duly authenticated by the Pass-Through Trustee, in authorized denominations equaling in the aggregate the aggregate principal amount of the Lessor Notes purchased on the Transfer Date and evidencing the entire ownership of the Pass-Through Trust. Section 3.3 TEMPORARY CERTIFICATES. Pending the preparation of definitive Certificates, the Pass-Through Trustee may execute, authenticate and deliver temporary Certificates which are printed, lithographed, typewritten, or otherwise produced, in any denomination, containing substantially the same terms and provisions as set forth in Exhibit A, except for such appropriate insertions, omissions, substitutions and other variations relating to 12 their temporary nature as the officer executing such temporary Certificates may determine, as evidenced by their execution of such temporary Certificates. If temporary Certificates are issued, the Pass-Through Trustee will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the Corporate Trust Office of the Pass-Through Trustee, or at the office or agency of the Pass-Through Trustee maintained in accordance with Section 7.12, without charge to the Holder upon surrender for cancellation of any one or more temporary Certificates, the Pass-Through Trustee shall execute, authenticate and deliver in exchange therefor definitive Certificates of authorized denominations of a like aggregate Fractional Undivided Interest. Until so exchanged, such temporary Certificates shall in all respects be entitled to the same benefits under this Pass-Through Trust Agreement as definitive Certificates. Section 3.4 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. Unless and until (i) an Initial Certificate is sold under an effective Shelf Registration Statement, or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the terms of the Registration Rights Agreement, the following provisions shall apply to such Initial Certificates: (a) The Pass-Through Trustee shall cause to be kept, at the office or agency to be maintained by it in accordance with the provisions of Section 7.12, a register (the "REGISTER") in which, subject to the provisions of this Section 3.4 and the Certificates, the Pass-Through Trustee shall provide for the registration of Certificates and of transfers and exchanges of Certificates as herein provided. The Pass-Through Trustee shall initially be the registrar (the "REGISTRAR") for the purpose of registering Certificates and transfers and exchanges of Certificates as herein provided. The Company, upon notice to the Pass-Through Trustee, may change the Registrar at any time. (b) Every Restricted Certificate shall be subject to the restrictions on transfer provided in the legend required to be set forth on the face of each Restricted Certificate pursuant to Section 3.1, and the Holder of each Restricted Certificate, by such Holder's acceptance thereof, agrees to be bound by such restrictions on transfer. Whenever any Restricted Certificate is presented or surrendered for registration of transfer or for exchange for a Certificate registered in a name other than that of the Holder, such Restricted Certificate must be accompanied by a certificate in substantially the form set forth in Exhibit C hereto, dated the date of such surrender and signed by the Holder of such Restricted Certificate, as to compliance with such restrictions on transfer. Neither the Pass-Through Trustee nor any Registrar shall be required to accept for such registration of transfer or exchange any Restricted Certificate not so accompanied by a properly completed certificate. Notwithstanding the preceding two sentences, a properly completed certificate shall not be required in connection with any transfer of any Restricted Certificate through the facilities of DTC or any other United States securities clearance and settlement organization, PROVIDED that such transfer does not require a change in the name (other than to another nominee of DTC or such other securities clearance and settlement organization) in which such Restricted Certificate is then registered. Whenever any Restricted Certificate is proposed to be transferred by a Holder to an Institutional Accredited Investor, the Pass-Through Trustee shall have received from such Institutional Accredited Investor, prior to such transfer, a signed letter substantially in the form of Exhibit D relating to certain representations and agreements regarding restrictions on transfer 13 of such Restricted Certificate. In addition, the Holder of the Restricted Certificate proposed to be transferred must, prior to such transfer, furnish to the Registrar such certifications (as required by and in the form set forth in this Pass-Through Trust Agreement), Opinions of Counsel or other information as the Registrar may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration rights of the Securities Act. The restrictions imposed by this Section 3.4 and Section 3.1 upon the transferability of any particular Restricted Certificate shall cease and terminate if and when such Restricted Certificate has been sold pursuant to an effective registration statement under the Securities Act or transferred pursuant to Rule 144 under the Securities Act (or any successor provision thereto), unless the Holder thereof is an affiliate of the Company within the meaning of Rule 144 (or such successor provision). Any Restricted Certificate as to which such restrictions on transfer shall have expired in accordance with their terms or shall have terminated may, upon surrender of such Restricted Certificate for exchange to the Pass-Through Trustee or any Registrar in accordance with the provisions of this Section 3.4 (accompanied, in the event that such restrictions on transfer have terminated by reason of a transfer pursuant to Rule 144 or any successor provision, by an Opinion of Counsel having substantial experience in practice under the Securities Act and otherwise reasonably acceptable to the Company, addressed to the Company and the Pass-Through Trustee and in form acceptable to the Company, to the effect that the transfer of such Restricted Certificate has been made in compliance with Rule 144 or such successor provision), be exchanged for a new Certificate, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by Section 3.1. The Company shall promptly inform the Pass-Through Trustee in writing of the effective date of any registration statement registering the Certificates under the Securities Act. The Pass-Through Trustee shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned Opinion of Counsel or registration statement. (c) Upon surrender for registration of transfer of any Certificate that is not a Restricted Certificate at the Corporate Trust Office or such other office or agency, the Pass-Through Trustee shall execute, authenticate and deliver, in the name of the designated transferee or transferees, one or more new Certificates, in authorized denominations of a like aggregate Fractional Undivided Interest. (d) At the option of a Certificateholder, Certificates may be exchanged for other Certificates, in authorized denominations and of a like aggregate Fractional Undivided Interest, upon surrender of the Certificates to be exchanged at any such office or agency; PROVIDED, that a Restricted Certificate may only be exchanged for another Restricted Certificate, until such restrictions on such Restricted Certificate shall cease and terminate in accordance with the terms of this Section 3.4 and PROVIDED ALSO, that no exchanges of Initial Certificates for Exchange Certificates shall occur until an Exchange Offer Registration Statement shall have been declared effective by the Commission (notice of which shall be provided to the Pass-Through Trustee by the Company). Whenever any Certificates are so surrendered for exchange, the Pass-Through Trustee shall execute, authenticate and deliver the Certificates that the Certificateholder making the exchange is entitled to receive. Every Certificate presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Pass-Through Trustee and the Registrar duly executed by the Certificateholder thereof or its attorney duly authorized in writing. 14 (e) No service charge shall be made to a Certificateholder for any registration of transfer or exchange of Certificates, but the Pass-Through Trustee shall require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. (f) All Certificates surrendered for registration of transfer and exchange shall be canceled and disposed of in accordance with the usual practices of the Pass-Through Trustee. Section 3.5 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a) any mutilated Certificate is surrendered to the Registrar, or the Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) in the case of such destruction, loss or theft, there is delivered to the Registrar and the Pass-Through Trustee such security, indemnity or bond as may be required by them to save each of them and the Pass-Through Trust harmless, then, in the absence of notice to the Registrar or the Pass-Through Trustee that such Certificate has been acquired by a bona fide purchaser, the Pass-Through Trustee, on behalf of the Pass-Through Trust, shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like Fractional Undivided Interest with the same final Distribution Date. In connection with the issuance of any new Certificate under this Section 3.5, the Pass-Through Trustee shall require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Pass-Through Trustee and the Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section 3.5 shall constitute conclusive evidence of the appropriate Fractional Undivided Interest in the Pass-Through Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. Section 3.6 PERSONS DEEMED OWNERS. Prior to due presentation of a Certificate for registration of transfer, the Pass-Through Trustee, the Company, the Owner Trust, the Registrar and any Paying Agent may treat the person in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 4.2 and for all other purposes whatsoever, and neither the Pass-Through Trustee, the Company, the Owner Trust, the Registrar nor any Paying Agent shall be affected by any notice to the contrary. Section 3.7 CANCELLATION. All Certificates surrendered for payment or transfer or exchange shall, if surrendered to any Person a party hereto other than the Registrar, be delivered by such Person to the Registrar for cancellation. No Certificates shall be authenticated in lieu of or in exchange for any Certificates canceled as provided in this Section, except as expressly permitted by this Pass-Through Trust Agreement. All canceled Certificates held by the Registrar shall be disposed of in accordance with the usual practice of the Pass-Through Trustee and, if destroyed, a certification of their destruction shall be delivered to the Pass-Through Trustee. Section 3.8 LIMITATION OF LIABILITY FOR PAYMENTS. All payments or distributions made to Certificateholders under this Pass-Through Trust Agreement shall be made only from the Trust Property and only to the extent that the Pass-Through Trust shall have received sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of Article IV of this Pass-Through Trust Agreement. Each Holder of a Certificate, by its acceptance of such Certificate, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to the Holder thereof as provided in this Pass-Through Trust Agreement. Nothing in this Pass-Through Trust Agreement shall be construed as an agreement, or otherwise creating an obligation, of (a) the Company, the Pass- 15 Through Company or the Pass-Through Trustee to pay any of the principal, premium, if any, and interest due from time to time under the Lessor Notes or (b) the Company or the Pass-Through Company to pay any amount due from time to time in respect of the Certificates. The liability of an Owner Trust under Lessor Notes shall be limited as set forth therein and in the applicable Lease Indenture. Section 3.9 BOOK ENTRY AND DEFINITIVE CERTIFICATES. (a) Except for Certificates issued to Institutional Accredited Investors who are not also qualified institutional buyers ("NON-GLOBAL PURCHASERS"), which must be issued in the form of definitive, fully registered Certificates without interest coupons ("DEFINITIVE CERTIFICATES"), the Certificates may be issued in the form of one or more typewritten Certificates representing the Book-Entry Certificates, to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Company. In such case, the Certificates delivered to DTC shall initially be registered on the Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Certificate Owner will receive a definitive certificate representing such Certificate Owner's interest in the Certificates, except as provided above and in subsection (d) below. As to the Book-Entry Certificates, unless and until Definitive Certificates have been issued pursuant to subsection (d) below: (i) the provisions of this Section 3.9 shall be in full force and effect; (ii) the Company, any Owner Trust, the Paying Agent, the Registrar and the Pass-Through Trustee may deal with the Clearing Agency for all purposes (including the making of distributions on the Certificates) as the authorized representative of the Certificate Owners; (iii) to the extent that the provisions of this Section 3.9 conflict with any other provisions of this Pass-Through Trust Agreement (other than the provisions of any supplemental agreement amending this Section 3.9 as permitted by this Pass-Through Trust Agreement), the provisions of this Section 3.9 shall control; (iv) the rights of Certificate Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Certificate Owners and the Clearing Agency Participants; and until Definitive Certificates are issued pursuant to subsection (d) below, the Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal and interest and premium, if any, on the Certificates to such Clearing Agency Participants; and (v) wherever this Pass-Through Trust Agreement requires or permits actions to be taken based upon instructions or directions of Certificateholders holding Certificates evidencing a specified percentage of the Fractional Undivided Interests in the Pass-Through Trust, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Certificate Owners and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in Certificates and has delivered such instructions to the Pass-Through Trustee. The Pass-Through Trustee shall have no obligation to determine whether the Clearing Agency has in fact received any such instructions. (b) With respect to Book-Entry Certificates, whenever notice or other communication to the Certificateholders is required under this Pass-Through Trust Agreement, unless and until Definitive Certificates shall have been issued pursuant to subsection (d) below, the Pass-Through Trustee shall give all such notices and communications specified herein to be given to Certificateholders to the Clearing Agency and/or the Clearing Agency Participants (and, 16 upon receipt of a valid Certificate Owner Request, to the Certificateholder or Certificate Owner making such request), and shall make available additional copies as requested by such Clearing Agency Participants. (c) Unless and until Definitive Certificates are issued pursuant to subsection (d) below, on the Record Date prior to each applicable Distribution Date and Special Distribution Date, the Pass-Through Trustee will request from the Clearing Agency a "Securities Position Listing" setting forth the names of all Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such Record Date. The Pass-Through Trustee shall mail to each such Clearing Agency Participant the statements described in Section 4.3 hereof. (d) If with respect to the Certificates (i) the Company advises the Pass-Through Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities and the Company is unable to locate a qualified successor within 90 days, (ii) the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trusts) at its option, advises the Pass-Through Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or (iii) after the occurrence of an Event of Default, Certificate Owners of Book-Entry Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Pass-Through Trust, by Act of said Certificate Owners delivered to the Company and the Pass-Through Trustee, advise the Company, the Owner Trusts, the Pass-Through Trustee and the Clearing Agency through the Clearing Agency Participants in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Certificate Owners, then the Pass-Through Trustee shall notify all Certificate Owners, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Certificates. Upon surrender to the Pass-Through Trustee of all the Certificates held by the Clearing Agency, accompanied by registration instructions from the Clearing Agency for registration of Definitive Certificates in the names of Certificate Owners, the Pass-Through Trust shall issue and deliver the Definitive Certificates in accordance with the instructions of the Clearing Agency. None of the Company, the Owner Trusts, the Registrar, the Paying Agent or the Pass-Through Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such registration instructions. Upon the issuance of Definitive Certificates, the Pass-Through Trustee shall recognize the Person in whose name the Definitive Certificates are registered in the Register as Certificateholder hereunder. Neither the Company nor the Pass-Through Trustee shall be liable if the Company is unable to locate a qualified successor Clearing Agency. (e) The Initial Certificates sold in offshore transactions in reliance on Regulation S under the Securities Act will be represented initially by a single, temporary Book-Entry Certificate, in definitive, fully registered form without interest coupons (the "TEMPORARY REGULATION S GLOBAL CERTIFICATE") and will be deposited with the Pass-Through Trustee as custodian for DTC and registered in the name of a nominee of DTC for the accounts of Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System ("EUROCLEAR"), and Clearstream, Luxembourg Banking, SOCIETE ANONYME ("CLEARSTREAM, LUXEMBOURG"). Each Temporary Regulation S Global Certificate will be exchangeable for a single, permanent Book-Entry Certificate (the "PERMANENT REGULATION S GLOBAL CERTIFICATE," and together with the Temporary Regulation S Global Certificate, the "REGULATION S GLOBAL CERTIFICATE") on or after 40 days after the later of the commencement of the offering of the Initial 17 Certificates and the Closing Date upon certification that the beneficial interests in such Book-Entry Certificate are owned by persons who are not U.S. persons as defined in Regulation S. Prior to the expiration of such 40-day period, beneficial interests in the Temporary Regulation S Global Certificate may be held only through Euroclear or Clearstream, Luxembourg, and any resale or other transfer of such interests to U.S. persons shall not be permitted during such period unless such resale or transfer is made pursuant to Rule 144A or Regulation S under the Securities Act and in accordance with the certification requirements specified in Section 3.9(f) below. The aggregate original principal amount of the Regulation S Global Certificate may from time to time be increased or decreased by adjustments made on the records of the Pass-Through Trustee, as custodian for DTC, in connection with a corresponding decrease or increase in the aggregate original principal amount of a Definitive Certificate or the Restricted Global Certificate, as hereinafter provided. (f) The Initial Certificates sold in reliance on Rule 144A under the Securities Act will be represented by a single, permanent Book-Entry Certificate, in definitive, fully registered form without interest coupons (the "RESTRICTED GLOBAL CERTIFICATE") and will be deposited with the Pass-Through Trustee as custodian for DTC and registered in the name of a nominee of DTC. Prior to the 40th day after the later of the commencement of the offering of the Initial Certificates and the Closing Date, a beneficial interest in the Temporary Regulation S Global Certificate may be transferred to a person who takes delivery in the form of an interest in the Restricted Global Certificate only upon receipt by the Pass-Through Trustee of a written certification from the transferor (in the form of Exhibit C hereto) to the effect that such transfer is being made to a person who the transferor reasonably believes is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction. Beneficial interests in the Restricted Global Certificate may be transferred to a person who takes delivery in the form of an interest in the Regulation S Global Certificate whether before, on or after such 40th day, only upon receipt by the Pass-Through Trustee of a written certification (in the form of Exhibit C hereto) to the effect that such transfer is being made in accordance with Regulation S under the Securities Act and, if such transfer occurs prior to such 40th day, the interest will be held immediately thereafter only through Euroclear or Clearstream, Luxembourg. The aggregate initial principal amount of the Restricted Global Certificate may from time to time be increased or decreased by adjustments made on the records of the Pass-Through Trustee, as custodian for DTC, in connection with a corresponding decrease or increase in the aggregate initial principal amount of a Definitive Certificate or a Regulation S Global Certificate, as hereinafter provided. (g) The Exchange Certificates shall be issued in the form of one or more global Certificates substantially in the form of Exhibit A hereto (each, a "GLOBAL EXCHANGE CERTIFICATE"), except that (i) the restricted legend shall be omitted and (ii) such Exchange Certificates shall contain such appropriate insertions, omissions, substitutions and other variations from the form set forth in Exhibit A hereto relating to the nature of the Exchange Certificates as the Responsible Officer of the Pass-Through Trustee executing such Exchange Certificates on behalf of the Pass-Through Trust may determine, as evidenced by such officer's execution on behalf of the Pass-Through Trust of such Exchange Certificates. Such Global Exchange Certificates shall be in registered form and be registered in the name of DTC and deposited with the Pass-Through Trustee, at its Corporate Trust Office, as custodian for DTC. The aggregate principal amount of any Global Exchange Certificate may from time to time be 18 increased or decreased by adjustments made on the records of the Pass-Through Trustee, as custodian for DTC for such Global Exchange Certificate, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Exchange Certificate. Subject to clause (i) and (ii) of the first sentence of this Section 3.9(g), the terms hereof applicable to Restricted Global Certificates and/or Global Certificates shall apply to the Global Exchange Certificates, MUTATIS MUTANDIS. (h) Any beneficial interest in one of the Book-Entry Certificates that is transferred to a person who takes delivery in the form of an interest in another Book-Entry Certificate will, upon transfer, cease to be an interest in such Book-Entry Certificate and become an interest in such other Book Entry Certificate and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Book-Entry Certificate for so long as it remains such an interest. Upon the transfer of Definitive Certificates from a Non-Global Purchaser to a qualified institutional buyer or in accordance with Regulation S, such Definitive Certificates will be exchanged for an interest in a Book-Entry Certificate. The Certificates shall not be issuable in bearer form. (i) The Company and, if necessary, the Pass-Through Trustee shall each enter into the Letter of Representations with respect to the Certificates and fulfill its responsibilities thereunder. Section 3.10 FORM OF CERTIFICATION. In connection with any certification contemplated by Section 3.4, relating to compliance with certain restrictions relating to transfers of Restricted Certificates, such certification shall be provided substantially in the form of Exhibit C hereto, with only such changes as shall be reasonably approved by the Company and reasonably acceptable to the Pass-Through Trustee. ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.1 CERTIFICATE ACCOUNT AND SPECIAL PAYMENTS ACCOUNT. (a) The Pass-Through Trustee shall establish and maintain on behalf of the Certificateholders the Certificate Account (Account No. 049 65500) with the Pass-Through Trustee as one or more non-interest bearing accounts. The Pass-Through Trustee shall hold the Certificate Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Pass-Through Trust Agreement. On each day when a Scheduled Payment is made under a Lease Indenture to the Pass-Through Trustee, as holder of the Lessor Notes issued under such Lease Indenture, the Pass-Through Trustee upon receipt shall immediately deposit the aggregate amount of such Scheduled Payment in the Certificate Account. (b) The Pass-Through Trustee shall establish and maintain on behalf of the Certificateholders the Special Payments Account (Account No. 049 65600) with the Pass-Through Trustee as one or more accounts, which shall be non-interest bearing except as provided in Section 4.4. The Pass-Through Trustee shall hold the Special Payments Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Pass-Through Trust Agreement. On each day when a Special Payment (other than a Special Payment that represents the proceeds of any sale pursuant to Article VI hereof by the Pass-Through Trustee of a Lessor Note) is made under a Lease Indenture to the Pass-Through Trustee, as 19 holder of the Lessor Notes issued under such Lease Indenture, the Pass-Through Trustee upon receipt shall immediately deposit the aggregate amounts of such Special Payments in the Special Payments Account. Upon the sale of any Lessor Note by the Pass-Through Trustee pursuant to Article VI hereof and the realization of any proceeds thereof, the Pass-Through Trustee shall deposit the aggregate amount of such proceeds as a Special Payment in the Special Payments Account. (c) The Pass-Through Trustee shall present to each Lease Indenture Trustee each Lessor Note issued under the related Lease Indenture, on the date of its stated final maturity, or in the case of any Lessor Note which is to be prepaid in whole pursuant to a Lease Indenture, on the applicable prepayment date under such Lease Indenture. Section 4.2 DISTRIBUTIONS FROM CERTIFICATE ACCOUNT AND SPECIAL PAYMENTS ACCOUNT. (a) On each Distribution Date if the Pass-Through Trustee receives payment of the Scheduled Payments due on the Lessor Notes on such date by 1:00 p.m., New York time, on such date, the Pass-Through Trustee shall distribute out of the Certificate Account the entire amount deposited therein pursuant to Section 4.1(a). If a Scheduled Payment is not received by the Pass-Through Trustee by 1:00 p.m., New York time, on a Distribution Date, such payment shall be distributed on the next Business Day. If a Scheduled Payment is not received by the Pass-Through Trustee on a Distribution Date but is received prior to the time such payment would become a Special Payment, such payment shall be distributed (i) on the date received, if received by 1:00 p.m., New York time, on such date or (ii) on the next Business Day, if received after 1:00 p.m., New York time, on such date. There shall be so distributed to each Certificateholder of record on the Record Date with respect to such Distribution Date (other than as provided in Section 11.1 concerning the final distribution) (i) if (A) DTC is the Certificateholder of record, or (B) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $10,000,000, or (C) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $1,000,000 and so requests to the Pass-Through Trustee, wire transfer in immediately available funds to an account maintained by such Certificateholder with a bank, or (ii) if none of the above apply, by check mailed to such Certificateholder at the address appearing in the Register, such Certificateholder's pro rata share (based on the aggregate Fractional Undivided Interest held by such Certificateholder) of the aggregate amount in the Certificate Account. (b) On each Special Distribution Date with respect to any Special Payment if the Pass-Through Trustee receives the Special Payments due on such date by 1:00 p.m., New York time, on such date, the Pass-Through Trustee shall distribute out of the Special Payments Account the entire amount deposited therein with respect to such Special Payment pursuant to Section 4.1(b). If a Special Payment is not received by the Pass-Through Trustee by 1:00 p.m., New York time, on a Special Distribution Date, such payment shall be distributed on the next Business Day. If a Special Payment is not received by the Pass-Through Trustee on a Special Distribution Date, such payment shall be distributed (i) on the date received, if received by 1:00 p.m., New York time, on such date or (ii) on the next Business Day, if received after 1:00 p.m., New York time, on such date. There shall be so distributed to each Certificateholder of record on the Record Date with respect to such Special Distribution Date (other than as provided in Section 11.1 concerning the final distribution) (i) if (A) DTC is the Certificateholder of record, or (B) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $10,000,000, or (C) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $1,000,000 and so requests to the Pass-Through Trustee, by wire transfer in 20 immediately available funds to an account maintained by the Certificateholder with a bank, or (ii) if none of the above apply, by check mailed to such Certificateholder at the address appearing in the Register, such Certificateholder's pro rata share (based on the aggregate Fractional Undivided Interest held by such Certificateholder) of the aggregate amount in the Special Payments Account on account of such Special Payment. (c) The Pass-Through Trustee shall at the expense of the Company cause notice of each Special Payment to be mailed to (i) each Certificateholder, at the address of such Certificateholder as it appears in the Register and (ii) any Certificate Owner who has made a valid Certificate Owner Request, at the address specified in such Certificate Owner Request. In the event of prepayment of Lessor Notes, such notice shall be mailed not less than 20 days prior to the date any such Special Payment is scheduled to be distributed. In the case of any other Special Payments, such notice shall be mailed as soon as practicable after the Pass-Through Trustee has confirmed that it has received funds for such Special Payment. Notices mailed by the Pass-Through Trustee shall set forth: (i) the Special Distribution Date and the Record Date therefor (except as otherwise provided in Section 11.1); (ii) the amount of the Special Payment per $1,000 of face amount of Certificates and the amount thereof constituting principal, premium, if any, and interest; (iii) the reason for the Special Payment; and (iv) if the Special Distribution Date is the same date as a Distribution Date, the total amount to be received on such date per $1,000 of face amount of Certificates. If the amount of premium payable upon the prepayment of a Lessor Note has not been calculated at the time that the Pass-Through Trustee mails notice of a Special Payment, it shall be sufficient if the notice sets forth the other amounts to be distributed and states that any premium received will also be distributed. Section 4.3 STATEMENTS TO CERTIFICATEHOLDERS. (a) On each Distribution Date and Special Distribution Date, the Pass-Through Trustee will include with each distribution to Certificateholders and any Certificate Owner who has made a valid Certificate Owner Request a statement, giving effect to such distribution to be made on such date, setting forth the following information (per a $1,000 face amount Certificate as to (i) and (ii) below): (i) the amount of such distribution allocable to principal and the amount allocable to premium, if any; and (ii) the amount of such distribution allocable to interest. (b) Within a reasonable period of time after the end of each calendar year but not later than the latest date permitted by law, the Pass-Through Trustee shall furnish (i) to each Person who at any time during such calendar year was a Certificateholder of record and (ii) to any Certificate Owner who has made a valid Certificate Owner Request and provided the Pass-Through Trustee with such pertinent information as the Pass-Through Trustee shall reasonably request, a report containing the sum of the amounts determined pursuant to clauses (a)(i) and (a)(ii) with respect to the Pass-Through Trust for such calendar year or, in the event such Person was a Certificateholder of record or Certificate Owner during a portion of such calendar year, for the applicable portion of such year, and such other items as are readily available to the Pass-Through Trustee and which a Certificateholder or Certificate Owner shall reasonably request as necessary for the purpose of such Certificateholder's or Certificate Owner's preparation of its Federal income tax returns. 21 Section 4.4 INVESTMENT OF SPECIAL PAYMENT MONEYS. Any money received by the Pass-Through Trustee pursuant to Section 4.1(b) representing a Special Payment which is not to be promptly distributed shall, to the extent practicable, be invested in Permitted Government Investments by the Pass-Through Trustee pending distribution of such Special Payment pursuant to Section 4.2. Any investment made pursuant to this Section 4.4 shall be in such Permitted Government Investments having maturities not later than the date that such moneys are required to be paid to make the payment required under Section 4.2 on the applicable Special Distribution Date and the Pass-Through Trustee shall hold any such Permitted Government Investments until maturity. The Pass-Through Trustee shall have no liability with respect to any investment made pursuant to this Section 4.4, other than by reason of the willful misconduct or negligence of the Pass-Through Trustee. All income and earnings from such investments shall be distributed on such Special Distribution Date as part of such Special Payment. Section 4.5. ADJUSTMENT OF INTEREST RATES APPLICABLE TO CERTIFICATES. (a) Subject to Sections 4.5(b) and 4.5(c), interest on the Certificates shall be payable at the rates specified in the first paragraph of the Lessor Notes without regard to the second paragraph of the Lessor Notes. (b) If an Illiquidity Event shall have occurred and be continuing, the interest rate applicable to the Lessor Notes (and consequently, the interest rate applicable to the Certificates) shall be increased by 0.50% per annum from and after the date such Illiquidity Event occurs to but excluding the date on which such Illiquidity Event shall cease to exist. (c) If a Reporting Cessation occurs, the interest rate applicable to the Lessor Notes (and consequently, the interest rate applicable to the Certificates) shall be increased by 0.50% per annum from the date such Reporting Cessation occurs until such time as the Reporting Cessation has ended; PROVIDED, HOWEVER, that if an Illiquidity Event and a Reporting Cessation shall have occurred and be continuing at the same time, the maximum increase in the interest rate applicable to the Lessor Notes (and consequently, the interest rate applicable to the Certificates) shall be 0.50% per annum. ARTICLE V THE COMPANY Section 5.1 REPORTS. For so long as any Certificates remain Outstanding, the Company shall furnish: (a) to Certificateholders, Certificate Owners and prospective investors, upon their request, unless the Company shall at the time be subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Certificates are not freely transferable under the Securities Act, and (b) to the Pass-Through Trustee, who in turn shall provide such information, upon a Certificate Owner Request, to Certificateholders and Certificate Owners (i) within 60 days following the end of each of the first three fiscal quarters of the Company during each fiscal year, unaudited quarterly financial statements, (ii) within 120 days following the end of the fiscal year of Holdings, audited annual financial statements (with the accompanying footnotes and audit report) and (iii) within 20 days after the occurrence thereof, notice of the following events: (A) a change in control with respect to the Company; (B) the acquisition or disposition of a significant amount of assets by the Company; (C) the appointment of a receiver over the Company or the confirmation of a plan of reorganization or liquidation for the Company; or (D) the resignation or dismissal of the independent accountants engaged by the 22 Company. Notwithstanding the foregoing, in the event annual audited financial statements of the Company become and for so long as they continue to be available, information delivery requirements of Section 5.1(b)(ii) shall be deemed to refer to such annual audited financial statements of the Company and not the annual audited financial statements of Holdings. In addition, following the effectiveness of any Registration Statement pursuant to the Registration Rights Agreement, whether or not required by the rules and regulations of the Commission, EME and the Company shall each maintain its status as a reporting company under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. If at any time either EME or the Company ceases to maintain its status as a reporting company under the Exchange Act (such cessation, a "REPORTING CESSATION"), the interest payable on the Lessor Notes (and consequently, the interest payable on the Certificates) shall increase as provided in Section 4.5(c); PROVIDED, HOWEVER, that no Reporting Cessation shall be deemed to occur if the Commission will not accept the information and reports of EME or the Company to be filed pursuant to the Exchange Act. ARTICLE VI DEFAULT Section 6.1 EVENTS OF DEFAULT. With respect to any Lessor Note, if a Lease Indenture Event of Default under the applicable Lease Indenture (an "EVENT OF DEFAULT") shall occur and be continuing, then, and in each and every case, so long as such Lease Indenture Event of Default shall be continuing, the Pass-Through Trustee may vote all of the Lessor Notes issued under such Lease Indenture held in the Pass-Through Trust, and upon the Direction of the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)), the Pass-Through Trustee shall vote a corresponding majority of such Lessor Notes, in favor of directing the applicable Lease Indenture Trustee to declare the unpaid principal amount of such Lessor Notes then outstanding and accrued interest thereon to be due and payable under, and to the extent permitted by and in accordance with, the provisions of such Lease Indenture. In addition, with respect to any Lessor Note, if a Lease Indenture Event of Default shall have occurred and be continuing under the related Lease Indenture, the Pass-Through Trustee may, and upon the Direction of Holders as provided in Section 6.4 shall, in accordance with such Lease Indenture vote the applicable Lessor Notes issued thereunder held in the Pass-Through Trust to direct the applicable Lease Indenture Trustee regarding the exercise of remedies provided in such Lease Indenture and consistent with the terms thereof. Notwithstanding the foregoing, no Lease Indenture Event of Default under a given Lease Indenture shall give rise to a Lease Indenture Event of Default under any other Lease Indenture. In addition, after an Event of Default shall have occurred and be continuing, the Pass-Through Trustee may in its discretion, and upon the Direction of the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)) shall, by such officer or agent as it may appoint, sell, convey, 23 transfer and deliver all or a portion of such Lessor Note or Lessor Notes issued under a Lease Indenture with respect to which the Event of Default has occurred, without recourse to or warranty by the Pass-Through Trustee or any Certificateholders to any Person. In any such case, the Pass-Through Trustee shall sell, assign, contract to sell or otherwise dispose of and deliver such Lessor Note or Lessor Notes in one or more parcels at public or private sale or sales, at any location or locations at the option of the Pass-Through Trustee, all upon such terms and conditions as it may reasonably deem advisable and at such prices as it may reasonably deem advisable, for cash. The Pass-Through Trustee shall give notice to the Company and the applicable Owner Trust promptly after any such sale. Section 6.2 INCIDENTS OF SALE OF LESSOR NOTES. Upon any sale of all or any part of the Lessor Notes made either under the power of sale given under this Pass-Through Trust Agreement or otherwise for the enforcement of this Pass-Through Trust Agreement, the following shall be applicable: (1) CERTIFICATEHOLDERS AND PASS-THROUGH TRUSTEE MAY PURCHASE LESSOR NOTES. Any Certificateholder, the Pass-Through Trustee in its individual or any other capacity or any other Person may bid for and purchase any of the Lessor Notes and, upon compliance with the terms of sale, may hold, retain, possess and dispose of such Lessor Notes in their or its or his own absolute right without further accountability. (2) RECEIPT OF PASS-THROUGH TRUSTEE SHALL DISCHARGE PURCHASER. The receipt of immediately available funds by the Pass-Through Trustee shall be a sufficient discharge to any purchaser for his purchase money, and, after paying such purchase money and receiving such receipt, such purchaser or his personal representative or assigns shall not be obliged to see to the application of such purchase money, or be in any way answerable for any loss, misapplication or non-application thereof. (3) APPLICATION OF MONEYS RECEIVED UPON SALE. Any moneys collected by the Pass-Through Trustee upon any sale made either under the power of sale given by this Pass-Through Trust Agreement or otherwise for the enforcement of this Pass-Through Trust Agreement, shall be applied as provided in Section 4.2. Section 6.3 JUDICIAL PROCEEDINGS INSTITUTED BY PASS-THROUGH TRUSTEE. (a) PASS-THROUGH TRUSTEE MAY BRING SUIT. If there shall be a failure to make payment of the principal of, premium, if any, or interest on any Lessor Note, or if there shall be any failure to pay Rent (as defined in a Lease) under the Lease related to any Lessor Note when due and payable (and to the extent such payment of Rent is not made under the EME Guarantee), then the Pass-Through Trustee, in its own name, and as trustee of an express trust, as holder of such Lessor Notes, shall be, to the extent permitted by and in accordance with the terms of the applicable Lease Financing Documents, entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on such Lessor Notes or under the applicable Lease and may prosecute any such claim or proceeding to judgment or final decree with respect to the whole amount of any such sums so due and unpaid; SUBJECT, HOWEVER, to the limitations of liability set forth in the Lessor Notes and the applicable Lease Financing Documents. (b) PASS-THROUGH TRUSTEE MAY FILE PROOFS OF CLAIM; APPOINTMENT OF PASS-THROUGH TRUSTEE AS ATTORNEY-IN-FACT IN JUDICIAL PROCEEDINGS. The Pass-Through Trustee in its own name, or as trustee of an express trust, or as attorney-in-fact for the Certificateholders, or in any one or more of such capacities (irrespective of whether distributions on the Certificates shall then be due and payable, or the payment of the principal on any Lessor Notes shall then be due 24 and payable, as therein expressed or by declaration or otherwise and irrespective of whether the Pass-Through Trustee shall have made any demand to the applicable Lease Indenture Trustee for the payment of overdue principal, premium (if any) or interest on any Lessor Notes), shall, subject to the terms of the applicable Lease Financing Documents, be entitled and empowered to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Pass-Through Trustee and of the Certificateholders allowed in any receivership, insolvency, bankruptcy, liquidation, readjustment, reorganization or any other judicial proceedings relative to the Company, any Owner Trust, any Owner Trustee or any Owner Participant, their respective creditors or property. Subject to the terms of the applicable Lease Financing Documents, any receiver, assignee, trustee, liquidator or sequestrator (or similar official) in any such judicial proceeding is hereby authorized by each Certificateholder to make payments in respect of such claim to the Pass-Through Trustee, and in the event that the Pass-Through Trustee shall consent to the making of such payments directly to the Certificateholders, to pay to the Pass-Through Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Pass-Through Trustee, its agents and counsel. Subject to Section 6.4, nothing contained in this Pass-Through Trust Agreement shall be deemed to give to the Pass-Through Trustee any right to accept or consent to any plan of reorganization or otherwise by action of any character in any such proceeding to waive or change in any way any right of any Certificateholder. Section 6.4 CONTROL BY CERTIFICATEHOLDERS. The Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time outstanding (determined as provided in Section 1.4(c)) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Pass-Through Trustee, or exercising any trust or power conferred upon the Pass-Through Trustee, under this Pass-Through Trust Agreement, including any right of the Pass-Through Trustee as holder of the Lessor Notes, PROVIDED that (1) such Direction shall not be in conflict with any rule of law or with this Pass-Through Trust Agreement and would not involve the Pass-Through Trustee in personal liability or expense, (2) the Pass-Through Trustee shall not determine that the action so directed would be unjustly prejudicial to the Certificateholders not taking part in such Direction, (3) the Pass-Through Trustee may take any other action deemed proper by the Pass-Through Trustee which is not inconsistent with such Direction, (4) such Holders shall have offered to the Pass-Through Trustee security or indemnity against the costs, expenses or liabilities which may be incurred thereby, and (5) if a Lease Indenture Event of Default shall have occurred and be continuing, such Direction shall not obligate the Pass-Through Trustee to vote more than a corresponding majority of the applicable Lessor Notes held by the Pass-Through Trust in favor of directing any action by the applicable Lease Indenture Trustee with respect to such Lease Indenture Event of Default. Section 6.5 WAIVER OF DEFAULTS. The Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)) may on behalf of the Certificateholders of all the Certificates waive 25 any Default hereunder and its consequences or may instruct the Pass-Through Trustee to waive any default under a Lease Indenture and its consequences, except a Default (1) in the deposit of any Scheduled Payment or Special Payment under Section 4.1 or in the distribution of any payment under Section 4.2 on the Certificates, or (2) in the payment of the principal of, premium, if any, or interest on any Lessor Notes, or (3) in respect of a covenant or provision hereof which under Article IX hereof cannot be modified or amended without the consent of the Holder of each Outstanding Certificate affected. Upon any such waiver, such Default shall cease to exist with respect to this Pass-Through Trust Agreement, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Pass-Through Trust Agreement and any direction given by the Pass-Through Trustee on behalf of such Holders to the applicable Lease Indenture Trustee shall be annulled with respect thereto; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Upon any such waiver, the Pass-Through Trustee shall vote the Lessor Notes issued under the applicable Lease Indenture to waive the corresponding Lease Indenture Default or Lease Indenture Event of Default. With respect to consents, approvals, waivers and authorizations which under the terms of Article VI of a Lease Indenture may be given by a Lease Indenture Trustee without the necessity of the consent of any of the holders of Lessor Notes, no consent, approval, waiver or authorization shall be required hereunder on the part of the Pass-Through Trustee or the Certificateholders. Section 6.6 UNDERTAKING TO PAY COURT COSTS. All parties to this Pass-Through Trust Agreement, and each Certificateholder by his acceptance of a Certificate, shall be deemed to have agreed that any court may in its discretion require, in any suit, action or proceeding for the enforcement of any right or remedy under this Pass-Through Trust Agreement, or in any suit, action or proceeding against the Pass-Through Trustee for any action taken or omitted by it as Pass-Through Trustee hereunder, the filing by any party litigant in such suit, action or proceeding of an undertaking to pay the costs of such suit, action or proceeding, and that such court may, in its discretion, assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, action or proceeding, having due regard to the merits and good faith of the claims or defenses made by such party litigant it being understood that any such requirement for the Pass-Through Trustee to assume any such costs is subject to the limitations set forth in Section 7.1 hereof; PROVIDED, HOWEVER, that the provisions of this Section shall not apply to (a) any suit, action or proceeding instituted by any Holder, or group of Holders, holding in the aggregate Certificates evidencing Fractional Divided Interests aggregating more than 10% of the Pass-Through Trust, (b) any suit, action or proceeding instituted by any Certificateholder for the enforcement of the distribution of payments pursuant to Section 4.2 hereof on or after the respective due dates expressed herein or (c) any suit, action or proceeding instituted by the Pass-Through Trustee. Section 6.7 RIGHT OF CERTIFICATEHOLDERS TO RECEIVE PAYMENTS NOT TO BE IMPAIRED. Anything in this Pass-Through Trust Agreement to the contrary notwithstanding, the right of any Certificateholder to receive distributions of payments required pursuant to Section 4.2 hereof on the Certificates when due, or to institute suit for the enforcement of any such payment on or after the applicable Distribution Date or Special Distribution Date, shall not be impaired or affected without the consent of such Certificateholder. 26 Section 6.8 CERTIFICATEHOLDERS MAY NOT BRING SUIT EXCEPT UNDER CERTAIN CONDITIONS. A Certificateholder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise with respect to this Pass-Through Trust Agreement, for the appointment of a receiver or for the enforcement of any other remedy under this Pass-Through Trust Agreement, unless: (1) such Certificateholder previously shall have given written notice to the Pass-Through Trustee of a continuing Event of Default; (2) the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)) shall have requested the Pass-Through Trustee in writing to institute such suit, action or proceeding and shall have offered to the Pass-Through Trustee indemnity as provided in Section 7.3(e); (3) the Pass-Through Trustee shall have refused or neglected to institute any such suit, action or proceeding for 60 days after receipt of such notice, request and offer of indemnity; and (4) no Direction inconsistent with such written request has been given to the Pass-Through Trustee during such 60-day period by the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)). It is understood and intended that no one or more of the Certificateholders shall have any right in any manner whatever hereunder or under the Certificates to (i) surrender, impair, waive, affect, disturb or prejudice any property in the Trust Property or the lien of any Lease Indenture on any property subject thereto, or the rights of the Certificateholders or the holders of the Lessor Notes, (ii) obtain or seek to obtain priority over or preference to any other such Holder or (iii) enforce any right under this Pass-Through Trust Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all the Certificateholders subject to the provisions of this Pass-Through Trust Agreement. Section 6.9 REMEDIES CUMULATIVE. Every remedy given hereunder to the Pass-Through Trustee or to any of the Certificateholders shall not be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter given by statute, law, equity or otherwise. ARTICLE VII THE PASS-THROUGH TRUSTEE Section 7.1 CERTAIN DUTIES AND RESPONSIBILITIES. (a) Prior to an Event of Default of which a Responsible Officer of the Pass-Through Trustee has actual knowledge, (1) the Pass-Through Trustee shall not be liable except for the performance of such duties as are specifically set out in this Pass-Through Trust Agreement; and (2) the Pass-Through Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, in the absence of bad 27 faith on the part of the Pass-Through Trustee, upon Officer's Certificates or Opinions of Counsel conforming to the requirements of this Pass-Through Trust Agreement; but the Pass-Through Trustee shall, at any time that the Certificates shall be subject to the Trust Indenture Act, examine the evidence furnished to it pursuant to Section 314 of the Trust Indenture Act to determine whether or not such evidence conforms to the requirements of this Pass-Through Trust Agreement; PROVIDED, HOWEVER, that the Pass-Through Trustee shall not be responsible for the accuracy of content of such evidence. (b) In case an Event of Default has occurred and is continuing, the Pass-Through Trustee shall exercise each of the rights and powers vested in it by this Pass-Through Trust Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Pass-Through Trust Agreement shall be construed to relieve the Pass-Through Trustee from liability for its own grossly negligent action or its own grossly negligent failure to act, or its own willful misconduct, except that: (1) this subsection shall not be construed to limit the effect of subsection (a) of this Section; (2) the Pass-Through Trustee shall not be liable in its individual capacity for any error of judgment made in good faith by a Responsible Officer of the Pass-Through Trustee, unless it shall be proved that the Pass-Through Trustee was grossly negligent in ascertaining the pertinent facts; and (3) the Pass-Through Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the Direction of the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)) relating to the time, method and place of conducting any proceeding for any remedy available to the Pass-Through Trustee, or exercising any trust or power conferred upon the Pass-Through Trustee, under this Pass-Through Trust Agreement. (d) Whether or not herein expressly so provided, every provision of this Pass-Through Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Pass-Through Trustee shall be subject to the provisions of this Section. Section 7.2 NOTICE OF DEFAULTS. The Pass-Through Trustee shall give to the Certificateholders, at any time that the Certificates shall be subject to the Trust Indenture Act, in the manner and to the extent required by Section 313(c) of the Trust Indenture Act, and to the Company, any Owner Trusts and any Lease Indenture Trustees in accordance with Section 12.3, notice of all Defaults actually known to a Responsible Officer of the Pass-Through Trustee within 90 days after the occurrence thereof, PROVIDED, HOWEVER, that, except in the case of a Default in the payment of the principal of, premium, if any, or interest on any Lessor Note, the Pass-Through Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Pass-Through Trustee in good faith determine that the withholding of such notice is in the interests of the Certificateholders. Section 7.3 CERTAIN RIGHTS OF PASS-THROUGH TRUSTEE. Subject to the provisions of Section 315 of the Trust Indenture Act, and except as otherwise provided in Section 7.1: (a) the Pass-Through Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any Act, Direction, resolution, certificate, statement, 28 instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Request; (c) whenever in the administration of this Pass-Through Trust Agreement the Pass-Through Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Pass-Through Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of the Company, an Owner Trust or a Lease Indenture Trustee; (d) the Pass-Through Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Pass-Through Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Pass-Through Trust Agreement at the request or direction of any of the Certificateholders pursuant to this Pass-Through Trust Agreement unless such Certificateholders shall have offered to the Pass-Through Trustee reasonable security or indemnity against the cost, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Pass-Through Trustee shall not be bound to make any investigation into the facts or matters stated in any Act, Direction, resolution, certificate, statement, instrument, opinion, report, notice, request direction, consent, order, bond, debenture or other paper or document; (g) the Pass-Through Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Pass-Through Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it hereunder with due care; (h) the Pass-Through Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion of rights or powers conferred upon it by this Agreement; (i) the right of the Pass-Through Trustee to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and the Pass-Through Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of such act; (j) the Pass-Through Trustee shall not be required to give any bond or surety in respect of the execution of the trust fund created hereby or the powers granted hereunder or expend any of its own funds in any action brought pursuant to this Agreement; and (k) the Pass-Through Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder or to record this Agreement. Section 7.4 NOT RESPONSIBLE FOR RECITALS; ISSUANCE OF CERTIFICATES. The recitals contained herein and in the Certificates, except the certificates of authentication, shall not be taken as the statements of the Pass-Through Trustee, and the Pass-Through Trustee assumes no responsibility for their correctness. The Pass-Through Trustee makes no representations as to the 29 validity or sufficiency of this Pass-Through Trust Agreement, the Lessor Notes, the applicable Lease Financing Documents or the Certificates, or the Collateral securing the Lessor Notes, except that the Pass-Through Trustee hereby represents and warrants that this Pass-Through Trust Agreement and the Registration Rights Agreement have been, and each Certificate will be, executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 7.5 MAY HOLD CERTIFICATES. The Pass-Through Trustee, any Paying Agent, Registrar or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of Certificates and subject to Sections 310(b) and 311 of the Trust Indenture Act, if applicable, may otherwise deal with the Company, any Owner Trust, any Owner Participant and any Lease Indenture Trustee with the same rights it would have if it were not the Pass-Through Trustee, Paying Agent, Registrar or such other agent, subject to Section 7.8 in the case of the Pass-Through Trustee. Section 7.6 MONEY HELD IN PASS-THROUGH TRUST. Money held by the Pass-Through Trustee or the Paying Agent in trust hereunder need not be segregated from other funds except to the extent required herein or by law and neither the Pass-Through Trustee nor the Paying Agent shall have any liability for interest upon any such moneys except as provided for herein. Section 7.7 COMPENSATION, REIMBURSEMENT AND INDEMNIFICATION. The Company agrees: (1) to pay, or cause to be paid, to the Pass-Through Trustee from time to time the compensation separately agreed to by the Pass-Through Trustee and the Company for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (2) except as otherwise expressly provided herein, to reimburse, or cause to be reimbursed, the Pass-Through Trustee upon its request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Pass-Through Trustee in accordance with any provision of this Pass-Through Trust Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its gross negligence, willful misconduct or bad faith. In addition, the Pass-Through Trustee shall be entitled to reimbursement from, and shall have a lien prior to the Certificates upon, all property and funds held or collected by the Pass-Through Trustee in its capacity as Pass-Through Trustee for any tax incurred without gross negligence, bad faith or willful misconduct, on its part, arising out of or in connection with the acceptance or administration of this Pass-Through Trust (other than any tax attributable to the Pass-Through Trustee's compensation for serving as such), including any costs and expenses incurred in contesting the imposition of any such tax. If the Pass-Through Trustee reimburses itself for any such tax, it will within 30 days mail a brief report setting forth the circumstances thereof to all Certificateholders as their names and addresses appear in the Register. Section 7.8 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Pass-Through Trustee hereunder which (a) shall be, at any time that the Certificates shall be subject to the Trust Indenture Act, a Person eligible to act as a trustee under Section 310(a) of the Trust Indenture Act and (b) shall be a corporation organized and doing business under the laws of the United States of America or of any state, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $100,000,000, and subject to 30 supervision or examination by Federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Pass-Through Trustee shall cease to be eligible in accordance with the provisions of clause (a) of this Section at a time when it is required to be so qualified, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 7.9 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Pass-Through Trustee and no appointment of a successor Pass-Through Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Pass-Through Trustee under Section 7.10. (b) The Pass-Through Trustee may resign at any time by giving written notice thereof to the Company, the Authorized Agents, the Owner Trusts, the Owner Participants and the Lease Indenture Trustees. If an instrument of acceptance by a successor Pass-Through Trustee shall not have been delivered to the Company, the Owner Trusts, the Owner Participants and the Lease Indenture Trustees within 30 days after the giving of such notice of resignation, the resigning Pass-Through Trustee may petition any court of competent jurisdiction for the appointment of a successor Pass-Through Trustee. (c) The Pass-Through Trustee may be removed at any time by Act of the Holders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Pass-Through Trust delivered to the Pass-Through Trustee and to the Company, the Owner Trusts and the Lease Indenture Trustees. (d) If at any time: (1) the Pass-Through Trustee fails to, at any time that the Certificates shall be subject to the Trust Indenture Act, comply with the requirements of Section 310 of the Trust Indenture Act after written request for such compliance by a Certificateholder that has been a bona fide Certificateholder for at least six months; or (2) the Pass-Through Trustee shall cease to be eligible under Section 7.8 and shall fail to resign after written request therefor by the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) or by any such Certificateholder; or (3) the Pass-Through Trustee shall become incapable of acting or shall be adjudged bankrupt or insolvent or a receiver of the Pass-Through Trustee or of its property shall be appointed or any public officer shall take charge or control of the Pass-Through Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any case, (i) the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) may remove the Pass-Through Trustee or (ii) subject to Section 6.6, any Certificateholder who has been a bona fide Holder of a Certificate for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Pass-Through Trustee and the appointment of a successor Pass-Through Trustee. (e) If a Responsible Officer of the Pass-Through Trustee shall obtain Actual Knowledge of an Avoidable Tax (as hereinafter defined) which has been or is likely to be asserted, the Pass-Through Trustee shall promptly notify the Company and the Owner Trust 31 thereof and shall, within 30 days of such notification, resign hereunder unless within such 30-day period the Pass-Through Trustee shall have received notice that the Company or the Owner Trusts have agreed to pay such tax. The Company shall promptly appoint a successor Pass-Through Trustee in a jurisdiction where there are no Avoidable Taxes. As used herein an Avoidable Tax means a state or local tax: (i) upon (w) the Pass-Through Trust, (x) the Trust Property, (y) Holders of the Certificates or (z) the Pass-Through Trustee for which the Pass-Through Trustee is entitled to seek reimbursement from the Trust Property, and (ii) that would be avoided if the Pass-Through Trustee were located in another state, or jurisdiction within a state, within the United States. A tax shall not be an Avoidable Tax if the Company or the Owner Trusts shall agree to pay, and shall pay, such tax. (f) If the Pass-Through Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Pass-Through Trustee for any cause, the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) shall promptly appoint a successor Pass-Through Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Pass-Through Trustee shall be appointed by Act of the Holders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Pass-Through Trust, delivered to the Company, the Owner Trusts, the Owner Participants, the Lease Indenture Trustees and the retiring Pass-Through Trustee, the successor Pass-Through Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Pass-Through Trustee and supersede the successor Pass-Through Trustee appointed as provided above. If no successor Pass-Through Trustee shall have been so appointed as provided above and accepted appointment in the manner hereinafter provided, any Certificateholder who has been a bona fide Holder of a Certificate for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Pass-Through Trustee. (g) The successor Pass-Through Trustee shall give notice of the resignation and removal of the Pass-Through Trustee and appointment of the successor Pass-Through Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Certificates as their names and addresses appear in the Register. Each notice shall include the name of such successor trustee and the address of its Corporate Trust Office. Section 7.10 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor Pass-Through Trustee appointed hereunder shall execute, acknowledge and deliver to the Company, the Owner Trusts and to the retiring Pass-Through Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Pass-Through Trustee shall become effective and such successor Pass-Through Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Pass-Through Trustee; but, on request of the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) to the successor Pass-Through Trustee, such retiring Pass-Through Trustee shall execute and deliver an instrument transferring to such successor Pass-Through Trustee all the rights, powers and trusts of the retiring Pass-Through Trustee and shall duly assign, transfer and deliver to such successor Pass-Through Trustee all property and money held by such retiring Pass-Through Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 7.7. Upon request of any such successor Pass-Through Trustee, the Company, the Owner Trusts, the retiring Pass-Through Trustee and such successor Pass-Through Trustee shall execute and deliver any and all instruments containing such 32 provisions as shall be necessary or desirable to transfer and confirm to, and for more fully and certainly vesting in, such successor Pass-Through Trustee all such rights, powers and trusts. No successor Pass-Through Trustee shall accept its appointment unless at the time of such acceptance such successor Pass-Through Trustee shall be qualified and eligible under this Article. Section 7.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Pass-Through Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Pass-Through Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Pass-Through Trustee, shall be the successor of the Pass-Through Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Certificates shall have been authenticated, but not delivered, by the Pass-Through Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Pass-Through Trustee may adopt such authentication and deliver the Certificates so authenticated with the same effect as if such successor Pass-Through Trustee had itself authenticated such Certificates. Section 7.12 MAINTENANCE OF AGENCIES. (a) There shall at all times be maintained in the Borough of Manhattan, the City of New York, an office or agency where Certificates may be presented or surrendered for registration of transfer or for exchange, and for payment thereof and where notices and demands to or upon the Pass-Through Trustee in respect of the Certificates or of this Pass-Through Trust Agreement may be served. Such office or agency shall be initially at 114 West 47th Street, New York, New York 10036. Written notice of the location of each such other office or agency and of any change of location thereof shall be given by the Pass-Through Trustee to the Company, the Owner Trusts, the Owner Participants, the Lease Indenture Trustees and the Certificateholders. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Pass-Through Trustee. (b) There shall at all times be a Registrar and a Paying Agent hereunder. Each such Authorized Agent shall be a bank or trust company, shall be a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $100,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by Federal or state authorities. The Pass-Through Trustee shall initially be the Paying Agent and, as provided in Section 3.4, Registrar hereunder. Each Registrar shall furnish to the Pass-Through Trustee, at stated intervals of not more than six months, and at such other times as the Pass-Through Trustee may request in writing, a copy of the Register. (c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor corporation. 33 (d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Pass-Through Trustee, the Company, the Owner Trusts, the Owner Participants and the Lease Indenture Trustees. The Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) may, and at the request of the Pass-Through Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Pass-Through Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section (when, in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) shall promptly appoint one or more qualified successor Authorized Agents reasonably satisfactory to the Pass-Through Trustee, to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section. The Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) shall give written notice of any such appointment made by it to the Pass-Through Trustee, the Company, the Owner Trusts and the Lease Indenture Trustees; and in each case the Pass-Through Trustee shall mail notice of such appointment to all Holders as their names and addresses appear on the Register. (e) The Company agrees to pay, or cause to be paid, from time to time to each Authorized Agent the compensation as set forth in the schedule agreed to by each Authorized Agent and the Company for its services and to reimburse it for its reasonable expenses. Section 7.13 MONEY FOR CERTIFICATE PAYMENTS TO BE HELD IN TRUST. All moneys deposited with any Paying Agent for the purpose of any payment on Certificates shall be deposited and held in trust for the benefit of the Holders of the Certificates entitled to such payment, subject to the provisions of this Section. Moneys so deposited and held in trust shall constitute a separate trust fund for the benefit of the Holders of the Certificates with respect to which such money was deposited. The Pass-Through Trustee will cause each Paying Agent other than the Pass-Through Trustee to execute and deliver to it an instrument in which such Paying Agent shall agree with the Pass-Through Trustee, subject to the provisions of this Section, that such Paying Agent will (1) hold all sums held by it for payments on Certificates in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Pass-Through Trustee notice in writing of any default by any obligor upon the Certificates in the making of any such payment; and (3) at any time during the continuance of any such default, upon the written request of the Pass-Through Trustee, forthwith pay to the Pass-Through Trustee all sums so held in trust by such Paying Agent. The Pass-Through Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Pass-Through Trust Agreement or for any other purpose, direct any Paying Agent to pay to the Pass-Through Trustee all sums held in trust by such Paying Agent, such sums to be held by the Pass-Through Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Pass-Through Trustee, such Paying Agent shall be released from all further liability with respect to such money. 34 Section 7.14 REGISTRATION OF LESSOR NOTES IN PASS-THROUGH TRUSTEE'S NAME. The Pass-Through Trustee agrees that all Lessor Notes and Permitted Government Investments, if any, shall be issued in the name of the Pass-Through Trustee or its nominee and held by the Pass-Through Trustee, or, if not so held, the Pass-Through Trustee or its nominee shall be reflected as the owner of such Lessor Notes or Permitted Government Investments, as the case may be, in the register of the issuer of such Lessor Notes or Permitted Government Investments under the applicable provisions of the Uniform Commercial Code in effect where the Pass-Through Trustee holds such Lessor Notes or Permitted Government Investments, or other applicable law then in effect. Section 7.15 WITHHOLDING TAXES; INFORMATION REPORTING. The Pass-Through Trustee, as trustee of a grantor trust, shall exclude and withhold from each distribution of principal, premium, if any, and interest and other amounts due hereunder or under the Certificates any and all withholding taxes applicable thereto as required by law. The Pass-Through Trustee agrees (i) to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Certificates, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Holders of the Certificates, (ii) to file any necessary withholding tax returns or statements when due, and (iii) as promptly as possible after the payment thereof, to deliver to each Holder of a Certificate appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Holders may reasonably request from time to time. The Pass-Through Trustee agrees to file any other information reports as it may be required to file under United States law. Any amounts withheld and paid to a relevant taxing authority pursuant to this Section 7.15 shall be deemed to have been paid to the related Certificateholders for all purposes under the Operative Documents. Section 7.16 PASS-THROUGH TRUSTEE'S LIENS. The Pass-Through Trustee, in its individual capacity, agrees that it will at its own cost and expense promptly take any action as may be necessary to duly discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance, security interest or claim on or with respect to the Trust Property which is either (i) attributable to the Pass-Through Trustee in its individual capacity and which is unrelated to the transactions contemplated by this Pass-Through Trust Agreement or any other applicable Lease Financing Document, or (ii) which is attributable to the Pass-Through Trustee as trustee hereunder or in its individual capacity and which arise out of acts or omissions which are prohibited by this Pass-Through Trust Agreement. Section 7.17 PREFERENTIAL COLLECTION OF CLAIMS. The Pass-Through Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. If the Pass-Through Trustee shall resign or be removed as Pass-Through Trustee, it shall be subject to Section 311(a) of the Trust Indenture Act to the extent provided therein. ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS Section 8.1 THE COMPANY TO FURNISH PASS-THROUGH TRUSTEE WITH NAMES AND ADDRESSES OF CERTIFICATEHOLDERS. The Company will furnish to the Pass-Through Trustee within 15 days after each Record Date with respect to a Scheduled Payment, and at such other times as 35 the Pass-Through Trustee may request in writing, a list, in such form as the Pass-Through Trustee may reasonably require, of all information in the possession or control of the Company as to the names and addresses of the Holders of Certificates, in each case as of a date not more than 15 days prior to the time such list is furnished; PROVIDED, HOWEVER, that so long as the Pass-Through Trustee is the sole Registrar, no such list need be furnished; and PROVIDED, FURTHER, HOWEVER, that no such list need be furnished for so long as a copy of the Register is being furnished to the Pass-Through Trustee pursuant to Section 7.12(b). Section 8.2 PRESERVATION OF INFORMATION. The Pass-Through Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders of Certificates contained in the most recent list furnished to the Pass-Through Trustee as provided in Section 7.12(b) or Section 8.1, as the case may be, and the names and addresses of Holders of Certificates received by the Pass-Through Trustee in its capacity as Registrar, if so acting. The Pass-Through Trustee may destroy any list furnished to it as provided in Section 7.12(b) or Section 8.1, as the case may be, upon receipt of a new list so furnished. Section 8.3 RECORDS BY THE COMPANY. The Company shall, at any time that the Certificates shall be subject to the Trust Indenture Act, comply with Section 314 of the Trust Indenture Act and shall file, furnish and deliver the reports, information, documents, certificates and opinions required thereunder, and, at any time that the Certificates shall be subject to the Trust Indenture Act, acknowledges and agrees that, for purposes of Section 314 of the Trust Indenture Act, the Company shall be considered to be the "obligor" upon the Certificates. Without limiting the generality of the foregoing, at any time that the Certificates shall be subject to the Trust Indenture Act, the Company shall deliver to the Pass-Through Trustee the annual certificate required under clause (4) of Section 314(a) of the Trust Indenture Act within 120 days following the end of each fiscal year of the Company ending after the date hereof. The provisions of this Section shall not be construed to impose any obligation or liability on the Company to pay any of the principal, premium, if any, or interest in respect of the Lessor Notes or the Certificates. Section 8.4 REPORTS BY THE PASS-THROUGH TRUSTEE. On or before each May 15, the Pass-Through Trustee shall, at any time that the Certificates shall be subject to the Trust Indenture Act, transmit, in the manner and to the extent required by Section 313(c) of the Trust Indenture Act, any report required by Section 313(a) of the Trust Indenture Act to be transmitted by the Pass-Through Trustee to the Certificateholders. ARTICLE IX SUPPLEMENTAL TRUST AGREEMENTS Section 9.1 SUPPLEMENTAL TRUST AGREEMENT WITHOUT CONSENT OF CERTIFICATEHOLDER. Without the consent of the Holder of any Certificates, the Company may, and the Pass-Through Trustee, at the Company's direction (subject to Section 9.3) shall, at any time and from time to time enter into one or more agreements supplemental hereto or, if applicable, to the Registration Rights Agreement, in form satisfactory to the Pass-Through Trustee, for any of the following purposes: (1) to evidence the succession of another corporation to the Company and the assumption by any such successor of the obligations of the Company herein contained or of the Company's obligations under the Registration Rights Agreement; 36 (2) to add to the covenants of the Company, for the protection of the Holders of the Certificates in this Agreement or the Registration Rights Agreement; (3) to surrender any right or power herein conferred upon the Company in this Agreement or in the Registration Rights Agreement; (4) to cure any ambiguity, to correct or supplement any provision in this Agreement or in the Registration Rights Agreement which may be defective or inconsistent with any other provision herein or to make any other provisions with respect to matters or questions arising under this Pass-Through Trust Agreement; PROVIDED that any such action will not adversely affect the interests of the Holders of the Certificates; (5) to correct or amplify the description of property that constitutes Trust Property or the conveyance of such property to the Pass-Through Trustee; (6) to evidence and provide for a successor Pass-Through Trustee; (7) at any time that the Certificates shall be subject to the Trust Indenture Act, to modify, eliminate or add to the provisions of this Pass-Through Trust Agreement to the extent as shall be necessary to qualify this Pass-Through Trust Agreement (including any supplemental agreement) under the Trust Indenture Act or under any similar Federal statute hereafter enacted, or to add to this Pass-Through Trust Agreement such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this instrument was executed or any corresponding provision in any similar Federal statute hereafter enacted; the interests of the Certificateholders; (8) to modify, amend or supplement any provision herein to reflect changes relating to (i) the conversion of an Owner Trust from a Delaware business trust to a Delaware limited liability company or (ii) the assumption and substitution of any Lessor Note pursuant to Section 2.10 or Section 2.12 of a Lease Indenture; (9) to add, eliminate, or change any provision under this Pass-Through Trust Agreement that will not adversely affect the interests of the Certificateholders; (10) to comply with any requirement of the Commission, any applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed, any regulatory body or the Registration Rights Agreement to effectuate the Exchange Offer; or (11) to modify or eliminate provisions relating to the transfer or exchange of Exchange Certificates or the Initial Certificates upon consummation of the Exchange Offer (as defined in the Registration Rights Agreement) or effectiveness of the Shelf Registration Statement or the Exchange Offer Registration Statement; PROVIDED that in each case such supplemental agreement does not cause the Pass-Through Trust to become taxable as an "association" within the meaning of Treasury Regulation Section 301.7701-2 or to be taxable as other than a "trust" within the meaning of Treasury Regulation 301.7701. Section 9.2 SUPPLEMENTAL TRUST AGREEMENTS WITH CONSENT OF CERTIFICATEHOLDERS. With the consent of the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)), by Act of said Holders delivered to the Company and the Pass-Through Trustee, the 37 Company may (with the consent of the Owner Trusts, such consent not to be unreasonably withheld), and the Pass-Through Trustee (subject to Section 9.3) shall, enter into an agreement or agreements supplemental hereto to this Agreement or the Registration Rights Agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Pass-Through Trust Agreement or the Registration Rights Agreement or of modifying in any manner the rights and obligations of the Holders of the Certificates under this Pass-Through Trust Agreement or the Registration Rights Agreement; PROVIDED, HOWEVER, that no such supplemental agreement shall, without the consent of the Holder of each Outstanding Certificate affected thereby: (1) reduce in any manner the amount of, or delay the timing of, any receipt by the Pass-Through Trustee of payments on the Lessor Notes held in the Pass-Through Trust, or distributions that are required to be made herein on any Certificate of such Pass-Through Trust, or change any date of payment on any such Certificate, or change the place of payment where, or the coin or currency in which, any such Certificate is payable, or impair the right of any Holder of any such Certificate to institute suit for the enforcement of any such payment or distribution on or after the Distribution Date or Special Distribution Date applicable thereto; or (2) except as provided in this Pass-Through Trust Agreement, permit the disposition of any Lessor Note in the Trust Property, or permit the creation of any lien on the Trust Property, or otherwise deprive any Certificateholder of the benefit of the ownership of the Lessor Notes held in the Pass-Through Trust or the lien of the related Lease Indenture; or (3) reduce the percentage of the aggregate Fractional Undivided Interests which is required to approve any such supplemental agreement, or reduce such percentage required for any waiver provided for in this Pass-Through Trust Agreement; or (4) cause the Pass-Through Trust to become taxable as an "association", within the meaning of Treasury Regulation Section 301.7701-2 or to be taxable as other than a "fixed investment trust" within the meaning of Treasury Regulation 301.7701. It shall not be necessary for any Act of Certificateholders under this Section to approve the particular form of any proposed supplemental agreement, but it shall be sufficient if such Act shall approve the substance thereof. Section 9.3 DOCUMENTS AFFECTING IMMUNITY OR INDEMNITY. If in the reasonable belief of the Pass-Through Trustee any document required to be executed by it pursuant to the terms of Section 9.1 or 9.2 affects any interest, right, duty, immunity or indemnity in favor of the Pass-Through Trustee under this Pass-Through Trust Agreement, the Pass-Through Trustee may in its discretion decline to execute such document. Section 9.4 EXECUTION OF SUPPLEMENTAL TRUST AGREEMENTS. In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article or the modifications thereby of the trusts created by this Pass-Through Trust Agreement, the Pass-Through Trustee shall be entitled to receive, and (subject to Section 7.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Pass-Through Trust Agreement. Section 9.5 EFFECT OF SUPPLEMENTAL TRUST AGREEMENTS. Upon the execution of any supplemental agreement under this Article, this Pass-Through Trust Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this 38 Pass-Through Trust Agreement for all purposes; and every Holder of Certificates theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.6 REFERENCE IN CERTIFICATES TO SUPPLEMENTAL TRUST AGREEMENTS. Certificates authenticated and delivered after the execution of any supplemental agreement pursuant to this Article may bear a notation in form approved by the Pass-Through Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon Outstanding Certificates after proper presentation and demand. ARTICLE X AMENDMENTS TO LEASE INDENTURES AND OTHER LEASE FINANCING DOCUMENTS Section 10.1 AMENDMENTS AND SUPPLEMENTS TO LEASE INDENTURE AND OTHER LEASE FINANCING DOCUMENTS. In the event that the Pass-Through Trustee, as holder of any Lessor Note in trust for the benefit of the Certificateholders, receives a request for a consent to any amendment, modification, waiver or supplement under any Lease Indenture or other Lessor Note Document that requires the consent of the holder of such Lessor Note, the Pass-Through Trustee shall forthwith send a notice of such proposed amendment, modification, waiver or supplement to each Certificateholder registered on the Register as of such date. Any such notice shall describe the proposed amendment, modification, waiver or supplement (or attach a copy thereof). The Pass-Through Trustee shall request from the Certificateholders Directions as to (i) whether or not to direct the applicable Lease Indenture Trustee to take or refrain from taking any action which a holder of such Lessor Note has the option to direct, (ii) whether or not to give or execute any waivers, consents, amendments, modifications or supplements as a holder of such Lessor Note and (iii) how to vote any Lessor Note if a vote has been called for with respect thereto. Any such request shall specify a date by which Certificateholders are requested to respond. Provided such a request for Certificateholder Direction shall have been made, in directing any action or casting any vote or giving any consent as the holder of any Lessor Note, the Pass-Through Trustee shall vote or consent with respect to such Lessor Note in the same proportion as the Certificates were actually voted by Acts of Holders delivered to the Pass-Through Trustee prior to two Business Days before the Pass-Through Trustee directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but subject to Section 6.4, in the case that an Event of Default hereunder shall have occurred and be continuing, the Pass-Through Trustee may, in its own discretion and at its own direction, consent and notify the Lease Indenture Trustees of such consent to any amendment, modification, waiver or supplement under the applicable Lease Indenture or other Lessor Note Document. With respect to consents, approvals, waivers and authorizations which under the terms of Section 6 of a Lease Indenture may be given by the applicable Lease Indenture Trustee without the necessity of the consent of any of the holders of Lessor Notes, no consent, approval, waiver or authorization shall be required hereunder on the part of the Pass-Through Trustee or the Certificateholders. 39 ARTICLE XI TERMINATION OF PASS-THROUGH TRUST Section 11.1 TERMINATION OF THE PASS-THROUGH TRUST. The respective obligations and responsibilities of the Company and the Pass-Through Trustee created hereby and the Pass-Through Trust created hereby shall terminate upon the distribution to all Certificateholders of all amounts required to be distributed to them pursuant to this Pass-Through Trust Agreement and the disposition of all property held as part of the Trust Property; PROVIDED, HOWEVER, that if and to the extent that any of the options, rights and privileges granted under this Pass-Through Trust Agreement, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interest in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Pass-Through Trust Agreement, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Pass-Through Trust Agreement of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H. W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Pass-Through Trust Agreement, whichever of (a) or (b) is shorter. Notice of any termination, specifying the Distribution Date (or Special Distribution Date, as the case may be) upon which the Certificateholders may surrender their Certificates to the Pass-Through Trustee for payment of the final distribution and cancellation (at maturity, redemption or otherwise), shall be mailed promptly by the Pass-Through Trustee to Certificateholders not earlier than the 60th day and not later than the 20th day next preceding such final distribution specifying (A) the Distribution Date (or Special Distribution Date, as the case may be) upon which final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency of the Pass-Through Trustee therein specified, (B) the amount of any such final payment, and (C) that the Record Date otherwise applicable to such Distribution Date (or Special Distribution Date, as the case may be) is not applicable, payments being made only upon presentation and surrender of the Certificates at the office or agency of the Pass-Through Trustee therein specified. The Pass-Through Trustee shall give such notice to the Registrar at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates, the Pass-Through Trustee shall cause to be distributed to Certificateholders amounts distributable on such Distribution Date or Special Distribution Date, as the case may be, pursuant to Section 4.2. In the event that all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above mentioned written notice, the Pass-Through Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. In the event that any money held by the Pass-Through Trustee for the payment of distributions on the Certificates shall remain unclaimed for two years (or such lesser time as the Pass-Through Trustee shall be satisfied, after sixty days' notice from the Company, is one month 40 prior to the escheat period provided under applicable law) after the final distribution date with respect thereto, the Pass-Through Trustee shall pay to the Lease Indenture Trustees the appropriate amount of money relating to such Lease Indenture Trustees and shall give written notice thereof to the Owner Trusts, the Owner Participants and the Company. ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.1 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. The death or incapacity of any Certificateholder shall not operate to terminate this Pass-Through Trust Agreement or the Pass-Through Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Pass-Through Trust, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. Section 12.2 CERTIFICATES NONASSESSABLE AND FULLY PAID. Certificateholders shall not be personally liable for obligations of the Pass-Through Trust, the Fractional Undivided Interests represented by the Certificates shall be nonassessable for any losses or expenses of the Pass-Through Trust or for any reason whatsoever, and Certificates upon authentication thereof by the Pass-Through Trustee pursuant to Section 3.2 are and shall be deemed fully paid. No Certificateholder shall have any right (except as expressly provided herein) to vote or in any manner otherwise control the operation and management of the Trust Property, the Pass-Through Trust established hereunder, or the obligations of the parties hereto, nor shall anything set forth herein, or contained in the terms of the Certificates, be construed so as to constitute the Certificateholders from time to time as partners or members of an association. Section 12.3 NOTICE. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to each party at the address for such party provided in Section 18.5 of the related Participation Agreement or at such other address as such party may from time to time designate by written notice to each of the other parties hereto. A copy of all notices provided for herein shall be sent by the party giving such notice to each of the other parties hereto. Section 12.4 GOVERNING LAW. THIS PASS-THROUGH TRUST AGREEMENT, THE CERTIFICATES AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 12.5 SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Pass-Through Trust Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Pass-Through Trust Agreement and shall in no way affect the validity or enforceability of the other provisions 41 of this Pass-Through Trust Agreement or the Pass-Through Trust, or of the Certificates or the rights of the Holders thereof. Section 12.6. TRUST INDENTURE ACT CONTROLS. Upon the declaration by the Commission of the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, this Agreement shall become subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions. From and after the declaration by the Commission of the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, if any provision of this Agreement limits, qualifies or conflicts with another provision which is required to be included in this Agreement by the Trust Indenture Act, the required provision shall control. Section 12.7 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article, Section and subsection headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 12.8 SUCCESSORS AND ASSIGNS. All covenants, agreements, representations and warranties in this Pass-Through Trust Agreement by the Pass-Through Trustee and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. Section 12.9 BENEFITS OF PASS-THROUGH TRUST AGREEMENT. Nothing in this Pass-Through Trust Agreement or in the Certificates, express or implied, shall give to any person, other than the Company, the Pass-Through Trustee, the Owner Trusts, the Owner Participants and the Lease Indenture Trustees, and their respective successors, and the Holders of Certificates, any benefit or any legal or equitable right, remedy or claim under this Pass-Through Trust Agreement. Section 12.10 LEGAL HOLIDAYS. In any case where any Distribution Date or Special Distribution Date relating to any Certificate shall not be a Business Day, then (notwithstanding any other provision of this Pass-Through Trust Agreement) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Distribution Date or Special Distribution Date and (provided that such payment is made on such next succeeding Business Day) no interest shall accrue during the intervening period. Section 12.11 COUNTERPARTS. For the purpose of facilitating the execution of this Pass-Through Trust Agreement and for other purposes, this Pass-Through Trust Agreement may be executed simultaneously in any number of counterparts and by the separate parties hereto on separate counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. 42 IN WITNESS WHEREOF, the Company and the Pass-Through Trustee have caused this Pass-Through Trust Agreement to be duly executed by their respective officers and their respective seals, duly attested, to be hereunto affixed, all as of the day and year first above written. MIDWEST GENERATION, LLC By: /s/ Gary Garcia ------------------------------ Name: Gary Garcia Title: Vice President & Treasurer UNITED STATES TRUST COMPANY OF NEW YORK, As Pass-Through Trustee By: /s/ Christopher J. Grell ------------------------------ Name: Christopher J. Grell Title: Assistant Vice President 43 SCHEDULE 1 PARTICIPATION AGREEMENT The Participation Agreements providing for the Lease Transactions to be partially financed by the purchase of Lessor Notes hereunder, and the parties thereto, are as follows: Participation Agreement (T1) dated as of August 17, 2000, among Midwest Generation, LLC, a limited liability company organized under the law of the State of Delaware, Powerton Trust I, a Delaware business trust created for the benefit of Powerton Generation I LLC, Wilmington Trust Company, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Trust Agreement, Powerton Generation I LLC, a Delaware limited liability company, Edison Mission Energy, a corporation organized under the laws of the State of California, United States Trust Company of New York not in its individual capacity, except as expressly provided therein, but solely as trustee under a Lease Indenture and United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under each of the Pass-Through Trust Agreements. Participation Agreement (T2) dated as of August 17, 2000, among Midwest Generation, LLC, a limited liability company organized under the law of the State of Delaware, Powerton Trust II, a Delaware business trust created for the benefit of Powerton Generation II LLC, Wilmington Trust Company, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Trust Agreement, Powerton Generation II LLC, a Delaware limited liability company, Edison Mission Energy, a corporation organized under the laws of the State of California, United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Lease Indenture and United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under each of the Pass-Through Trust Agreements. Participation Agreement (T1) dated as of August 17, 2000, among Midwest Generation, LLC, a limited liability company organized under the law of the State of Delaware, Joliet Trust I, a Delaware business trust created for the benefit of Joliet Generation I LLC, Wilmington Trust Company, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Trust Agreement, Joliet Generation I LLC, a Delaware limited liability company, Edison Mission Energy, a corporation organized under the laws of the State of California, United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Lease Indenture and United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under each of the Pass-Through Trust Agreements. Participation Agreement (T2) dated as of August 17, 2000, among Midwest Generation, LLC, a limited liability company organized under the law of the State of Delaware, Joliet Trust II, a Delaware business trust created for the benefit of Joliet Generation II LLC, Wilmington Trust Company, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Trust Agreement, Joliet Generation II LLC, a Delaware limited liability company, Edison Mission Energy, a corporation organized under the laws of the State of California, United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, 1 but solely as trustee under a Lease Indenture and United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under each of the Pass-Through Trust Agreements. 2 EXHIBIT A FORM OF CERTIFICATE [Legend if Certificate is a Restricted Certificate] [non-registration legend] THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND UNDER APPLICABLE STATE SECURITIES LAWS, AND THIS CERTIFICATE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS CERTIFICATE IS HEREBY NOTIFIED THAT THE SELLER OF THIS CERTIFICATE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS CERTIFICATE AGREES FOR THE BENEFIT OF MIDWEST GENERATION, LLC (THE "COMPANY") THAT (A) THIS CERTIFICATE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS FOR RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS CERTIFICATE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. [THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.] [registration rights legend] THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE HEREOF, WILL BE DEEMED TO HAVE AGREED TO BE BOUND BY THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT DATED AUGUST 17, 2000, AMONG THE COMPANY, EDISON MISSION ENERGY AND THE INITIAL PURCHASERS OF THIS CERTIFICATE. A-1 MIDWEST GENERATION SERIES A PASS-THROUGH TRUST 8.30% Pass-Through Certificate, Series A CUSIP: ISIN: Final Distribution Date: July 2, 2009 evidencing a fractional undivided interest in a trust, the property of which includes certain notes secured by certain property leased to Midwest Generation, LLC Certificate No. ______ $ ____________ Fractional Undivided Interest THIS CERTIFIES THAT ___________________, for value received, is the registered owner of a $ ___________________ (___________________ dollars) Fractional Undivided Interest in the Midwest Generation Series A Pass-Through Trust (the "Pass-Through Trust") created pursuant to a Pass-Through Trust Agreement dated as of August 17, 2000 (the "Agreement") between United States Trust Company of New York, as trustee (the "Pass-Through Trustee") and Midwest Generation, LLC, a limited liability company organized under Delaware law (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates designated as "8.30% Pass-Through Certificates, Series A" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. The property of the Pass-Through Trust includes Lessor Notes (the "Trust Property"). Each Lessor Note is secured by a security interest in and lien over the Undivided Interest subject of the Lease relating to the Lease Indenture under which such Lessor Note was issued and certain other related property described in such Lease Indenture, and liability thereunder is limited to the income and proceeds of such security. Subject to and in accordance with the terms of this Agreement, from funds then available to the Pass-Through Trustee, there will be distributed on each January 2 and July 2 (a "Distribution Date"), commencing on January 2, 2001, to the person in whose name this Certificate is registered at the close of business on the day of the month which is 15 days preceding the Distribution Date, an amount in respect of the Scheduled Payments on the Lessor Notes due on such Distribution Date, the receipt of which has been confirmed by the Pass-Through Trustee, equal to the product of the percentage interest in the Pass-Through Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement, in the event that Special Payments on the Lessor Notes are received by the Pass-Through Trustee, from funds then available to the Pass-Through Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this certificate is registered at the close of business on the day of the month which is 15 days preceding the Special Distribution Date, an amount in respect of such Special Payments on the Lessor Notes, the receipt of which has been confirmed by the Pass-Through Trustee, equal to the product of the percentage interest in the Pass-Through Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so A-2 received. The Special Distribution Date shall be determined as provided in the Agreement. If a Distribution Date or Special Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same effect as if made on the date on which such payment was due. The Pass-Through Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Holders of the Certificates. Distributions on this Certificate will be made by the Pass-Through Trustee by (i) if (A) The Depository Trust Company, a New York corporation ("DTC") or its nominee is the Certificateholder of record of this Certificate, or (B) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $10,000,000, or (C) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $1,000,000 and so requests to the Pass-Through Trustee, by wire transfer in immediately available funds to an account maintained by such Certificateholder with a bank, or (ii) if none of the above apply, by check mailed to such Certificateholder at the address appearing in the Register, without the presentation or surrender of this Certificate or the making of any notation hereon. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Pass-Through Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Pass-Through Trustee specified in such notice. [Unless this certificate is presented by an authorized representative of DTC to the Company or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSONS IS WRONGFUL in as much as the registered owner hereof, Cede & Co., has an interest herein.]* Each Person who acquires or accepts this Certificate or an interest herein will be deemed by such acquisition or acceptance to have represented and warranted that either: (i) no Plan assets have been used to purchase this Certificate or an interest herein or (ii) the purchase and holding of this Certificate or interest herein are either exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to one or more prohibited transaction statutory or administrative exemptions or do not constitute a prohibited transaction under such restrictions of ERISA and the Code. This Certificate shall be governed by and construed in accordance with the laws of the State of New York. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Pass-Through Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Pass-Through Trustee has caused this Certificate to be duly executed. - -------------------- * This legend to appear on Book-Entry Certificates to be deposited with the Depository Trust Company. A-3 MIDWEST GENERATION SERIES A PASS- THROUGH TRUST By: UNITED STATES TRUST COMPANY OF NEW YORK, as Pass-Through Trustee By: ----------------------------- Authorized Officer A-4 [Reverse Of Certificate] The Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Company, Edison Mission Energy, the Pass-Through Company or the Pass-Through Trustee or any affiliate of any such Person. The Certificates are limited in right of payment, all as more specifically set forth in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Pass-Through Trustee shall have received sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Holder of this Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Holder as provided in the Agreement. This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Pass-Through Trustee, and at such other places, if any, designated by the Pass-Through Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Agreement at any time by the Company and the Pass-Through Trustee with the consent of the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the Pass-Through Trustee in its capacity as Registrar, or by any successor Registrar, if delivered by hand at: 30 Broad Street, B-Level, New York, New York 10004-2304, Attention: Corporate Trust and Agency Division, or if delivered by mail to: P.O. Box 84, Bowling Green Station, New York, New York 10274-0084, Attention: Corporate Trust and Agency Division, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Pass-Through Trustee and the Registrar duly executed by the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass-Through Trust will be issued to the designated transferee or transferees. The Certificates are issuable only as registered Certificates without coupons in minimum denominations of $100,000 Fractional Undivided Interest and any integral multiples of $1,000 in excess thereof. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass-Through Trust, as requested by the Holder surrendering the same. A-5 No service charge will be made for any such registration of transfer or exchange, but the Pass-Through Trustee shall require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Pass-Through Trustee, the Company, the Owner Trusts, the Registrar and any agent of the Pass-Through Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Pass-Through Trustee, the Company, the Owner Trusts, the Registrar nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Pass-Through Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. A-6 EXHIBIT B FORM OF THE PASS-THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. UNITED STATES TRUST COMPANY OF NEW YORK as Pass-Through Trustee By: ------------------------------- Authorized Officer B-1 EXHIBIT C FORM OF TRANSFER CERTIFICATE CERTIFICATE MIDWEST GENERATION SERIES A PASS-THROUGH TRUST PASS-THROUGH CERTIFICATES, SERIES A This is to certify that as of the date hereof with respect to $___________________ principal amount of the above-captioned securities presented or surrendered on the date hereof (the "Surrendered Certificates") for registration of transfer, or for exchange where the securities issuable upon such exchange are to be registered in a name other than that of the undersigned Holder (each such transaction being a "transfer"), the undersigned Holder (as defined in the Indenture) certifies that the transfer of Surrendered Certificates associated with such transfer complies with the restrictive legend set forth on the face of the Surrendered Certificates for the reason checked below: / / Transfer to Midwest Generation / / Transfer outside the United States in compliance Series A Pass-Through Trust with Rule 904 of the Securities Act. / / Transfer inside the United / / Transfer inside the United States (i) to an States to a Qualified Institutional Accredited Investor that has Institutional Buyer in previously furnished to the Pass-Through Trustee a compliance with Rule 144A under signed letter containing certain representations and the Securities Act. agreements relating to restrictions on transfer and (ii) by a Holder that has previously furnished the Company and the Transfer Agent with such certifications, legal opinions or other information requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
[Name of Holder] ---------------------------------- Dated: _____________, ______* - -------------------------- * To be dated the date of presentation or surrender C-1 EXHIBIT D FORM OF LETTER TO BE DELIVERED BY ACCREDITED INVESTORS Midwest Generation, LLC One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Credit Suisse First Boston Corporation Lehman Brothers Inc. As Representatives of the several Initial Purchasers c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010-3629 Dear Sirs: We are delivering this letter in connection with an offering of Midwest Generation Pass-Through Certificates, Series A and Series B (the "Securities") of Midwest Generation, LLC, a Delaware limited liability company (the "Company"), all as described in the Confidential Offering Circular (the "Offering Circular") relating to the offering. We hereby confirm that: (i) we are an "accredited investor" within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act (an "Institutional Accredited Investor"); (ii) (A) any purchase of the Securities by us will be for our own account or for the account of one or more other Institutional Accredited Investors or as fiduciary for the account of one or more trusts, each of which is an "accredited investor" within the meaning of Rule 501(a)(7) under the Securities Act and for each of which we exercise sole investment discretion or (B) we are a "bank", within the meaning of Section 3(a)(2) of the Securities Act, or a "savings and loan association" or other institution described in Section 3(a)(5)(A) of the Securities Act that is acquiring the Securities as fiduciary for the account of one or more institutions for which we exercise sole investment discretion, (iii) in the event that we purchase any of the Securities, we will acquire Securities having a minimum purchase price of not less than $100,000 for our own account or for any separate account for which we are acting; (iv) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing the Securities; (v) we are not acquiring the Securities with a view to distribution thereof or with any present intention of offering or selling any of the Securities, except inside the United States in accordance with Rule 144A under the Securities Act or outside the United States in accordance with Regulation S under the Securities Act, as provided C-1 below; PROVIDED that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our control; and (vi) we have received a copy of the Offering Circular relating to the offering of the Securities and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary in connection with our decision to purchase the Securities. We understand that the Securities are being offered in a transaction not involving any public offering within the United States within the meaning of the Securities Act and that the Securities have not been and will not be registered under the Securities Act, and we agree, on our own behalf and on behalf of each account for which we acquire any Securities, that if in the future we decide to resell, pledge or otherwise transfer such Securities, such Securities may be offered, resold, pledged or otherwise transferred only (i) to the Company, (ii) in the United States to a person who we reasonably believe is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, (iii) outside the United States in a transaction in accordance with Rule 904 under the Securities Act, (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available) or (v) pursuant to an effective registration statement under the Securities Act, in each of cases (i) through (v), in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction. We understand that the registrar and transfer agent for the Securities will not be required to accept for registration of transfer any Securities acquired by us, except upon presentation of evidence satisfactory to the Company and the transfer agent that the foregoing restrictions on transfer have been complied with. We further understand that any Securities acquired by us will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of this paragraph. We acknowledge that you, the Company and others will rely upon our confirmations, acknowledgements and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Date:____________________ __________________________________________ (Name of Purchaser) By:_______________________________________ Name: Title: Address: 3 EX-4.2 6 a2031364zex-4_2.txt EXHIBIT 4.2 Exhibit 4.2 Reconciliation and tie between Midwest Generation, LLC Pass-Through Trust Agreement B, dated as of August 17, 2000, and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Pass-Through Trust Agreement.
TRUST INDENTURE ACT OF 1939 SECTION PASS-THROUGH TRUST AGREEMENT SECTION ----------------------------------- ------------------------------------ 310 (a) (1) 7.8 310 (a) (2) 7.8 311 (a) 7.17 (b) 7.17 312 (a) 7.12 (b); 8.1; 8.2 313 (a) 8.4 (c) 8.4 314 (a)(1) 5.1 (c)(1) 1.2 (e) 1.2 315 (a) 7.1 (a) (b) 7.2 (c) 7.1 (b) (d) 7.1 (c) (e) 6.6 316 (a)(1) 6.4; 6.5 (b) 6.7 (c) 1.4 (e) 317 (a) 6.3 (b) 7.13 318 (a) 12.6
MIDWEST GENERATION, LLC and UNITED STATES TRUST COMPANY OF NEW YORK as Pass-Through Trustee -------------------------------------------------- PASS-THROUGH TRUST AGREEMENT B Dated as of August 17, 2000 -------------------------------------------------- $813,500,000 MIDWEST GENERATION Series B Pass-Through Trust 8.56% Initial Pass-Through Certificates, Series B 8.56% Exchange Pass-Through Certificates, Series B TABLE OF CONTENTS ARTICLE I DEFINITIONS...........................................................................................2 Section 1.1 Definitions.................................................................................2 Section 1.2 Compliance Certificates and Opinions........................................................9 Section 1.3 Form of Documents Delivered to Pass-Through Trustee........................................10 Section 1.4 Acts of Holders............................................................................10 ARTICLE II ACQUISITION OF LESSOR NOTES; ORIGINAL ISSUANCE OF CERTIFICATES......................................12 Section 2.1 (a) Issuance of Certificates; Acquisition of Lessor Notes.................................12 Section 2.2 Acceptance by Pass-Through Trustee.........................................................13 Section 2.3 Limitation of Powers.......................................................................13 ARTICLE III THE CERTIFICATES...................................................................................13 Section 3.1 Form, Denomination and Execution of Certificates...........................................13 Section 3.2 Authentication of Certificates.............................................................14 Section 3.3 Temporary Certificates.....................................................................15 Section 3.4 Registration of Transfer and Exchange of Certificates......................................15 Section 3.5 Mutilated, Destroyed, Lost or Stolen Certificates..........................................17 Section 3.6 Persons Deemed Owners......................................................................17 Section 3.7 Cancellation...............................................................................17 Section 3.8 Limitation of Liability for Payments.......................................................18 Section 3.9 Book Entry and Definitive Certificates.....................................................18 Section 3.10 Form of Certification......................................................................21 ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS.....................................................22 Section 4.1 Certificate Account and Special Payments Account...........................................22 Section 4.2 Distributions from Certificate Account and Special Payments Account........................22 Section 4.3 Statements to Certificateholders...........................................................24 Section 4.4 Investment of Special Payment Moneys.......................................................24 Section 4.5. Adjustment of Interest Rates Applicable to Certificates....................................25 ARTICLE V THE COMPANY..........................................................................................25 Section 5.1 Reports....................................................................................25 ARTICLE VI DEFAULT.............................................................................................26 Section 6.1 Events of Default..........................................................................26 Section 6.2 Incidents of Sale of Lessor Notes..........................................................27 Section 6.3 Judicial Proceedings Instituted by Pass-Through Trustee....................................27 Section 6.4 Control by Certificateholders..............................................................28 Section 6.5 Waiver of Defaults.........................................................................29 Section 6.6 Undertaking to Pay Court Costs.............................................................29 Section 6.7 Right of Certificateholders to Receive Payments Not to Be Impaired.........................30 Section 6.8 Certificateholders May Not Bring Suit Except Under Certain Conditions......................30 Section 6.9 Remedies Cumulative........................................................................31 i ARTICLE VII THE PASS-THROUGH TRUSTEE...........................................................................31 Section 7.1 Certain Duties and Responsibilities........................................................31 Section 7.2 Notice of Defaults.........................................................................32 Section 7.3 Certain Rights of Pass-Through Trustee.....................................................32 Section 7.4 Not Responsible for Recitals; Issuance of Certificates.....................................33 Section 7.5 May Hold Certificates......................................................................34 Section 7.6 Money Held in Pass-Through Trust...........................................................34 Section 7.7 Compensation, Reimbursement and Indemnification............................................34 Section 7.8 Corporate Trustee Required; Eligibility....................................................34 Section 7.9 Resignation and Removal; Appointment of Successor..........................................35 Section 7.10 Acceptance of Appointment by Successor.....................................................36 Section 7.11 Merger, Conversion, Consolidation or Succession to Business................................37 Section 7.12 Maintenance of Agencies....................................................................37 Section 7.13 Money for Certificate Payments to Be Held in Trust.........................................38 Section 7.14 Registration of Lessor Notes in Pass-Through Trustee's Name................................39 Section 7.15 Withholding Taxes; Information Reporting...................................................39 Section 7.16 Pass-Through Trustee's Liens...............................................................40 Section 7.17 Preferential Collection of Claims..........................................................40 ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS.............................................................40 Section 8.1 The Company to Furnish Pass-Through Trustee with Names and Addresses of Certificateholders.........................................................................40 Section 8.2 Preservation of Information................................................................40 Section 8.3 Records by the Company.....................................................................40 Section 8.4 Reports by the Pass-Through Trustee........................................................41 ARTICLE IX SUPPLEMENTAL TRUST AGREEMENTS.......................................................................41 Section 9.1 Supplemental Trust Agreement Without Consent of Certificateholder..........................41 Section 9.2 Supplemental Trust Agreements with Consent of Certificateholders...........................42 Section 9.3 Documents Affecting Immunity or Indemnity..................................................43 Section 9.4 Execution of Supplemental Trust Agreements.................................................43 Section 9.5 Effect of Supplemental Trust Agreements....................................................43 Section 9.6 Reference in Certificates to Supplemental Trust Agreements.................................44 ARTICLE X AMENDMENTS TO LEASE INDENTURES AND OTHER LEASE FINANCING DOCUMENTS..................................44 Section 10.1 Amendments and Supplements to Lease Indenture and Other Lease Financing Documents..........44 ARTICLE XI TERMINATION OF PASS-THROUGH TRUST...................................................................45 Section 11.1 Termination of the Pass-Through Trust......................................................45 ARTICLE XII MISCELLANEOUS PROVISIONS...........................................................................46 Section 12.1 Limitation on Rights of Certificateholders.................................................46 Section 12.2 Certificates Nonassessable and Fully Paid..................................................46 Section 12.3 Notice.....................................................................................46 Section 12.4 Governing Law..............................................................................46 ii Section 12.5 Severability of Provisions.................................................................47 Section 12.6. Trust Indenture Act Controls...............................................................47 Section 12.7 Effect of Headings and Table of Contents...................................................47 Section 12.8 Successors and Assigns.....................................................................47 Section 12.9 Benefits of Pass-Through Trust Agreement...................................................47 Section 12.10 Legal Holidays.............................................................................47 Section 12.11 Counterparts...............................................................................47
SCHEDULE 1 - Participation Agreement EXHIBIT A - Form of Pass-Through Certificate EXHIBIT B - Form of Pass-Through Trustee's Certificate of Authentication EXHIBIT C - Form of Transfer Certificate EXHIBIT D - Form of Purchase Letter for Institutional Accredited Investors iii PASS-THROUGH TRUST AGREEMENT B, dated as of August 17, 2000, with respect to the formation of the Midwest Generation Series B Pass-Through Trust, between Midwest Generation, LLC, a Delaware limited liability company, and United States Trust Company of New York, a New York banking corporation, as Pass-Through Trustee. W I T N E S S E T H: WHEREAS, each of the Powerton Trusts has purchased a separate Powerton Undivided Interest from the Company and is leasing such interest to the Company pursuant to a Lease Transaction (as such terms and certain other capitalized terms used herein are defined below); WHEREAS, each of the Joliet Trusts has purchased a separate Joliet Undivided Interest from the Company and is leasing such interest to the Company pursuant to a Lease Transaction; WHEREAS, pursuant to each Lease Transaction, each Owner Trust will issue, on a non-recourse basis, Lessor Notes under a Lease Indenture in order to finance and refinance a portion of the purchase price for the related Undivided Interest purchased by such Owner Trust; WHEREAS, pursuant to the terms and conditions of this Pass-Through Trust Agreement and the Participation Agreements relating to the Lease Transactions, Lessor Notes are to be sold to the Pass-Through Trust by each Owner Trust, and the Pass-Through Trust will purchase such Lessor Notes and will hold such Lessor Notes in trust for the benefit of the Certificateholders; WHEREAS, the Pass-Through Trustee, upon the execution and delivery of this Pass-Through Trust Agreement, hereby declares the creation of this Pass-Through Trust for the benefit of the Certificateholders, and the initial Certificateholders as the grantors of the Pass-Through Trust and by their respective acceptances of the Certificates join in the creation of this Pass-Through Trust with the Pass-Through Trustee; and WHEREAS, to facilitate the sale of the Lessor Notes to the Pass-Through Trust and the purchase of the Lessor Notes by the Pass-Through Trust, the Company has duly authorized the execution, delivery and effectiveness of this Pass-Through Trust Agreement as the "issuer", as such term is defined in and solely for purposes of the Securities Act of 1933, as amended (the "Securities Act"), of the Certificates deemed to be issued pursuant hereto and as the "obligor", as such term is defined in and solely for purposes of the Trust Indenture Act of 1939, as amended from time to time (the "Trust Indenture Act"), with respect to all such Certificates and is undertaking to perform certain administrative and ministerial duties hereunder and is also undertaking to pay the fees and expenses of the Pass-Through Trustee. WHEREAS, upon issuance of the Exchange Certificates, if any, or the effectiveness of the Shelf Registration Statement, this Agreement, as amended or supplemented from time to time, will be subject to the provisions of the Trust Indenture Act, and shall, to the extent applicable, be governed by such provisions. 1 NOW, THEREFORE, In consideration of the foregoing premises, the mutual agreements herein contained, and of the other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1 DEFINITIONS. (a) Capitalized terms used in this Pass-Through Trust Agreement, including the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A to the applicable Participation Agreement, unless the context hereof shall otherwise require. The general provisions of Appendix A to such Participation Agreement shall apply to the terms used in this Pass-Through Trust Agreement and specifically defined herein. (b) As used in this Pass-Through Trust Agreement, the following terms shall have the respective meanings assigned thereto as follows: ACT: When used with respect to any Holder, has the meaning specified in Section 1.4. AUTHORIZED AGENT: Means any Paying Agent or Registrar. AVOIDABLE TAX. Has the meaning specified in Section 7.9(e). BOOK-ENTRY CERTIFICATES: Means a beneficial interest in the Certificates, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 3.9. CERTIFICATE: Means any one of the Initial Certificates or Exchange Certificates that are Outstanding as of the Transfer Date and any such Initial Certificates or Exchange Certificates issued in exchange therefor or replacement thereof pursuant to this Pass-Through Trust Agreement. CERTIFICATE ACCOUNT: Means that account or accounts created and maintained pursuant to Section 4.1(a). CERTIFICATE OWNER: Means, when used in Section 3.9, the Person for whom a Clearing Agency Participant acts. CERTIFICATE OWNER REQUEST: Means a request to the Pass-Through Trustee to receive the reports and other information the Company, EME or any other Person is required to furnish to the Pass-Through Trustee pursuant to the Operative Documents, which request certifies that the Person making the request is a Certificateholder or Certificate Owner. Any Certificateholder or Certificate Owner making a Certificate Owner Request may specify its election to receive such information from the Pass-Through Trustee on an ongoing basis. CERTIFICATEHOLDER OR HOLDER: Means the Person in whose name a Certificate is registered in the Register, except that, when used in Section 3.9, such term means the Certificate Owners. CLEARING AGENCY: Means an organization registered as a clearing agency pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. CLEARING AGENCY PARTICIPANT: Means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects, directly or indirectly, book-entry transfers and pledges of securities deposited with the Clearing Agency. 2 CLEARSTREAM, LUXEMBOURG: Has the meaning specified in Section 3.9. CLOSING DATE: Means August 24, 2000. COMMISSION: Means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934 as amended, or any successor body. COMPANY: Means Midwest Generation, LLC, a Delaware limited liability company, or its successor in interest. CONSIDERATION: Has the meaning specified in Section 2.1(a). CORPORATE TRUST OFFICE: With respect to the Pass-Through Trustee, any Owner Trustee and any Lease Indenture Trustee, means the office of such trustee in the city in which at any particular time its corporate trust business shall be principally administered. DEFAULT: Means any event which is or, after notice or lapse of time or both would become, an Event of Default. DEFINITIVE CERTIFICATES: Has the meaning specified in Section 3.9. DIRECTION: Has the meaning specified in Section 1.4(c). DISTRIBUTION DATE: With respect to distributions of Scheduled Payments, means each January 2 and July 2 of each year until payment of all the Scheduled Payments to be made under the applicable Lessor Notes has been made, commencing on January 2, 2001. DTC: Means The Depository Trust Company and any successor that is a Clearing Agency. EFFECTIVE DATE: Has the meaning specified in Section 4.5(b). EME: Means Edison Mission Energy, a California corporation. EUROCLEAR: Has the meaning specified in Section 3.9. EXCHANGE ACT: Has the meaning specified in Section 5.1. EXCHANGE CERTIFICATES: Means the pass-through certificates issued in exchange for the Initial Certificates pursuant to the Registration Rights Agreement and authenticated under the this Pass-Through Trust Agreement. EXCHANGE OFFER: Means the exchange offer which may be made pursuant to the Registration Rights Agreement to exchange Initial Certificates for Exchange Certificates. EXCHANGE OFFER REGISTRATION STATEMENT: Means the registration statement that, pursuant to the Registration Rights Agreement, is filed by the Company and EME with the Commission with respect to the exchange of Initial Certificates for Exchange Certificates and the Other Certificates. EVENT OF DEFAULT: Has the meaning specified in Section 6.1. FACILITY: Means the Joliet Facility or the Powerton Facility, as the context requires. FRACTIONAL UNDIVIDED INTEREST: Means the fractional undivided interest in the Pass-Through Trust that is evidenced by a Certificate. HOLDER: See Certificateholder. ILLIQUIDITY EVENT: Has the meaning specified in the Registration Rights Agreement. INITIAL CERTIFICATES: Means the "Initial Certificates" issued and authenticated under this Pass-Through Trust Agreement, and any certificates issued and authenticated 3 hereunder substantially in the form of Exhibit A thereto, other than the Exchange Certificates. INSTITUTIONAL ACCREDITED INVESTOR: Means an institutional "accredited investor", as such term (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act). JOLIET FACILITY: Means Units No. 7 and No. 8 of the 1,358 MW coal-fired electric generating station in Joliet, Illinois. JOLIET PARTY: Means any owner trust, owner participant or owner lessor in connection with any Lease Transaction related to the Joliet Facility. JOLIET GENERATION I: Means Joliet Generation I, LLC, a Delaware limited liability company, and any successors and assigns permitted by the applicable Participation Agreement. JOLIET GENERATION II: Means Joliet Generation II, LLC, a Delaware limited liability company, and any successors and assigns permitted by the applicable Participation Agreement. JOLIET TRUST: Means one or more as the context may require of Joliet Trust I and Joliet Trust II. JOLIET TRUST I: Means Joliet Trust I, a Delaware business trust. JOLIET TRUST II: Means Joliet Trust II, a Delaware business trust. JOLIET UNDIVIDED INTEREST: Means, as the context may require, the 63.6% undivided ownership interest of Joliet Trust I in the Joliet Facility and the 36.4% undivided ownership interest of Joliet Trust II in the Joliet Facility. LEASE: Means a Facility Lease Agreement between an Owner Trust, as the lessor, and the Company, as the lessee, entered into in connection with a Lease Transaction, as such Lease may be amended or supplemented in accordance with its terms. LEASE EVENT OF DEFAULT: Means any Lease Event of Default (as such term is defined in the applicable Lease). LEASE FINANCING DOCUMENTS: Means, with respect to any Lease Transaction, the Pass-Through Trust Agreements and the applicable Lease Indenture, Lessor Notes, EME Guarantee, Certificates and other agreements, documents and instruments delivered in connection with the Lease Indenture and the Lessor Notes. LEASE INDENTURE: Means (i) an Indenture of Trust, Mortgage and Security Agreement between an Owner Trust and a Lease Indenture Trustee, entered into in connection with a Lease Transaction, as the same may be amended or supplemented in accordance with its terms and (ii) any Indenture of Trust, Mortgage and Security Agreement, or analogous document, between the Company and a Lease Indenture Trustee, entered into in connection with the assumption by the Company of the indebtedness evidenced by any Lessor Note, as the same may be amended or supplemented in accordance with its terms. The term LEASE INDENTURE refers to any one or all of such Lease Indentures, as the context requires. LEASE INDENTURE DEFAULT: Means any event which is, or after notice or lapse of time or both would become, a Lease Indenture Event of Default. LEASE INDENTURE EVENT OF DEFAULT: Means any Lease Indenture Event of Default (as such term is defined in an applicable Lease Indenture). LEASE INDENTURE TRUSTEE: Means a bank or trust company acting as indenture trustee under an applicable Lease Indenture; and any successor to such Lease Indenture Trustee as such trustee. LEASE TRANSACTION: Means a sale-leaseback transaction in respect of an Undivided Interest between the Company and an Owner Trust that is financed in part by the issuance of 4 Lessor Notes to the Pass-Through Trustee, as contemplated by the applicable Participation Agreement and the agreements and instruments referred to therein. LESSOR NOTE: Means any one of the Series B Lessor Notes (as defined in a Lease Indenture) issued under a Lease Indenture, including any lessor note issued under the Lease Indenture in replacement or substitution therefor, held by the Pass-Through Trustee. LETTER OF REPRESENTATIONS: Means the agreement among the Company, the Pass-Through Trustee and the initial Clearing Agency. NON-GLOBAL PURCHASERS: Has the meaning specified in Section 3.9. OPINION OF COUNSEL: Means an opinion in writing signed by legal counsel, who may be counsel designated by the Company, an Owner Trust or a Lease Indenture Trustee, whether or not such counsel is an employee of any of them, and who shall be acceptable to the Pass-Through Trustee in its reasonable discretion. OTHER CERTIFICATES: Means the pass-through trust certificates issued pursuant to the Other Pass-Through Trust Agreement. OTHER PASS-THROUGH TRUSTEE: Means the Pass-Through Trustee pursuant to the Other Pass-Through Trust Agreement. OTHER PASS-THROUGH TRUST AGREEMENT: Means the Pass-Through Trust Agreement A, dated as of August 17, 2000. OUTSTANDING: When used with respect to Certificates, means, as of the date of determination, and subject to Section 1.4(c), all Certificates theretofore authenticated and delivered under this Pass-Through Trust Agreement, except: (i) Certificates theretofore canceled by the Registrar or delivered to the Pass-Through Trustee or the Registrar for cancellation; (ii) Certificates for which money in the full amount has been theretofore deposited with the Pass-Through Trustee or any Paying Agent in trust for the holders of such Certificates as provided in Section 4.1 pending distribution of such money to the Certificateholders pursuant to the final distribution payment to be made pursuant to Section 11.1; and (iii) Certificates in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to this Pass-Through Trust Agreement. OWNER PARTICIPANT: Means one or more, as the context may require, of (i) Powerton Generation I, (ii) Powerton Generation II, (iii) Joliet Generation I and (iv) Joliet Generation II and any successors and assigns permitted by the applicable Participation Agreement. OWNER TRUSTEE: Means, initially, Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity but solely as trustee of each of the Owner Trusts pursuant to the related Trust Agreement; and any successor to such Owner Trustee as such trustee. OWNER TRUSTS: Means one or more as the context may require of the Powerton Trusts and the Joliet Trusts. PARTICIPATION AGREEMENT: Means one or more as the context may require of the related Participation Agreements enumerated in Schedule 1 hereto among the Company, EME, an Owner Participant, an Owner Trust, an Owner Trustee, a Lease Indenture Trustee, and the Pass-Through Trustee, providing for a Lease Transaction. PASS-THROUGH TRUST: Means the trust created by this Pass- Through Trust Agreement, the estate of which consists of the Trust Property. 5 PASS-THROUGH TRUSTEES: Means, collectively, the Pass-Through Trustee and the Other Pass-Through Trustee. PAYING AGENT: Means the paying agent maintained and appointed pursuant to Section 7.12. PERMANENT REGULATION S GLOBAL CERTIFICATE: Has the meaning specified in Section 3.9. PERMITTED GOVERNMENT INVESTMENT: Means obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days or such lesser time as is necessary for payment of any Special Payments on a Special Distribution Date. POWERTON FACILITY: Means the 1,538 MW net coal-fired electric-generating station in Pekin, Illinois. POWERTON GENERATION I: Means Powerton Generation I, LLC, a Delaware limited liability company, and any successors and assigns permitted by the applicable Participation Agreement. POWERTON GENERATION II: Means Powerton Generation II, LLC, a Delaware limited liability company, and any successors and assigns permitted by the applicable Participation Agreement. POWERTON TRUST: Means one or more as the context may require, of Powerton Trust I and Powerton Trust II. POWERTON TRUST I: Means Powerton Trust I, a Delaware business trust. POWERTON TRUST II: Means Powerton Trust II, a Delaware business trust. POWERTON UNDIVIDED INTEREST: Means, as the context may require, the 63.6% undivided ownership interest of Powerton Trust I in the Powerton Facility and the 36.4% undivided ownership interest of Powerton Trust II in the Powerton Facility. PURCHASE AGREEMENT: Means the Purchase Agreement dated August 17, 2000 among the representatives of the Initial Purchasers, the Company and EME, as the same may be implemented, supplemented or otherwise modified from time to time in accordance with its terms. RECORD DATE: Means (i) for Scheduled Payments to be distributed on any Distribution Date, other than the final distribution, the day (whether or not a Business Day) which is 15 days preceding such Distribution Date, and (ii) for Special Payments to be distributed on any Special Distribution Date, other than the final distribution, the day (whether or not a Business Day) which is 15 days preceding such Special Distribution Date. REGISTER AND REGISTRAR: Means the register maintained and the registrar appointed pursuant to Sections 3.4 and 7.12. REGISTRATION RIGHTS AGREEMENT: Means the Exchange and Registration Rights Agreement dated as of August 17, 2000, among the representatives of the Initial Purchasers, the Company and EME, as amended, supplemented or otherwise modified from time to time in accordance with its terms. REGULATION S GLOBAL CERTIFICATE: Has the meaning specified in Section 3.9. REPORTING CESSATION: Has the meaning specified in Section 5.1. REQUEST: Means a request by the Company setting forth the subject matter of the request accompanied by an Officer's Certificate and an Opinion of Counsel as provided in Section 1.2. 6 RESPONSIBLE OFFICER: When used with respect to the initial Pass-Through Trustee, the initial Lease Indenture Trustee or any Owner Trustee, means any officer in the Corporate Trust Office having direct responsibility for the administration of the Operative Documents; when used with respect to any successor Pass-Through Trustee, or successor Lease Indenture Trustee, means the chairman or vice-chairman of the board of directors or trustees, the chairman or vice-chairman of the executive or standing committee of the board of directors or trustees, the president, the chairman of the committee on trust matters, any vice-president, any second vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the comptroller and any assistant comptroller, and, when used with respect to the Pass-Through Trustee and any Lease Indenture Trustee, also means any other officer of the Pass-Through Trustee or any Lease Indenture Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, when used with respect to the Pass-Through Trustee, any Lease Indenture Trustee or any Owner Trustee with respect to a particular corporate trust matter, or any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. RESTRICTED CERTIFICATE: Has the meaning specified in Section 3.1. RESTRICTED GLOBAL CERTIFICATE: Has the meaning specified in Section 3.9. SCHEDULED PAYMENT: With respect to a Distribution Date, means any payment (other than Special Payments) of principal and interest on a Lessor Note, due from the Owner Trust, which payment represents the payment of a regularly scheduled installment of principal then due on such Lessor Note, or the payment of regularly scheduled interest accrued on such Lessor Note. SHELF REGISTRATION STATEMENT: Means the shelf registration statement which may be required to be filed by the Company and EME with the Commission pursuant to the Registration Rights Agreement, other than an Exchange Offer Registration Statement. SPECIAL DISTRIBUTION DATE: Means (i) with respect to the prepayment of any Lessor Notes, the day on which such prepayment is scheduled to occur pursuant to the terms of the applicable Lease Indenture and (ii) with respect to any Special Payment relating to a Lessor Note other than as described in clause (i) of the definition of Special Payment, the earliest second day of a month for which it is practicable for the Pass-Through Trustee to give notice pursuant to Section 4.2(c). SPECIAL PAYMENT: With respect to a Lessor Note, means (i) any payment of principal, premium, if any, and interest on such Lessor Note resulting from the prepayment of such Lessor Note pursuant to the applicable provisions of the applicable Lease Indenture, (ii) any payment of principal and interest (including any interest accruing upon default) on, or any other amount in respect of, such Lessor Note upon a Lease Indenture Event of Default in respect thereof or upon the exercise of remedies under the applicable Lease Indenture, (iii) any Special Payment referred to in clause (i) of this definition or any Scheduled Payment which is not in fact paid within five days of the Special Distribution Date or Distribution Date applicable thereto, or (iv) any proceeds from the sale of any Lessor Note by the Pass-Through Trustee pursuant to Article VI hereof, and SPECIAL PAYMENTS means all of such Special Payments. SPECIAL PAYMENTS ACCOUNT: Means the account or accounts created and maintained pursuant to Section 4.1(b). TEMPORARY REGULATION S GLOBAL CERTIFICATE: Has the meaning specified in Section 3.9. 7 TRANSFER DATE: Means the closing date of the public offering of the Certificates. TRUST INDENTURE ACT: Has the meaning specified in the recitals hereto. TRUST PROPERTY: Means the Lessor Notes held as the property of the Pass-Through Trust created hereby and all monies at any time paid thereon and all monies due and to become due thereunder, funds from time to time deposited in the Certificate Account and the Special Payments Account and any proceeds from the sale by the Pass-Through Trustee pursuant to Article VI hereof of any Lessor Note. UNDIVIDED INTEREST: Means, as the context may require, the Joliet Undivided Interest and/or the Powerton Undivided Interest. Section 1.2 COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company, an Owner Trust or a Lease Indenture Trustee to the Pass-Through Trustee to take any action under any provision of this Pass-Through Trust Agreement, the Company, such Owner Trust or such Lease Indenture Trustee, as the case may be, shall furnish to the Pass-Through Trustee (i) an Officer's Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Pass-Through Trust Agreement relating to the proposed action have been complied with and (ii) as to any legal matters involved, an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Pass-Through Trust Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Pass-Through Trust Agreement (other than a certificate provided pursuant to Section 5.1(b)) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.3 FORM OF DOCUMENTS DELIVERED TO PASS-THROUGH TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Any Opinion of Counsel stated to be based on the opinion of other counsel shall be accompanied by a copy of such other opinion. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Pass-Through Trust Agreement, they may, but need not, be consolidated and form one instrument. 8 Section 1.4 ACTS OF HOLDERS. (a) Any direction, consent, request, demand, authorization, notice, waiver or other action provided by this Pass-Through Trust Agreement in respect of the Certificates to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Pass-Through Trustee and, where it is hereby expressly required, to the Company, any Owner Trust or any Lease Indenture Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Pass-Through Trust Agreement and (subject to Section 7.1) conclusive in favor of the Pass-Through Trustee, the Company, the related Owner Trust and the related Lease Indenture Trustee, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or such other officer and where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Pass-Through Trustee deems sufficient. (c) In determining whether the Holders of the requisite Fractional Undivided Interests of Certificates Outstanding have given any direction, consent, request, demand, authorization, notice or waiver (a "DIRECTION"), under this Pass-Through Trust Agreement, Certificates owned by the Company, EME, any Owner Trust, any Owner Participant or any Affiliate of any such Person shall be disregarded and deemed not to be Outstanding under this Pass-Through Trust Agreement for purposes of any such determination. In determining whether the Pass-Through Trustee shall be protected in relying upon any such Direction, only Certificates which the Pass-Through Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding, such Certificates shall not be so disregarded as aforesaid, and (ii) if any amount of Certificates so owned by any such Person have been pledged in good faith, such Certificates shall not be disregarded as aforesaid if the pledgee establishes to the satisfaction of the Pass-Through Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Company, an Owner Trust, an Owner Participant or any Affiliate of any such Persons. (d) For all purposes of this Pass-Through Trust Agreement, all Initial Certificates and all Exchange Certificates shall vote and take all other actions of Certificateholders together as one class of Certificates. (e) The Company may at its option, by delivery of an Officer's Certificate to the Trustee, set a record date to determine the Certificateholders entitled to give any Direction. Notwithstanding Section 316(c) of the Trust Indenture Act, such record date shall be the record date specified in such Officer's Certificate, which shall be a date not more than 30 days prior to the first solicitation of Certificateholders in connection therewith. If such a record date is fixed, 9 such Direction may be given before or after such record date, but only the Certificateholders of record at the close of business on such record date shall be deemed to be Certificateholders for the purposes of determining whether Certificateholders of the requisite proportion of Outstanding Certificates have authorized or agreed or consented to such Direction, and for that purpose the Outstanding Certificates shall be computed as of such record date; PROVIDED that no such Direction by the Certificateholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Pass-Through Trust Agreement not later than one year after such record date. (f) Any Act by the Holder of any Certificate shall bind the Holder of every Certificate issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of the related Direction is made upon such Certificate. (g) Except as otherwise provided in Section 1.4(c), Certificates owned by or pledged to any Person shall have an equal and proportionate benefit under the provisions of this Pass-Through Trust Agreement, without preference, priority or distinction as among all of the Certificates. ARTICLE II ACQUISITION OF LESSOR NOTES; ORIGINAL ISSUANCE OF CERTIFICATES Section 2.1 (a) ISSUANCE OF CERTIFICATES; ACQUISITION OF LESSOR NOTES. The Pass-Through Trustee, at or promptly following the execution and delivery of this Pass-Through Trust Agreement, shall also execute and deliver Participation Agreements, in the form delivered to the Pass-Through Trustee on or prior to the date of the execution and delivery hereof. On the Transfer Date, upon delivery of an authentication order by the Company and the satisfaction of the closing conditions with respect to any Lessor Notes to be purchased on the Transfer Date, the Pass-Through Trustee shall execute, deliver and authenticate, on behalf of the Pass-Through Trust, Initial Certificates equaling in the aggregate the aggregate principal amount of the Lessor Notes deposited into the Pass-Through Trust on the Transfer Date. The Initial Certificates so executed, delivered and authenticated on the Transfer Date shall evidence the entire ownership of the Pass-Through Trust. The Pass-Through Trust shall issue such Initial Certificates on the Transfer Date, in authorized denominations and in such Fractional Undivided Interests, so as to result in the receipt of consideration (the "CONSIDERATION") in an amount equal to the aggregate principal amount of such Lessor Notes referred to in the second preceding sentence. The Pass-Through Trust shall purchase Lessor Notes on the Transfer Date at an aggregate purchase price equal to the amount of the Consideration so received. Except as provided in Sections 3.4 and 3.5 hereof, the Pass-Through Trustee shall not execute or deliver Initial Certificates in excess of the aggregate amount specified in this paragraph. The aggregate Fractional Undivided Interest of Certificates shall not at any time exceed $813,500,000. (b) ASSUMPTION OF LESSOR NOTES. If an Eligible Successor shall assume the obligations of an Owner Trust under any Lessor Note pursuant to Section 2.12 of the applicable Lease Indenture, (i) if requested by the applicable Lease Indenture Trustee, the Pass-Through Trustee shall surrender the Lessor Notes issued pursuant to Section 2.12 of such Lease Indenture to the applicable Lease Indenture Trustee in exchange for new Lessor Notes of the same aggregate outstanding principal amount as the Lessor Notes so surrendered, bearing interest at the same rate, and having the same maturity and amortization schedule, and otherwise of similar 10 tenor, issued under such Lease Indenture and any new Lease Indenture entered into by such Eligible Successor and the applicable Lease Indenture Trustee in connection with such assumption, and (ii) thereafter each reference to such Lessor Notes in this Pass-Through Trust Agreement shall be deemed to include a reference to such new Lessor Notes or the existing Lessor Notes as assumed by such Eligible Successor. (c) AUTHENTICATION. Any authentication order delivered by the Company hereunder shall be signed by one of its authorized signatories and shall specify the amount at maturity of the Certificates to be authenticated and the date on which the original issue of Certificates is to be authenticated. The Pass-Through Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Certificates. Unless limited by the terms of such appointment, an authenticating agent may authenticate the Certificates whenever the Pass-Through Trustee may do so. Each reference in this Pass-Through Trust Agreement to authentication by the Pass-Through Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. Section 2.2 ACCEPTANCE BY PASS-THROUGH TRUSTEE. The Pass-Through Trustee, upon the execution and delivery of this Pass-Through Trust Agreement, acknowledges its acceptance of all right, title, and interest in and to the Lessor Notes acquired pursuant to Section 2.1 hereof and declares that the Pass-Through Trustee holds and will hold such right, title, and interest, together with all other property constituting the Trust Property, for the benefit of all present and future Certificateholders, upon the trusts herein set forth. By its payment for and acceptance of each Certificate issued to it hereunder, each initial Certificateholder as grantor of the Pass-Through Trust thereby joins in the creation and declaration of the Pass-Through Trust. Section 2.3 LIMITATION OF POWERS. The Pass-Through Trust is constituted solely for the purpose of making the investment in the Lessor Notes, and, except as set forth herein, the Pass-Through Trustee is not authorized or empowered to acquire any other investments or engage in any other activities and, in particular, the Pass-Through Trustee is not authorized or empowered to do anything that would cause the Pass-Through Trust to fail to qualify as a grantor trust for federal income tax purposes (including, as subject to this restriction, acquiring a Facility by bidding the Lessor Notes or otherwise, or taking any action with respect to an Undivided Interest or a Facility once acquired). ARTICLE III THE CERTIFICATES Section 3.1 FORM, DENOMINATION AND EXECUTION OF CERTIFICATES. (a) The Initial Certificates shall be known as the "8.56% INITIAL PASS-THROUGH CERTIFICATES, SERIES B" and the Exchange Certificates shall be known as the "8.56% EXCHANGE PASS-THROUGH CERTIFICATES, SERIES B", in each case, of the Pass-Through Trust. Each Certificate shall represent a fractional undivided interest in the Pass-Through Trust. The Certificates shall be issued in registered form without coupons and shall be substantially in the form attached hereto as Exhibit A, with such omissions, variations and insertions as are permitted by this Pass-Through Trust Agreement, and may have such letters, numbers or other marks of identification and such legends or endorsements printed, lithographed or engraved thereon, as may be required to comply with the rules of any securities exchange on which such Certificates may be listed or to conform to any 11 usage in respect thereof, or as may, consistently herewith, be prescribed by the Pass-Through Trustee or by the officer executing such Certificates, such determination by said officer to be evidenced by such officer signing the Certificates. (b) Except as provided in Section 3.9, definitive Certificates shall be printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Certificates may be listed, all as determined by the officer executing such Certificates, as evidenced by such officer's execution of such Certificates. (c) During the period beginning on the Closing Date and ending on the date two years from the Closing Date, all Initial Certificates issued on the Closing Date, and all Certificates issued upon registration of transfer of, or in exchange for, such Initial Certificates, shall be "RESTRICTED CERTIFICATES" and shall be subject to the restrictions on transfer provided in the legend set forth on the face of the form of certificate in Exhibit A; PROVIDED, HOWEVER, that the term "RESTRICTED CERTIFICATES" shall not include Certificates as to which such restrictions on transfer have been terminated in accordance with Section 3.4. All Restricted Certificates shall bear the legend set forth on the face of the Certificate in Exhibit A. Certificates which are not Restricted Certificates shall not bear such legend. (d) The Initial Certificates shall be issued in minimum denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a different denomination. The Exchange Certificates will be issued in denominations of $1,000 or integral multiples thereof, except that one Certificate may be issued in a different denomination. The Certificates shall be executed on behalf of the Pass-Through Trust by manual or facsimile signature of a Responsible Officer of the Pass-Through Trustee. Certificates bearing the manual or facsimile signature of an individual who was, at the time when such signature was affixed, authorized to sign on behalf of the Pass-Through Trustee shall be valid and binding obligations of the Pass-Through Trustee, notwithstanding that such individual has ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold such office at the date of such Certificates. No Certificate shall be entitled to any benefit under this Pass-Through Trust Agreement, or be valid for any purpose unless there appears on such Certificate a certificate of authentication substantially in the form set forth in Exhibit B hereto executed by the Pass-Through Trustee by manual signature, and such certificate of authentication upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated on the date of their authentication. Section 3.2 AUTHENTICATION OF CERTIFICATES. Upon delivery of an authentication order by the Company, the Pass-Through Trustee on the Transfer Date shall cause to be authenticated and delivered Certificates duly authenticated by the Pass-Through Trustee, in authorized denominations equaling in the aggregate the aggregate principal amount of the Lessor Notes purchased on the Transfer Date and evidencing the entire ownership of the Pass-Through Trust. Section 3.3 TEMPORARY CERTIFICATES. Pending the preparation of definitive Certificates, the Pass-Through Trustee may execute, authenticate and deliver temporary Certificates which are printed, lithographed, typewritten, or otherwise produced, in any denomination, containing substantially the same terms and provisions as set forth in Exhibit A, except for such appropriate insertions, omissions, substitutions and other variations relating to 12 their temporary nature as the officer executing such temporary Certificates may determine, as evidenced by their execution of such temporary Certificates. If temporary Certificates are issued, the Pass-Through Trustee will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the Corporate Trust Office of the Pass-Through Trustee, or at the office or agency of the Pass-Through Trustee maintained in accordance with Section 7.12, without charge to the Holder upon surrender for cancellation of any one or more temporary Certificates, the Pass-Through Trustee shall execute, authenticate and deliver in exchange therefor definitive Certificates of authorized denominations of a like aggregate Fractional Undivided Interest. Until so exchanged, such temporary Certificates shall in all respects be entitled to the same benefits under this Pass-Through Trust Agreement as definitive Certificates. Section 3.4 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. Unless and until (i) an Initial Certificate is sold under an effective Shelf Registration Statement, or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the terms of the Registration Rights Agreement, the following provisions shall apply to such Initial Certificates: (a) The Pass-Through Trustee shall cause to be kept, at the office or agency to be maintained by it in accordance with the provisions of Section 7.12, a register (the "REGISTER") in which, subject to the provisions of this Section 3.4 and the Certificates, the Pass-Through Trustee shall provide for the registration of Certificates and of transfers and exchanges of Certificates as herein provided. The Pass-Through Trustee shall initially be the registrar (the "REGISTRAR") for the purpose of registering Certificates and transfers and exchanges of Certificates as herein provided. The Company, upon notice to the Pass-Through Trustee, may change the Registrar at any time. (b) Every Restricted Certificate shall be subject to the restrictions on transfer provided in the legend required to be set forth on the face of each Restricted Certificate pursuant to Section 3.1, and the Holder of each Restricted Certificate, by such Holder's acceptance thereof, agrees to be bound by such restrictions on transfer. Whenever any Restricted Certificate is presented or surrendered for registration of transfer or for exchange for a Certificate registered in a name other than that of the Holder, such Restricted Certificate must be accompanied by a certificate in substantially the form set forth in Exhibit C hereto, dated the date of such surrender and signed by the Holder of such Restricted Certificate, as to compliance with such restrictions on transfer. Neither the Pass-Through Trustee nor any Registrar shall be required to accept for such registration of transfer or exchange any Restricted Certificate not so accompanied by a properly completed certificate. Notwithstanding the preceding two sentences, a properly completed certificate shall not be required in connection with any transfer of any Restricted Certificate through the facilities of DTC or any other United States securities clearance and settlement organization, PROVIDED that such transfer does not require a change in the name (other than to another nominee of DTC or such other securities clearance and settlement organization) in which such Restricted Certificate is then registered. Whenever any Restricted Certificate is proposed to be transferred by a Holder to an Institutional Accredited Investor, the Pass-Through Trustee shall have received from such Institutional Accredited Investor, prior to such transfer, a signed letter substantially in the form of Exhibit D relating to certain representations and agreements regarding restrictions on transfer 13 of such Restricted Certificate. In addition, the Holder of the Restricted Certificate proposed to be transferred must, prior to such transfer, furnish to the Registrar such certifications (as required by and in the form set forth in this Pass-Through Trust Agreement), Opinions of Counsel or other information as the Registrar may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration rights of the Securities Act. The restrictions imposed by this Section 3.4 and Section 3.1 upon the transferability of any particular Restricted Certificate shall cease and terminate if and when such Restricted Certificate has been sold pursuant to an effective registration statement under the Securities Act or transferred pursuant to Rule 144 under the Securities Act (or any successor provision thereto), unless the Holder thereof is an affiliate of the Company within the meaning of Rule 144 (or such successor provision). Any Restricted Certificate as to which such restrictions on transfer shall have expired in accordance with their terms or shall have terminated may, upon surrender of such Restricted Certificate for exchange to the Pass-Through Trustee or any Registrar in accordance with the provisions of this Section 3.4 (accompanied, in the event that such restrictions on transfer have terminated by reason of a transfer pursuant to Rule 144 or any successor provision, by an Opinion of Counsel having substantial experience in practice under the Securities Act and otherwise reasonably acceptable to the Company, addressed to the Company and the Pass-Through Trustee and in form acceptable to the Company, to the effect that the transfer of such Restricted Certificate has been made in compliance with Rule 144 or such successor provision), be exchanged for a new Certificate, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by Section 3.1. The Company shall promptly inform the Pass-Through Trustee in writing of the effective date of any registration statement registering the Certificates under the Securities Act. The Pass-Through Trustee shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned Opinion of Counsel or registration statement. (c) Upon surrender for registration of transfer of any Certificate that is not a Restricted Certificate at the Corporate Trust Office or such other office or agency, the Pass-Through Trustee shall execute, authenticate and deliver, in the name of the designated transferee or transferees, one or more new Certificates, in authorized denominations of a like aggregate Fractional Undivided Interest. (d) At the option of a Certificateholder, Certificates may be exchanged for other Certificates, in authorized denominations and of a like aggregate Fractional Undivided Interest, upon surrender of the Certificates to be exchanged at any such office or agency; PROVIDED, that a Restricted Certificate may only be exchanged for another Restricted Certificate, until such restrictions on such Restricted Certificate shall cease and terminate in accordance with the terms of this Section 3.4 and PROVIDED ALSO, that no exchanges of Initial Certificates for Exchange Certificates shall occur until an Exchange Offer Registration Statement shall have been declared effective by the Commission (notice of which shall be provided to the Pass-Through Trustee by the Company). Whenever any Certificates are so surrendered for exchange, the Pass-Through Trustee shall execute, authenticate and deliver the Certificates that the Certificateholder making the exchange is entitled to receive. Every Certificate presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Pass-Through Trustee and the Registrar duly executed by the Certificateholder thereof or its attorney duly authorized in writing. 14 (e) No service charge shall be made to a Certificateholder for any registration of transfer or exchange of Certificates, but the Pass-Through Trustee shall require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. (f) All Certificates surrendered for registration of transfer and exchange shall be canceled and disposed of in accordance with the usual practices of the Pass-Through Trustee. Section 3.5 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a) any mutilated Certificate is surrendered to the Registrar, or the Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) in the case of such destruction, loss or theft, there is delivered to the Registrar and the Pass-Through Trustee such security, indemnity or bond as may be required by them to save each of them and the Pass-Through Trust harmless, then, in the absence of notice to the Registrar or the Pass-Through Trustee that such Certificate has been acquired by a bona fide purchaser, the Pass-Through Trustee, on behalf of the Pass-Through Trust, shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like Fractional Undivided Interest with the same final Distribution Date. In connection with the issuance of any new Certificate under this Section 3.5, the Pass-Through Trustee shall require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Pass-Through Trustee and the Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section 3.5 shall constitute conclusive evidence of the appropriate Fractional Undivided Interest in the Pass-Through Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. Section 3.6 PERSONS DEEMED OWNERS. Prior to due presentation of a Certificate for registration of transfer, the Pass-Through Trustee, the Company, the Owner Trust, the Registrar and any Paying Agent may treat the person in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 4.2 and for all other purposes whatsoever, and neither the Pass-Through Trustee, the Company, the Owner Trust, the Registrar nor any Paying Agent shall be affected by any notice to the contrary. Section 3.7 CANCELLATION. All Certificates surrendered for payment or transfer or exchange shall, if surrendered to any Person a party hereto other than the Registrar, be delivered by such Person to the Registrar for cancellation. No Certificates shall be authenticated in lieu of or in exchange for any Certificates canceled as provided in this Section, except as expressly permitted by this Pass-Through Trust Agreement. All canceled Certificates held by the Registrar shall be disposed of in accordance with the usual practice of the Pass-Through Trustee and, if destroyed, a certification of their destruction shall be delivered to the Pass-Through Trustee. Section 3.8 LIMITATION OF LIABILITY FOR PAYMENTS. All payments or distributions made to Certificateholders under this Pass-Through Trust Agreement shall be made only from the Trust Property and only to the extent that the Pass-Through Trust shall have received sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of Article IV of this Pass-Through Trust Agreement. Each Holder of a Certificate, by its acceptance of such Certificate, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to the Holder thereof as provided in this Pass-Through Trust Agreement. Nothing in this Pass-Through Trust Agreement shall be construed as an agreement, or otherwise creating an obligation, of (a) the Company, the Pass- 15 Through Company or the Pass-Through Trustee to pay any of the principal, premium, if any, and interest due from time to time under the Lessor Notes or (b) the Company or the Pass-Through Company to pay any amount due from time to time in respect of the Certificates. The liability of an Owner Trust under Lessor Notes shall be limited as set forth therein and in the applicable Lease Indenture. Section 3.9 BOOK ENTRY AND DEFINITIVE CERTIFICATES. (a) Except for Certificates issued to Institutional Accredited Investors who are not also qualified institutional buyers ("NON-GLOBAL PURCHASERS"), which must be issued in the form of definitive, fully registered Certificates without interest coupons ("DEFINITIVE CERTIFICATES"), the Certificates may be issued in the form of one or more typewritten Certificates representing the Book-Entry Certificates, to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Company. In such case, the Certificates delivered to DTC shall initially be registered on the Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Certificate Owner will receive a definitive certificate representing such Certificate Owner's interest in the Certificates, except as provided above and in subsection (d) below. As to the Book-Entry Certificates, unless and until Definitive Certificates have been issued pursuant to subsection (d) below: (i) the provisions of this Section 3.9 shall be in full force and effect; (ii) the Company, any Owner Trust, the Paying Agent, the Registrar and the Pass-Through Trustee may deal with the Clearing Agency for all purposes (including the making of distributions on the Certificates) as the authorized representative of the Certificate Owners; (iii) to the extent that the provisions of this Section 3.9 conflict with any other provisions of this Pass-Through Trust Agreement (other than the provisions of any supplemental agreement amending this Section 3.9 as permitted by this Pass-Through Trust Agreement), the provisions of this Section 3.9 shall control; (iv) the rights of Certificate Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Certificate Owners and the Clearing Agency Participants; and until Definitive Certificates are issued pursuant to subsection (d) below, the Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal and interest and premium, if any, on the Certificates to such Clearing Agency Participants; and (v) wherever this Pass-Through Trust Agreement requires or permits actions to be taken based upon instructions or directions of Certificateholders holding Certificates evidencing a specified percentage of the Fractional Undivided Interests in the Pass-Through Trust, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Certificate Owners and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in Certificates and has delivered such instructions to the Pass-Through Trustee. The Pass-Through Trustee shall have no obligation to determine whether the Clearing Agency has in fact received any such instructions. (b) With respect to Book-Entry Certificates, whenever notice or other communication to the Certificateholders is required under this Pass-Through Trust Agreement, unless and until Definitive Certificates shall have been issued pursuant to subsection (d) below, the Pass-Through Trustee shall give all such notices and communications specified herein to be given to Certificateholders to the Clearing Agency and/or the Clearing Agency Participants (and, 16 upon receipt of a valid Certificate Owner Request, to the Certificateholder or Certificate Owner making such request), and shall make available additional copies as requested by such Clearing Agency Participants. (c) Unless and until Definitive Certificates are issued pursuant to subsection (d) below, on the Record Date prior to each applicable Distribution Date and Special Distribution Date, the Pass-Through Trustee will request from the Clearing Agency a "Securities Position Listing" setting forth the names of all Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such Record Date. The Pass-Through Trustee shall mail to each such Clearing Agency Participant the statements described in Section 4.3 hereof. (d) If with respect to the Certificates (i) the Company advises the Pass-Through Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities and the Company is unable to locate a qualified successor within 90 days, (ii) the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trusts) at its option, advises the Pass-Through Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or (iii) after the occurrence of an Event of Default, Certificate Owners of Book-Entry Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Pass-Through Trust, by Act of said Certificate Owners delivered to the Company and the Pass-Through Trustee, advise the Company, the Owner Trusts, the Pass-Through Trustee and the Clearing Agency through the Clearing Agency Participants in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Certificate Owners, then the Pass-Through Trustee shall notify all Certificate Owners, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Certificates. Upon surrender to the Pass-Through Trustee of all the Certificates held by the Clearing Agency, accompanied by registration instructions from the Clearing Agency for registration of Definitive Certificates in the names of Certificate Owners, the Pass-Through Trust shall issue and deliver the Definitive Certificates in accordance with the instructions of the Clearing Agency. None of the Company, the Owner Trusts, the Registrar, the Paying Agent or the Pass-Through Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such registration instructions. Upon the issuance of Definitive Certificates, the Pass-Through Trustee shall recognize the Person in whose name the Definitive Certificates are registered in the Register as Certificateholder hereunder. Neither the Company nor the Pass-Through Trustee shall be liable if the Company is unable to locate a qualified successor Clearing Agency. (e) The Initial Certificates sold in offshore transactions in reliance on Regulation S under the Securities Act will be represented initially by a single, temporary Book-Entry Certificate, in definitive, fully registered form without interest coupons (the "TEMPORARY REGULATION S GLOBAL CERTIFICATE") and will be deposited with the Pass-Through Trustee as custodian for DTC and registered in the name of a nominee of DTC for the accounts of Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System ("EUROCLEAR"), and Clearstream, Luxembourg Banking, SOCIETE ANONYME ("CLEARSTREAM, LUXEMBOURG"). Each Temporary Regulation S Global Certificate will be exchangeable for a single, permanent Book-Entry Certificate (the "PERMANENT REGULATION S GLOBAL CERTIFICATE," and together with the Temporary Regulation S Global Certificate, the "REGULATION S GLOBAL CERTIFICATE") on or after 40 days after the later of the commencement of the offering of the Initial 17 Certificates and the Closing Date upon certification that the beneficial interests in such Book-Entry Certificate are owned by persons who are not U.S. persons as defined in Regulation S. Prior to the expiration of such 40-day period, beneficial interests in the Temporary Regulation S Global Certificate may be held only through Euroclear or Clearstream, Luxembourg, and any resale or other transfer of such interests to U.S. persons shall not be permitted during such period unless such resale or transfer is made pursuant to Rule 144A or Regulation S under the Securities Act and in accordance with the certification requirements specified in Section 3.9(f) below. The aggregate original principal amount of the Regulation S Global Certificate may from time to time be increased or decreased by adjustments made on the records of the Pass-Through Trustee, as custodian for DTC, in connection with a corresponding decrease or increase in the aggregate original principal amount of a Definitive Certificate or the Restricted Global Certificate, as hereinafter provided. (f) The Initial Certificates sold in reliance on Rule 144A under the Securities Act will be represented by a single, permanent Book-Entry Certificate, in definitive, fully registered form without interest coupons (the "RESTRICTED GLOBAL CERTIFICATE") and will be deposited with the Pass-Through Trustee as custodian for DTC and registered in the name of a nominee of DTC. Prior to the 40th day after the later of the commencement of the offering of the Initial Certificates and the Closing Date, a beneficial interest in the Temporary Regulation S Global Certificate may be transferred to a person who takes delivery in the form of an interest in the Restricted Global Certificate only upon receipt by the Pass-Through Trustee of a written certification from the transferor (in the form of Exhibit C hereto) to the effect that such transfer is being made to a person who the transferor reasonably believes is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction. Beneficial interests in the Restricted Global Certificate may be transferred to a person who takes delivery in the form of an interest in the Regulation S Global Certificate whether before, on or after such 40th day, only upon receipt by the Pass-Through Trustee of a written certification (in the form of Exhibit C hereto) to the effect that such transfer is being made in accordance with Regulation S under the Securities Act and, if such transfer occurs prior to such 40th day, the interest will be held immediately thereafter only through Euroclear or Clearstream, Luxembourg. The aggregate initial principal amount of the Restricted Global Certificate may from time to time be increased or decreased by adjustments made on the records of the Pass-Through Trustee, as custodian for DTC, in connection with a corresponding decrease or increase in the aggregate initial principal amount of a Definitive Certificate or a Regulation S Global Certificate, as hereinafter provided. (g) The Exchange Certificates shall be issued in the form of one or more global Certificates substantially in the form of Exhibit A hereto (each, a "GLOBAL EXCHANGE CERTIFICATE"), except that (i) the restricted legend shall be omitted and (ii) such Exchange Certificates shall contain such appropriate insertions, omissions, substitutions and other variations from the form set forth in Exhibit A hereto relating to the nature of the Exchange Certificates as the Responsible Officer of the Pass-Through Trustee executing such Exchange Certificates on behalf of the Pass-Through Trust may determine, as evidenced by such officer's execution on behalf of the Pass-Through Trust of such Exchange Certificates. Such Global Exchange Certificates shall be in registered form and be registered in the name of DTC and deposited with the Pass-Through Trustee, at its Corporate Trust Office, as custodian for DTC. The aggregate principal amount of any Global Exchange Certificate may from time to time be 18 increased or decreased by adjustments made on the records of the Pass-Through Trustee, as custodian for DTC for such Global Exchange Certificate, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Exchange Certificate. Subject to clause (i) and (ii) of the first sentence of this Section 3.9(g), the terms hereof applicable to Restricted Global Certificates and/or Global Certificates shall apply to the Global Exchange Certificates, MUTATIS MUTANDIS. (h) Any beneficial interest in one of the Book-Entry Certificates that is transferred to a person who takes delivery in the form of an interest in another Book-Entry Certificate will, upon transfer, cease to be an interest in such Book-Entry Certificate and become an interest in such other Book Entry Certificate and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Book-Entry Certificate for so long as it remains such an interest. Upon the transfer of Definitive Certificates from a Non-Global Purchaser to a qualified institutional buyer or in accordance with Regulation S, such Definitive Certificates will be exchanged for an interest in a Book-Entry Certificate. The Certificates shall not be issuable in bearer form. (i) The Company and, if necessary, the Pass-Through Trustee shall each enter into the Letter of Representations with respect to the Certificates and fulfill its responsibilities thereunder. Section 3.10 FORM OF CERTIFICATION. In connection with any certification contemplated by Section 3.4, relating to compliance with certain restrictions relating to transfers of Restricted Certificates, such certification shall be provided substantially in the form of Exhibit C hereto, with only such changes as shall be reasonably approved by the Company and reasonably acceptable to the Pass-Through Trustee. ARTICLE IV DISTRIBUTIONS; STATEMENTS TOCERTIFICATEHOLDERS Section 4.1 CERTIFICATE ACCOUNT AND SPECIAL PAYMENTS ACCOUNT. (a) The Pass-Through Trustee shall establish and maintain on behalf of the Certificateholders the Certificate Account (Account No. 049 65700) with the Pass-Through Trustee as one or more non-interest bearing accounts. The Pass-Through Trustee shall hold the Certificate Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Pass-Through Trust Agreement. On each day when a Scheduled Payment is made under a Lease Indenture to the Pass-Through Trustee, as holder of the Lessor Notes issued under such Lease Indenture, the Pass-Through Trustee upon receipt shall immediately deposit the aggregate amount of such Scheduled Payment in the Certificate Account. (b) The Pass-Through Trustee shall establish and maintain on behalf of the Certificateholders the Special Payments Account (Account No. 049 65800) with the Pass-Through Trustee as one or more accounts, which shall be non-interest bearing except as provided in Section 4.4. The Pass-Through Trustee shall hold the Special Payments Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Pass-Through Trust Agreement. On each day when a Special Payment (other than a Special Payment that represents the proceeds of any sale pursuant to Article VI hereof by the Pass-Through Trustee of a Lessor Note) is made under a Lease Indenture to the Pass-Through Trustee, as 19 holder of the Lessor Notes issued under such Lease Indenture, the Pass-Through Trustee upon receipt shall immediately deposit the aggregate amounts of such Special Payments in the Special Payments Account. Upon the sale of any Lessor Note by the Pass-Through Trustee pursuant to Article VI hereof and the realization of any proceeds thereof, the Pass-Through Trustee shall deposit the aggregate amount of such proceeds as a Special Payment in the Special Payments Account. (c) The Pass-Through Trustee shall present to each Lease Indenture Trustee each Lessor Note issued under the related Lease Indenture, on the date of its stated final maturity, or in the case of any Lessor Note which is to be prepaid in whole pursuant to a Lease Indenture, on the applicable prepayment date under such Lease Indenture. Section 4.2 DISTRIBUTIONS FROM CERTIFICATE ACCOUNT AND SPECIAL PAYMENTS ACCOUNT. (a) On each Distribution Date if the Pass-Through Trustee receives payment of the Scheduled Payments due on the Lessor Notes on such date by 1:00 p.m., New York time, on such date, the Pass-Through Trustee shall distribute out of the Certificate Account the entire amount deposited therein pursuant to Section 4.1(a). If a Scheduled Payment is not received by the Pass-Through Trustee by 1:00 p.m., New York time, on a Distribution Date, such payment shall be distributed on the next Business Day. If a Scheduled Payment is not received by the Pass-Through Trustee on a Distribution Date but is received prior to the time such payment would become a Special Payment, such payment shall be distributed (i) on the date received, if received by 1:00 p.m., New York time, on such date or (ii) on the next Business Day, if received after 1:00 p.m., New York time, on such date. There shall be so distributed to each Certificateholder of record on the Record Date with respect to such Distribution Date (other than as provided in Section 11.1 concerning the final distribution) (i) if (A) DTC is the Certificateholder of record, or (B) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $10,000,000, or (C) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $1,000,000 and so requests to the Pass-Through Trustee, wire transfer in immediately available funds to an account maintained by such Certificateholder with a bank, or (ii) if none of the above apply, by check mailed to such Certificateholder at the address appearing in the Register, such Certificateholder's pro rata share (based on the aggregate Fractional Undivided Interest held by such Certificateholder) of the aggregate amount in the Certificate Account. (b) On each Special Distribution Date with respect to any Special Payment if the Pass-Through Trustee receives the Special Payments due on such date by 1:00 p.m., New York time, on such date, the Pass-Through Trustee shall distribute out of the Special Payments Account the entire amount deposited therein with respect to such Special Payment pursuant to Section 4.1(b). If a Special Payment is not received by the Pass-Through Trustee by 1:00 p.m., New York time, on a Special Distribution Date, such payment shall be distributed on the next Business Day. If a Special Payment is not received by the Pass-Through Trustee on a Special Distribution Date, such payment shall be distributed (i) on the date received, if received by 1:00 p.m., New York time, on such date or (ii) on the next Business Day, if received after 1:00 p.m., New York time, on such date. There shall be so distributed to each Certificateholder of record on the Record Date with respect to such Special Distribution Date (other than as provided in Section 11.1 concerning the final distribution) (i) if (A) DTC is the Certificateholder of record, or (B) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $10,000,000, or (C) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $1,000,000 and so requests to the Pass-Through Trustee, by wire transfer in 20 immediately available funds to an account maintained by the Certificateholder with a bank, or (ii) if none of the above apply, by check mailed to such Certificateholder at the address appearing in the Register, such Certificateholder's pro rata share (based on the aggregate Fractional Undivided Interest held by such Certificateholder) of the aggregate amount in the Special Payments Account on account of such Special Payment. (c) The Pass-Through Trustee shall at the expense of the Company cause notice of each Special Payment to be mailed to (i) each Certificateholder, at the address of such Certificateholder as it appears in the Register and (ii) any Certificate Owner who has made a valid Certificate Owner Request, at the address specified in such Certificate Owner Request. In the event of prepayment of Lessor Notes, such notice shall be mailed not less than 20 days prior to the date any such Special Payment is scheduled to be distributed. In the case of any other Special Payments, such notice shall be mailed as soon as practicable after the Pass-Through Trustee has confirmed that it has received funds for such Special Payment. Notices mailed by the Pass-Through Trustee shall set forth: (i) the Special Distribution Date and the Record Date therefor (except as otherwise provided in Section 11.1); (ii) the amount of the Special Payment per $1,000 of face amount of Certificates and the amount thereof constituting principal, premium, if any, and interest; (iii) the reason for the Special Payment; and (iv) if the Special Distribution Date is the same date as a Distribution Date, the total amount to be received on such date per $1,000 of face amount of Certificates. If the amount of premium payable upon the prepayment of a Lessor Note has not been calculated at the time that the Pass-Through Trustee mails notice of a Special Payment, it shall be sufficient if the notice sets forth the other amounts to be distributed and states that any premium received will also be distributed. Section 4.3 STATEMENTS TO CERTIFICATEHOLDERS. (a) On each Distribution Date and Special Distribution Date, the Pass-Through Trustee will include with each distribution to Certificateholders and any Certificate Owner who has made a valid Certificate Owner Request a statement, giving effect to such distribution to be made on such date, setting forth the following information (per a $1,000 face amount Certificate as to (i) and (ii) below): (i) the amount of such distribution allocable to principal and the amount allocable to premium, if any; and (ii) the amount of such distribution allocable to interest. (b) Within a reasonable period of time after the end of each calendar year but not later than the latest date permitted by law, the Pass-Through Trustee shall furnish (i) to each Person who at any time during such calendar year was a Certificateholder of record and (ii) to any Certificate Owner who has made a valid Certificate Owner Request and provided the Pass-Through Trustee with such pertinent information as the Pass-Through Trustee shall reasonably request, a report containing the sum of the amounts determined pursuant to clauses (a)(i) and (a)(ii) with respect to the Pass-Through Trust for such calendar year or, in the event such Person was a Certificateholder of record or Certificate Owner during a portion of such calendar year, for the applicable portion of such year, and such other items as are readily available to the Pass-Through Trustee and which a Certificateholder or Certificate Owner shall reasonably request as necessary for the purpose of such Certificateholder's or Certificate Owner's preparation of its Federal income tax returns. 21 Section 4.4 INVESTMENT OF SPECIAL PAYMENT MONEYS. Any money received by the Pass-Through Trustee pursuant to Section 4.1(b) representing a Special Payment which is not to be promptly distributed shall, to the extent practicable, be invested in Permitted Government Investments by the Pass-Through Trustee pending distribution of such Special Payment pursuant to Section 4.2. Any investment made pursuant to this Section 4.4 shall be in such Permitted Government Investments having maturities not later than the date that such moneys are required to be paid to make the payment required under Section 4.2 on the applicable Special Distribution Date and the Pass-Through Trustee shall hold any such Permitted Government Investments until maturity. The Pass-Through Trustee shall have no liability with respect to any investment made pursuant to this Section 4.4, other than by reason of the willful misconduct or negligence of the Pass-Through Trustee. All income and earnings from such investments shall be distributed on such Special Distribution Date as part of such Special Payment. Section 4.5. ADJUSTMENT OF INTEREST RATES APPLICABLE TO CERTIFICATES. (a) Subject to Sections 4.5(b) and 4.5(c), interest on the Certificates shall be payable at the rates specified in the first paragraph of the Lessor Notes without regard to the second paragraph of the Lessor Notes. (b) If an Illiquidity Event shall have occurred and be continuing, the interest rate applicable to the Lessor Notes (and consequently, the interest rate applicable to the Certificates) shall be increased by 0.50% per annum from and after the date such Illiquidity Event occurs to but excluding the date on which such Illiquidity Event shall cease to exist. (c) If a Reporting Cessation occurs, the interest rate applicable to the Lessor Notes (and consequently, the interest rate applicable to the Certificates) shall be increased by 0.50% per annum from the date such Reporting Cessation occurs until such time as the Reporting Cessation has ended; PROVIDED, HOWEVER, that if an Illiquidity Event and a Reporting Cessation shall have occurred and be continuing at the same time, the maximum increase in the interest rate applicable to the Lessor Notes (and consequently, the interest rate applicable to the Certificates) shall be 0.50% per annum. ARTICLE V THE COMPANY Section 5.1 REPORTS. For so long as any Certificates remain Outstanding, the Company shall furnish: (a) to Certificateholders, Certificate Owners and prospective investors, upon their request, unless the Company shall at the time be subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Certificates are not freely transferable under the Securities Act, and (b) to the Pass-Through Trustee, who in turn shall provide such information, upon a Certificate Owner Request, to Certificateholders and Certificate Owners (i) within 60 days following the end of each of the first three fiscal quarters of the Company during each fiscal year, unaudited quarterly financial statements, (ii) within 120 days following the end of the fiscal year of Holdings, audited annual financial statements (with the accompanying footnotes and audit report) and (iii) within 20 days after the occurrence thereof, notice of the following events: (A) a change in control with respect to the Company; (B) the acquisition or disposition of a significant amount of assets by the Company; (C) the appointment of a receiver over the Company or the confirmation of a plan of reorganization or liquidation for the Company; or (D) the resignation or dismissal of the independent accountants engaged by the 22 Company. Notwithstanding the foregoing, in the event annual audited financial statements of the Company become and for so long as they continue to be available, information delivery requirements of Section 5.1(b)(ii) shall be deemed to refer to such annual audited financial statements of the Company and not the annual audited financial statements of Holdings. In addition, following the effectiveness of any Registration Statement pursuant to the Registration Rights Agreement, whether or not required by the rules and regulations of the Commission, EME and the Company shall each maintain its status as a reporting company under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. If at any time either EME or the Company ceases to maintain its status as a reporting company under the Exchange Act (such cessation, a "REPORTING CESSATION"), the interest payable on the Lessor Notes (and consequently, the interest payable on the Certificates) shall increase as provided in Section 4.5(c); PROVIDED, HOWEVER, that no Reporting Cessation shall be deemed to occur if the Commission will not accept the information and reports of EME or the Company to be filed pursuant to the Exchange Act. ARTICLE VI DEFAULT Section 6.1 EVENTS OF DEFAULT. With respect to any Lessor Note, if a Lease Indenture Event of Default under the applicable Lease Indenture (an "EVENT OF DEFAULT") shall occur and be continuing, then, and in each and every case, so long as such Lease Indenture Event of Default shall be continuing, the Pass-Through Trustee may vote all of the Lessor Notes issued under such Lease Indenture held in the Pass-Through Trust, and upon the Direction of the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)), the Pass-Through Trustee shall vote a corresponding majority of such Lessor Notes, in favor of directing the applicable Lease Indenture Trustee to declare the unpaid principal amount of such Lessor Notes then outstanding and accrued interest thereon to be due and payable under, and to the extent permitted by and in accordance with, the provisions of such Lease Indenture. In addition, with respect to any Lessor Note, if a Lease Indenture Event of Default shall have occurred and be continuing under the related Lease Indenture, the Pass-Through Trustee may, and upon the Direction of Holders as provided in Section 6.4 shall, in accordance with such Lease Indenture vote the applicable Lessor Notes issued thereunder held in the Pass-Through Trust to direct the applicable Lease Indenture Trustee regarding the exercise of remedies provided in such Lease Indenture and consistent with the terms thereof. Notwithstanding the foregoing, no Lease Indenture Event of Default under a given Lease Indenture shall give rise to a Lease Indenture Event of Default under any other Lease Indenture. In addition, after an Event of Default shall have occurred and be continuing, the Pass-Through Trustee may in its discretion, and upon the Direction of the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)) shall, by such officer or agent as it may appoint, sell, convey, 23 transfer and deliver all or a portion of such Lessor Note or Lessor Notes issued under a Lease Indenture with respect to which the Event of Default has occurred, without recourse to or warranty by the Pass-Through Trustee or any Certificateholders to any Person. In any such case, the Pass-Through Trustee shall sell, assign, contract to sell or otherwise dispose of and deliver such Lessor Note or Lessor Notes in one or more parcels at public or private sale or sales, at any location or locations at the option of the Pass-Through Trustee, all upon such terms and conditions as it may reasonably deem advisable and at such prices as it may reasonably deem advisable, for cash. The Pass-Through Trustee shall give notice to the Company and the applicable Owner Trust promptly after any such sale. Section 6.2 INCIDENTS OF SALE OF LESSOR NOTES. Upon any sale of all or any part of the Lessor Notes made either under the power of sale given under this Pass-Through Trust Agreement or otherwise for the enforcement of this Pass-Through Trust Agreement, the following shall be applicable: (1) CERTIFICATEHOLDERS AND PASS-THROUGH TRUSTEE MAY PURCHASE LESSOR NOTES. Any Certificateholder, the Pass-Through Trustee in its individual or any other capacity or any other Person may bid for and purchase any of the Lessor Notes and, upon compliance with the terms of sale, may hold, retain, possess and dispose of such Lessor Notes in their or its or his own absolute right without further accountability. (2) RECEIPT OF PASS-THROUGH TRUSTEE SHALL DISCHARGE PURCHASER. The receipt of immediately available funds by the Pass-Through Trustee shall be a sufficient discharge to any purchaser for his purchase money, and, after paying such purchase money and receiving such receipt, such purchaser or his personal representative or assigns shall not be obliged to see to the application of such purchase money, or be in any way answerable for any loss, misapplication or non-application thereof. (3) APPLICATION OF MONEYS RECEIVED UPON SALE. Any moneys collected by the Pass-Through Trustee upon any sale made either under the power of sale given by this Pass-Through Trust Agreement or otherwise for the enforcement of this Pass-Through Trust Agreement, shall be applied as provided in Section 4.2. Section 6.3 JUDICIAL PROCEEDINGS INSTITUTED BY PASS-THROUGH TRUSTEE. (a) PASS-THROUGH TRUSTEE MAY BRING SUIT. If there shall be a failure to make payment of the principal of, premium, if any, or interest on any Lessor Note, or if there shall be any failure to pay Rent (as defined in a Lease) under the Lease related to any Lessor Note when due and payable (and to the extent such payment of Rent is not made under the EME Guarantee), then the Pass-Through Trustee, in its own name, and as trustee of an express trust, as holder of such Lessor Notes, shall be, to the extent permitted by and in accordance with the terms of the applicable Lease Financing Documents, entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on such Lessor Notes or under the applicable Lease and may prosecute any such claim or proceeding to judgment or final decree with respect to the whole amount of any such sums so due and unpaid; SUBJECT, HOWEVER, to the limitations of liability set forth in the Lessor Notes and the applicable Lease Financing Documents. (b) PASS-THROUGH TRUSTEE MAY FILE PROOFS OF CLAIM; APPOINTMENT OF PASS-THROUGH TRUSTEE AS ATTORNEY-IN-FACT IN JUDICIAL PROCEEDINGS. The Pass-Through Trustee in its own name, or as trustee of an express trust, or as attorney-in-fact for the Certificateholders, or in any one or more of such capacities (irrespective of whether distributions on the Certificates shall then be due 24 and payable, or the payment of the principal on any Lessor Notes shall then be due and payable, as therein expressed or by declaration or otherwise and irrespective of whether the Pass-Through Trustee shall have made any demand to the applicable Lease Indenture Trustee for the payment of overdue principal, premium (if any) or interest on any Lessor Notes), shall, subject to the terms of the applicable Lease Financing Documents, be entitled and empowered to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Pass-Through Trustee and of the Certificateholders allowed in any receivership, insolvency, bankruptcy, liquidation, readjustment, reorganization or any other judicial proceedings relative to the Company, any Owner Trust, any Owner Trustee or any Owner Participant, their respective creditors or property. Subject to the terms of the applicable Lease Financing Documents, any receiver, assignee, trustee, liquidator or sequestrator (or similar official) in any such judicial proceeding is hereby authorized by each Certificateholder to make payments in respect of such claim to the Pass-Through Trustee, and in the event that the Pass-Through Trustee shall consent to the making of such payments directly to the Certificateholders, to pay to the Pass-Through Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Pass-Through Trustee, its agents and counsel. Subject to Section 6.4, nothing contained in this Pass-Through Trust Agreement shall be deemed to give to the Pass-Through Trustee any right to accept or consent to any plan of reorganization or otherwise by action of any character in any such proceeding to waive or change in any way any right of any Certificateholder. Section 6.4 CONTROL BY CERTIFICATEHOLDERS. The Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time outstanding (determined as provided in Section 1.4(c)) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Pass-Through Trustee, or exercising any trust or power conferred upon the Pass-Through Trustee, under this Pass-Through Trust Agreement, including any right of the Pass-Through Trustee as holder of the Lessor Notes, PROVIDED that (1) such Direction shall not be in conflict with any rule of law or with this Pass-Through Trust Agreement and would not involve the Pass-Through Trustee in personal liability or expense, (2) the Pass-Through Trustee shall not determine that the action so directed would be unjustly prejudicial to the Certificateholders not taking part in such Direction, (3) the Pass-Through Trustee may take any other action deemed proper by the Pass-Through Trustee which is not inconsistent with such Direction, (4) such Holders shall have offered to the Pass-Through Trustee security or indemnity against the costs, expenses or liabilities which may be incurred thereby, and (5) if a Lease Indenture Event of Default shall have occurred and be continuing, such Direction shall not obligate the Pass-Through Trustee to vote more than a corresponding majority of the applicable Lessor Notes held by the Pass-Through Trust in favor of directing any action by the applicable Lease Indenture Trustee with respect to such Lease Indenture Event of Default. Section 6.5 WAIVER OF DEFAULTS. The Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)) may on behalf of the Certificateholders of all the Certificates waive 25 any Default hereunder and its consequences or may instruct the Pass-Through Trustee to waive any default under a Lease Indenture and its consequences, except a Default (1) in the deposit of any Scheduled Payment or Special Payment under Section 4.1 or in the distribution of any payment under Section 4.2 on the Certificates, or (2) in the payment of the principal of, premium, if any, or interest on any Lessor Notes, or (3) in respect of a covenant or provision hereof which under Article IX hereof cannot be modified or amended without the consent of the Holder of each Outstanding Certificate affected. Upon any such waiver, such Default shall cease to exist with respect to this Pass-Through Trust Agreement, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Pass-Through Trust Agreement and any direction given by the Pass-Through Trustee on behalf of such Holders to the applicable Lease Indenture Trustee shall be annulled with respect thereto; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Upon any such waiver, the Pass-Through Trustee shall vote the Lessor Notes issued under the applicable Lease Indenture to waive the corresponding Lease Indenture Default or Lease Indenture Event of Default. With respect to consents, approvals, waivers and authorizations which under the terms of Article VI of a Lease Indenture may be given by a Lease Indenture Trustee without the necessity of the consent of any of the holders of Lessor Notes, no consent, approval, waiver or authorization shall be required hereunder on the part of the Pass-Through Trustee or the Certificateholders. Section 6.6 UNDERTAKING TO PAY COURT COSTS. All parties to this Pass-Through Trust Agreement, and each Certificateholder by his acceptance of a Certificate, shall be deemed to have agreed that any court may in its discretion require, in any suit, action or proceeding for the enforcement of any right or remedy under this Pass-Through Trust Agreement, or in any suit, action or proceeding against the Pass-Through Trustee for any action taken or omitted by it as Pass-Through Trustee hereunder, the filing by any party litigant in such suit, action or proceeding of an undertaking to pay the costs of such suit, action or proceeding, and that such court may, in its discretion, assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, action or proceeding, having due regard to the merits and good faith of the claims or defenses made by such party litigant it being understood that any such requirement for the Pass-Through Trustee to assume any such costs is subject to the limitations set forth in Section 7.1 hereof; PROVIDED, HOWEVER, that the provisions of this Section shall not apply to (a) any suit, action or proceeding instituted by any Holder, or group of Holders, holding in the aggregate Certificates evidencing Fractional Divided Interests aggregating more than 10% of the Pass-Through Trust, (b) any suit, action or proceeding instituted by any Certificateholder for the enforcement of the distribution of payments pursuant to Section 4.2 hereof on or after the respective due dates expressed herein or (c) any suit, action or proceeding instituted by the Pass-Through Trustee. Section 6.7 RIGHT OF CERTIFICATEHOLDERS TO RECEIVE PAYMENTS NOT TO BE IMPAIRED. Anything in this Pass-Through Trust Agreement to the contrary notwithstanding, the right of any Certificateholder to receive distributions of payments required pursuant to Section 4.2 hereof on the Certificates when due, or to institute suit for the enforcement of any such payment on or after the applicable Distribution Date or Special Distribution Date, shall not be impaired or affected without the consent of such Certificateholder. 26 Section 6.8 CERTIFICATEHOLDERS MAY NOT BRING SUIT EXCEPT UNDER CERTAIN CONDITIONS. A Certificateholder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise with respect to this Pass-Through Trust Agreement, for the appointment of a receiver or for the enforcement of any other remedy under this Pass-Through Trust Agreement, unless: (1) such Certificateholder previously shall have given written notice to the Pass-Through Trustee of a continuing Event of Default; (2) the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)) shall have requested the Pass-Through Trustee in writing to institute such suit, action or proceeding and shall have offered to the Pass-Through Trustee indemnity as provided in Section 7.3(e); (3) the Pass-Through Trustee shall have refused or neglected to institute any such suit, action or proceeding for 60 days after receipt of such notice, request and offer of indemnity; and (4) no Direction inconsistent with such written request has been given to the Pass-Through Trustee during such 60-day period by the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)). It is understood and intended that no one or more of the Certificateholders shall have any right in any manner whatever hereunder or under the Certificates to (i) surrender, impair, waive, affect, disturb or prejudice any property in the Trust Property or the lien of any Lease Indenture on any property subject thereto, or the rights of the Certificateholders or the holders of the Lessor Notes, (ii) obtain or seek to obtain priority over or preference to any other such Holder or (iii) enforce any right under this Pass-Through Trust Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all the Certificateholders subject to the provisions of this Pass-Through Trust Agreement. Section 6.9 REMEDIES CUMULATIVE. Every remedy given hereunder to the Pass-Through Trustee or to any of the Certificateholders shall not be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter given by statute, law, equity or otherwise. ARTICLE VII THE PASS-THROUGH TRUSTEE Section 7.1 CERTAIN DUTIES AND RESPONSIBILITIES. (a) Prior to an Event of Default of which a Responsible Officer of the Pass-Through Trustee has actual knowledge, (1) the Pass-Through Trustee shall not be liable except for the performance of such duties as are specifically set out in this Pass-Through Trust Agreement; and (2) the Pass-Through Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, in the absence of bad 27 faith on the part of the Pass-Through Trustee, upon Officer's Certificates or Opinions of Counsel conforming to the requirements of this Pass-Through Trust Agreement; but the Pass-Through Trustee shall, at any time that the Certificates shall be subject to the Trust Indenture Act, examine the evidence furnished to it pursuant to Section 314 of the Trust Indenture Act to determine whether or not such evidence conforms to the requirements of this Pass-Through Trust Agreement; PROVIDED, HOWEVER, that the Pass-Through Trustee shall not be responsible for the accuracy of content of such evidence. (b) In case an Event of Default has occurred and is continuing, the Pass-Through Trustee shall exercise each of the rights and powers vested in it by this Pass-Through Trust Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Pass-Through Trust Agreement shall be construed to relieve the Pass-Through Trustee from liability for its own grossly negligent action or its own grossly negligent failure to act, or its own willful misconduct, except that: (1) this subsection shall not be construed to limit the effect of subsection (a) of this Section; (2) the Pass-Through Trustee shall not be liable in its individual capacity for any error of judgment made in good faith by a Responsible Officer of the Pass-Through Trustee, unless it shall be proved that the Pass-Through Trustee was grossly negligent in ascertaining the pertinent facts; and (3) the Pass-Through Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the Direction of the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)) relating to the time, method and place of conducting any proceeding for any remedy available to the Pass-Through Trustee, or exercising any trust or power conferred upon the Pass-Through Trustee, under this Pass-Through Trust Agreement. (d) Whether or not herein expressly so provided, every provision of this Pass-Through Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Pass-Through Trustee shall be subject to the provisions of this Section. Section 7.2 NOTICE OF DEFAULTS. The Pass-Through Trustee shall give to the Certificateholders, at any time that the Certificates shall be subject to the Trust Indenture Act, in the manner and to the extent required by Section 313(c) of the Trust Indenture Act, and to the Company, any Owner Trusts and any Lease Indenture Trustees in accordance with Section 12.3, notice of all Defaults actually known to a Responsible Officer of the Pass-Through Trustee within 90 days after the occurrence thereof, PROVIDED, HOWEVER, that, except in the case of a Default in the payment of the principal of, premium, if any, or interest on any Lessor Note, the Pass-Through Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Pass-Through Trustee in good faith determine that the withholding of such notice is in the interests of the Certificateholders. Section 7.3 CERTAIN RIGHTS OF PASS-THROUGH TRUSTEE. Subject to the provisions of Section 315 of the Trust Indenture Act, and except as otherwise provided in Section 7.1: (a) the Pass-Through Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any Act, Direction, resolution, certificate, statement, 28 instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Request; (c) whenever in the administration of this Pass-Through Trust Agreement the Pass-Through Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Pass-Through Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of the Company, an Owner Trust or a Lease Indenture Trustee; (d) the Pass-Through Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Pass-Through Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Pass-Through Trust Agreement at the request or direction of any of the Certificateholders pursuant to this Pass-Through Trust Agreement unless such Certificateholders shall have offered to the Pass-Through Trustee reasonable security or indemnity against the cost, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Pass-Through Trustee shall not be bound to make any investigation into the facts or matters stated in any Act, Direction, resolution, certificate, statement, instrument, opinion, report, notice, request direction, consent, order, bond, debenture or other paper or document; (g) the Pass-Through Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Pass-Through Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it hereunder with due care; (h) the Pass-Through Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion of rights or powers conferred upon it by this Agreement; (i) the right of the Pass-Through Trustee to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and the Pass-Through Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of such act; (j) the Pass-Through Trustee shall not be required to give any bond or surety in respect of the execution of the trust fund created hereby or the powers granted hereunder or expend any of its own funds in any action brought pursuant to this Agreement; and (k) the Pass-Through Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder or to record this Agreement. Section 7.4 NOT RESPONSIBLE FOR RECITALS; ISSUANCE OF CERTIFICATES. The recitals contained herein and in the Certificates, except the certificates of authentication, shall not be taken as the statements of the Pass-Through Trustee, and the Pass-Through Trustee assumes no responsibility for their correctness. The Pass-Through Trustee makes no representations as to the 29 validity or sufficiency of this Pass-Through Trust Agreement, the Lessor Notes, the applicable Lease Financing Documents or the Certificates, or the Collateral securing the Lessor Notes, except that the Pass-Through Trustee hereby represents and warrants that this Pass-Through Trust Agreement and the Registration Rights Agreement have been, and each Certificate will be, executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 7.5 MAY HOLD CERTIFICATES. The Pass-Through Trustee, any Paying Agent, Registrar or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of Certificates and subject to Sections 310(b) and 311 of the Trust Indenture Act, if applicable, may otherwise deal with the Company, any Owner Trust, any Owner Participant and any Lease Indenture Trustee with the same rights it would have if it were not the Pass-Through Trustee, Paying Agent, Registrar or such other agent, subject to Section 7.8 in the case of the Pass-Through Trustee. Section 7.6 MONEY HELD IN PASS-THROUGH TRUST. Money held by the Pass-Through Trustee or the Paying Agent in trust hereunder need not be segregated from other funds except to the extent required herein or by law and neither the Pass-Through Trustee nor the Paying Agent shall have any liability for interest upon any such moneys except as provided for herein. Section 7.7 COMPENSATION, REIMBURSEMENT AND INDEMNIFICATION. The Company agrees: (1) to pay, or cause to be paid, to the Pass-Through Trustee from time to time the compensation separately agreed to by the Pass-Through Trustee and the Company for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (2) except as otherwise expressly provided herein, to reimburse, or cause to be reimbursed, the Pass-Through Trustee upon its request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Pass-Through Trustee in accordance with any provision of this Pass-Through Trust Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its gross negligence, willful misconduct or bad faith. In addition, the Pass-Through Trustee shall be entitled to reimbursement from, and shall have a lien prior to the Certificates upon, all property and funds held or collected by the Pass-Through Trustee in its capacity as Pass-Through Trustee for any tax incurred without gross negligence, bad faith or willful misconduct, on its part, arising out of or in connection with the acceptance or administration of this Pass-Through Trust (other than any tax attributable to the Pass-Through Trustee's compensation for serving as such), including any costs and expenses incurred in contesting the imposition of any such tax. If the Pass-Through Trustee reimburses itself for any such tax, it will within 30 days mail a brief report setting forth the circumstances thereof to all Certificateholders as their names and addresses appear in the Register. Section 7.8 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Pass-Through Trustee hereunder which (a) shall be, at any time that the Certificates shall be subject to the Trust Indenture Act, a Person eligible to act as a trustee under Section 310(a) of the Trust Indenture Act and (b) shall be a corporation organized and doing business under the laws of the United States of America or of any state, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $100,000,000, and subject to 30 supervision or examination by Federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Pass-Through Trustee shall cease to be eligible in accordance with the provisions of clause (a) of this Section at a time when it is required to be so qualified, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 7.9 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Pass-Through Trustee and no appointment of a successor Pass-Through Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Pass-Through Trustee under Section 7.10. (b) The Pass-Through Trustee may resign at any time by giving written notice thereof to the Company, the Authorized Agents, the Owner Trusts, the Owner Participants and the Lease Indenture Trustees. If an instrument of acceptance by a successor Pass-Through Trustee shall not have been delivered to the Company, the Owner Trusts, the Owner Participants and the Lease Indenture Trustees within 30 days after the giving of such notice of resignation, the resigning Pass-Through Trustee may petition any court of competent jurisdiction for the appointment of a successor Pass-Through Trustee. (c) The Pass-Through Trustee may be removed at any time by Act of the Holders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Pass-Through Trust delivered to the Pass-Through Trustee and to the Company, the Owner Trusts and the Lease Indenture Trustees. (d) If at any time: (1) the Pass-Through Trustee fails to, at any time that the Certificates shall be subject to the Trust Indenture Act, comply with the requirements of Section 310 of the Trust Indenture Act after written request for such compliance by a Certificateholder that has been a bona fide Certificateholder for at least six months; or (2) the Pass-Through Trustee shall cease to be eligible under Section 7.8 and shall fail to resign after written request therefor by the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) or by any such Certificateholder; or (3) the Pass-Through Trustee shall become incapable of acting or shall be adjudged bankrupt or insolvent or a receiver of the Pass-Through Trustee or of its property shall be appointed or any public officer shall take charge or control of the Pass-Through Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any case, (i) the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) may remove the Pass-Through Trustee or (ii) subject to Section 6.6, any Certificateholder who has been a bona fide Holder of a Certificate for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Pass-Through Trustee and the appointment of a successor Pass-Through Trustee. (e) If a Responsible Officer of the Pass-Through Trustee shall obtain Actual Knowledge of an Avoidable Tax (as hereinafter defined) which has been or is likely to be asserted, the Pass-Through Trustee shall promptly notify the Company and the Owner Trust 31 thereof and shall, within 30 days of such notification, resign hereunder unless within such 30-day period the Pass-Through Trustee shall have received notice that the Company or the Owner Trusts have agreed to pay such tax. The Company shall promptly appoint a successor Pass-Through Trustee in a jurisdiction where there are no Avoidable Taxes. As used herein an Avoidable Tax means a state or local tax: (i) upon (w) the Pass-Through Trust, (x) the Trust Property, (y) Holders of the Certificates or (z) the Pass-Through Trustee for which the Pass-Through Trustee is entitled to seek reimbursement from the Trust Property, and (ii) that would be avoided if the Pass-Through Trustee were located in another state, or jurisdiction within a state, within the United States. A tax shall not be an Avoidable Tax if the Company or the Owner Trusts shall agree to pay, and shall pay, such tax. (f) If the Pass-Through Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Pass-Through Trustee for any cause, the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) shall promptly appoint a successor Pass-Through Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Pass-Through Trustee shall be appointed by Act of the Holders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Pass-Through Trust, delivered to the Company, the Owner Trusts, the Owner Participants, the Lease Indenture Trustees and the retiring Pass-Through Trustee, the successor Pass-Through Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Pass-Through Trustee and supersede the successor Pass-Through Trustee appointed as provided above. If no successor Pass-Through Trustee shall have been so appointed as provided above and accepted appointment in the manner hereinafter provided, any Certificateholder who has been a bona fide Holder of a Certificate for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Pass-Through Trustee. (g) The successor Pass-Through Trustee shall give notice of the resignation and removal of the Pass-Through Trustee and appointment of the successor Pass-Through Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Certificates as their names and addresses appear in the Register. Each notice shall include the name of such successor trustee and the address of its Corporate Trust Office. Section 7.10 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor Pass-Through Trustee appointed hereunder shall execute, acknowledge and deliver to the Company, the Owner Trusts and to the retiring Pass-Through Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Pass-Through Trustee shall become effective and such successor Pass-Through Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Pass-Through Trustee; but, on request of the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) to the successor Pass-Through Trustee, such retiring Pass-Through Trustee shall execute and deliver an instrument transferring to such successor Pass-Through Trustee all the rights, powers and trusts of the retiring Pass-Through Trustee and shall duly assign, transfer and deliver to such successor Pass-Through Trustee all property and money held by such retiring Pass-Through Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 7.7. Upon request of any such successor Pass-Through Trustee, the Company, the Owner Trusts, the retiring Pass-Through Trustee and such successor Pass-Through Trustee shall execute and deliver any and all instruments containing such 32 provisions as shall be necessary or desirable to transfer and confirm to, and for more fully and certainly vesting in, such successor Pass-Through Trustee all such rights, powers and trusts. No successor Pass-Through Trustee shall accept its appointment unless at the time of such acceptance such successor Pass-Through Trustee shall be qualified and eligible under this Article. Section 7.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Pass-Through Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Pass-Through Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Pass-Through Trustee, shall be the successor of the Pass-Through Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Certificates shall have been authenticated, but not delivered, by the Pass-Through Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Pass-Through Trustee may adopt such authentication and deliver the Certificates so authenticated with the same effect as if such successor Pass-Through Trustee had itself authenticated such Certificates. Section 7.12 MAINTENANCE OF AGENCIES. (a) There shall at all times be maintained in the Borough of Manhattan, the City of New York, an office or agency where Certificates may be presented or surrendered for registration of transfer or for exchange, and for payment thereof and where notices and demands to or upon the Pass-Through Trustee in respect of the Certificates or of this Pass-Through Trust Agreement may be served. Such office or agency shall be initially at 114 West 47th Street, New York, New York 10036. Written notice of the location of each such other office or agency and of any change of location thereof shall be given by the Pass-Through Trustee to the Company, the Owner Trusts, the Owner Participants, the Lease Indenture Trustees and the Certificateholders. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Pass-Through Trustee. (b) There shall at all times be a Registrar and a Paying Agent hereunder. Each such Authorized Agent shall be a bank or trust company, shall be a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $100,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by Federal or state authorities. The Pass-Through Trustee shall initially be the Paying Agent and, as provided in Section 3.4, Registrar hereunder. Each Registrar shall furnish to the Pass-Through Trustee, at stated intervals of not more than six months, and at such other times as the Pass-Through Trustee may request in writing, a copy of the Register. (c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor corporation. 33 (d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Pass-Through Trustee, the Company, the Owner Trusts, the Owner Participants and the Lease Indenture Trustees. The Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) may, and at the request of the Pass-Through Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Pass-Through Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section (when, in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) shall promptly appoint one or more qualified successor Authorized Agents reasonably satisfactory to the Pass-Through Trustee, to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section. The Company (or, following the occurrence of a Lease Event of Default, the applicable Owner Trust) shall give written notice of any such appointment made by it to the Pass-Through Trustee, the Company, the Owner Trusts and the Lease Indenture Trustees; and in each case the Pass-Through Trustee shall mail notice of such appointment to all Holders as their names and addresses appear on the Register. (e) The Company agrees to pay, or cause to be paid, from time to time to each Authorized Agent the compensation as set forth in the schedule agreed to by each Authorized Agent and the Company for its services and to reimburse it for its reasonable expenses. Section 7.13 MONEY FOR CERTIFICATE PAYMENTS TO BE HELD IN TRUST. All moneys deposited with any Paying Agent for the purpose of any payment on Certificates shall be deposited and held in trust for the benefit of the Holders of the Certificates entitled to such payment, subject to the provisions of this Section. Moneys so deposited and held in trust shall constitute a separate trust fund for the benefit of the Holders of the Certificates with respect to which such money was deposited. The Pass-Through Trustee will cause each Paying Agent other than the Pass-Through Trustee to execute and deliver to it an instrument in which such Paying Agent shall agree with the Pass-Through Trustee, subject to the provisions of this Section, that such Paying Agent will (1) hold all sums held by it for payments on Certificates in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Pass-Through Trustee notice in writing of any default by any obligor upon the Certificates in the making of any such payment; and (3) at any time during the continuance of any such default, upon the written request of the Pass-Through Trustee, forthwith pay to the Pass-Through Trustee all sums so held in trust by such Paying Agent. The Pass-Through Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Pass-Through Trust Agreement or for any other purpose, direct any Paying Agent to pay to the Pass-Through Trustee all sums held in trust by such Paying Agent, such sums to be held by the Pass-Through Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Pass-Through Trustee, such Paying Agent shall be released from all further liability with respect to such money. 34 Section 7.14 REGISTRATION OF LESSOR NOTES IN PASS-THROUGH TRUSTEE'S NAME. The Pass-Through Trustee agrees that all Lessor Notes and Permitted Government Investments, if any, shall be issued in the name of the Pass-Through Trustee or its nominee and held by the Pass-Through Trustee, or, if not so held, the Pass-Through Trustee or its nominee shall be reflected as the owner of such Lessor Notes or Permitted Government Investments, as the case may be, in the register of the issuer of such Lessor Notes or Permitted Government Investments under the applicable provisions of the Uniform Commercial Code in effect where the Pass-Through Trustee holds such Lessor Notes or Permitted Government Investments, or other applicable law then in effect. Section 7.15 WITHHOLDING TAXES; INFORMATION REPORTING. The Pass-Through Trustee, as trustee of a grantor trust, shall exclude and withhold from each distribution of principal, premium, if any, and interest and other amounts due hereunder or under the Certificates any and all withholding taxes applicable thereto as required by law. The Pass-Through Trustee agrees (i) to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Certificates, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Holders of the Certificates, (ii) to file any necessary withholding tax returns or statements when due, and (iii) as promptly as possible after the payment thereof, to deliver to each Holder of a Certificate appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Holders may reasonably request from time to time. The Pass-Through Trustee agrees to file any other information reports as it may be required to file under United States law. Any amounts withheld and paid to a relevant taxing authority pursuant to this Section 7.15 shall be deemed to have been paid to the related Certificateholders for all purposes under the Operative Documents. Section 7.16 PASS-THROUGH TRUSTEE'S LIENS. The Pass-Through Trustee, in its individual capacity, agrees that it will at its own cost and expense promptly take any action as may be necessary to duly discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance, security interest or claim on or with respect to the Trust Property which is either (i) attributable to the Pass-Through Trustee in its individual capacity and which is unrelated to the transactions contemplated by this Pass-Through Trust Agreement or any other applicable Lease Financing Document, or (ii) which is attributable to the Pass-Through Trustee as trustee hereunder or in its individual capacity and which arise out of acts or omissions which are prohibited by this Pass-Through Trust Agreement. Section 7.17 PREFERENTIAL COLLECTION OF CLAIMS. The Pass-Through Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. If the Pass-Through Trustee shall resign or be removed as Pass-Through Trustee, it shall be subject to Section 311(a) of the Trust Indenture Act to the extent provided therein. ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS Section 8.1 THE COMPANY TO FURNISH PASS-THROUGH TRUSTEE WITH NAMES AND ADDRESSES OF CERTIFICATEHOLDERS. The Company will furnish to the Pass-Through Trustee within 15 days after each Record Date with respect to a Scheduled Payment, and at such other times as 35 the Pass-Through Trustee may request in writing, a list, in such form as the Pass-Through Trustee may reasonably require, of all information in the possession or control of the Company as to the names and addresses of the Holders of Certificates, in each case as of a date not more than 15 days prior to the time such list is furnished; PROVIDED, HOWEVER, that so long as the Pass-Through Trustee is the sole Registrar, no such list need be furnished; and PROVIDED, FURTHER, HOWEVER, that no such list need be furnished for so long as a copy of the Register is being furnished to the Pass-Through Trustee pursuant to Section 7.12(b). Section 8.2 PRESERVATION OF INFORMATION. The Pass-Through Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders of Certificates contained in the most recent list furnished to the Pass-Through Trustee as provided in Section 7.12(b) or Section 8.1, as the case may be, and the names and addresses of Holders of Certificates received by the Pass-Through Trustee in its capacity as Registrar, if so acting. The Pass-Through Trustee may destroy any list furnished to it as provided in Section 7.12(b) or Section 8.1, as the case may be, upon receipt of a new list so furnished. Section 8.3 RECORDS BY THE COMPANY. The Company shall, at any time that the Certificates shall be subject to the Trust Indenture Act, comply with Section 314 of the Trust Indenture Act and shall file, furnish and deliver the reports, information, documents, certificates and opinions required thereunder, and, at any time that the Certificates shall be subject to the Trust Indenture Act, acknowledges and agrees that, for purposes of Section 314 of the Trust Indenture Act, the Company shall be considered to be the "obligor" upon the Certificates. Without limiting the generality of the foregoing, at any time that the Certificates shall be subject to the Trust Indenture Act, the Company shall deliver to the Pass-Through Trustee the annual certificate required under clause (4) of Section 314(a) of the Trust Indenture Act within 120 days following the end of each fiscal year of the Company ending after the date hereof. The provisions of this Section shall not be construed to impose any obligation or liability on the Company to pay any of the principal, premium, if any, or interest in respect of the Lessor Notes or the Certificates. Section 8.4 REPORTS BY THE PASS-THROUGH TRUSTEE. On or before each May 15, the Pass-Through Trustee shall, at any time that the Certificates shall be subject to the Trust Indenture Act, transmit, in the manner and to the extent required by Section 313(c) of the Trust Indenture Act, any report required by Section 313(a) of the Trust Indenture Act to be transmitted by the Pass-Through Trustee to the Certificateholders. ARTICLE IX SUPPLEMENTAL TRUST AGREEMENTS Section 9.1 SUPPLEMENTAL TRUST AGREEMENT WITHOUT CONSENT OF CERTIFICATEHOLDER. Without the consent of the Holder of any Certificates, the Company may, and the Pass-Through Trustee, at the Company's direction (subject to Section 9.3) shall, at any time and from time to time enter into one or more agreements supplemental hereto or, if applicable, to the Registration Rights Agreement, in form satisfactory to the Pass-Through Trustee, for any of the following purposes: (1) to evidence the succession of another corporation to the Company and the assumption by any such successor of the obligations of the Company herein contained or of the Company's obligations under the Registration Rights Agreement; 36 (2) to add to the covenants of the Company, for the protection of the Holders of the Certificates in this Agreement or the Registration Rights Agreement; (3) to surrender any right or power herein conferred upon the Company in this Agreement or in the Registration Rights Agreement; (4) to cure any ambiguity, to correct or supplement any provision in this Agreement or in the Registration Rights Agreement which may be defective or inconsistent with any other provision herein or to make any other provisions with respect to matters or questions arising under this Pass-Through Trust Agreement; PROVIDED that any such action will not adversely affect the interests of the Holders of the Certificates; (5) to correct or amplify the description of property that constitutes Trust Property or the conveyance of such property to the Pass-Through Trustee; (6) to evidence and provide for a successor Pass-Through Trustee; (7) at any time that the Certificates shall be subject to the Trust Indenture Act, to modify, eliminate or add to the provisions of this Pass-Through Trust Agreement to the extent as shall be necessary to qualify this Pass-Through Trust Agreement (including any supplemental agreement) under the Trust Indenture Act or under any similar Federal statute hereafter enacted, or to add to this Pass-Through Trust Agreement such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this instrument was executed or any corresponding provision in any similar Federal statute hereafter enacted; the interests of the Certificateholders; (8) to modify, amend or supplement any provision herein to reflect changes relating to (i) the conversion of an Owner Trust from a Delaware business trust to a Delaware limited liability company or (ii) the assumption and substitution of any Lessor Note pursuant to Section 2.10 or Section 2.12 of a Lease Indenture; (9) to add, eliminate, or change any provision under this Pass-Through Trust Agreement that will not adversely affect the interests of the Certificateholders; (10) to comply with any requirement of the Commission, any applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed, any regulatory body or the Registration Rights Agreement to effectuate the Exchange Offer; or (11) to modify or eliminate provisions relating to the transfer or exchange of Exchange Certificates or the Initial Certificates upon consummation of the Exchange Offer (as defined in the Registration Rights Agreement) or effectiveness of the Shelf Registration Statement or the Exchange Offer Registration Statement; PROVIDED that in each case such supplemental agreement does not cause the Pass-Through Trust to become taxable as an "association" within the meaning of Treasury Regulation Section 301.7701-2 or to be taxable as other than a "trust" within the meaning of Treasury Regulation 301.7701. Section 9.2 SUPPLEMENTAL TRUST AGREEMENTS WITH CONSENT OF CERTIFICATEHOLDERS. With the consent of the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding (determined as provided in Section 1.4(c)), by Act of said Holders delivered to the Company and the Pass-Through Trustee, the 37 Company may (with the consent of the Owner Trusts, such consent not to be unreasonably withheld), and the Pass-Through Trustee (subject to Section 9.3) shall, enter into an agreement or agreements supplemental hereto to this Agreement or the Registration Rights Agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Pass-Through Trust Agreement or the Registration Rights Agreement or of modifying in any manner the rights and obligations of the Holders of the Certificates under this Pass-Through Trust Agreement or the Registration Rights Agreement; PROVIDED, HOWEVER, that no such supplemental agreement shall, without the consent of the Holder of each Outstanding Certificate affected thereby: (1) reduce in any manner the amount of, or delay the timing of, any receipt by the Pass-Through Trustee of payments on the Lessor Notes held in the Pass-Through Trust, or distributions that are required to be made herein on any Certificate of such Pass-Through Trust, or change any date of payment on any such Certificate, or change the place of payment where, or the coin or currency in which, any such Certificate is payable, or impair the right of any Holder of any such Certificate to institute suit for the enforcement of any such payment or distribution on or after the Distribution Date or Special Distribution Date applicable thereto; or (2) except as provided in this Pass-Through Trust Agreement, permit the disposition of any Lessor Note in the Trust Property, or permit the creation of any lien on the Trust Property, or otherwise deprive any Certificateholder of the benefit of the ownership of the Lessor Notes held in the Pass-Through Trust or the lien of the related Lease Indenture; or (3) reduce the percentage of the aggregate Fractional Undivided Interests which is required to approve any such supplemental agreement, or reduce such percentage required for any waiver provided for in this Pass-Through Trust Agreement; or (4) cause the Pass-Through Trust to become taxable as an "association", within the meaning of Treasury Regulation Section 301.7701-2 or to be taxable as other than a "fixed investment trust" within the meaning of Treasury Regulation 301.7701. It shall not be necessary for any Act of Certificateholders under this Section to approve the particular form of any proposed supplemental agreement, but it shall be sufficient if such Act shall approve the substance thereof. Section 9.3 DOCUMENTS AFFECTING IMMUNITY OR INDEMNITY. If in the reasonable belief of the Pass-Through Trustee any document required to be executed by it pursuant to the terms of Section 9.1 or 9.2 affects any interest, right, duty, immunity or indemnity in favor of the Pass-Through Trustee under this Pass-Through Trust Agreement, the Pass-Through Trustee may in its discretion decline to execute such document. Section 9.4 EXECUTION OF SUPPLEMENTAL TRUST AGREEMENTS. In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article or the modifications thereby of the trusts created by this Pass-Through Trust Agreement, the Pass-Through Trustee shall be entitled to receive, and (subject to Section 7.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Pass-Through Trust Agreement. Section 9.5 EFFECT OF SUPPLEMENTAL TRUST AGREEMENTS. Upon the execution of any supplemental agreement under this Article, this Pass-Through Trust Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this 38 Pass-Through Trust Agreement for all purposes; and every Holder of Certificates theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.6 REFERENCE IN CERTIFICATES TO SUPPLEMENTAL TRUST AGREEMENTS. Certificates authenticated and delivered after the execution of any supplemental agreement pursuant to this Article may bear a notation in form approved by the Pass-Through Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon Outstanding Certificates after proper presentation and demand. ARTICLE X AMENDMENTS TO LEASE INDENTURES AND OTHER LEASE FINANCING DOCUMENTS Section 10.1 AMENDMENTS AND SUPPLEMENTS TO LEASE INDENTURE AND OTHER LEASE FINANCING DOCUMENTS. In the event that the Pass-Through Trustee, as holder of any Lessor Note in trust for the benefit of the Certificateholders, receives a request for a consent to any amendment, modification, waiver or supplement under any Lease Indenture or other Lessor Note Document that requires the consent of the holder of such Lessor Note, the Pass-Through Trustee shall forthwith send a notice of such proposed amendment, modification, waiver or supplement to each Certificateholder registered on the Register as of such date. Any such notice shall describe the proposed amendment, modification, waiver or supplement (or attach a copy thereof). The Pass-Through Trustee shall request from the Certificateholders Directions as to (i) whether or not to direct the applicable Lease Indenture Trustee to take or refrain from taking any action which a holder of such Lessor Note has the option to direct, (ii) whether or not to give or execute any waivers, consents, amendments, modifications or supplements as a holder of such Lessor Note and (iii) how to vote any Lessor Note if a vote has been called for with respect thereto. Any such request shall specify a date by which Certificateholders are requested to respond. Provided such a request for Certificateholder Direction shall have been made, in directing any action or casting any vote or giving any consent as the holder of any Lessor Note, the Pass-Through Trustee shall vote or consent with respect to such Lessor Note in the same proportion as the Certificates were actually voted by Acts of Holders delivered to the Pass-Through Trustee prior to two Business Days before the Pass-Through Trustee directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but subject to Section 6.4, in the case that an Event of Default hereunder shall have occurred and be continuing, the Pass-Through Trustee may, in its own discretion and at its own direction, consent and notify the Lease Indenture Trustees of such consent to any amendment, modification, waiver or supplement under the applicable Lease Indenture or other Lessor Note Document. With respect to consents, approvals, waivers and authorizations which under the terms of Section 6 of a Lease Indenture may be given by the applicable Lease Indenture Trustee without the necessity of the consent of any of the holders of Lessor Notes, no consent, approval, waiver or authorization shall be required hereunder on the part of the Pass-Through Trustee or the Certificateholders. 39 ARTICLE XI TERMINATION OF PASS-THROUGH TRUST Section 11.1 TERMINATION OF THE PASS-THROUGH TRUST. The respective obligations and responsibilities of the Company and the Pass-Through Trustee created hereby and the Pass-Through Trust created hereby shall terminate upon the distribution to all Certificateholders of all amounts required to be distributed to them pursuant to this Pass-Through Trust Agreement and the disposition of all property held as part of the Trust Property; PROVIDED, HOWEVER, that if and to the extent that any of the options, rights and privileges granted under this Pass-Through Trust Agreement, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interest in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Pass-Through Trust Agreement, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Pass-Through Trust Agreement of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H. W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Pass-Through Trust Agreement, whichever of (a) or (b) is shorter. Notice of any termination, specifying the Distribution Date (or Special Distribution Date, as the case may be) upon which the Certificateholders may surrender their Certificates to the Pass-Through Trustee for payment of the final distribution and cancellation (at maturity, redemption or otherwise), shall be mailed promptly by the Pass-Through Trustee to Certificateholders not earlier than the 60th day and not later than the 20th day next preceding such final distribution specifying (A) the Distribution Date (or Special Distribution Date, as the case may be) upon which final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency of the Pass-Through Trustee therein specified, (B) the amount of any such final payment, and (C) that the Record Date otherwise applicable to such Distribution Date (or Special Distribution Date, as the case may be) is not applicable, payments being made only upon presentation and surrender of the Certificates at the office or agency of the Pass-Through Trustee therein specified. The Pass-Through Trustee shall give such notice to the Registrar at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates, the Pass-Through Trustee shall cause to be distributed to Certificateholders amounts distributable on such Distribution Date or Special Distribution Date, as the case may be, pursuant to Section 4.2. In the event that all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above mentioned written notice, the Pass-Through Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. In the event that any money held by the Pass-Through Trustee for the payment of distributions on the Certificates shall remain unclaimed for two years (or such lesser time as the Pass-Through Trustee shall be satisfied, after sixty days' notice from the Company, is one month 40 prior to the escheat period provided under applicable law) after the final distribution date with respect thereto, the Pass-Through Trustee shall pay to the Lease Indenture Trustees the appropriate amount of money relating to such Lease Indenture Trustees and shall give written notice thereof to the Owner Trusts, the Owner Participants and the Company. ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.1 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. The death or incapacity of any Certificateholder shall not operate to terminate this Pass-Through Trust Agreement or the Pass-Through Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Pass-Through Trust, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. Section 12.2 CERTIFICATES NONASSESSABLE AND FULLY PAID. Certificateholders shall not be personally liable for obligations of the Pass-Through Trust, the Fractional Undivided Interests represented by the Certificates shall be nonassessable for any losses or expenses of the Pass-Through Trust or for any reason whatsoever, and Certificates upon authentication thereof by the Pass-Through Trustee pursuant to Section 3.2 are and shall be deemed fully paid. No Certificateholder shall have any right (except as expressly provided herein) to vote or in any manner otherwise control the operation and management of the Trust Property, the Pass-Through Trust established hereunder, or the obligations of the parties hereto, nor shall anything set forth herein, or contained in the terms of the Certificates, be construed so as to constitute the Certificateholders from time to time as partners or members of an association. Section 12.3 NOTICE. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to each party at the address for such party provided in Section 18.5 of the related Participation Agreement or at such other address as such party may from time to time designate by written notice to each of the other parties hereto. A copy of all notices provided for herein shall be sent by the party giving such notice to each of the other parties hereto. Section 12.4 GOVERNING LAW. THIS PASS-THROUGH TRUST AGREEMENT, THE CERTIFICATES AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 12.5 SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Pass-Through Trust Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Pass-Through Trust Agreement and shall in no way affect the validity or enforceability of the other provisions 41 of this Pass-Through Trust Agreement or the Pass-Through Trust, or of the Certificates or the rights of the Holders thereof. Section 12.6. TRUST INDENTURE ACT CONTROLS. Upon the declaration by the Commission of the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, this Agreement shall become subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions. From and after the declaration by the Commission of the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, if any provision of this Agreement limits, qualifies or conflicts with another provision which is required to be included in this Agreement by the Trust Indenture Act, the required provision shall control. Section 12.7 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article, Section and subsection headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 12.8 SUCCESSORS AND ASSIGNS. All covenants, agreements, representations and warranties in this Pass-Through Trust Agreement by the Pass-Through Trustee and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. Section 12.9 BENEFITS OF PASS-THROUGH TRUST AGREEMENT. Nothing in this Pass-Through Trust Agreement or in the Certificates, express or implied, shall give to any person, other than the Company, the Pass-Through Trustee, the Owner Trusts, the Owner Participants and the Lease Indenture Trustees, and their respective successors, and the Holders of Certificates, any benefit or any legal or equitable right, remedy or claim under this Pass-Through Trust Agreement. Section 12.10 LEGAL HOLIDAYS. In any case where any Distribution Date or Special Distribution Date relating to any Certificate shall not be a Business Day, then (notwithstanding any other provision of this Pass-Through Trust Agreement) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Distribution Date or Special Distribution Date and (provided that such payment is made on such next succeeding Business Day) no interest shall accrue during the intervening period. Section 12.11 COUNTERPARTS. For the purpose of facilitating the execution of this Pass-Through Trust Agreement and for other purposes, this Pass-Through Trust Agreement may be executed simultaneously in any number of counterparts and by the separate parties hereto on separate counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. 42 IN WITNESS WHEREOF, the Company and the Pass-Through Trustee have caused this Pass-Through Trust Agreement to be duly executed by their respective officers and their respective seals, duly attested, to be hereunto affixed, all as of the day and year first above written. MIDWEST GENERATION, LLC By: /s/ Gary Garcia ------------------------------ Name: Gary Garcia Title: Vice President & Treasurer UNITED STATES TRUST COMPANY OF NEW YORK, As Pass-Through Trustee By: /s/ Christopher J. Grell ------------------------------ Name: Christopher J. Grell Title: Assistant Vice President 43 SCHEDULE 1 PARTICIPATION AGREEMENT The Participation Agreements providing for the Lease Transactions to be partially financed by the purchase of Lessor Notes hereunder, and the parties thereto, are as follows: Participation Agreement (T1) dated as of August 17, 2000, among Midwest Generation, LLC, a limited liability company organized under the law of the State of Delaware, Powerton Trust I, a Delaware business trust created for the benefit of Powerton Generation I LLC, Wilmington Trust Company, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Trust Agreement, Powerton Generation I LLC, a Delaware limited liability company, Edison Mission Energy, a corporation organized under the laws of the State of California, United States Trust Company of New York not in its individual capacity, except as expressly provided therein, but solely as trustee under a Lease Indenture and United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under each of the Pass-Through Trust Agreements. Participation Agreement (T2) dated as of August 17, 2000, among Midwest Generation, LLC, a limited liability company organized under the law of the State of Delaware, Powerton Trust II, a Delaware business trust created for the benefit of Powerton Generation II LLC, Wilmington Trust Company, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Trust Agreement, Powerton Generation II LLC, a Delaware limited liability company, Edison Mission Energy, a corporation organized under the laws of the State of California, United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Lease Indenture and United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under each of the Pass-Through Trust Agreements. Participation Agreement (T1) dated as of August 17, 2000, among Midwest Generation, LLC, a limited liability company organized under the law of the State of Delaware, Joliet Trust I, a Delaware business trust created for the benefit of Joliet Generation I LLC, Wilmington Trust Company, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Trust Agreement, Joliet Generation I LLC, a Delaware limited liability company, Edison Mission Energy, a corporation organized under the laws of the State of California, United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Lease Indenture and United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under each of the Pass-Through Trust Agreements. Participation Agreement (T2) dated as of August 17, 2000, among Midwest Generation, LLC, a limited liability company organized under the law of the State of Delaware, Joliet Trust II, a Delaware business trust created for the benefit of Joliet Generation II LLC, Wilmington Trust Company, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, except as expressly provided therein, but solely as trustee under a Trust Agreement, Joliet Generation II LLC, a Delaware limited liability company, Edison Mission Energy, a corporation organized under the laws of the State of California, United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, 2 but solely as trustee under a Lease Indenture and United States Trust Company of New York, not in its individual capacity, except as expressly provided therein, but solely as trustee under each of the Pass-Through Trust Agreements. EXHIBIT A FORM OF CERTIFICATE [Legend if Certificate is a Restricted Certificate] [non-registration legend] THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND UNDER APPLICABLE STATE SECURITIES LAWS, AND THIS CERTIFICATE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS CERTIFICATE IS HEREBY NOTIFIED THAT THE SELLER OF THIS CERTIFICATE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS CERTIFICATE AGREES FOR THE BENEFIT OF MIDWEST GENERATION, LLC (THE "COMPANY") THAT (A) THIS CERTIFICATE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS FOR RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS CERTIFICATE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. [THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.] [registration rights legend] THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE HEREOF, WILL BE DEEMED TO HAVE AGREED TO BE BOUND BY THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT DATED AUGUST 17, 2000, AMONG THE COMPANY, EDISON MISSION ENERGY AND THE INITIAL PURCHASERS OF THIS CERTIFICATE. A-1 MIDWEST GENERATION SERIES B PASS-THROUGH TRUST 8.56% Pass-Through Certificate, Series B CUSIP: ISIN: Final Distribution Date: January 2, 2016 evidencing a fractional undivided interest in a trust, the property of which includes certain notes secured by certain property leased to Midwest Generation, LLC Certificate No. ______ $ ____________ Fractional Undivided Interest THIS CERTIFIES THAT ___________________, for value received, is the registered owner of a $ ___________________ (___________________ dollars) Fractional Undivided Interest in the Midwest Generation Series B Pass-Through Trust (the "Pass-Through Trust") created pursuant to a Pass-Through Trust Agreement dated as of August 17, 2000 (the "Agreement") between United States Trust Company of New York, as trustee (the "Pass-Through Trustee") and Midwest Generation, LLC, a limited liability company organized under Delaware law (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates designated as "8.56% Pass-Through Certificates, Series B" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. The property of the Pass-Through Trust includes Lessor Notes (the "Trust Property"). Each Lessor Note is secured by a security interest in and lien over the Undivided Interest subject of the Lease relating to the Lease Indenture under which such Lessor Note was issued and certain other related property described in such Lease Indenture, and liability thereunder is limited to the income and proceeds of such security. Subject to and in accordance with the terms of this Agreement, from funds then available to the Pass-Through Trustee, there will be distributed on each January 2 and July 2 (a "Distribution Date"), commencing on January 2, 2001, to the person in whose name this Certificate is registered at the close of business on the day of the month which is 15 days preceding the Distribution Date, an amount in respect of the Scheduled Payments on the Lessor Notes due on such Distribution Date, the receipt of which has been confirmed by the Pass-Through Trustee, equal to the product of the percentage interest in the Pass-Through Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement, in the event that Special Payments on the Lessor Notes are received by the Pass-Through Trustee, from funds then available to the Pass-Through Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this certificate is registered at the close of business on the day of the month which is 15 days preceding the Special Distribution Date, an amount in respect of such Special Payments on the Lessor Notes, the receipt of which has been confirmed by the Pass-Through Trustee, equal to the product of the percentage interest in the Pass-Through Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so A-2 received. The Special Distribution Date shall be determined as provided in the Agreement. If a Distribution Date or Special Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same effect as if made on the date on which such payment was due. The Pass-Through Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Holders of the Certificates. Distributions on this Certificate will be made by the Pass-Through Trustee by (i) if (A) The Depository Trust Company, a New York corporation ("DTC") or its nominee is the Certificateholder of record of this Certificate, or (B) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $10,000,000, or (C) a Certificateholder holds a Certificate or Certificates in an aggregate amount greater than $1,000,000 and so requests to the Pass-Through Trustee, by wire transfer in immediately available funds to an account maintained by such Certificateholder with a bank, or (ii) if none of the above apply, by check mailed to such Certificateholder at the address appearing in the Register, without the presentation or surrender of this Certificate or the making of any notation hereon. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Pass-Through Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Pass-Through Trustee specified in such notice. [Unless this certificate is presented by an authorized representative of DTC to the Company or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSONS IS WRONGFUL in as much as the registered owner hereof, Cede & Co., has an interest herein.]* Each Person who acquires or accepts this Certificate or an interest herein will be deemed by such acquisition or acceptance to have represented and warranted that either: (i) no Plan assets have been used to purchase this Certificate or an interest herein or (ii) the purchase and holding of this Certificate or interest herein are either exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to one or more prohibited transaction statutory or administrative exemptions or do not constitute a prohibited transaction under such restrictions of ERISA and the Code. This Certificate shall be governed by and construed in accordance with the laws of the State of New York. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Pass-Through Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Pass-Through Trustee has caused this Certificate to be duly executed. - -------------------------- * This legend to appear on Book-Entry Certificates to be deposited with the Depository Trust Company. A-3 MIDWEST GENERATION SERIES B PASS-THROUGH TRUST By: UNITED STATES TRUST COMPANY OF NEW YORK, as Pass-Through Trustee By:__________________________________ Authorized Officer A-4 [Reverse Of Certificate] The Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Company, Edison Mission Energy, the Pass-Through Company or the Pass-Through Trustee or any affiliate of any such Person. The Certificates are limited in right of payment, all as more specifically set forth in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Pass-Through Trustee shall have received sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Holder of this Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Holder as provided in the Agreement. This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Pass-Through Trustee, and at such other places, if any, designated by the Pass-Through Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Agreement at any time by the Company and the Pass-Through Trustee with the consent of the Holders of Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest of the Fractional Undivided Interests evidenced by all Certificates at the time Outstanding. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the Pass-Through Trustee in its capacity as Registrar, or by any successor Registrar, if delivered by hand at: 30 Broad Street, B-Level, New York, New York 10004-2304, Attention: Corporate Trust and Agency Division, or if delivered by mail to: P.O. Box 84, Bowling Green Station, New York, New York 10274-0084, Attention: Corporate Trust and Agency Division, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Pass-Through Trustee and the Registrar duly executed by the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass-Through Trust will be issued to the designated transferee or transferees. The Certificates are issuable only as registered Certificates without coupons in minimum denominations of $100,000 Fractional Undivided Interest and any integral multiples of $1,000 in excess thereof. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass-Through Trust, as requested by the Holder surrendering the same. A-5 No service charge will be made for any such registration of transfer or exchange, but the Pass-Through Trustee shall require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Pass-Through Trustee, the Company, the Owner Trusts, the Registrar and any agent of the Pass-Through Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Pass-Through Trustee, the Company, the Owner Trusts, the Registrar nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Pass-Through Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. A-6 EXHIBIT B FORM OF THE PASS-THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. UNITED STATES TRUST COMPANY OF NEW YORK as Pass-Through Trustee By:______________________ Authorized Officer B-1 EXHIBIT C FORM OF TRANSFER CERTIFICATE CERTIFICATE MIDWEST GENERATION SERIES B PASS-THROUGH TRUST PASS-THROUGH CERTIFICATES, SERIES B This is to certify that as of the date hereof with respect to $___________________ principal amount of the above-captioned securities presented or surrendered on the date hereof (the "Surrendered Certificates") for registration of transfer, or for exchange where the securities issuable upon such exchange are to be registered in a name other than that of the undersigned Holder (each such transaction being a "transfer"), the undersigned Holder (as defined in the Indenture) certifies that the transfer of Surrendered Certificates associated with such transfer complies with the restrictive legend set forth on the face of the Surrendered Certificates for the reason checked below: / / Transfer to Midwest Generation / / Transfer outside the United States in compliance Series B Pass-Through Trust with Rule 904 of the Securities Act. / / Transfer inside the United / / Transfer inside the United States (i) to an States to a Qualified Institutional Accredited Investor that has Institutional Buyer in previously furnished to the Pass-Through Trustee a compliance with Rule 144A under signed letter containing certain representations and the Securities Act. agreements relating to restrictions on transfer and (ii) by a Holder that has previously furnished the Company and the Transfer Agent with such certifications, legal opinions or other information requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
[Name of Holder] ___________________________ Dated: _____________, ______* - -------------------------- * To be dated the date of presentation or surrender C-1 EXHIBIT D FORM OF LETTER TO BE DELIVERED BY ACCREDITED INVESTORS Midwest Generation, LLC One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Credit Suisse First Boston Corporation Lehman Brothers Inc. As Representatives of the several Initial Purchasers c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010-3629 Dear Sirs: We are delivering this letter in connection with an offering of Midwest Generation Pass-Through Certificates, Series A and Series B (the "Securities") of Midwest Generation, LLC, a Delaware limited liability company (the "Company"), all as described in the Confidential Offering Circular (the "Offering Circular") relating to the offering. We hereby confirm that: (i) we are an "accredited investor" within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act (an "Institutional Accredited Investor"); (ii) (A) any purchase of the Securities by us will be for our own account or for the account of one or more other Institutional Accredited Investors or as fiduciary for the account of one or more trusts, each of which is an "accredited investor" within the meaning of Rule 501(a)(7) under the Securities Act and for each of which we exercise sole investment discretion or (B) we are a "bank", within the meaning of Section 3(a)(2) of the Securities Act, or a "savings and loan association" or other institution described in Section 3(a)(5)(A) of the Securities Act that is acquiring the Securities as fiduciary for the account of one or more institutions for which we exercise sole investment discretion, (iii) in the event that we purchase any of the Securities, we will acquire Securities having a minimum purchase price of not less than $100,000 for our own account or for any separate account for which we are acting; (iv) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing the Securities; (v) we are not acquiring the Securities with a view to distribution thereof or with any present intention of offering or selling any of the Securities, except inside the United States in accordance with Rule 144A under the Securities Act or outside the United States in accordance with Regulation S under the Securities Act, as provided C-1 below; PROVIDED that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our control; and (vi) we have received a copy of the Offering Circular relating to the offering of the Securities and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary in connection with our decision to purchase the Securities. We understand that the Securities are being offered in a transaction not involving any public offering within the United States within the meaning of the Securities Act and that the Securities have not been and will not be registered under the Securities Act, and we agree, on our own behalf and on behalf of each account for which we acquire any Securities, that if in the future we decide to resell, pledge or otherwise transfer such Securities, such Securities may be offered, resold, pledged or otherwise transferred only (i) to the Company, (ii) in the United States to a person who we reasonably believe is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, (iii) outside the United States in a transaction in accordance with Rule 904 under the Securities Act, (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available) or (v) pursuant to an effective registration statement under the Securities Act, in each of cases (i) through (v), in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction. We understand that the registrar and transfer agent for the Securities will not be required to accept for registration of transfer any Securities acquired by us, except upon presentation of evidence satisfactory to the Company and the transfer agent that the foregoing restrictions on transfer have been complied with. We further understand that any Securities acquired by us will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of this paragraph. We acknowledge that you, the Company and others will rely upon our confirmations, acknowledgements and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. 2 THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Date: _____________________ __________________________________________ (Name of Purchaser) By:_______________________________________ Name: Title: Address: 3 EX-4.5 7 a2031364zex-4_5.txt EXHIBIT 4.5 Exhibit 4.5 EXECUTION COUNTERPART WHEN RECORDED, RETURN TO: Ross Agre, Esq. Milbank, Tweed, Hadley & McCloy LLP 1 Chase Manhattan Plaza New York, New York 10005 ================================================================================ INDENTURE OF TRUST, MORTGAGE AND SECURITY AGREEMENT (T1) Dated as of August 17, 2000 between POWERTON TRUST I and UNITED STATES TRUST COMPANY OF NEW YORK as Lease Indenture Trustee ============================================================================== Powerton Station Coal-Fired Electric Generating Facility Land Located in Tazewell County, Illinois
TABLE OF CONTENTS PAGE SECTION 1. DEFINITIONS...............................................................................................6 SECTION 2. THE LESSOR NOTES..........................................................................................6 Section 2.1 Limitation on Lessor Notes.........................................................................6 Section 2.2 Initial Lessor Notes...............................................................................7 Section 2.3 Execution and Authentication of Lessor Notes.......................................................7 Section 2.4 Issuance and Terms of the Initial Lessor Notes.....................................................7 Section 2.5 Payments from Indenture Estate Only; No Personal Liability of the Owner Trust, the Owner Participant or the Lease Indenture Trustee..................................8 Section 2.6 Method of Payment..................................................................................9 Section 2.7 Application of Payments...........................................................................10 Section 2.8 Registration, Transfer and Exchange of Lessor Notes...............................................10 Section 2.9 Mutilated, Destroyed, Lost or Stolen Lessor Notes.................................................11 Section 2.10 Optional Purchase upon Lease Event of Default.....................................................11 Section 2.11 Mandatory Prepayment..............................................................................12 Section 2.12 Assumption of Lessor Notes........................................................................13 Section 2.13 Subsequent Lessor Notes...........................................................................16 Section 2.14 Payment of Expenses on Transfer...................................................................18 Section 2.15 Restrictions of Transfer Resulting from Federal Securities Laws; Legend...........................18 Section 2.16 Security for and Parity of Lessor Notes...........................................................19 Section 2.17 Acceptance of the Lease Indenture Trustee.........................................................19 Section 2.18 Taxes; Withholding................................................................................19 SECTION 3. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM INDENTURE ESTATE....................................20 Section 3.1 Distribution Prior to Lessor Loan Event of Default................................................20 Section 3.2 Payments Following Event of Loss or Other Early Termination.......................................20 Section 3.3 Payments After Lease Indenture Event of Default...................................................21 Section 3.4 Certain Payments..................................................................................22 Section 3.5 Other Payments....................................................................................23 Section 3.6 Manner of Payment to the Owner Trust..............................................................23 Section 3.7 Investment of Amounts Held by Lease Indenture Trustee.............................................24 Section 3.8 Establishment of the Lease Indenture Trustee's Account; and Lien and Security Interest; Etc.......24 Section 3.9 The Account Bank; Limited Rights of the Owner Trust...............................................25 SECTION 4. COVENANTS OF THE OWNER TRUST; LEASE INDENTURE EVENTS OF DEFAULT; REMEDIES................................27 Section 4.1 Covenants of the Owner Trust......................................................................27 Section 4.2 Lease Indenture Events of Default.................................................................28 Section 4.3 Certain Rights....................................................................................30 Section 4.4 Remedies..........................................................................................31 Section 4.5 Taking Possession of Indenture Estate.............................................................33 i Section 4.6 Remedies Cumulative...............................................................................34 Section 4.7 Discontinuance of Proceedings.....................................................................34 Section 4.8 Waiver of Past Defaults...........................................................................34 Section 4.9 Waiver of Stay, Extension, Moratorium Laws; Equity of Redemption..................................35 SECTION 5. DISCLAIMER OF REPRESENTATIONS; NO SEGREGATION OF MONEYS; FURTHER ASSURANCES; CERTAIN RIGHTS..............35 Section 5.1 No Representations or Warranties as to the Property Interest or other Lessor Security Documents...35 Section 5.2 No Segregation of Moneys; No Interest.............................................................36 Section 5.3 Further Assurances; Financing Statements..........................................................36 Section 5.4 Certain Rights of Owner Trust and Owner Participant...............................................36 SECTION 6. SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS.........................................38 Section 6.1 Supplements and Amendments to this Indenture and the Other Documents:.............................38 Section 6.2 Documents Furnished to Holders....................................................................42 Section 6.3 Lease Indenture Trustee Protected.................................................................42 SECTION 7. MISCELLANEOUS............................................................................................42 Section 7.1 Termination of Indenture..........................................................................42 Section 7.2 Governing Law; Counterparts.......................................................................43 Section 7.3 No Legal Title to Indenture Estate in Holders.....................................................43 Section 7.4 Sale of Indenture Estate by Lease Indenture Trustee Is Binding....................................43 Section 7.5 Indenture for Benefit of the Owner Trust, the Owner Participant, the Equity Investor, any OP Guarantor and the Holders.............................................43 Section 7.6 Notices...........................................................................................43 Section 7.7 Severability......................................................................................44 Section 7.8 No Oral Modifications or Continuing Waivers.......................................................44 Section 7.9 Successors and Assigns............................................................................44 Section 7.10 Headings..........................................................................................44 Section 7.11 Normal Commercial Relations.......................................................................45 Section 7.12 Waiver of Setoff..................................................................................45 Section 7.13 Concerning the Owner Trustee......................................................................45 Section 7.14 Required Holders; Etc.............................................................................45 Section 7.15 The Lease Indenture Trustee.......................................................................46 Section 7.16 Maximum Secured Obligations.......................................................................50
ii INDENTURE OF TRUST, MORTGAGE AND SECURITY AGREEMENT (T1) This INDENTURE OF TRUST, MORTGAGE AND SECURITY AGREEMENT (T1) (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this "INDENTURE"), dated as of August 17, 2000, between POWERTON TRUST I, a Delaware business trust created for the benefit of the Owner Participant referred to below, as grantor (the "OWNER TRUST") and UNITED STATES TRUST COMPANY OF NEW YORK as grantee (the "LEASE INDENTURE TRUSTEE"). WITNESSETH: WHEREAS, the Owner Trust and the Facility Lessee will enter into that certain Facility Lease Agreement (T1), dated as of August 17, 2000 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof, the "FACILITY LEASE"), pursuant to which the Owner Trust will lease to the Facility Lessee and the Facility Lessee will lease from the Owner Trust for a term of years the Owner Trust's undivided interest equal to the Undivided Interest Percentage in and to the Powerton Station (the "FACILITY") with the right to nonexclusive possession thereof (the "UNDIVIDED INTEREST"); WHEREAS, the Facility Lessee will lease a corresponding interest equal to the Undivided Interest Percentage in and to the Facility Site with the right to nonexclusive possession thereof and will grant certain non-exclusive easements (such undivided leasehold interest, together with such non-exclusive easements, the "GROUND INTEREST") to the Owner Trust and the Owner Trust simultaneously therewith will sublease the Ground Interest back to the Facility Lessee; WHEREAS, the Facility is more particularly described in Exhibit A attached hereto and made a part hereof and is located on the Facility Site, which, together with certain easements, are more particularly described in Exhibit B attached hereto and made a part hereof; WHEREAS, the Owner Trust was authorized and directed in the Amended and Restated Trust Agreement (T1), dated as of August 17, 2000 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof, the "TRUST AGREEMENT"), between Wilmington Trust Company and Powerton Generation I, LLC (the "OWNER PARTICIPANT") to execute and deliver this Indenture; WHEREAS, in connection with the transactions contemplated by the Trust Agreement, the Owner Trust entered into the Participation Agreement; WHEREAS, the Owner Trust, pursuant to the Facility Deed and Bill of Sale, will purchase the Undivided Interest from Midwest and concurrently therewith will lease such Undivided Interest to Midwest pursuant to the Facility Lease; WHEREAS, in accordance with this Indenture, the Owner Trust will execute and deliver the Initial Lessor Notes, the proceeds of which will be used by the Owner Trust to finance a portion of the Purchase Price, and will grant to the Lease Indenture Trustee the liens and security interests herein provided; WHEREAS, this Indenture is regarded as a mortgage under the laws of the State of Illinois and as a security agreement under the Uniform Commercial Code of the State of New York; and WHEREAS, the Owner Trust and the Lease Indenture Trustee desire to enter into this Indenture, to, among other things, provide for (a) the issuance by the Owner Trust of the Lessor Notes, (b) the conveyance and assignment by the Owner Trust to the Lease Indenture Trustee, as part of the Indenture Estate, of the Undivided Interest, the Ground Interest, the Owner Trust's interest as tenant under the Facility Site Lease, the Owner Trust's interest as landlord and sublandlord under the Facility Lease and the Facility Site Sublease, respectively, the Owner Trust's interest under the Participation Agreement and all payments and other amounts received or receivable hereunder or thereunder in accordance herewith (excluding Excepted Payments and except as otherwise provided herein or therein) as security for, INTER ALIA, the Owner Trust's obligations to and for the benefit of the Holders and for the benefit and security of such Holders. GRANTING CLAUSE: NOW, THEREFORE, to secure the prompt payment of the principal of and interest on, and all other amounts due with respect to, the Lessor Notes from time to time outstanding hereunder, all other amounts owing hereunder by the Owner Trust and the performance and observance by the Owner Trust of all the agreements, covenants and provisions contained in the Operative Documents, and the prompt payment of all amounts from time to time due or to become due from the Owner Trust to the Lease Indenture Trustee or the Holders under any of the Operative Documents (collectively, the "LESSOR SECURED OBLIGATIONS"), and for the uses and purposes and subject to the terms and provisions hereof, and in consideration of the premises and of the covenants herein contained, and of the acceptance of the Lessor Notes by the Holders thereof, the Owner Trust does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, warrant and confirm with MORTGAGE COVENANTS, unto and for the security and benefit of, the Lease Indenture Trustee acting for and on behalf of itself and the Holders from time to time, a first priority security interest in and mortgage lien on all estate, right, title and interest now held or hereafter acquired by the Owner Trust in, to and under the following described property, rights, interests and privileges, whether now or hereafter acquired, other than Excepted Payments (such property, rights and privileges as are conveyed pursuant to this granting clause, but excluding Excepted Payments and the rights to enforce and collect the sums as set forth herein, being hereinafter referred to as the "INDENTURE ESTATE"): (1) the Undivided Interest, the Owner Trust's interest in any Components; the Owner Trust's interest in any Improvements; the Facility Site Lease and the Ground Interest thereunder; the Facility Lease and all payments of any kind by the Facility Lessee thereunder (including Rent); the Facility Site Sublease and the Sublease Ground Interest thereunder and all payments of any kind by the Facility Lessee thereunder; all tangible property located on or at or attached to the Facility Land that an interest in such tangible property arises under applicable real estate law ("FIXTURES"); the Facility Deed, the Bill of Sale, the Operation Agreement, the Shared Facilities Agreement and all and any interest in any property now or hereafter granted to the Owner Trust pursuant to any provision of the Facility Site Lease, Facility Lease or the Facility Site Sublease; the EME Guarantee and each other Operative Document (other than the Tax Indemnity Agreement, the Reimbursement Agreement and the EME OP Guarantee) to which the Owner Trust is a 2 party (the Undivided Interest, the Owner Trust's interest in any Components, the Owner Trust's interest in any fixtures, Improvements and the Ground Interest are collectively referred to as the "PROPERTY INTEREST" and the documents specifically referred to above in this paragraph (1) (excluding the Tax Indemnity Agreement, the Reimbursement Agreement and the EME OP Guarantee) are collectively referred to as the "INDENTURE ESTATE DOCUMENTS"), including, without limitation, (x) all rights of the Owner Trust or the Facility Lessee (to the extent assigned by the Facility Lessee to the Owner Trust) to receive any payments or other amounts or to exercise any election or option or to make any decision or determination or to give or receive any notice, consent, waiver or approval or to make any demand or to take any other action under or in respect of any such document, to accept surrender or redelivery of the Property Interest or any part thereof, as well as all the rights, powers and remedies on the part of the Owner Trust or the Facility Lessee (to the extent assigned by the Facility Lessee to the Owner Trust), whether acting under any such document or by statute or at law or in equity or otherwise, arising out of any Lease Default or Lease Event of Default and (y) any right to restitution from the Facility Lessee, any sublessee or any other Person in respect of any determination of invalidity of any such document; (2) all rents, royalties, issues, profits, revenues, proceeds, damages, claims and other income from the property described in this Granting Clause, including, without limitation, all payments or proceeds payable to the Owner Trust as the result of the sale of the Property Interest or the lease or other disposition of the Property Interest, and all estate, right, title and interest of every nature whatsoever of the Owner Trust in and to such rents, issues, profits, revenues and other income and every part thereof (the "REVENUES"); (3) all condemnation proceeds with respect to the Property Interest or any part thereof (to the extent of the Owner Trust's interest therein), and all proceeds (to the extent of the Owner Trust's interest therein) of all insurance maintained pursuant to Section 11 of the Facility Lease or otherwise; (4) all other property of every kind and description and interests therein now held or hereafter acquired by the Owner Trust pursuant to the terms of any Operative Document, wherever located; (5) all damages resulting from breach (including, without limitation, breach of warranty or misrepresentation) or termination of any of the Indenture Estate Documents or arising from bankruptcy, insolvency or other similar proceedings involving any party to the Indenture Estate Documents; and (6) all proceeds of the foregoing; BUT EXCLUDING from the Indenture Estate all Excepted Payments, the rights to enforce and collect the same as set forth herein and all right title and interest of the Owner Trust in, to or under the EME OP Guarantee and SUBJECT TO the rights of the Owner Trust under Section 5.4 hereof. 3 Concurrently with the delivery hereof, the Owner Trust is delivering to the Lease Indenture Trustee on behalf of itself and the other Holders from time to time the original executed counterpart of the Facility Lease to which a chattel paper receipt is attached. TO HAVE AND TO HOLD the Indenture Estate and all parts, rights, members and appurtenances thereof, to the use, benefit and on behalf of the Lease Indenture Trustee and the successors and permitted assigns of the Lease Indenture Trustee forever, and in fee simple as to all parts thereof constituting real property. This Indenture is intended to constitute a mortgage under the laws of the State of Illinois and a security agreement as required under the Uniform Commercial Code of the State of New York. This Indenture is given to secure the payment and performance of the Lessor Secured Obligations. PROVIDED HOWEVER, that if the principal, interest and any other amounts due in respect of all the Lessor Notes and all other amounts due the Holders at the time and in the manner required hereby and by the Lessor Notes, the Facility Lease and the Participation Agreement (but not including Excepted Payments) shall have been paid, then this Indenture shall be surrendered and cancelled and upon such surrender and cancellation the rights hereby and thereby granted and assigned shall terminate and cease and the Lease Indenture Trustee shall take such actions as are required to be taken by it pursuant to and as directed under Section 7.1. Subject to the terms and conditions hereof (including, without limitation, Section 5.4), the Owner Trust does hereby irrevocably constitute and appoint the Lease Indenture Trustee the true and lawful attorney of the Owner Trust (which appointment is coupled with an interest) with full power (in the name of the Owner Trust or otherwise) to ask, require, demand and receive any and all moneys and claims for moneys (in each case, including, without limitation, insurance and requisition proceeds to the extent of the Owner Trust's interest therein and guaranteed amounts under the EME Guarantee but excluding in all cases Excepted Payments) due and to become due under or arising out of the Indenture Estate Documents and all other property which now or hereafter constitutes part of the Indenture Estate and, to endorse any checks or other instruments or orders in connection therewith and to file any claims or to take any action or to institute any proceedings (other than in connection with the enforcement or collection of Excepted Payments) which the Lease Indenture Trustee may deem to be necessary or advisable. Pursuant to the Facility Lease, the Facility Lessee is directed to make all payments of Rent required to be paid or deposited with the Owner Trust (other than Excepted Payments) and all other amounts which are required to be paid to or deposited with the Owner Trust pursuant to the Facility Lease (other than Excepted Payments) directly to the Lease Indenture Trustee at such address or addresses as the Lease Indenture Trustee shall specify, for application as provided in this Indenture. Pursuant to the EME Guarantee, EME is directed to make all payments of Guaranteed Obligations (as defined in the EME Guarantee) (other than Excepted Payments) and all other amounts (other than Excepted Payments) which are required to be paid to or deposited with the Owner Trust pursuant to the EME Guarantee directly to the Lease Indenture Trustee at such address or addresses as the Lease Indenture Trustee shall specify, for application as provided in this Indenture. Further, the Owner Trust agrees that promptly on receipt thereof, it will transfer to the Lease Indenture Trustee any and all moneys from time to time received by it constituting part 4 of the Indenture Estate, whether or not expressly referred to in the immediately preceding sentence, for distribution pursuant to this Indenture. It is expressly agreed that anything herein contained to the contrary notwithstanding, the Owner Trust shall remain liable under the Indenture Estate Documents to perform all of the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and the Lease Indenture Trustee and the Holders shall have no obligation or liability under any thereof by reason of or arising out of the assignment hereunder, nor shall the Lease Indenture Trustee or the Holders be required or obligated in any manner, except as herein expressly provided, to perform or fulfill any obligations of the Owner Trust under or pursuant to any of the Indenture Estate Documents to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The Owner Trust agrees that at any time and from time to time, upon the written request of the Lease Indenture Trustee (acting on the instruction of any Holder) or any Holder, the Owner Trust will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents necessary to obtain the full benefits of the assignment hereunder and of the rights and powers herein granted; PROVIDED, HOWEVER, that the Owner Trust shall have no obligation to execute or deliver or to cause to be executed or delivered any further instruments or documents that would give the Lease Indenture Trustee or the Holders greater rights and powers than the rights and powers of the Owner Trust which have been granted herein. The Owner Trust does hereby warrant and represent that it has not assigned, pledged or granted a lien or security interest in, to or under, and hereby covenants that, so long as this Indenture shall remain in effect and the Lien hereof shall not have been released pursuant to Section 7.1 hereof, it will not assign, pledge or grant a lien or security interest in any of its estate, right, title or interest in, to or under, the Indenture Estate to anyone other than the Lease Indenture Trustee for the benefit of the Holders. The Owner Trust hereby further covenants that with respect to its estate, right, title and interest in, to or under the Indenture Estate, it will not, except as provided in this Indenture and except as to Excepted Payments, (i) and except as provided in Section 5.4 or 6.1 hereof, accept any payment from the Facility Lessee or any sublessee or EME or enter into any agreement amending, modifying or supplementing any of the Indenture Estate Documents, execute any waiver or modification of, or consent under, the terms of any of the Indenture Estate Documents or revoke or terminate any of the Indenture Estate Documents, (ii) settle or compromise any claim arising under any of the Indenture Estate Documents, or (iii) submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Indenture Estate Documents to arbitration thereunder. Subject to Sections 5.4 or 6.1 hereof, the Owner Trust hereby ratifies and confirms its obligations under the Indenture Estate Documents and does hereby agree that it will not take or omit to take any action, the taking or omission of which might result in an alteration or impairment of any of the Indenture Estate Documents or of any of the rights created by any thereof or the assignment (subject to the previous paragraph) hereunder. 5 The Lease Indenture Trustee, for itself and its successors and permitted assigns, hereby agrees that it shall hold the Indenture Estate, in trust for the benefit and security of (i) the Holders of the Lessor Notes from time to time outstanding, without any priority of any one Lessor Note over any other except as herein otherwise expressly provided and (ii) the Lease Indenture Trustee, and for the uses and purposes and subject to the terms and provisions set forth in this Indenture. Accordingly, the Owner Trust, for itself and its successors and permitted assigns, agrees that all Lessor Notes are to be issued and delivered and that all property subject or to become subject hereto is to be held subject to the further covenants, conditions, uses and trusts hereinafter set forth, and the Owner Trust, for itself and its successors and permitted assigns, hereby covenants and agrees with the Lease Indenture Trustee, for the benefit and security of the Holders from time to time of the Lessor Notes from time to time outstanding and to protect the security of this Indenture, and the Lease Indenture Trustee agrees to accept the trusts and duties hereinafter set forth, as follows: SECTION 1. DEFINITIONS Unless otherwise defined herein (including Annex A hereto), each capitalized term used in this Indenture and not otherwise defined herein shall have the respective meaning set forth in Appendix A to the Participation Agreement (T1) dated as of August 17, 2000 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof, the "PARTICIPATION AGREEMENT") among the Facility Lessee, EME, the Owner Trustee, the Owner Trust, the Owner Participant, the Lease Indenture Trustee, and United States Trust Company of New York, as Pass Through Trustees, unless the context hereof shall otherwise require. The general provisions of Appendix A to the Participation Agreement shall apply to terms used in this Indenture and specifically defined herein. SECTION 2. THE LESSOR NOTES SECTION 2.1 LIMITATION ON LESSOR NOTES. No Lessor Notes may be issued under the provisions of, or become secured by, this Indenture except in accordance with the provisions of this Section 2. The aggregate principal amount of the Lessor Notes which may be authenticated and delivered and outstanding at any one time under this Indenture shall be limited to the aggregate principal amount of the Initial Lessor Notes issued on the Closing Date to the Pass Through Trustees plus the aggregate principal amount of Additional Lessor Notes issued pursuant to Section 2.12 hereof. SECTION 2.2 INITIAL LESSOR NOTES. There are hereby created and established hereunder two series of Lessor Notes consisting of (a) Series A Lessor Notes in the aggregate principal amount of $107,750,000 with a final maturity date of July 2, 2009, in substantially the form set forth in Exhibit C to this Indenture (the "SERIES A LESSOR NOTES"), and (b) Series B Lessor Notes in the aggregate principal amount of $303,310,000 with a final maturity date of January 2, 2016, in substantially the form set forth in Exhibit D to this Indenture (the "SERIES B LESSOR NOTES" and, together with the Series A Lessor Notes, the "INITIAL LESSOR NOTES" or, individually, an "INITIAL LESSOR NOTE"). 6 SECTION 2.3 EXECUTION AND AUTHENTICATION OF LESSOR NOTES. Each Lessor Note issued hereunder shall be executed and delivered on behalf of the Owner Trust by one of its authorized signatories, be in fully registered form, be dated the date of original issuance of such Lessor Note and be in denominations of not less than $1,000. Any Lessor Note may be signed by a Person who, at the actual date of the execution of such Lessor Note, is an authorized signatory of the Owner Trust although at the nominal date of such Lessor Note such Person may not have been an authorized signatory of the Owner Trust. No Lessor Note shall be secured by or be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears thereon a certificate of authentication in the form contained in Exhibit E (or in the appropriate form provided for in any supplement hereto executed pursuant to Section 2.13 hereof), executed by the Lease Indenture Trustee by the manual signature of one of its authorized officers, and such certificate upon any Lessor Note shall be conclusive evidence that such Lessor Note has been duly authenticated and delivered hereunder. The Lease Indenture Trustee shall authenticate and deliver the Series A Lessor Note and the Series B Lessor Note for original issue in the respective aggregate principal amount specified in Section 2.2 hereof, upon a written order of the Owner Trust signed by the Owner Trustee. The Lease Indenture Trustee shall authenticate and deliver Subsequent Lessor Notes, upon a written order of the Owner Trust executed by the Owner Trustee and satisfaction of the conditions specified in Section 2.13 hereof. Such order shall specify the principal amount of the Subsequent Lessor Notes to be authenticated and the date on which the original issue of Subsequent Lessor Notes is to be authenticated. SECTION 2.4 ISSUANCE AND TERMS OF THE INITIAL LESSOR NOTES. (a) There shall be issued to the respective Pass Through Trustee the Series A Lessor Note and the Series B Lessor Note, as the case may be, dated the Closing Date. The aggregate amount of the Initial Lessor Notes shall be in the principal amount equal to the aggregate principal amount of the Lessor Notes purchased by the Pass Through Trustees from the Owner Trust pursuant to Section 2.1(c) of the Participation Agreement. (b) The principal amount of the Series A Lessor Note shall be due and payable in installments having a final payment date of July 2, 2009, and the principal amount of the Series B Lessor Note shall be due and payable in a series of installments having a final payment date of January 2, 2016. The principal of each series of Initial Lessor Notes shall be due and payable in installments on the respective dates (each such date a "PAYMENT DATE") and in the respective amounts set forth in Annex A attached to the respective Initial Lessor Note on the date of issuance and authentication thereof. Annex A to such Initial Lessor Note to the contrary notwithstanding, the last installment of principal of such Initial Lessor Note shall be equal to the then unpaid balance of the principal of such Initial Lessor Note. Each Initial Lessor Note shall bear interest on the principal from time to time outstanding, from and including the date of issuance thereof (computed on the basis of a 360-day year of twelve 30-day months) until paid in full at the rate set forth in such Initial Lessor Note. Each Initial Lessor Note shall accrue additional interest under the circumstances and at the rate per annum set forth in the second paragraph of each Initial Lessor Note. Interest on each Initial Lessor Note shall be due and payable in arrears semi-annually commencing on January 2, 2001, and on each January 2 and July 2 thereafter (each such date, an "INTEREST PAYMENT DATE") until paid in full. If any day on which principal, premium (including, without limitation, Make-Whole Premium), if any, or interest on the Initial Lessor Notes is payable is not a Business Day, payment thereof shall be made on the succeeding Business Day with the same effect as if made on the date on which such payment was due. 7 (c) Interest (computed on the basis of a 360-day year of twelve 30-day months) on any overdue principal and, to the extent permitted by Applicable Law, on overdue interest or Make-Whole Premium shall be paid on demand at the Overdue Rate. SECTION 2.5 PAYMENTS FROM INDENTURE ESTATE ONLY; NO PERSONAL LIABILITY OF THE OWNER TRUST, THE OWNER PARTICIPANT OR THE LEASE INDENTURE TRUSTEE. Except as otherwise specifically provided in this Indenture and in the Participation Agreement, all payments to be made by the Lease Indenture Trustee in respect of the Lessor Notes or under this Indenture shall be made only from the Indenture Estate, and the Owner Trust shall have no obligation for the payment thereof except to the extent that there shall be sufficient income or proceeds from the Indenture Estate to make such payments in accordance with the terms of Section 3 hereof, and the Owner Participant shall not have any obligation for payments in respect of the Lessor Notes or under this Indenture. The Lease Indenture Trustee and each Holder, by its acceptance thereof, agrees that it will look solely to the income and proceeds from the Indenture Estate to the extent available for distribution to the Lease Indenture Trustee or such Holder, as the case may be, as herein provided and that, except as expressly provided in this Indenture or the Participation Agreement, none of the Owner Participant, the Owner Trust, the Trust Company, or the Lease Indenture Trustee shall be personally liable to such Holder or the Lease Indenture Trustee for any amounts payable hereunder, under such Lessor Note or for any performance to be rendered under any Indenture Estate Document or for any liability under any Indenture Estate Document. Without prejudice to the foregoing, the Owner Trust will duly and punctually pay or cause to be paid the principal of, premium (including, without limitation, Make-Whole Premium), if any, and interest on all Lessor Notes according to their terms and the terms of this Indenture. Nothing contained in this Section 2.5 limiting the liability of the Owner Trust shall derogate from the right of the Lease Indenture Trustee and the Holders to proceed against the Indenture Estate to secure and enforce all payments and obligations due hereunder and under the Indenture Estate Documents and the Lessor Notes. In furtherance of the foregoing, to the fullest extent permitted by law, each Holder (and each assignee of such Person), by its acceptance thereof, agrees, as a condition to its being secured under this Indenture, that neither it nor the Lease Indenture Trustee will exercise any statutory right to negate the agreements set forth in this Section 2.5. Nothing herein contained shall be interpreted as affecting the representations, warranties or agreements of the Owner Trust expressly made in its individual capacity set forth in the Participation Agreement or the Trust Agreement. SECTION 2.6 METHOD OF PAYMENT. (a) The Owner Trust shall maintain an office or agency where Lessor Notes may be presented for payment (the "PAYING AGENT"). The Owner Trust may have one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Owner Trust initially appoints the Lease Indenture Trustee as Paying Agent in connection with the Lessor Notes. (b) The Owner Trust shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Owner Trust shall require each Paying Agent (other than the Lease Indenture Trustee) to agree in writing that the Paying Agent shall hold in 8 trust for the benefit of Holders or the Lease Indenture Trustee all money held by the Paying Agent for the payment of principal of or interest on the Lessor Notes and shall notify the Lease Indenture Trustee of any default by the Owner Trust in making any such payment. (c) The principal of, premium (including, without limitation, Make-Whole Premium), if any, and interest on each Lessor Note shall be paid by the Lease Indenture Trustee in Dollars from amounts available in the Indenture Estate on the dates provided in the Lessor Notes by mailing a check for such amount, payable in New York Clearing House funds, to each Holder at the last address of each such Holder appearing on the Note Register, or by whichever of the following methods shall be specified by notice from a Holder to the Lease Indenture Trustee: (a) by crediting the amount to be distributed to such Holder to an account maintained by such Holder with the Lease Indenture Trustee, (b) by making such payment to such Holder in immediately available funds at the Lease Indenture Trustee Office, or (c) in the case of the Initial Lessor Notes and in the case of other Lessor Notes, if such Holder of such other Lessor Notes is the Pass Through Trustee, or a bank or other institutional investor, by transferring such amount in immediately available funds for the account of such Holder to the banking institution having bank wire transfer facilities as shall be specified by such Holder, such transfer to be subject to telephonic confirmation of payment. Any payment made under any of the foregoing methods shall be made without any presentment or surrender of such Lessor Note, unless otherwise specified by the terms of the Lessor Note, except that, in the case of the final payment in respect of any Lessor Note, such Lessor Note shall be surrendered to the Lease Indenture Trustee. All payments in respect of the Lessor Notes shall be made (i) as soon as practicable prior to the close of business on the date the amounts to be distributed by the Lease Indenture Trustee are actually received by the Lease Indenture Trustee if such amounts are received by 2:00 p.m., New York City time, on a Business Day, or (ii) on the next succeeding Business Day if received after such time or on any day other than a Business Day. One or more of the foregoing methods of payment may be specified in a Lessor Note. Prior to due presentment for registration of transfer of any Lessor Note, the Owner Trust and the Lease Indenture Trustee may deem and treat the Person in whose name any Lessor Note is registered on the Note Register as the absolute owner and holder of such Lessor Note for the purpose of receiving payment of all amounts payable with respect to such Lessor Note and for all other purposes, and neither the Owner Trust nor the Lease Indenture Trustee shall be affected by any notice to the contrary. All payments made on any Lessor Note in accordance with the provisions of this Section 2.6 shall be valid and effective to satisfy and discharge the liability on such Lessor Note to the extent of the sums so paid and neither the Lease Indenture Trustee nor the Owner Trust shall have any liability in respect of such payment. SECTION 2.7 APPLICATION OF PAYMENTS. Each payment on any outstanding Lessor Note shall be applied, FIRST, to the payment of accrued interest (including interest on overdue principal and, to the extent permitted by Applicable Law, overdue interest) on such Lessor Note to the date of such payment, SECOND, to the payment of the principal amount of, and premium (including, without limitation, Make-Whole Premium), if any, on such Lessor Note then due (including any overdue installments of principal) thereunder and THIRD, to the extent permitted by Section 2.11 hereof, the balance, if any, remaining thereafter, to the payment of the principal amount of, and premium (including, without limitation, Make-Whole Premium), if any, on such Lessor Note. The order of application of payments prescribed by this Section 2.7 shall not be deemed to supersede any provision of Section 3 hereof regarding application of funds. 9 SECTION 2.8 REGISTRATION, TRANSFER AND EXCHANGE OF LESSOR NOTES. The Owner Trust shall maintain an office or agency where Lessor Notes may be presented for registration of transfer or for exchange (the "REGISTRAR"). The Registrar shall keep a register of the Lessor Notes and of their transfer and exchange. The Owner Trust may have one or more co-registrars. The Owner Trust initially appoints the Lease Indenture Trustee as Registrar in connection with the Lessor Notes. The Lease Indenture Trustee shall maintain at the Lease Indenture Trustee Office a register in which it will provide for the registration, registration of transfer and exchange of Lessor Notes (such register being referred to herein as the "NOTE REGISTER"). If any Lessor Note is surrendered at said office for registration of transfer or exchange (accompanied by a written instrument of transfer duly executed by or on behalf of the holder thereof, together with the amount of any applicable transfer taxes), the Owner Trust will execute and the Lease Indenture Trustee will authenticate and deliver, in the name of the designated transferee or transferees, if any, one or more new Lessor Notes (subject to the limitations specified in Sections 2.3 and 2.15 hereof) in any denomination or denominations not prohibited by this Indenture, as requested by the Person surrendering the Lessor Note, dated the same date as the Lessor Note so surrendered and of like tenor and aggregate unpaid principal amount. Any Lessor Note or Lessor Notes issued in a registration of transfer or exchange shall be entitled to the same security and benefits to which the Lessor Note or Lessor Notes so transferred or exchanged were entitled, including, without limitation, rights as to interest accrued but unpaid and to accrue so that there will not be any loss or gain of interest on the Lessor Note or Lessor Notes surrendered. Every Lessor Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Lease Indenture Trustee duly executed by the Holder thereof or his attorney duly authorized in writing, and the Lease Indenture Trustee may require opinion of counsel as to compliance of any such transfer with the Securities Act. The Lease Indenture Trustee shall make a notation on each new Lessor Note of the amount of all payments of principal previously made on the old Lessor Note or Lessor Notes with respect to which such new Lessor Note is issued and the date on which such new Lessor Note is issued and the date to which interest on such old Lessor Note or Lessor Notes shall have been paid. The Lease Indenture Trustee shall not be required to register the transfer or exchange of any Lessor Note during the 15 days preceding the due date of any payment on such Lessor Note. SECTION 2.9 MUTILATED, DESTROYED, LOST OR STOLEN LESSOR NOTES. Upon receipt by the Owner Trust and the Lease Indenture Trustee of evidence satisfactory to each of them of the loss, theft, destruction or mutilation of any Lessor Note and, in case of loss, theft or destruction, of indemnity satisfactory to each of them, and upon reimbursement to the Owner Trust and the Lease Indenture Trustee of all reasonable expenses incidental thereto and payment or reimbursement for any transfer taxes, and upon surrender and cancellation of such Lessor Note, if mutilated, the Owner Trust will execute and the Lease Indenture Trustee will authenticate and deliver in lieu of such Lessor Note, a new Lessor Note, dated the same date as such Lessor Note and of like tenor and principal amount. Any indemnity provided by the holder on a Lessor Note pursuant to this Section 2.9 must be sufficient in the judgment of the Owner Trust and the Lease Indenture Trustee to protect the Owner Trust, the Lease Indenture Trustee, the Paying Agent, the Registrar and any co-registrar or co-paying agent from any loss which any of them may suffer if a Lessor Note is replaced. SECTION 2.10 OPTIONAL PURCHASE UPON LEASE EVENT OF DEFAULT. At any time (i) while a Lease Event of Default shall have occurred and shall be continuing, (ii) after the Lessor Notes 10 shall have become due and payable as provided in Section 4.4 hereof or (iii) the Lease Indenture Trustee shall have commenced the exercise of material remedies, the Owner Trust, the Owner Participant or an OP Guarantor may, but shall not be obligated to, at any time thereafter, elect to purchase all, but not less than all, of the Lessor Notes then outstanding, or all of the Lessor Notes then outstanding not held by the Facility Lessee or an Affiliate of the Facility Lessee, in accordance with the provisions of this Section 2.10. To exercise such election the Owner Trust, the Owner Participant or an OP Guarantor, as the case may be, shall give written notice thereof to the Lease Indenture Trustee and each Holder. Such notice shall designate a date which is not more than five (5) (nor less than three (3)) Business Days thereafter as the purchase payment date. Each Holder agrees that such Holder will, upon payment to such Holder in the manner provided for in Section 2.6 from the Owner Trust, the Owner Participant or an OP Guarantor, as the case may be, of an amount equal to the aggregate unpaid principal amount of all Lessor Notes then held by such Holder, together with accrued and unpaid interest thereon to the date of payment thereof and all other sums then due and payable to such Holder hereunder and under the other Operative Documents (but excluding any Make-Whole Premium), forthwith sell, assign, transfer and convey to the Owner Trust, the Owner Participant or an OP Guarantor, as the case may be (without recourse, representation or warranty of any kind except for its own acts), all of the estate, right, title and interest of such Holder in and to the Indenture Estate, this Indenture, all Lessor Notes held by such Holder, the Participation Agreement and the other Operative Documents (excluding all estate, right, title and interest of such Holder under any of the foregoing to the extent such estate, right, title or interest is, with respect to an obligation not then due and payable or past due, with respect to any action, inaction or state of affairs occurring prior to such sale). The Owner Trust, the Owner Participant or an OP Guarantor, as the case may be, shall assume all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale (except to the extent such obligations relate solely to periods prior to such sale). If the Owner Trust, the Owner Participant or an OP Guarantor, as the case may be, shall so request, such Holder will comply with the provisions of Section 2.8 hereof to enable new Lessor Notes to be issued to the Owner Trust, the Owner Participant or such OP Guarantor, as the case may be, in such authorized denominations (as provided in said Section 2.8) as the Owner Trust, the Owner Participant or such OP Guarantor, as the case may be, shall request. All charges and expenses required pursuant to Section 2.14 hereof in connection with the issuance of any such new Lessor Note pursuant to this Section 2.10 shall be borne by the Owner Trust, the Owner Participant or such OP Guarantor, as the case may be. Any election to purchase the Lessor Notes under this Section 2.10 shall be irrevocable. For the avoidance of doubt, it is expressly understood and agreed that no Holder shall be obligated under this Section 2.10 to sell the Lessor Notes held by it unless such Holder shall have received on the specified payment date the full amount owing to such Holder under this Section 2.10. SECTION 2.11 MANDATORY PREPAYMENT. (a) Except as otherwise provided in Section 2.12(a), the Lessor Notes shall be prepaid by the Owner Trust in whole, together with accrued interest thereon to the date of prepayment, Make-Whole Premium (but only if, pursuant to Section 2.11(c), the payment of Make-Whole Premium is required to be made in connection with such prepayment), and all other amounts then payable hereunder, under the Lessor Notes and under the other Operative Documents to the Holders in immediately available funds in Dollars at the place and by the time and otherwise in the manner provided in Section 2.6, on the earliest of: 11 (i) if the Facility Lease is terminated pursuant to Section 13.1 or 13.2 thereof, on the applicable Termination Date; or (ii) if the Facility Lease is terminated pursuant to Section 14.1 thereof, on the applicable Obsolescence Termination Date; or (iii) if the Facility Lease is terminated pursuant to Section 10.2(a) thereof, on the applicable Termination Date provided in Section 10.2(a) of the Facility Lease; or (iv) if the obligations represented by the Lessor Notes shall have been refinanced in whole but not in part pursuant to Section 14.2 of the Participation Agreement, on the date of such refinancing. (b) Unless the Facility Lease or the Participation Agreement requires the Facility Lessee to give notice to the Lease Indenture Trustee of the event giving rise to a mandatory prepayment, the Owner Trust shall give a notice of prepayment (subject to revocation as provided below) under this Section 2.11 to the Lease Indenture Trustee (and the Lease Indenture Trustee shall thereupon promptly deliver such notice to each Holder) in the manner specified in Section 7.6 promptly after the Owner Trust shall have received written notice from the Facility Lessee of any event giving rise to a mandatory prepayment pursuant to Section 2.11(a) hereof. Any such notice of prepayment shall specify (i) that it is a notice of prepayment given pursuant to this Section 2.11, (ii) the date fixed for such prepayment, (iii) the clause of Section 2.11(a) hereof under which such prepayment is to be made, and (iv) the amount of and interest on each Lessor Note to be prepaid pursuant to Section 2.11(a) and the amount of the Make-Whole Premiums, if any. Any such notice given under this Section 2.11 by the Owner Trust may be withdrawn to the same extent as the corresponding notice under the Facility Lease or the Participation Agreement, as the case may be. (c) Make-Whole Premium shall be payable in connection with any mandatory prepayment of the Lessor Notes pursuant to this Section 2.11 if (i) such mandatory prepayment is required as a result of a termination of the Facility Lease pursuant to Section 14.1(a)(ii), (b) or (c) thereof or (ii) the obligations evidenced by the Lessor Notes shall have been refinanced pursuant to Section 14.2 of the Participation Agreement. Make-Whole Premium shall not be payable in connection with any mandatory prepayment of the Lessor Notes pursuant to this Section 2.11 if such mandatory prepayment is required as a result of a termination of the Facility Lease pursuant to Section 10.2(a), 13.1, 13.2 or 14.1(a)(i) thereof. (d) Except as otherwise expressly provided in this Indenture, the Lessor Notes may not be prepaid in whole or in part. SECTION 2.12 ASSUMPTION OF LESSOR NOTES. (a) Upon the occurrence of (x) a Midwest Assumption Event, the Facility Lessee may notify, or (y) an Owner Participant Assumption Event, the Owner Participant may notify, in either case, the Lease Indenture Trustee of its intention to assume the Lessor Notes pursuant to and in accordance with this Section 2.12. Upon receipt by the Lease Indenture Trustee of such notice, notwithstanding anything herein or in any other Operative Document to the contrary, neither the Lease Indenture Trustee nor any Holder shall be entitled to exercise any remedy 12 under Section 4.4 or 4.5 hereof or under Section 17.1 of the Facility Lease relating to the event giving rise to such assumption until the earlier to occur of (x) the date on which, pursuant to this Section 2.12, all of the Lessor Notes have been assumed by an Eligible Successor and (y) the date falling 30 days after the Lease Indenture Trustee's receipt of such notice; PROVIDED, that, if an Owner Participant Assumption Event of the type specified in clause (a) of the definition thereof shall have occurred and prior to the end of such 30-day period the Owner Participant shall have cured, pursuant to Section 4.3 hereof, the Lease Event of Default giving rise to such Owner Participant Assumption Event, then, solely for purposes of this Section 2.12, such Owner Participant Assumption Event shall be deemed to be continuing for a period not to exceed 90 days following the effective date of such cure so long as during such 90-day period no other Lease Indenture Event of Default shall occur and remain uncured; PROVIDED, FURTHER, that, notwithstanding anything to the contrary contained herein, such 90-day period and the 60-day period referred to clauses (vi) and (vii) below shall run concurrently and not consecutively. In the event of the occurrence of an Assumption Event and upon receipt by the Lease Indenture Trustee of the documents listed below, all the obligations and liabilities of the Owner Trust under this Indenture and each Lessor Note shall be assumed by an Eligible Successor and, in the case of a Midwest Assumption Event, the Owner Trust shall be released and discharged without further act or formality whatsoever from all obligations and liabilities under this Indenture and each Lessor Note: (i) a duly executed Assumption Agreement substantially in the form of Exhibit F to this Indenture; (ii) an opinion of counsel to the Eligible Successor (with customary qualifications and limitations), addressed to the Lease Indenture Trustee and the Holders of the Lessor Notes, to the effect that (A) the Eligible Successor is duly organized or formed, validly existing and in good standing in the jurisdiction of its organization or formation and is qualified to do business in each jurisdiction where the nature of its business requires qualification, (B) the Assumption Agreement and each other instrument, document or agreement executed and delivered by the Eligible Successor in connection with the assumption contemplated by the Assumption Agreement (collectively, the "ASSUMPTION DOCUMENTS") have been duly authorized, executed and delivered by the Eligible Successor, (C) each Assumption Document and the assumption contemplated thereby do not contravene (1) the Organic Documents of the Eligible Successor, (2) any Contractual Obligation of the Eligible Successor or (3) Requirements of Law, (D) no Governmental Approval is necessary or required in connection with any Assumption Document or the assumption contemplated thereby (or, if any such Governmental Approval is necessary or required, that the same has been duly obtained and is final and in full force and effect and any period for the filing of notice of rehearing or application for judicial review of the issuance of such Governmental Approval has expired without any such notice or application having been made), (E) each Assumption Document is a legal, valid and binding obligation of the Eligible Successor, enforceable in accordance with its terms (except as limited by bankruptcy, insolvency or similar laws of general application affecting the enforcement of creditors' rights generally and equitable principles), (F) the Eligible Successor is not (1) an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended or (2) subject to regulation under PUHCA except 13 pursuant to Section 9(a)(2) or Section 32 thereof and (G) to the knowledge of such counsel there is no pending or threatened, action, suit, investigation or proceeding against the Eligible Successor that questions the validity of any Assumption Document or the assumption contemplated thereby or which, if adversely determined, would have a material adverse effect on the ability of the Eligible Successor to perform its obligations under any Assumption Document; (iii) copies of all Governmental Approvals (if any) referred to in the opinion of counsel referred to in clause (ii) above; (iv) a supplement to this Indenture which shall, among other things, (A) in the case of a Midwest Assumption Event, confirm the release of the Owner Trust thereby effected and (B) contain provisions appropriately amending this Indenture: (1) to reflect the fact that the obligations of the Owner Trust under this Indenture have been assumed directly by the Eligible Successor; (2) in the case of an Owner Participant Assumption Event, (x) to include covenants of the Eligible Successor substantially the same as the covenants of the Facility Lessee under the Facility Lease, covenants of the Eligible Successor substantially similar to the covenants of the Facility Lessee and EME under the Participation Agreement to the extent that such covenants relate to the use, operation or maintenance of the Facility, new Indenture Events of Defaults substantially the same as Sections 16(h) and (k) of the Facility Lease relating to the Eligible Successor and a new Indenture Event of Default based upon default by the Eligible Successor in the performance by the Eligible Successor of its covenants (other than payment obligations) set forth in the rated, long-term, unsecured indebtedness of the Eligible Successor that has resulted in, or, after giving effect to applicable grace periods, would permit, the acceleration of the maturity of such indebtedness, (y) to delete Section 4.2(a) hereof and all related references herein to a Lease Event of Default and (z) to reflect a modification of Section 5.04 so as to permit the Eligible Successor (to the exclusion of the Lease Indenture Trustee) to exercise all rights of the Owner Trust under the Facility Lease and (3) as otherwise necessary to reflect the foregoing provisions and preserve, protect and maintain the Lien on the Indenture Estate; (v) a certificate of an Authorized Officer of the Eligible Successor stating that (A) the conditions precedent required by this Indenture for such assumption have been complied with, (B) there is no pending or, to the knowledge of such Eligible Successor, threatened, action, suit, investigation or proceeding against the Eligible Successor that questions the validity of any Assumption Document or the assumption contemplated thereby or which, if adversely determined, would have a material adverse effect on the ability of the Eligible Successor to perform its obligations under any Assumption Document and (C) after giving effect to the assumption by the Eligible Successor, (1) no Lease Indenture Default or Lease Indenture Event of Default has occurred and is continuing (taking into account any cure effected pursuant to Section 4.3 hereof), (2) each representation and warranty of the Eligible Successor or any of its Affiliates set forth in this Indenture and each other Operative Document to which it or any of its Affiliates is a party is true and correct in all material respects and (3) the Eligible Successor is not insolvent within the meaning of any applicable preferential transfer, fraudulent conveyance or bankruptcy law; 14 (vi) ratings letters from each of Moody's and S&P to the effect that, after giving effect to such assumption, the rating of the long-term, unsecured senior Indebtedness of the Eligible Successor shall be at least Baa2 by Moody's and BBB by S&P; PROVIDED that if, immediately prior to the assumption of such Lessor Notes, the long-term, unsecured senior Indebtedness of the Eligible Successor is not rated by Moody's and S&P or such Indebtedness of the Eligible Successor is rated Baa2 or better by Moody's and BBB or better by S&P then, subject to clause (vii)(A)(3) of this Section 2.12(a), the Eligible Successor shall not be required to deliver such ratings letters as a condition precedent to consummating such assumption; and (vii) in the case of an Owner Participant Assumption Event where immediately prior to the assumption of such Lessor Notes either (A) the long-term, unsecured senior Indebtedness of the Eligible Successor is not rated by Moody's and S&P or (B) such Indebtedness of the Eligible Successor is rated by Baa2 or better by Moody's and BBB or better by S&P, but such Eligible Successor has not delivered ratings letters that reflect the assumption of the Lessor Notes by such Eligible Successor, a supplement to this Indenture which shall effect the following modifications to the terms of each Lessor Note: (I) for the period commencing on and including the effective date of such assumption and ending on but not including the earlier to occur of (x) the date falling 60 days after such effective date and (y) the date on which initial ratings of the long-term, unsecured senior Indebtedness of the Eligible Successor are issued by each of Moody's and S&P or the date on which such Eligible Successor has delivered ratings letters that reflect the assumption of the Lessor Notes by such Eligible Successor, the interest rate payable on such Lessor Notes shall increase (in addition to the interest rate thereon in effect immediately prior to the effective date of such assumption) and additional interest reflecting such increase shall accrue with respect to such Lessor Notes at the rate of 0.50% per annum and (II) Section 4.2 hereof shall be amended to provide that it shall be a "Lease Indenture Event of Default" hereunder if (w) the initial rating on the long-term, unsecured senior Indebtedness of the Eligible Successor giving effect to such assumption from Moody's shall be lower than Baa2, (x) such initial rating from S&P shall be lower than BBB, (y) such initial ratings shall not have been issued by either of Moody's or S&P on or before the date falling 60 days after the effective date of such assumption or (z) the Eligible Successor has failed to deliver, on of before the date falling 60 days after the effective date of such assumption, ratings letters from each of S&P and Moody's to the effect that, after giving effect to such assumption of the Lessor Notes by such Eligible Successor, the rating on the long-term, unsecured senior Indebtedness of such Eligible Successor is at least equal to Baa2 by Moody's and BBB by S&P. (b) The credit rating requirements set out in clause (vi) of Section 2.12(a) hereof shall be deemed to have been satisfied with respect to an Eligible Successor if (i) the obligations of such Eligible Successor hereunder and in respect of the Lessor Notes shall have been guaranteed pursuant to an instrument in writing reasonably acceptable to each Holder by a Person that would qualify as an "Eligible Successor" hereunder whose long-term unsecured Indebtedness is rated Baa2 or better by Moody's and BBB or better by S&P at the time required under said clause (vi); and (ii) in addition to the documents required to be delivered under Section 2.12(a) hereof, the Lease Indenture Trustee shall have received on the effective date of such assumption each of the 15 documents specified in clauses (ii), (iii) and (v) of Section 2.12(a) hereof as to such Person with respect to such guarantee. (c) Notice of any assumption of Lessor Notes shall be given by the Lease Indenture Trustee to the Holders as promptly as practicable after the Lease Indenture Trustee has received written notice thereof in accordance with the first sentence of Section 2.12(a) hereof. SECTION 2.13 SUBSEQUENT LESSOR NOTES. (a) The Owner Trust may, subject to the conditions hereafter provided in this Section 2.13, issue additional Lessor Notes ("SUBSEQUENT LESSOR NOTES") under and secured by this Indenture, at any time or from time to time for the purpose of (i) providing funds for a Supplemental Financing pursuant to Section 14.1 of the Participation Agreement (Subsequent Lessor Notes issued for such purpose, the "ADDITIONAL LESSOR NOTES") or (ii) refinancing the Lessor Notes or other Subsequent Lessor Notes pursuant to Section 14.2 of the Participation Agreement (Subsequent Lessor Notes issued for such purpose, the "NEW LESSOR NOTES"). (b) Before any Subsequent Lessor Notes shall be issued under the provisions of this Section 2.13, the Facility Lessee shall have delivered to the Owner Trust, not less than 5 days nor more than 60 days (or in the case of a Supplemental Financing under Section 14.1 of the Participation Agreement, 90 days) prior to the proposed date of issuance of such Subsequent Lessor Notes, a request and authorization to issue such Subsequent Lessor Notes, which request and authorization shall (i) contain the proposed date of issuance of such Lessor Notes and the terms thereof and (ii) include a certification by the Facility Lessee that the terms of such Lessor Notes are in compliance with this Section 2.13 and Section 14.1 or 14.2 of the Participation Agreement, as the case may be. Such Subsequent Lessor Notes shall have a designation so as to distinguish such Subsequent Lessor Notes from the Lessor Notes theretofore issued, be dated their respective dates of issuance, bear interest at such rates (which may be either fixed or floating) as shall be agreed between the Facility Lessee and the Owner Trust, and shall be stated to be payable by their terms not later than the latest date permitted therefor under Section 14.1 or 14.2 of the Participation Agreement. The Subsequent Lessor Notes shall not be subject to (i) prepayment except as provided in Section 2.11 hereof, (ii) purchase by the Facility Lessee, the Owner Trust, the Owner Participant, an OP Guarantor or any Affiliate of any of them other than as provided in Section 2.10 hereof or (iii) assumption by any Person except as provided in Section 2.12 hereof. (c) Except as to any differences in the maturity dates of the Subsequent Lessor Notes or the rate or rates of interest thereon, such Subsequent Lessor Notes shall be on a parity with, and shall be entitled to the same benefits and security of this Indenture, as the other Lessor Notes issued pursuant to the terms hereof. (d) The terms, provisions and designations of such Subsequent Lessor Notes shall be set forth in a supplement to this Indenture executed by the Owner Trust and the Lease Indenture Trustee. Such Subsequent Lessor Notes shall be executed, delivered and registered as provided in this Indenture, but before such Subsequent Lessor Notes shall be delivered and registered there shall be filed with the Lease Indenture Trustee, in addition to other documents and certificates required by this Section 2.13, the following, all of which shall be dated as of the date of the supplement to this Indenture: 16 (i) a copy of such supplement (which shall include the form of such series of Subsequent Lessor Notes); (ii) in the event that, in accordance with Section 7.1 hereof, a replacement Lease Indenture Trustee has been appointed in connection with the issuance of such series of Lessor Notes, evidence of the acceptance of such replacement Lease Indenture Trustee of such appointment; (iii) unless the Subsequent Lessor Notes will, upon issuance, be the only Lessor Notes outstanding, UCC lien searches, supplemental title reports and such other evidence that may be reasonably required by the Lease Indenture Trustee demonstrating that no impairment exists to the first-priority perfected lien and security interest in the Indenture Estate; (iv) an officer's certificate of an Authorized Officer of the Facility Lessee stating that (A) no Lease Default has occurred and is continuing, (B) the conditions in respect of the issuance of such Subsequent Lessor Notes contained in this Section 2.13 have been satisfied, (C) Basic Lease Rent and the Termination Value are calculated to be sufficient to pay all the outstanding Lessor Notes, after taking into account the issuance of such Subsequent Lessor Notes and any related prepayment of Lessor Notes theretofore outstanding and (D) all conditions to the Supplemental Financing or refinancing contained in Section 14.1 or 14.2 of the Participation Agreement or in any other provision of the Operative Documents have been satisfied; (v) an officer's certificate of the Owner Trust stating that no Lease Indenture Default has occurred and is continuing; (vi) an opinion of counsel to the Owner Trust that the Subsequent Lessor Notes and the supplement to this Indenture have been duly authorized, executed and delivered by the Owner Trust and constitute the legal, valid and binding obligations of the Owner Trust enforceable in accordance with their terms; and (vii) an opinion of counsel, which may be counsel to the Facility Lessee, that all conditions of this Section 2.13 to the issuance of Subsequent Lessor Notes have been satisfied. SECTION 2.14 PAYMENT OF EXPENSES ON TRANSFER. Upon the issuance of a new Lessor Note or Lessor Notes pursuant to Section 2.8 or 2.9 hereof, the Owner Trust or the Lease Indenture Trustee may require from the party requesting such new Lessor Note or Lessor Notes payment of a sum to reimburse the Owner Trust and the Lease Indenture Trustee for, or to provide funds for, the payment of any tax or other governmental charge in connection therewith or any charges and expenses connected with such tax or governmental charge paid or payable by the Owner Trust or the Lease Indenture Trustee. SECTION 2.15 RESTRICTIONS OF TRANSFER RESULTING FROM FEDERAL SECURITIES LAWS; LEGEND. Each Lessor Note shall be delivered to the initial Holder thereof without registration of such Lessor Note under the Securities Act and without qualification of this Indenture under the Trust Indenture Act of 1939, as amended. Prior to any transfer of any such Lessor Note, in whole or in 17 part, to any Person, the Holder thereof shall furnish to the Facility Lessee, the Lease Indenture Trustee and the Owner Trust an opinion of counsel, which opinion and which counsel shall be reasonably satisfactory to the Lease Indenture Trustee, the Owner Trust and the Facility Lessee, to the effect that such transfer will not violate the registration provisions of the Securities Act or require qualification of this Indenture under the Trust Indenture Act of 1939, as amended, and all Lessor Notes issued hereunder shall be endorsed with a legend which shall read substantially as follows: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH REGISTRATION IS IN EFFECT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT. SECTION 2.16 SECURITY FOR AND PARITY OF LESSOR NOTES. All Lessor Notes issued and outstanding hereunder shall rank on a parity with each other and shall as to each other be secured equally and ratably by this Indenture, without preference, priority or distinction of any thereof over any other by reason of difference in time of issuance or otherwise. SECTION 2.17 ACCEPTANCE OF THE LEASE INDENTURE TRUSTEE. Each Holder, by its acceptance of a Lessor Note, shall be deemed to have consented to the appointment of the Lease Indenture Trustee. SECTION 2.18 TAXES; WITHHOLDING. Without limiting the indemnification obligations of EME under Section 12.1 or 12.2 of the Participation Agreement, if any amount of principal, interest or other amounts payable with respect to this Indenture or any Lessor Note becomes subject to any withholding Tax, the Owner Trust shall withhold such Tax and the Owner Trust shall pay to each Holder such additional amount so that the net amount actually received by such Holder, after reduction for such withholding Tax, shall be on an After-Tax Basis equal to the full amount otherwise due and payable without regard to whether EME pays such Tax under the Participation Agreement; PROVIDED, that, notwithstanding the foregoing, the Owner Trust shall be required to pay such additional amounts only if and to the extent that (i) EME is required to indemnify the Holder for such withholding amount under Section 12.1 or 12.2 of the Participation Agreement and (ii) EME has not paid such amount within three days after notice of nonpayment; PROVIDED, FURTHER, that, the Owner Trust shall, upon such payment to such Holder, be subrogated to the rights of the Holder in respect thereof following payment in full to such Holder of all amounts due and owing to it under Section 12.1 or 12.2 of the Participation Agreement with respect to such withholding Taxes. If any amount of principal, interest or other amount payable with respect to this Indenture or any Lessor Note becomes subject to any withholding Tax and EME is not required to indemnify the Holder for such withholding amount under Section 12.1 or 12.2 of the Participation Agreement, the Owner Trust shall withhold such Tax and the Owner Trust shall pay to such Holder the amount of such principal, interest or other amount net of such withheld Tax. SECTION 3. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM INDENTURE ESTATE SECTION 3.1 DISTRIBUTION PRIOR TO LESSOR LOAN EVENT OF DEFAULT. (a) Except as otherwise provided in Section 3.2 or 3.3 of this Indenture, each installment of Basic Lease Rent and any payment of Supplemental Lease Rent constituting 18 interest on overdue installments of Basic Lease Rent received by the Lease Indenture Trustee shall be distributed by the Lease Indenture Trustee in the following order of priority: FIRST, so much of such amounts as shall be required to pay in full the aggregate principal and accrued interest (as well as any interest on overdue principal and, to the extent permitted by Applicable Law, on overdue interest) then due and payable under the Lessor Notes shall be distributed to the Holders ratably, without priority of any Holder over any other Holder, in the proportion that the amount of such payment then due and payable under each such Lessor Note bears to the aggregate amount of the payments then due and payable under all such Lessor Notes; and SECOND, the balance, if any, of such amounts remaining shall be distributed to the Owner Trust for distribution by it in accordance with the terms of the Trust Agreement; PROVIDED, HOWEVER, that if a Lease Indenture Event of Default shall have occurred and be continuing, then such balance shall not be distributed as provided in this clause "SECOND" but shall be held by the Lease Indenture Trustee as part of the Indenture Estate until the earliest to occur of: (i) receipt by the Lease Indenture Trustee of written notice from the Required Holders stating that all Lease Indenture Events of Default shall have been cured or waived, in which event such balance shall be distributed as provided in this clause "SECOND," (ii) receipt by the Lease Indenture Trustee of written notice from the Required Holders stating that Section 3.3 hereof shall be applicable, in which event such balance shall be distributed in accordance with the provisions of said Section 3.3, or (iii) unless the Lease Indenture Trustee shall have commenced to exercise material remedies pursuant to Section 4.4 hereof, such Lease Indenture Event of Default shall have continued for a period of 180 days (such period to be extended if and for so long as the Lease Indenture Trustee shall be precluded by operation of law or by any judgment or order of any court or regulatory body of competent jurisdiction from exercising remedies under Section 4 hereof), in which event such balance shall be distributed as provided in this clause "SECOND" and so long as the Lease Indenture Trustee shall have failed to commence to exercise material remedies pursuant to Section 4.4 hereof in respect thereof such Lease Indenture Event of Default shall not thereafter be the basis of a retention of any amount under this proviso. SECTION 3.2 PAYMENTS FOLLOWING EVENT OF LOSS OR OTHER EARLY TERMINATION. (a) Except as otherwise provided in Section 3.3 hereof, any payment received by the Lease Indenture Trustee with respect to a prepayment arising pursuant to Section 2.11(a) hereof shall be distributed by the Lease Indenture Trustee in the following order of priority: FIRST, as provided in clause "SECOND" of Section 3.3 hereof; SECOND, as provided in clause "THIRD" of Section 3.3 hereof (but including all Make-Whole Premium (if any) due in respect thereof required to be paid in accordance with Sections 2.11(a) and (c) hereof); THIRD, to reimburse such Holder (to the extent not previously reimbursed) for any reasonable out-of-pocket costs or expenses incurred in connection with such prepayment; and FOURTH, as provided in clause "FIFTH" of Section 3.3 hereof. (b) Except as otherwise provided in Section 3.2(a) or 3.3 hereof, any amounts received directly or indirectly from any Governmental Authority or insurer or other party not as a result of an Event of Loss or pursuant to any provision of Section 10.3, Section 10.5 or Section 19 11 of the Facility Lease shall be applied as provided in the applicable provisions of the Facility Lease and, if and to the extent that any portion of such amounts are required to be held for the account of the Facility Lessee and are not at the time required to be paid to the Facility Lessee pursuant to the applicable provisions of Section 10.3, Section 10.5 or Section 11 of the Facility Lease, shall be promptly paid to (if not initially paid directly to the Lease Indenture Trustee) and, thereafter, held by, the Lease Indenture Trustee as security for the obligations of the Facility Lessee under the Facility Lease, and at such time as the Lease Indenture Trustee shall have received written notice from the Facility Lessee (i) stating that the conditions specified in the Facility Lease for payment of such amounts to the Facility Lessee shall have been satisfied and (ii) setting out the portion of such amounts so held by the Lease Indenture Trustee to be paid to the Facility Lessee, the Lease Indenture Trustee shall pay to the Facility Lessee the amount specified in such notice. SECTION 3.3 PAYMENTS AFTER LEASE INDENTURE EVENT OF DEFAULT. Notwithstanding Section 2.7 hereof, (a) if, during the continuance of a Lease Indenture Event of Default, the Lease Indenture Trustee (acting on the instruction of the Required Holders) has elected to pursue remedies in respect thereof or (b) the entire principal amount of the Lessor Notes shall have become due and payable as provided herein, all payments (other than Excepted Payments) received by the Lease Indenture Trustee in respect of, all amounts (other than Excepted Payments) held or realized by the Lease Indenture Trustee upon, and all other payments or amounts (other than Excepted Payments) held by the Lease Indenture Trustee as part of, the Indenture Estate shall be promptly distributed in the following order of priority: FIRST, to the Lease Indenture Trustee, so much of such payments or amounts as shall be required to reimburse the Lease Indenture Trustee for any amounts payable to it under Section 12.1 of the Participation Agreement and not previously paid to the Lease Indenture Trustee pursuant to Section 3.4 hereof; SECOND, so much of such payments or amounts, as shall be required to pay to the Holders all amounts payable to the Holders pursuant to the Operative Documents, including, without limitation, the indemnification provisions of Sections 12.1 and 12.2 of the Participation Agreement, but excluding principal and interest on the Lessor Notes, shall be distributed to the Holders as their interests may appear, and if the aggregate amount shall be insufficient to pay all such amounts in full, such amount shall be distributed ratably, without priority of any Holder over any other Holder, in the proportion that the aggregate amount due each such Holder under this clause "SECOND" bears to the aggregate amount due to all such Holders under this clause "SECOND"; THIRD, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid principal amount of all Lessor Notes and accrued but unpaid interest thereon to the date of distribution (as well as any interest on overdue principal and, to the extent permitted by Requirements of Law, overdue interest at the Overdue Rate), shall be distributed to the Holders, and if the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then such distribution shall be made, ratably, without priority of one over the other, in the proportion that the aggregate unpaid principal amount of all Lessor Notes held by each such Holder, plus the accrued but unpaid interest thereon to the date of distribution, bears to the aggregate unpaid principal 20 amount of all Lessor Notes, plus the accrued but unpaid interest thereon to the date of distribution; FOURTH, to the Holders (other than the Facility Lessee or any Affiliate thereof), so much of such payments or amounts as shall be required to reimburse each such Holder for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon, the tolls, rents, revenues, issues, products and profits of the Indenture Estate pursuant to Section 4.5 (b) hereof) incurred by such Holder (to the extent not previously reimbursed) under the Operative Documents, including, without limitation, the expenses of any sale, taking or other proceeding, reasonable attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by such Holder in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by such Holder, liquidated or otherwise, upon such Lease Indenture Event of Default shall be applied by such Holder in reimbursement of such expenses; and FIFTH, the balance, if any, of such payments or amounts remaining thereafter shall be paid to the Owner Trust for distribution in accordance with the terms of the Trust Agreement. SECTION 3.4 CERTAIN PAYMENTS. (a) Except as otherwise provided in this Indenture, any payments received by the Lease Indenture Trustee or any Holder for which provision as to the application thereof is made in any other Operative Document shall be applied forthwith to the purpose for which such payment was made in accordance with the terms of such Operative Document. (b) The Owner Trust hereby agrees that if, at any time during the term of this Indenture, it receives from the Facility Lessee, EME or any Affiliate of any of them any amount or payment (other than Excepted Payments) described in Section 3.4(c) hereof, it shall hold such amount or payment in trust for the benefit of the Lease Indenture Trustee and promptly pay such amount or payment to the Lease Indenture Trustee. The Owner Trust further agrees that the obligation to remit such amount or payment shall be secured by this Indenture. (c) Any payment of Supplemental Lease Rent received by the Owner Participant or the Lease Indenture Trustee pursuant to the fourth sentence of Section 4.3 hereof shall, so long as no Lease Indenture Event of Default shall have occurred and be continuing, and except to the extent applied as provided in Section 3.3 hereof, be retained by, or promptly distributed to, the Owner Participant. Notwithstanding anything to the contrary in this Section 3 and without regard to whether a Lease Indenture Event of Default shall have occurred and be continuing, all Excepted Payments specified as such in writing by the payor or clearly described as such by the payor, or which to the actual knowledge of an Authorized Officer of the Lease Indenture Trustee constitute Excepted Payments and received by the Lease Indenture Trustee shall be paid by the Lease Indenture Trustee forthwith to the Person or Persons entitled thereto. SECTION 3.5 OTHER PAYMENTS. Any payments in respect of the Indenture Estate received by the Lease Indenture Trustee no provision for the application of which is made in the Facility Lease or in another Operative Document or elsewhere in this Indenture shall (i) to the 21 extent received or realized at any time prior to the payment in full of all obligations to the Holders secured by the Lien of this Indenture, be deposited into the Lease Indenture Trustee's Account, and thereafter applied to the payment of principal, interest, Make-Whole Premium and other amounts as and when such principal, interest, Make-Whole Premium or other amounts come due pursuant to priority "FIRST" specified in Section 3.1 hereof or, if applicable at such time, pursuant to Section 3.2 or 3.3 hereof and (ii) to the extent received or realized at any time after payment in full of all obligations to the Holders secured by the Lien of this Indenture, in the following order of priority: FIRST, to reimburse the Lease Indenture Trustee and the Holders (to the extent not previously reimbursed) for any reasonable out-of-pocket costs or expenses to which it is entitled to reimbursement pursuant to an Operative Document; and SECOND, in the manner provided in clause "FIFTH" of Section 3.3 hereof. SECTION 3.6 MANNER OF PAYMENT TO THE OWNER TRUST. Any amounts distributed hereunder by the Lease Indenture Trustee to the Owner Trust shall be paid by the Lease Indenture Trustee to the Owner Trust by wire transfer of funds of the type received by the Lease Indenture Trustee at such offices and to such account or accounts of such entity or entities as shall be designated in advance by written notice from the Owner Trust to the Lease Indenture Trustee from time to time. The Lease Indenture Trustee shall, whether or not the Lien of this Indenture shall have been discharged in accordance herewith, act as paying agent for the Owner Trust, in connection with the Lease Indenture Trustee's duties to make distributions to or for the benefit of the Owner Trust pursuant to this Section 3 and to accept all revenues, payments, securities, investments and other amounts received by the Lease Indenture Trustee and to be distributed to the Owner Trust pursuant thereto or held in trust for the benefit of the Owner Trust pursuant to the terms of this Indenture. The Owner Trust hereby notifies and instructs the Lease Indenture Trustee that unless and until the Lease Indenture Trustee receives written notice to the contrary from the Owner Trust, all amounts to be distributed to the Owner Trust pursuant to clause "SECOND" of Section 3.1 hereof shall be distributed by wire transfer of funds of the type received by the Lease Indenture Trustee to the Owner Participant. In the event that the Lease Indenture Trustee is unable to distribute any amounts to the Owner Trust or the Owner Participant on the same day such amounts are received by the Lease Indenture Trustee, the Lease Indenture Trustee agrees that such amounts shall be held in trust for the benefit of the Owner Trust or the Owner Participant, as the case may be, and shall be invested by the Lease Indenture Trustee for and at the expense and risk of the Owner Trust or the Owner Participant, as the case may be, in Permitted Investments identified in written instructions to the Lease Indenture Trustee from the Owner Trust or the Owner Participant, as the case may be, if such investments are reasonably available. SECTION 3.7 INVESTMENT OF AMOUNTS HELD BY LEASE INDENTURE TRUSTEE. Any amounts held by the Lease Indenture Trustee pursuant to the proviso to clause "SECOND" of Section 3.1 hereof, pursuant to Section 3.2 hereof, or pursuant to Section 10 or 11 of the Facility Lease shall be invested by the Lease Indenture Trustee from time to time in Permitted Investments identified in written instructions to the Lease Indenture Trustee from the Owner Trust, at the expense of the Owner Trust, or, so long as no Lease Event of Default shall have occurred and be continuing, from the Facility Lessee acting on behalf of the Owner Trust, at the expense of the Facility Lessee, if such investments are reasonably available. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment and any payments by the Facility Lessee pursuant to the Facility Lease in respect of any losses or expenses, net of the Lease Indenture Trustee's reasonable fees and expenses in making such investment, shall be held 22 and applied by the Lease Indenture Trustee in the same manner as the principal amount of such investment is to be applied, and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lease Indenture Trustee shall not be liable for any loss resulting from any investment required to be made by it under this Indenture other than by reason of its willful misconduct or gross negligence as determined by a court of competent jurisdiction in receiving, handling or disbursing funds, and any such investment may be sold (without regard to its maturity) by it without instructions whenever it reasonably believes such sale is necessary to make a distribution required by this Indenture. SECTION 3.8 ESTABLISHMENT OF THE LEASE INDENTURE TRUSTEE'S ACCOUNT; AND LIEN AND SECURITY INTEREST; ETC. (a) The Account Bank hereby confirms that it has established at its office in New York, New York located at 114 West 47th Street, New York, NY 10036 a securities account entitled the "Lease Indenture Trustee's Account" (the "LEASE INDENTURE TRUSTEE'S ACCOUNT"), which Lease Indenture Trustee's Account shall be maintained by the Account Bank until the date this Indenture is terminated pursuant to Section 7.1 hereof. The account number of the Lease Indenture Trustee's Account established hereunder is 049 65900. The Lease Indenture Trustee's Account shall not be evidenced by passbooks or similar writings. (b) All amounts from time to time held in the Lease Indenture Trustee's Account shall be maintained (i) in the name of the Owner Trust subject to the lien and security interest of the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each of the Holders as set forth herein and (ii) in the custody of the Account Bank for and on behalf of the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each of the Holders for the purposes and on the terms set forth in this Indenture. All such amounts shall constitute a part of the Lease Indenture Trustee Account Collateral and shall not constitute payment of any Indebtedness or any other obligation of the Owner Trust until applied as hereinafter provided. (c) As collateral security for the prompt payment in full when due of the Lessor Secured Obligations owed to the Lease Indenture Trustee and each Holder, the Owner Trust hereby pledges, assigns, hypothecates and transfers to the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each of the Holders, and hereby grants to the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each of the Holders, a lien on and security interest in and to, (i) the Lease Indenture Trustee's Account and any successor account thereto and (ii) all cash, investments, investment property, securities or other property at any time on deposit in or credited to the Lease Indenture Trustee's Account, including all income or gain earned thereon and any proceeds thereof (the "LEASE INDENTURE TRUSTEE ACCOUNT COLLATERAL"). SECTION 3.9 THE ACCOUNT BANK; LIMITED RIGHTS OF THE OWNER TRUST. (a) THE ACCOUNT BANK. (i) ESTABLISHMENT OF SECURITIES ACCOUNT. The Account Bank hereby agrees and confirms that (A) the Account Bank has established the Lease Indenture Trustee's Account as set forth in Section 3.8, (B) the Lease Indenture Trustee's Account is and will be maintained as a "securities account" (within the meaning of Section 8-501(a) of the UCC), (C) the Owner Trust is the "entitlement holder" (within the meaning of Section 8-102(a)(7) of the UCC) in respect of the "financial assets" (within the meaning of 23 Section 8-102(a)(9) of the UCC) credited to the Lease Indenture Trustee's Account, (D) all property delivered to the Account Bank pursuant to this Indenture or any other Operative Document will be held by the Account Bank and promptly credited to the Lease Indenture Trustee's Account by an appropriate entry in its records in accordance with this Indenture, (E) all "financial assets" (within the meaning of Section 8-102(a)(9) of the UCC) in registered form or payable to or to the order and credited to the Lease Indenture Trustee's Account shall be registered in the name of, payable to or to the order of, or indorsed to, the Account Bank or in blank, or credited to another securities account maintained in the name of the Account Bank, and in no case will any financial asset credited to the Lease Indenture Trustee's Account be registered in the name of, payable to or to the order of, or indorsed to, the Owner Trust except to the extent the foregoing have been subsequently indorsed by the Owner Trust to the Account Bank or in blank and (F) the Account Bank shall not change the name or account number of the Lease Indenture Trustee's Account without the prior written consent of the Lease Indenture Trustee. (ii) FINANCIAL ASSETS ELECTION. The Account Bank agrees that each item of property (including any security, instrument or obligation, share, participation, interest or other property whatsoever) credited to the Lease Indenture Trustee's Account shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the UCC. (iii) ENTITLEMENT ORDERS. Notwithstanding anything in this Indenture to the contrary, if at any time the Account Bank shall receive any "entitlement order" (within the meaning of Section 8-102(a)(8) of the UCC) or any other order from the Lease Indenture Trustee directing the transfer or redemption of any financial asset relating to the Lease Indenture Trustee's Account, the Account Bank shall comply with such entitlement order or other order without further consent by the Owner Trust or any other Person. The parties hereto hereby agree that the Lease Indenture Trustee shall have "control" (within the meaning of Section 8-106(d) of the UCC) of the Owner Trust's "security entitlements" (within the meaning of Section 8-102(a)(17) of the UCC) with respect to the financial assets credited to the Lease Indenture Trustee's Account and the Owner Trust hereby disclaims any entitlement to claim "control" of such "security entitlements". Unless a Lease Indenture Event of Default shall have occurred and is continuing, the Lease Indenture Trustee shall not deliver any entitlement order directing the transfer or redemption of any financial asset relating to the Lease Indenture Trustee's Account. (iv) SUBORDINATION OF LIEN; WAIVER OF SET-OFF. In the event that the Account Bank has or subsequently obtains by agreement, operation of law or otherwise a lien or security interest in the Lease Indenture Trustee's Account or any security entitlement credited thereto, the Account Bank agrees that such lien or security interest shall be subordinate to the lien and security interest of the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each Holder. The financial assets standing to the credit of the Lease Indenture Trustee's Account will not be subject to deduction, set-off, banker's lien, or any other right in favor of any Person other than the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each Holder (except for the 24 face amount of any checks which have been credited to the Lease Indenture Trustee's Account but are subsequently returned unpaid because of uncollected or insufficient funds). (v) NO OTHER AGREEMENTS. The Account Bank and the Owner Trust have not entered into any agreement with respect to the Lease Indenture Trustee's Account or any financial assets credited to the Lease Indenture Trustee's Account other than this Indenture. The Account Bank has not entered into any agreement with the Owner Trust or any other Person purporting to limit or condition the obligation of the Account Bank to comply with entitlement orders originated by the Lease Indenture Trustee in accordance with Section 3.9(a)(iii) hereof. In the event of any conflict between this Section 3.9 or any other agreement now existing or hereafter entered into, the terms of this Section 3.9 shall prevail. (vi) NOTICE OF ADVERSE CLAIMS. Except for the claims and interest of the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each Holder and the Owner Trust in the Lease Indenture Trustee's Account, the Account Bank does not know of any claim to, or interest in, the Lease Indenture Trustee's Account or in any financial asset credited thereto. If any Person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Lease Indenture Trustee's Account or in any financial asset credited thereto, the Account Bank will promptly notify the Lease Indenture Trustee and the Owner Trust in writing thereof. (vii) RIGHTS AND POWERS OF THE LEASE INDENTURE TRUSTEE. The rights and powers granted by the Lease Indenture Trustee to the Account Bank have been granted in order to perfect its lien and security interests in the Lease Indenture Trustee's Account, are powers coupled with an interest and will neither be affected by the bankruptcy of the Owner Trust nor the lapse of time. (b) LIMITED RIGHTS OF THE OWNER TRUST. The Owner Trust shall not have any rights against or to monies held in the Lease Indenture Trustee's Account, as third party beneficiary or otherwise, or any right to direct the Account Bank or the Lease Indenture Trustee to apply or transfer monies in the Lease Indenture Trustee's Account, except the right to receive or make requisitions of monies held in the Lease Indenture Trustee's Account, as expressly provided in this Indenture, and to direct the investment of monies held in the Lease Indenture Trustee's Account as expressly provided in Section 3.7 hereof. Except as expressly provided in this Indenture, in no event shall any amounts or Cash Equivalent Investments deposited in or credited to the Lease Indenture Trustee's Account be registered in the name of the Owner Trust, payable to the order of the Owner Trust or specially indorsed to the Owner Trust except to the extent that the foregoing have been specially indorsed to the Lease Indenture Trustee or in blank. SECTION 4. COVENANTS OF THE OWNER TRUST; LEASE INDENTURE EVENTS OF DEFAULT; REMEDIES SECTION 4.1 COVENANTS OF THE OWNER TRUST. The Owner Trust hereby covenants and agrees as follows: 25 (i) the Owner Trust will duly and punctually pay the principal of and interest on and other amounts (including any Make-Whole Premium) due under the Lessor Notes and this Indenture in accordance with the terms hereof and thereof and all amounts payable by it to the Lease Indenture Trustee and the Holders under any other Operative Document; (ii) in the event that an Authorized Officer of the Owner Trust shall have actual knowledge of a Lease Indenture Event of Default or a Lease Indenture Default, the Owner Trust will give prompt written notice of such Lease Indenture Event of Default or Lease Indenture Default to the Facility Lessee, the Owner Participant and the Lease Indenture Trustee (and the Lease Indenture Trustee shall thereupon promptly deliver a copy of such notice to each Holder); (iii) in the event that an Authorized Officer of the Owner Trust shall have actual knowledge of an Event of Loss, then, to the extent that the Facility Lessee is not required, pursuant to the Facility Lease, to give notice of such event to the Lease Indenture Trustee, the Owner Trust will give prompt written notice of such Event of Loss to the Lease Indenture Trustee, (and the Lease Indenture Trustee shall thereupon promptly deliver a copy of such notice to each Holder) and the Owner Participant; (iv) the Owner Trust will furnish to the Lease Indenture Trustee true and correct duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trust under the Facility Lease, to the extent that the same shall not have been (or are not required to be) furnished to the Lease Indenture Trustee or the Holders pursuant to the Facility Lease or the Participation Agreement; and (v) except as contemplated by the Operative Documents, the Owner Trust will not incur any Indebtedness or engage in any business or activity except with the prior written consent of the Lease Indenture Trustee (acting on the instructions of Required Holders). SECTION 4.2 LEASE INDENTURE EVENTS OF DEFAULT. "LEASE INDENTURE EVENT OF DEFAULT" means any of the following events (whatever the reason for such Lease Indenture Event of Default and whether such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority): (a) any Lease Event of Default (other than with respect to Excepted Payments unless the Facility Lease has been declared in default pursuant to Section 16(a) thereof) shall have occurred and be continuing; or (b) the failure of the Owner Trust to pay when due any payment of principal of, premium (including, without limitation, Make-Whole Premium) (if any) or interest on, or any scheduled fees or other amounts due and payable under or with respect to, any Lessor Note and such failure shall continue for five Business Days; or the failure of the Owner Trust to pay when due any other amounts under or with respect to, any Lessor Note or this Indenture and such failure shall continue for 30 Business Days after the 26 Owner Trust and the Owner Participant receive written demand therefor from the Lease Indenture Trustee or any Holder; or (c) any material representation or warranty made by the Owner Participant or the Owner Trust in this Indenture or in any other Operative Document to which it is a party or by any OP Guarantor in its Owner Participant Guaranty, as the case may be, shall prove to have been inaccurate when made or deemed made in any material respect; and such misrepresentation or breach of warranty shall not have been corrected within a period of 30 days following notice thereof being given to the Owner Trust and the Owner Participant or such OP Guarantor, as the case may be, by any Holder (through the Lease Indenture Trustee); PROVIDED that, if such misrepresentation or breach of warranty is capable of correction but cannot with diligence be corrected within such 30-day period, such failure will not constitute a Lease Indenture Event of Default so long as the party whose representation or warranty was inaccurate (i) promptly institutes corrective action within such 30-day period and diligently pursues such corrective action and (ii) the continuation of such inaccuracy beyond such 30-day period would not have a Material Adverse Effect (but in no event shall the total period permitted to correct such misrepresentation or breach of warranty extend beyond 90 days from the date such notice was provided); or (d) any failure (i) by the Owner Trust to observe or perform any other material covenant or obligation of the Owner Trust contained in this Indenture or in any Operative Document to which it is a party (other than as provided in clause (a) above) in any material respect, or (ii) by the Owner Participant to observe or perform any material covenant or obligation of the Owner Participant contained in any Operative Document to which it is a party or (iii) by any OP Guarantor to observe or perform any material covenant or obligation of such OP Guarantor contained in any Owner Participant Guaranty, is not remedied within a period of 30 days following notice of such failure being given to the Owner Trust and the Owner Participant or such OP Guarantor, as the case may be, by any Holder (through the Lease Indenture Trustee); PROVIDED that, if such failure is capable of remedy but cannot with diligence be remedied within such 30-day period, such failure will not constitute a Lease Indenture Event of Default so long as (A) the party failing to perform promptly commences remedial action within such 30-day period and diligently pursues such action and (B) the continuation of such failure beyond such 30-day period would not have a Material Adverse Effect (but in no event shall the total period permitted to cure such default extend beyond 120 days from the date such notice was provided); or (e) the Owner Participant, the Owner Trust or any OP Guarantor shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for the Owner Trust, the Owner Participant or such OP Guarantor or any substantial part of the property of any of the foregoing, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a 27 general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due, or (vii) take corporate action for the purpose of effecting any of the foregoing; or (f) an involuntary proceeding is commenced or an involuntary petition is filed in a court of competent jurisdiction seeking (i) relief in respect of the Owner Participant, any OP Guarantor or the Owner Trust under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency or similar law now or hereafter in effect, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for the Owner Participant, such OP Guarantor or the Owner Trust or any substantial part of the property of the foregoing or (iii) the winding-up or liquidation of the Owner Trust, such OP Guarantor or the Owner Participant and such proceeding or petition continues undismissed for 60 days or an order or decree approving or ordering any of the foregoing continues unstayed and in effect for 60 days. SECTION 4.3 CERTAIN RIGHTS. In the event of any Lease Default or Lease Event of Default in the payment of any installment of Basic Lease Rent due under the Facility Lease, the Owner Trust or the Owner Participant may, but shall not be obligated to, within ten Business Days after the earlier of (a) receipt by the Owner Trust of notice of or (b) the Owner Trust acquiring actual knowledge of the occurrence of such Lease Default or Lease Event of Default, without the consent or concurrence of the Lease Indenture Trustee or any Holder, pay, as provided in Section 2.6 hereof, for application in accordance with Section 3.1 hereof, a sum equal to the amount of all (but not less than all) of the principal of, interest on and other amounts payable under or in respect of, the Lessor Notes as shall then be due and payable on the Lessor Notes (without giving effect to any acceleration pursuant to Section 4.4(b) or (c) hereof). If any other Lease Default or other Lease Event of Default occurs and the Owner Trust shall have been furnished (by or for the account of the Owner Participant) with all funds necessary for remedying such Lease Default or Lease Event of Default, the Owner Participant may, within ten Business Days after the earlier of (a) receipt by the Owner Trust of notice of or (b) the Owner Trust acquiring actual knowledge of the occurrence of such Lease Default or Lease Event of Default, without the consent or concurrence of the Lease Indenture Trustee or any Holder, instruct the Owner Trust to exercise the Owner Trust's rights under Section 20 of the Facility Lease to perform such obligation on behalf of the Facility Lessee. Solely for the purpose of determining whether there exists a Lease Indenture Event of Default, (a) any payment by the Owner Participant or the Owner Trust pursuant to, and in compliance with, the first sentence of this Section 4.3 shall be deemed to remedy any Lease Default or Lease Event of Default in the payment of installments of Basic Lease Rent theretofore due and payable and to remedy any default by the Owner Trust in the payment of any amount due and payable under the Lessor Notes or hereunder, and (b) any performance by the Owner Trust of any obligation of the Facility Lessee under the Facility Lease pursuant to, and in compliance with, the second sentence of this Section 4.3 shall be deemed to remedy any Lease Default or Lease Event of Default to the same extent that like performance by the Facility Lessee itself would have remedied such Lease Default or Lease Event of Default (but any such payment or performance shall not relieve the Facility Lessee of its duty to pay all Rent and perform all of its obligations pursuant to the Facility Lease). If, on the basis specified in the preceding sentence, such Lease Default or Lease Event of Default shall have been remedied, then any determination that the Facility Lease, and any declaration pursuant to this Indenture that the Lessor Notes are due and payable or that a 28 Lease Indenture Default or Lease Indenture Event of Default exists hereunder, based upon such Lease Default or Lease Event of Default shall be deemed to be rescinded, and the Owner Participant shall (to the extent of any such payments made by or for the account of the Owner Trust) be subrogated to the rights of the Holders hereunder to receive such payment of Rent from the Facility Lessee (and the payment of interest on account of such Rent from the Facility Lessee being overdue), and shall be entitled, so long as no other Lease Indenture Default or Lease Indenture Event of Default shall have occurred or would result therefrom, to receive and retain such payment from the Facility Lessee; PROVIDED, HOWEVER, that the Owner Participant shall not, so long as this Indenture shall not have terminated, otherwise attempt to recover any such amount paid by it or for its account on behalf of the Facility Lessee pursuant to this Section 4.3 except by demanding of the Facility Lessee payment of such amount or by commencing an action at law and obtaining and enforcing a judgment against the Facility Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Facility Lessee and the Owner Participant will not obtain any Lien on any part of the Indenture Estate on account of such payment nor will any claim of the Owner Participant against the Facility Lessee or any other party for the repayment thereof impair the prior right and security interest of the Lease Indenture Trustee and the Holders in and to the Indenture Estate, as the case may be; PROVIDED, FURTHER, however, that (a) this Section 4.3 shall not apply with respect to any cure of any default in the payment of Basic Lease Rent if such cure shall have previously been effected with respect to (A) four consecutive payments of Basic Lease Rent immediately preceding the date of such default, or (B) more than eight payments of Basic Lease Rent; and (b) neither the Owner Trust nor the Owner Participant shall (without the prior written consent of the Required Holders) have the right to cure any Lease Default or Lease Event of Default except as specified in this Section 4.3. SECTION 4.4 REMEDIES. (a) Subject to the second sentence of Section 2.12(a) hereof, if a Lease Indenture Event of Default shall have occurred and so long as the same shall be continuing unremedied and, except as provided in the proviso at the end of this sentence, if the Lessor Notes shall have been accelerated pursuant to Section 4.4(b) or 4.4(c) hereof, then and in every such case the Lease Indenture Trustee (acting on the instructions of the Required Holders) may, if not precluded by law or otherwise, consistent with this Section 4.4(a), exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Section 4 and shall have and may exercise all of the rights and remedies of a secured party under Requirements of Law and, in the event such Lease Indenture Event of Default arises as a result of an event described in clause (a) of Section 4.2 hereof and is continuing unremedied and Section 4.3 hereof shall either not apply or shall have ceased to apply with respect to such Lease Indenture Event of Default, any and all of the remedies pursuant to Section 17 of the Facility Lease) and may take possession of all or any part of the Indenture Estate covered or intended to be covered by the Lien created pursuant hereto and may exclude the Owner Participant, the Owner Trust, the Facility Lessee (to the extent permitted by Section 17 of the Facility Lease and all Persons claiming under any thereof or wholly or partly therefrom; PROVIDED, HOWEVER, that, under no circumstances shall the Lease Indenture Trustee sell any of the Property Interest or exercise other remedies against the Property Interest seeking to deprive the Owner Trust or the Owner Participant of their respective interests therein unless the Lessor Notes have been accelerated. It 29 is understood and agreed that, subject to the provisions of this Section 4.4, the Lease Indenture Trustee (acting on the instructions of the Required Holders) may exercise any right of sale of the Property Interest available to it, even though it shall not have taken possession of the Property Interest and shall not have possession thereof at the time of such sale. It is further agreed and understood that if the Lease Indenture Trustee (acting on the instructions of the Required Holders) shall proceed to foreclose on the Lien of this Indenture or exercise any other material remedy with respect to the Property Interest, the Lease Indenture Trustee shall substantially simultaneously therewith, to the extent the Lease Indenture Trustee is then entitled to do so hereunder and under the Facility Lease proceed (to the extent it has not already done so) to exercise one or more of the remedies with respect to the Property Interest referred to in clause (e) or (f) of Section 17.1 of the Facility Lease; PROVIDED that in the event the Lease Indenture Trustee is stayed or otherwise prevented by operation of any law from exercising such remedies for a continuous period of 180 days following the commencement of such stay or other prevention, it may (acting on the instruction of the Required Holders), upon the expiration of such 180-day period, exercise any remedy available to it under this Indenture. For the avoidance of doubt, it is expressly understood and agreed that the above-described inability of the Lease Indenture Trustee to exercise any right or remedy under the Facility Lease shall not prevent the Lease Indenture Trustee from exercising any of its other rights, powers and remedies under this Indenture. (b) If a Lease Indenture Event of Default referred to in clause (e) or (f) of Section 4.2 shall have occurred, then and in every such case the unpaid principal of all Lessor Notes then outstanding, together with interest accrued but unpaid thereon and all other amounts due thereunder or with respect thereto (but excluding any Make-Whole Premium), shall immediately and without further act become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Lease Indenture Event of Default (other than a Lease Indenture Event of Default referred to in clause (e) or (f) of Section 4.2) shall have occurred and be continuing, then and in every such case the Lease Indenture Trustee (acting on the instruction of the Required Holders) may at any time declare the Lessor Notes to be due and payable, whereupon the unpaid principal of all Lessor Notes then outstanding, together with accrued but unpaid interest thereon and other amounts due thereunder or respect thereto (but excluding any Make-Whole Premium), shall immediately become due and payable without presentment, demand, protest or notice, all of which are hereby waived. (d) Each Holder shall be entitled, at any sale pursuant to Section 17.1 of the Facility Lease, to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder and secured by the Lien of this Indenture. (e) Notwithstanding anything to the contrary contained herein, if all Lessor Notes are held by the Facility Lessee or an Affiliate of the Facility Lessee, then (i) upon a Lease Indenture Event of Default that is caused by a Lease Default or Lease Event of Default, the remedies hereunder may be exercised only with the written consent of the Owner Trust and (ii) only the Owner Trust may exercise any or all of the remedies under the Facility Lease with respect to any such Lease Default or Lease Event of Default. 30 (f) In addition to all other remedies provided for herein if a Lease Indenture Event of Default shall have occurred and be continuing, the Lease Indenture Trustee shall have the right to exercise any STATUTORY POWER OF SALE and sell the Indenture Estate or any part of the Indenture Estate at public sale or sales, in order to pay the Lessor Secured Obligations, and all impositions, if any, with accrued interest thereon, and all expenses of the sale and of all proceedings in connection therewith, including reasonable attorney's fees, if incurred. SECTION 4.5 TAKING POSSESSION OF INDENTURE ESTATE. (a) Subject to the rights of the Owner Trust and the Owner Participant under Section 4.3 hereof, and unless an OP Guarantor, the Owner Participant or the Owner Trust shall have purchased the Lessor Notes pursuant to Section 2.10 hereof, if a Lease Indenture Event of Default shall have occurred and be continuing and the Lessor Notes shall have been accelerated pursuant to Section 4.4(b) or 4.4(c) hereof, at the request of the Required Holders, the Owner Trust shall promptly execute and deliver or cause to be delivered to the Lease Indenture Trustee and the Holders such instruments and other documents as the Required Holders may deem necessary or advisable to enable the Lease Indenture Trustee at such time or times and place or places as the Lease Indenture Trustee (acting on the instruction of the Required Holders) may specify, to obtain possession of all or any part of the Indenture Estate to which the Holders shall at the time be entitled hereunder. If the Owner Trust shall for any reason fail to execute and deliver or cause to be delivered such instruments and documents after such request by the Lease Indenture Trustee, the Lease Indenture Trustee (acting on the instruction of the Required Holders) may (i) obtain a judgment conferring on the Lease Indenture Trustee the right to immediate possession and requiring the Owner Trust to execute and deliver or cause to be delivered such instruments and documents to the Lease Indenture Trustee and the Owner Trust hereby specifically consents to the entry of such judgment to the fullest extent it may lawfully do so, and (ii) to the extent permitted by law, pursue all or part of such Indenture Estate, as applicable, wherever it may be found, subject to Section XIII of the Participation Agreement and Section 4.2 of the Facility Lease, if applicable. All expenses (including those of the Lease Indenture Trustee) of obtaining such judgment or of pursuing, searching for and taking such property shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession in connection with a Lease Event of Default, the Lease Indenture Trustee (acting on the instruction of the Required Holders) may, from time to time at the expense of the Indenture Estate, make all such expenditures for maintenance, insurance, repairs, replacements, alterations, additions and improvements to and of the Indenture Estate as the Required Holders may deem proper. In each such case, the Lease Indenture Trustee (acting on the instructions of the Required Holders) or its designee shall have the right to maintain, use, operate, store, lease, control or manage the Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trust relating to the Indenture Estate, as the Required Holders shall deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of the Indenture Estate or any part thereof as the Required Holders may determine; and the Lease Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits constituting part of the Indenture Estate and every part thereof, except Excepted Payments, without prejudice, however, to the right of the Lease Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Lease 31 Indenture Trustee hereunder. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of use, operation, storage, subleasing, control, management or disposition of the Indenture Estate and of conducting the business thereof, and of all maintenance, repairs, replacements, alterations, additions and improvements, and to make all payments which the Lease Indenture Trustee may be required or may elect (acting on the instruction of the Required Holders) to make, if any, for taxes, assessments, insurance or other proper charges upon the Indenture Estate or any part thereof (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trust), and all other payments which the Lease Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as reasonable compensation for the services of the Lease Indenture Trustee, and of all Persons properly engaged and employed by the Lease Indenture Trustee. SECTION 4.6 REMEDIES CUMULATIVE. Except as provided herein, each and every right, power and remedy given to the Lease Indenture Trustee on behalf of the Holders or any of them specifically or otherwise in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Lease Indenture Trustee (acting on the instruction of the Required Holders), and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by the Lease Indenture Trustee in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trust or the Facility Lessee or to be an acquiescence therein. SECTION 4.7 DISCONTINUANCE OF PROCEEDINGS. In case the Lease Indenture Trustee (acting on the instruction of the Required Holders) shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Holders, then and in every such case the Owner Trust, the Owner Participant, the Lease Indenture Trustee and the Facility Lessee shall, subject to any determination in such proceedings, be restored to their former positions and rights hereunder with respect to the Indenture Estate, as the case may be, and all rights, remedies and powers of the Lease Indenture Trustee shall continue in effect as if no such proceedings had been instituted. SECTION 4.8 WAIVER OF PAST DEFAULTS. Upon the instruction of the Required Holders, the Lease Indenture Trustee shall waive any past default hereunder and its consequences and upon any such waiver such default shall cease to exist and any Lease Indenture Event of Default (as well as any Lease Event of Default giving rise to such Lease Indenture Event of Default) or Lease Indenture Default (as well as any Lease Default giving rise to such Lease Indenture Default) arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 4.9 WAIVER OF STAY, EXTENSION, MORATORIUM LAWS; EQUITY OF REDEMPTION. To the maximum extent permitted by law, the Owner Trust shall not at any time insist upon, or plead, or in any manner whatever claim or take any benefit or advantage of any applicable present or future stay, extension or moratorium law, that may affect observance or performance of the 32 provisions of this Indenture; nor claim, take or insist upon any benefit or advantage of any present or future law providing for the valuation or appraisal of the Indenture Estate or any portion thereof prior to any sale or sales thereof that may be made under or by virtue of Section 4.2 or 4.3 hereof; and the Owner Trust, to the extent that it lawfully may, hereby waives all benefit or advantage of any such law or laws. The Owner Trust for itself and all who may claim under it, hereby waives, to the maximum extent permitted by applicable law, any and all rights and equities of redemption from sale under the power of sale created hereunder or from sale under any order or decree of foreclosure of this Indenture and (if a Lease Indenture Default shall have occurred) all notice or notices of seizure, and all right to have the Indenture Estate marshalled upon any foreclosure hereof. The Indenture Trustee shall not be obligated to pursue or exhaust its rights or remedies as against any other part of the Indenture Estate and the Owner Trust hereby waives any right or claim of right to have the Indenture Trustee proceed in any particular order. SECTION 5. DISCLAIMER OF REPRESENTATIONS; NO SEGREGATION OF MONEYS; FURTHER ASSURANCES; CERTAIN RIGHTS SECTION 5.1 NO REPRESENTATIONS OR WARRANTIES AS TO THE PROPERTY INTEREST OR OTHER LESSOR SECURITY DOCUMENTS. NONE OF THE OWNER TRUST, THE owner trustee, THE TRUST COMPANY OR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, WORKMANSHIP, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, QUALITY, DURABILITY, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE PROPERTY INTEREST OR ANY PART OF THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, INCLUDING ANY ENVIRONMENTAL LIABILITY, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROPERTY INTEREST OR ANY PART THEREOF WHATSOEVER, except that the Owner Trust warrants that on the Closing Date it shall have received such rights and interests that were conveyed to it with respect to the Property Interest pursuant to the Facility Deed, the Bill of Sale and the Facility Site Lease subject to the rights of the parties to this Indenture and to Permitted Liens and Permitted Encumbrances, and the Trust Company warrants that on the Closing Date the Property Interest shall be free and clear of Owner Trust's Liens attributable to the Trust Company. None of the Owner Trustee or the Trust Company makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement or the Lessor Notes or as to the correctness of any statement contained in any thereof, except for the representations and warranties of the Owner Trust, the Owner Trustee or the Trust Company in its individual capacity made under this Indenture or in the Participation Agreement. SECTION 5.2 NO SEGREGATION OF MONEYS; NO INTEREST. Any moneys paid to or retained by the Lease Indenture Trustee pursuant to any provision hereof and not then required to be distributed to any Holder, the Facility Lessee or the Owner Trust or the Owner Participant as provided in Section 3 hereof need not be segregated in any manner except to the extent provided herein or as otherwise required by Requirements of Law, and may, except as aforesaid, be 33 deposited under such general conditions as may be prescribed by Requirements of Law, and the Lease Indenture Trustee shall not (except as otherwise provided in Section 3.7 hereof) be liable for any interest thereon or any losses resulting from the investment thereof. SECTION 5.3 FURTHER ASSURANCES; FINANCING STATEMENTS. At any time and from time to time, upon the request of any Holder (through the Lease Indenture Trustee), the Facility Lessee or the Owner Participant, the Owner Trust shall, at the expense of the Owner Trust, promptly and duly execute and deliver any and all such further instruments and documents presented to it in execution form as may be specified in such request and as are necessary or desirable to perfect, preserve or protect the mortgage, first priority security interests and assignments created or intended to be created hereby, or to obtain for the Lease Indenture Trustee and the Holders the full benefit of the specific rights and powers herein granted, including, without limitation, the execution and delivery of Uniform Commercial Code financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the mortgage, security interests or assignments created or intended to be created hereby. SECTION 5.4 CERTAIN RIGHTS OF OWNER TRUST AND OWNER PARTICIPANT. (a) Notwithstanding any other provisions of this Indenture other than Sections 4.4(e) and 5.4(b) hereof, including the Granting Clause, the following rights (the "SECTION 5.4 RIGHTS") shall be exercisable by the Owner Trust or the Lease Indenture Trustee (acting on the instruction of the Required Holders): (i) at all times the Owner Trust shall have the right, together with or independently of the Lease Indenture Trustee, (A) to receive from the Facility Lessee all notices, certificates, reports, filings, opinions of counsel and other documents and all information which the Facility Lessee is permitted or required to give or furnish to the Owner Trust pursuant to any Operative Document, (B) to exercise inspection rights granted to the Owner Trust pursuant to Section 12 of the Facility Lease, (C) to exercise, to the extent necessary to enable it to exercise its rights under Section 4.3 hereof, the rights of the Owner Trust under Section 20 of the Facility Lease, (D) to request from the Facility Lessee such further documents or assurances, or request that the Facility Lessee take such further actions in respect of such party's interests, as shall be required to be delivered or taken by the Facility Lessee pursuant to Section 5.7 or 18.14 of the Participation Agreement, and (E) to give notice of a Lease Default or a Lease Event of Default pursuant to Section 17 of the Facility Lease; PROVIDED, HOWEVER, that the rights excepted and reserved by this Section 5.4(a)(i) shall not be deemed to include the exercise of any remedies provided for in Section 17.1 of the Facility Lease, except that the Owner Trust and the Owner Participant may proceed by appropriate court action or actions, either at law or in equity, to enforce performance by the Facility Lessee of the applicable covenants and terms of Excepted Payments or to recover damages for the breach thereof but not to terminate the Facility Lease; (ii) so long as a Lease Indenture Event of Default under clauses (c), (d), (e) or (f) of Section 4.2 hereof shall not have occurred and be continuing and the Lease Indenture Trustee shall not have commenced the exercise of material remedies under this Indenture, the Owner Trust shall have the right, together with the Lease Indenture Trustee and to the extent permitted by the Operative Documents and Requirements of Law, (A) to seek specific performance of the covenants of the Facility Lessee under the Operative Documents relating to the protection, insurance, maintenance, possession and use of the 34 Property Interest or (B) to enforce any manufacturer's warranty pursuant to any of the Operative Documents; (iii) so long as a Lease Indenture Event of Default under clauses (c), (d), (e) or (f) of Section 4.2 hereof shall not have occurred and be continuing and the Lease Indenture Trustee shall not have commenced the exercise of material remedies under this Indenture, neither the Owner Trust nor the Lease Indenture Trustee shall have any right, without the prior consent of the other (A) to amend, supplement, modify or waive any return condition in Section 5 of the Facility Lease, or (B) to exercise any rights with respect to the Facility Lessee's use and operation, modification or maintenance of the Property Interest which the Facility Lease specifically confers on the Owner Trust; and (iv) so long as a Lease Indenture Event of Default under clauses (c), (d), (e) or (f) of Section 4.2 hereof shall not have occurred and be continuing and the Lease Indenture Trustee shall not have commenced the exercise of material remedies under this Indenture, neither the Owner Trust nor the Lease Indenture Trustee shall have any right, without the prior written consent of the other except as otherwise provided in Section 6.1, subject to the limitations contained in Section 3.4 of the Facility Lease, to exercise the rights, elections and options of the Owner Trust (other than the right to receive payment), to make any decision or determination and to give any notice, consent, waiver or approval with respect to any adjustments of Basic Lease Rent or Termination Value under Section 3.4 of the Facility Lease. (b) Notwithstanding the foregoing provisions of this Section 5.4 but subject to Section 4 hereof, the Lease Indenture Trustee (acting on the instructions of the Required Holders) shall at all times have the right, to the exclusion of the Owner Trust and the Owner Participant, to exercise the remedies set forth in Section 17.1 of the Facility Lease and in Section 4.4 and 4.5 hereof. Notwithstanding anything herein or in any other Operative Document to the contrary, so long as the Facility Lessee of any Affiliate of the Facility Lessee is a Holder, neither the Facility Lessee nor any such Affiliate, in its capacity as Holder, shall have any rights to approve, consent to, vote on or ratify any action, inaction or determination taken or made or to be taken or made hereunder; PROVIDED, HOWEVER, that this sentence shall not apply to the Facility Lessee or any such Affiliate with respect to those matters set forth in Section 6.1 requiring the consent of all Holders. (c) Notwithstanding any other provision of this Indenture: (1) The Owner Trust shall at all times, to the exclusion of the Lease Indenture Trustee, (i) retain all rights to demand and receive payment of, and to commence an action for payment of, Excepted Payments but the Owner Trust shall have no remedy or right with respect to any such payment against the Indenture Estate nor any right to collect any such payment by the exercise of any of the remedies under Section 17 of the Facility Lease; (ii) retain all rights to exercise the rights granted it under the EME OP Guarantee; to give all notices (including, without limitation, the right to give notice of a breach by EME of its covenants contained therein) under the EME OP Guarantee, to agree to any amendment, supplement or modification to the EME OP Guarantee; and to take any other action permitted to be taken by it under or otherwise with respect to the 35 EME OP Guarantee; (iii) to declare a Lease Event of Default arising under Section 16(p) of the Facility Lease and to declare the Facility Lease to be in default as a result thereof; and (iv) except in connection with the exercise of remedies pursuant to the Facility Lease, retain all rights to exercise the Owner Trust's rights relating to the Appraisal Procedure and to confer and agree with the Facility Lessee on Fair Market Rental Value, or any Renewal Lease Term; (2) So long as the Lessor Notes have not been accelerated pursuant to Section 4.2 hereof (or, if accelerated, such acceleration has theretofore been rescinded) or the Lease Indenture Trustee shall not have exercised any of its rights pursuant to Section 4 hereof to take possession of, foreclose, sell or otherwise take control of all or any part of the Indenture Estate, the Owner Trust shall retain the right to the exclusion of the Lease Indenture Trustee to exercise the rights of the Owner Trust under, and to determine compliance by the Facility Lessee, with the provisions of Section 10 (other than Section 10.2 and Section 10.4 thereof), 13, 14 and 15 of the Facility Lease; PROVIDED, HOWEVER, that if a Lease Indenture Event of Default shall have occurred and be continuing, the Owner Trust shall cease to retain such rights upon notice from the Lease Indenture Trustee (acting on the instruction of the Required Holders) stating that such rights shall no longer be retained by the Owner Trust. SECTION 6. SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS SECTION 6.1 SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND THE OTHER DOCUMENTS: (a) WITHOUT CONSENT OF HOLDERS. Subject to the provisions of the Participation Agreement, at any time and from time to time the Owner Trust (but only on the written request of the Owner Participant) and the Lease Indenture Trustee may, from time to time and at any time, enter into a supplement hereto without the consent of the Holders or the Required Holders for one or more of the following purposes: (i) to convey, transfer, assign, mortgage or pledge to the Lease Indenture Trustee as security for the Lessor Notes any property or assets; (ii) to evidence the succession of another corporation to the Trust Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trust; (iii) to add to the covenants of the Owner Trust for the benefit of the Holders of all or any series of Lessor Notes (and if such covenants are to be for the benefit of less than all series of Lessor Notes, stating that such covenants are expressly being included solely for the benefit of such series) such further covenants, restrictions, conditions or provisions as the Owner Trust and the Lease Indenture Trustee shall consider to be for the protection of the Holders of any series, and to make the occurrence, or the occurrence and continuance, of a default in complying with any such additional covenant, restriction, condition or provision a Lease Indenture Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; in respect of any such additional covenant, restriction, condition or provision, such 36 supplement may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such a Lease Indenture Event of Default or may limit the remedies available to the Lease Indenture Trustee upon such a Lease Indenture Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Lessor Notes of such series to waive such a Lease Indenture Event of Default; (iv) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplement which may be defective or inconsistent with any other provision contained herein or in any supplement, or to make such other provisions as the Owner Trust may deem necessary or desirable, with respect to matters or questions arising under this Indenture, PROVIDED that no such action shall adversely affect the interests of the Holders of the Lessor Notes of any series; (v) to establish the form and terms of the Lessor Notes of any series, as permitted by Section 2.13; (vi) to effect an assumption of the Lessor Notes, as permitted by Section 2.12; (vii) to evidence and provide for the acceptance of appointment hereunder by a successor Lease Indenture Trustee with respect to the Lessor Notes and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, all as provided in Section 7.15; and (viii) subject to Section 6.1(b) with respect to the provisions of the Indenture Estate Documents referred to therein, to effect any amendment, modification, supplement, waiver or consent with respect to any Indenture Estate Document, provided that no such action shall, in the judgment of the Lease Indenture Trustee, materially and adversely affect the interests of the Holders of any of the Lessor Notes of any series. The Lease Indenture Trustee is hereby authorized to join with the Owner Trust in the execution of any such supplement, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property or assets thereunder, but the Lease Indenture Trustee shall not be obligated to enter into any such supplement which affects the Lease Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. (b) INSTRUCTIONS OF REQUIRED HOLDERS; LIMITATIONS. Subject to the provisions of the Participation Agreement, at any time and from time to time, (i) the Owner Trust (but only on the written request of the Owner Participant) and the Lease Indenture Trustee (but only if so directed by the Required Holders to the extent that the same is not expressly permitted by Section 6.1(a)), may execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Indenture as specified in such request, (ii) the Owner Trust (but only on the written request of the Owner Participant) and, except with respect to Excepted Payments, the Lease Indenture Trustee (but only if so directed by the Required Holders to the extent that the same is not expressly permitted by Section 6.1(a)), may enter into such written amendment of or 37 supplement to any Indenture Estate Document as may be specified in such request and (iii) the Owner Trust shall not revoke or otherwise terminate the Trust Agreement or, if such amendment or supplement would impair the rights of the Lease Indenture Trustee or any Holder, amend or supplement the Trust Agreement; PROVIDED, HOWEVER, that, without the consent of each Holder, except with respect to Excepted Payments, no such amendment of or supplement to any Indenture Estate Document, and no waiver or modification of the terms of any thereof, shall, except to the extent pertaining to the Excepted Payments, (1) modify (A) any of the provisions of this Section 6.1 or Sections 2.6, 2.8, 2.10, 2.11 or 2.12 hereof, Section 3 hereof (other than Sections 3.6 and 3.7 hereof) or Section 4 hereof (other than Sections 4.1 and 4.2 hereof), (B) any of the provisions of Sections 2.3, IV, XII or XIV of the Participation Agreement to the extent applicable to the Lease Indenture Trustee or any Holder (including, without limitation, any Pass-Through Trustee or any Certificateholder), (C) any of the provisions of Section 3.4, 14, 15, 18 or 20 of the Facility Lease or (D) the definitions of the terms "EXCEPTED PAYMENTS", "PURCHASE PRICE", "OPERATIVE DOCUMENTS", "REQUIRED HOLDER", "TERMINATION VALUE", "BASIC LEASE RENT", "SUPPLEMENTAL LEASE RENT", "EVENT OF LOSS", "OWNER TRUST'S LIEN", "RENT", "MAKE-WHOLE PREMIUM" or any components thereof contained herein or in any Indenture Estate Document (except to change default definitions by providing for additional events of default), (2) reduce the amount or extend the time of payment of any amount owing or payable under any Lessor Note or reduce the interest payable on any Lessor Note, or alter or modify the provisions of Section 3 hereof with respect to the order of priorities in which distribution thereunder shall be made as between the Holders and the Owner Trust or the Owner Participant or with respect to the amount or time of payment of any such distribution, (3) reduce, modify or amend any indemnities or other payment provisions resulting in Supplemental Lease Rent in favor of any Holder (except as consented to by each Person adversely affected thereby), (4) reduce the amount or extend the time of payment of Rent or Termination Value (or any other amounts payable therewith other than such amounts that constitute Excepted Payments) as set forth in the Facility Lease, (5) modify, amend or supplement the Facility Lease with respect to, or consent to any assignment of the Facility Lease, releasing the Facility Lessee from its obligations in respect of the payment of Rent or Termination Value (or other amounts payable therewith other than such amounts that constitute Excepted Payments) or altering the absolute and unconditional character of such obligations as set forth in Section 9 of the Facility Lease or change any of the circumstances under which Termination Value (or other amounts payable therewith) is payable or (6) take any action which would reduce or extend the term of the Facility Lease. Notwithstanding the foregoing, (A) without the consent of the Lease Indenture Trustee (acting with the consent of each Holder), no such supplement to this Indenture or waiver or modification of the terms hereof or of any other agreement or document shall permit the creation of any Lien on the Indenture Estate or any part thereof, or deprive the Lease Indenture Trustee or any Holder of the benefit of the Lien of this Indenture on the Indenture Estate, except as provided in Section 14.2 of the Participation Agreement or in connection with the exercise of remedies under Section 4 hereof; (B) except as provided in Section 9.3 of the Participation Agreement, the sections of this Indenture set forth or referred to in such Section 9.3 may not be amended without the prior written consent of the Facility Lessee; (C) subject always to the provisions of Section 3.4(a) of the Facility 38 Lease, no amendment of Exhibits of the Facility Lease to give effect to adjustments in accordance with Section 3.4(a) of the Facility Lease shall be deemed to be an amendment to the Facility Lease which requires the consent of the Holders hereunder; (D) without the necessity of the consent of any of the Lease Indenture Trustee or any Holder, (I) any indemnities solely in favor of the Equity Investor, any OP Guarantor, the Owner Participant, the Owner Trust, the Trust Company or any of their Affiliates may be modified, amended, or changed in such manner as shall be agreed to by the Equity Investor, such OP Guarantor, the Owner Participant, the Owner Trust or the Trust Company, as the case may be, and the Facility Lessee, (II) the Owner Participant and EME may enter into any amendment or supplement to the Tax Indemnity Agreement and (III) the Owner Trust, the Owner Participant, the Equity Investor and EME may enter into any amendment or supplement to the EME OP Guarantee; and (E) each Holder shall not unreasonably withhold its consent to an amendment to Section 5 or 13 of the Facility Lease which amendment does not change or otherwise affect the timing or the amount of the payments due thereunder or otherwise adversely affect the Holders. SECTION 6.2 DOCUMENTS FURNISHED TO HOLDERS. Promptly after the execution by the Owner Trust or the Lease Indenture Trustee of any document entered into pursuant to Section 6.1, the Lease Indenture Trustee shall furnish a copy thereof to the Holders but the failure of the Lease Indenture Trustee to deliver such conformed copy, or the failure of the Holders to receive such conformed copies, shall not impair or affect the validity of such document. SECTION 6.3 LEASE INDENTURE TRUSTEE PROTECTED. Notwithstanding anything to the contrary contained herein, if, in the opinion of the Lease Indenture Trustee, any document required to be executed by it pursuant to Section 6.1 adversely affects any right, duty, immunity or indemnity of or in favor of the Lease Indenture Trustee under any Lessor Security Document or under any other Operative Document, the Lease Indenture Trustee may in its discretion decline to execute such document unless the Person or Persons requesting any related action shall provide an indemnity that is reasonably satisfactory to the Lease Indenture Trustee. SECTION 7. MISCELLANEOUS SECTION 7.1 TERMINATION OF INDENTURE. Upon (or at any time after) receipt by the Lease Indenture Trustee of a certificate from each Holder to the effect that the principal of and interest on, and all other amounts payable to the Holders hereunder, under all Lessor Notes and under the Operative Documents otherwise secured hereby have been paid in full, the Lease Indenture Trustee shall execute and deliver to the Owner Trust an appropriate instrument releasing the Indenture Estate from the Lien of this Indenture and releasing the Indenture Estate Documents from the assignment and pledge thereof hereunder, and the Lease Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trust's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trust to give effect to such release; PROVIDED, HOWEVER, that this Indenture shall earlier terminate and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Lease Indenture Trustee of all property constituting part of the Indenture Estate and the final distribution by the Lease Indenture Trustee of all moneys or other property or proceeds constituting part of the Indenture Estate in accordance with the terms hereof. Further, upon the purchase or prepayment in full of the Lessor Notes pursuant to Section 2.10 or 2.11 hereof, and receipt by the Lease Indenture Trustee of a certificate from each Holder to the effect that all other sums payable to the Holders hereunder and under the Operative Documents, the Lease 39 Indenture Trustee shall execute and deliver to the Owner Trust an appropriate instrument releasing the Indenture Estate from the Lien of this Indenture and releasing the Indenture Estate Documents from the assignment and pledge hereunder, and the Lease Indenture Trustee shall execute and deliver such instruments as aforesaid. Except as otherwise provided in this Section 7.1, this Indenture and the Lien created by this Indenture shall continue in full force and effect in accordance with the terms hereof. Promptly upon receipt by a Holder of payment in full of the principal of and interest on the Lessor Notes held by it, and all other amounts payable to it hereunder, under the Lessor Notes and under the Operative Documents such Holder shall deliver the appropriate certificate contemplated by the foregoing sentences of this Section 7.1 to be delivered by it. SECTION 7.2 GOVERNING LAW; COUNTERPARTS. THIS INDENTURE AND THE LESSOR NOTES SHALL BE IN ALL RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THE LAWS OF THE STATE OF ILLINOIS ARE MANDATORILY APPLICABLE UNDER THE LAWS OF THE STATE OF ILLINOIS. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Regardless of any provision in any other agreement, for purposes of the Uniform Commercial Code (as in effect from time to time in the State of New York), the "Securities Intermediary's Jurisdiction" of the Account Bank with respect to the Lease Indenture Trustee's Account is the State of New York. SECTION 7.3 NO LEGAL TITLE TO INDENTURE ESTATE IN HOLDERS. No Holder shall have legal title to any part of the Indenture Estate except as may result from the exercise of remedies hereunder. No transfer, by operation of law or otherwise, of any Lessor Note or other right, title and interest of any Holder in and to the Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Indenture Estate. SECTION 7.4 SALE OF INDENTURE ESTATE BY LEASE INDENTURE TRUSTEE IS BINDING. Any sale or other conveyance of the Indenture Estate or any interest therein by the Lease Indenture Trustee made pursuant to the terms of this Indenture shall be effective to transfer or convey all right, title and interest of the Lease Indenture Trustee, the Owner Trust, the Owner Participant and the Holders in and to the Indenture Estate. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Lease Indenture Trustee. SECTION 7.5 INDENTURE FOR BENEFIT OF THE OWNER TRUST, THE OWNER PARTICIPANT, THE EQUITY INVESTOR, ANY OP GUARANTOR AND THE HOLDERS. Nothing in this Indenture, whether express or implied, shall be construed to give to any Person, other than the Owner Trust, the Owner Participant, the Equity Investor, any OP Guarantor, the Lease Indenture Trustee, the Holders (including, without limitation, any pledgee of the Lessor Notes) and the Facility Lessee, any legal or equitable right, remedy or claim under or in respect of this Indenture. SECTION 7.6 NOTICES. All notices, instructions or demands required or permitted by the terms hereof shall be in English and, unless otherwise specifically provided herein, in writing and must be given in the manner hereinafter specified. Any written notice instruction or demand shall be given by United States mail (certified or registered, postage pre-paid, return receipt requested), by hand-delivery (including overnight mail or courier service), or, if followed and 40 confirmed by hand delivery (including overnight mail or courier service) or United States mail, by facsimile. Any notice, instruction or demand delivered by hand (including overnight mail or courier service) shall become effective when delivered. Any notice, instruction or demand delivered by United States mail shall become effective on the date of receipt. Any notice, instruction or demand delivered by facsimile shall become effective on the date such facsimile is sent, as established by evidence of proper receipt of such transmission. Any notice to any party to the Participation Agreement shall be directed to such party at its address or facsimile numbers set forth in the Participation Agreement or to such other address or number as any such party may designate by notice given to the other parties hereto. Any notice to any Holder shall be directed to such Holder at its address or facsimile numbers as set forth in the Note Register. Each Person delivering a notice hereunder shall deliver a copy thereof to the Facility Lessee; PROVIDED that no such Person shall have any liability for failing to deliver such copy to the Facility Lessee and all notices otherwise properly delivered pursuant to this Section 7.6 shall be effective against the Owner Trust regardless of whether the Person delivering such notice delivers a copy thereof to the Facility Lessee. SECTION 7.7 SEVERABILITY. Any provision of this Indenture 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. SECTION 7.8 NO ORAL MODIFICATIONS OR CONTINUING WAIVERS. No terms or provisions of this Indenture or the Lessor Notes may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other Person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Lessor Note shall be effective only in the specific instance and for the specific purpose given. SECTION 7.9 SUCCESSORS AND ASSIGNS. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. SECTION 7.10 HEADINGS. The headings of the various Sections herein and in the table of contents hereto are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 7.11 NORMAL COMMERCIAL RELATIONS. Anything contained in this Indenture to the contrary notwithstanding, the Lease Indenture Trustee, any Holder or any Affiliate of any of them may conduct any banking or other financial transactions, and have banking, trustee, custody, administrative support or other commercial relationships, with any Holder, Facility Lessee, the Owner Trust, the Owner Participant, the Equity Investor and any OP Guarantor fully to the same extent as if this Indenture were not in effect, including, without limitation, the making of loans or other extensions of credit to any Holder, the Facility Lessee, the Owner Trust, the Owner Participant, the Equity Investor or such OP Guarantor for any purpose whatsoever, related to any of the transactions contemplated hereby or otherwise. SECTION 7.12 WAIVER OF SETOFF. Each of the Holders hereby irrevocably waives any and all rights of set-off that it may have in connection with this Indenture or the Lessor Notes against the Owner Trust, the Facility Lessee or any other Person by reason of Requirements of Law or 41 otherwise. The Owner Trust hereby irrevocably waives any and all rights of set-off that it may have in connection with this Indenture or the Lessor Notes against any Holder, the Facility Lessee, the Facility Sublessee or any other Person by reason of Requirements of Law or otherwise. SECTION 7.13 CONCERNING THE OWNER TRUSTEE. The Owner Trustee is executing this Indenture on behalf of the Owner Trust solely in its capacity as Owner Trustee under the Trust Agreement and not in its individual capacity (except as expressly stated herein) and in no case shall the Trust Company (or any entity acting as Owner Trustee under the Trust Agreement) be personally liable for or on account of any of the statements, representations, warranties, covenants or obligations stated to be those of the Owner Trust or the Owner Trustee hereunder, all such liability, if any, being expressly waived by the parties hereto and any Person claiming by, through, or under such party; PROVIDED, however, that the Trust Company (or any such successor Owner Trustee) shall be personally liable hereunder for its own gross negligence or willful misconduct or for its breach of its covenants, representations and warranties contained herein, to the extent covenanted or made in its individual capacity. SECTION 7.14 REQUIRED HOLDERS; ETC. As used in this Indenture and the other Lessor Security Documents, the term "REQUIRED HOLDERS" means Holders holding at least 50.1% of the principal amount of Lessor Notes outstanding (disregarding for such computation any Lessor Notes held directly or beneficially by the Facility Lessee, the Owner Trust, the Owner Participant, the Equity Investor, any OP Guarantor or any Affiliate of any of them, unless such Person owns all of the Lessor Notes in accordance with the provisions of this Indenture). In the event that any Holder has pledged its interests in any of its Lessor Notes, upon registration in the Note Register, the pledgee will, upon delivery of a written request of such pledgee to the Lease Indenture Trustee and the Owner Trust, be treated as the Holder of such Lessor Notes for all purposes under this Indenture. SECTION 7.15 THE LEASE INDENTURE TRUSTEE. (a) Each of the Holders hereby designates and appoints United States Trust Company of New York to act as the Lease Indenture Trustee under this Indenture, and each of the Holders hereby acknowledges such appointment and the rights and powers of the Lease Indenture Trustee under this Indenture. The Lease Indenture Trustee may take such actions on its behalf under the provisions of this Indenture and may exercise such powers and perform such duties as are expressly delegated to the Lease Indenture Trustee by the terms of this Indenture or which duties have been instructed or directed in writing, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Indenture, the Lease Indenture Trustee shall not have any duties or responsibilities, except those expressly set forth in this Indenture, nor shall the Lease Indenture Trustee have any fiduciary relationship with any Holder, and no implied covenants, functions or responsibilities shall be read into this Indenture or otherwise exist against the Lease Indenture Trustee. The Lease Indenture Trustee shall not be responsible or liable for any action taken, suffered or omitted to be taken by it in good faith hereunder, or in connection herewith, or in connection with the Indenture Estate, unless caused by its gross negligence or willful misconduct as determined by a court of competent jurisdiction. (b) In the administration of its duties hereunder, the Lease Indenture Trustee may perform such duties directly or through agents or attorneys and may consult with counsel, accountants and other relevant experts to be selected with due care and employed by it, and the Lease Indenture Trustee shall not be responsible or liable for any action taken, suffered or 42 omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other relevant experts (which shall be complete authorization and protection to the Lease Indenture Trustee) and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture and shall not be responsible or liable for any act or omission on the part of any agent or attorney appointed with due care by it hereunder. (c) Neither the Lease Indenture Trustee nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall (i) be liable for any action lawfully taken, suffered or omitted to be taken by it under or in connection with this Indenture (except for its gross negligence or willful misconduct as determined by a court of competent jurisdiction) or (ii) be responsible or liable in any manner to any of the Holders for any recitals, statements, representations or warranties made by Owner Trust or any other Person or any representative of any thereof contained in this Indenture or in any certificate, report, statement or other document referred to or provided for in, or received by the Lease Indenture Trustee under or in connection with this Indenture or for the accuracy, value, validity, effectiveness, genuineness, enforceability or sufficiency of this Indenture or for any failure of any of the Owner Trust, the Owner Trustee, the Equity Investor, any OP Guarantor, the Facility Lessee or Facility Sublessee to perform their respective obligations hereunder. The Lease Indenture Trustee shall not be responsible for perfecting or continuing the perfection of any security interest or Lien granted under this Indenture or for filing, re-filing, recording or re-recording any document, instrument or notice in any public office at any time or times. The Lease Indenture Trustee shall not be under any obligation to any Holder to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Indenture, or to inspect the properties, books or records of the Owner Trust or any other Person. (d) The Lease Indenture Trustee shall be entitled to rely conclusively, and shall be fully authorized and protected in so relying, upon any Lessor Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and purported to have been signed, sent or made by the proper Person or Persons. In connection with any request of the Required Holders or making any determinations under this Indenture, the Lease Indenture Trustee shall be fully authorized and protected in so relying on a certificate of any Person, purportedly signed by an Authorized Officer of such Person, setting forth the Lessor Notes held by such Person as of the date of such certificate, which certificate shall state that the Person signing such certificate is an Authorized Officer of such Person and shall state specifically the provision hereof pursuant to which the Lease Indenture Trustee is being directed to act. The Lease Indenture Trustee shall be entitled to rely conclusively, and shall be fully authorized and protected in so relying on such certificate. In the absence of bad faith on its part (as determined by a court of competent jurisdiction), the Lease Indenture Trustee may rely conclusively, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates, advice or opinions furnished to the Lease Indenture Trustee hereunder and conforming to the respective requirements hereof. The Lease Indenture Trustee shall be fully justified and protected in failing or refusing to take any action under this Indenture (i) if such action would, in the opinion of the Lease Indenture Trustee (upon consultation with counsel), be contrary to Requirements of Law or the terms of this Indenture, (ii) if such action is not specifically provided for in this Indenture, and it shall not have received such advice or 43 concurrence of the Required Holders, (iii) while waiting for advice or instructions requested by the Lease Indenture Trustee from the Holders or (iv) if, in connection with the taking of any such action that would constitute an exercise of remedies under this Indenture, it shall not first be indemnified to its satisfaction 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 Lease Indenture Trustee shall in all cases be fully protected in acting, or in refraining from acting, under this Indenture in accordance with a request of the Required Holders (except to the extent the consent of each Holder is required hereunder, in which case the Lease Indenture Trustee shall be fully protected in acting or refraining from acting in accordance with the direction of the Holders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Holders. (e) If, with respect to a proposed action to be taken by it, the Lease Indenture Trustee shall determine in good faith that the provisions of this Indenture relating to the functions or responsibilities or powers of the Lease Indenture Trustee are or may be ambiguous or inconsistent, the Lease Indenture Trustee shall notify the Holders, identifying the proposed action and the provisions that it considers are or may be ambiguous or inconsistent, and shall not perform such function or responsibility or exercise such power unless it shall have received the written confirmation from each of the Holders that such Holder concurs in the circumstances that the action proposed to be taken by the Lease Indenture Trustee is consistent with the terms of this Indenture or is otherwise appropriate. The Lease Indenture Trustee shall be fully authorized and protected in acting or refraining from acting upon such confirmation received by it from each of the Holders in this respect, and such confirmation shall be binding upon each such Holder and the Lease Indenture Trustee. Each Holder may consult with counsel in determining the appropriateness of the proposed action. (f) The Lease Indenture Trustee shall not be deemed to have actual, constructive, direct or indirect knowledge or notice of the occurrence of any Lease Default, Lease Event of Default, Lease Indenture Default or Lease Indenture Event of Default or of the acceleration of any Lessor Note by the Holder thereof unless and until an Authorized Officer of the Lease Indenture Trustee has received an officer's certificate from an Authorized Officer of such Holder stating that such an event has occurred. The Lease Indenture Trustee shall have no obligation whatsoever either prior to or after receiving such certificate to inquire whether any Lease Default, Lease Event of Default, Lease Indenture Default or Lease Indenture Event of Default has in fact occurred and shall be entitled to rely conclusively, and shall be fully authorized and protected in so relying, on any such certificate so furnished to it. No provision of this Indenture shall require the Lease Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers. In the event that the Lease Indenture Trustee receives such a certificate regarding the occurrence of any Lease Default, Lease Event of Default, Lease Indenture Default or Lease Indenture Event of Default, the Lease Indenture Trustee shall give notice thereof to the Holders. The Lease Indenture Trustee shall take such action with respect to such Event of Default as so requested by the Required Holders pursuant to this Indenture. (g) The Owner Trust shall pay upon demand to the Lease Indenture Trustee (but only to the extent that the Owner Trust has received such amounts from the Facility Lessee or EME) the amount of any and all reasonable fees, costs and expenses (including disbursements), 44 including the reasonable fees and expenses of its counsel (and any local counsel) and of any experts and agents, which the Lease Indenture Trustee may incur in connection with (i) without duplication of amounts payable in accordance with any fee letter with the Lease Indenture Trustee expressly with respect to the administration of this Indenture, the preparation, execution, delivery and administration of this Indenture (including any amendments hereto), (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Indenture Estate, (iii) the exercise or enforcement (whether through negotiations, legal proceedings or otherwise) of any of the rights or remedies of the Lease Indenture Trustee or the Holders hereunder or (iv) the failure by the Owner Trust or any other Person to perform or observe any of the provisions hereof or of any of the other Lessor Security Documents or Indenture Estate Documents. Each of the Owner Trust and the Lease Indenture Trustee agrees that the fees set forth in the fee letter dated August 4, 2000 cover the services of the Lease Indenture Trustee enumerated therein assuming that no Lease Default, Lease Event of Default, Lease Indenture Default, Lease Indenture Event of Default or other extraordinary event has occurred. At any time any Lease Default, Lease Event of Default, Lease Indenture Default or Lease Indenture Event of Default has occurred and is continuing, the Lease Indenture Trustee shall be entitled to receive additional fees commensurate with the time spent by the Lease Indenture Trustee in connection with its duties hereunder. The Lease Indenture Trustee shall from time to time determine such fees and send Midwest, EME and the Owner Trust notice thereof, and such fees shall be payable upon demand. The Owner Trust and the Lease Indenture Trustee may from time to time agree in writing to modify the fees payable to the Lease Indenture Trustee and no consent of any other Person shall be required in order to so modify such fees. (h) Each of the Holders expressly acknowledges that neither the Lease Indenture Trustee nor any of its officers, directors, employees, agents or attorneys has made any representations or warranties to it and that no act by the Lease Indenture Trustee hereinafter taken, including, without limitation, any review of the Indenture Estate Documents or of the affairs of the Owner Trust or any other Person, shall be deemed to constitute any representation or warranty by the Lease Indenture Trustee to any Holder. Each Holder represents to the Lease Indenture Trustee that it (i) has, independently and without reliance upon the Lease Indenture Trustee or any other Holder, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Indenture Estate or any obligor under any Indenture Estate Document and (ii) has no obligation to make any such appraisals, investigations or credit analyses under this Indenture and has not relied upon the Lease Indenture Trustee for any information, appraisal, investigation or credit analyses in entering into this Indenture or acquiring any Lessor Note. Each Holder also represents that (i) it will, independently and without reliance upon the Lease Indenture Trustee or any other Holder, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Indenture Estate or any obligor under any Indenture Estate Document and (ii) it will not rely upon the Lease Indenture Trustee to provide any investigation or analyses relating to the Indenture Estate or any obligor under any Indenture Estate Document. Except for notices, reports and other documents expressly required to be furnished to the Holders by the Lease Indenture Trustee hereunder, the Lease Indenture Trustee shall not have any duty or responsibility to provide any Holder with any 45 credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Indenture Estate or any obligor under any Indenture Estate Document which may come into the possession of the Lease Indenture Trustee or any of its officers, directors, employees, agents or attorneys-in-fact. (i) Either of the Lease Indenture Trustee or the Account Bank may resign its appointment upon 30 days' notice to the Holders and may be removed at any time with or without cause by the Required Holders, with any such resignation or removal to become effective only upon the acceptance of appointment of a successor Lease Indenture Trustee or Account Bank that (i) has an office in New York, New York, (ii) has capital, surplus and undivided profits of at least $100,000,000 and (iii) is experienced in administering sophisticated financing transactions; PROVIDED, HOWEVER, that if no successor Lease Indenture Trustee or Account Bank shall have been so appointed within 30 days, the resigning Lease Indenture Trustee or Account Bank may, at the expense of Owner Trust, petition any court of competent jurisdiction for the appointment of a new Lease Indenture Trustee or Account Bank. If the Lease Indenture Trustee or the Account Bank shall resign or be removed as Lease Indenture Trustee or Account Bank by the Required Holders then the Required Holders shall (and if no such successor shall have been appointed within 30 days of the Lease Indenture Trustee's or Account Bank's resignation or removal, the Lease Indenture Trustee may) appoint a successor that (i) has an office in New York, New York, (ii) has capital, surplus and undivided profits of at least $100,000,000 and (iii) is experienced in administering sophisticated financing transactions, whereupon such successor shall succeed to the rights, powers and duties of the "Lease Indenture Trustee" or "Account Bank", and the term "Lease Indenture Trustee" or "Account Bank" shall mean such successor effective upon its acceptance of appointment, and the former Lease Indenture Trustee's or Account Bank's rights, powers and duties as Lease Indenture Trustee or Account Bank shall be terminated, without any other or further act or deed on the part of such former Lease Indenture Trustee or Account Bank (except that the resigning Lease Indenture Trustee or Account Bank shall deliver all Indenture Estate then in its possession to the successor Lease Indenture Trustee or Account Bank) or any of the other Holders. Such former Lease Indenture Trustee or Account Bank shall give notice of its resignation or removal to the Owner Trust and all Holders. After any retiring Lease Indenture Trustee's or Account Bank's resignation or removal hereunder as Lease Indenture Trustee or Account Bank, the provisions of this Indenture shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Lease Indenture Trustee or Account Bank. (j) The Lease Indenture Trustee and each Holder hereby irrevocably designate and appoint United States Trust Company of New York, as the Account Bank under this Indenture. The Account Bank hereby agrees to act as "securities intermediary" (within the meaning of Section 8-102(a)(14) of the UCC) with respect to the Lease Indenture Trustee's Account. The Owner Trust hereby acknowledges that the Account Bank shall act as securities intermediary with respect to the Lease Indenture Trustee's Account pursuant to this Indenture. The Account Bank shall not have duties or responsibilities except those expressly set forth in Sections 3.8 and 3.9 of this Indenture. The Lease Indenture Trustee, at the written direction of the Required Holders, may remove and replace the Account Bank pursuant to the terms and conditions of Section 7.15(i) and direct such Account Bank according to the terms of this Indenture. 46 SECTION 7.16 MAXIMUM SECURED OBLIGATIONS. The principal amount of the Lessor Notes initially secured hereby is $411,060,000; the maximum principal amount, including the principal amount of the initial and, subject to the provisions of Section 2.5, future Lessor Notes, which may be secured hereby at any one time is $499,450,800, plus interest and Make-Whole Premium (if any), plus any disbursements for taxes and insurance on the Facility, plus interest thereon, and any other sums advanced in accordance with the terms hereof or any of the other Operative Documents to protect the security of this Indenture. 47 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed on the day and year first above written. POWERTON TRUST I, By: Wilmington Trust Company, not in its individual capacity but solely as the Owner Trustee under the Trust Agreement By: /s/ JAMES P. LAWLER ---------------------------------- Name: James P. Lawler Title: Vice President UNITED STATES TRUST COMPANY OF NEW YORK, as Lease Indenture Trustee, By: /s/ CHRISTOPHER J. GRELL ---------------------------------- Name: Christopher J. Grell Title: Assistant Vice President STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this 24TH day of August, 2000, by JAMES P. LAWLER, VICE PRESIDENT of WILMINGTON TRUST COMPANY, a Delaware banking corporation, to be the free act and deed on behalf of the banking corporation as the Owner Trustee under the Amended and Restated Trust Agreement dated as of August 17, 2000. /s/ JOHN BEAULIEU ---------------------------------------- Notary Public My Commission Expires APRIL 1, 2001 - ------------------------ STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this the 24TH day of August, 2000, by Christopher J. Grell, Assistant Vice President of United States Trust Company of New York, a New York banking corporation, to be the free act and deed on behalf of the corporation. /s/ PETER W. KIM ------------------------------------ Notary Public My Commission Expires MAY 1, 2002 - --------------------- ANNEX A TO LEASE INDENTURE --------------- DEFINED TERMS Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Indenture shall have such meanings when used in each notice and other communication delivered from time to time in connection with this Indenture. "ACCOUNT BANK" means United States Trust Company of New York, in its capacity as Account Bank hereunder, together with its successors and assigns in such capacity. "ADDITIONAL LESSOR NOTES" has the meaning assigned to such term in Section 2.13 hereof. "ASSUMPTION AGREEMENT" means an Assumption Agreement executed and delivered by an Eligible Successor substantially in the form of Exhibit F hereto. "ASSUMPTION DOCUMENTS" has the meaning assigned to such term in Section 2.12(a). "ASSUMPTION EVENT" shall mean a Midwest Assumption Event or an Owner Participant Assumption Event. "ELIGIBLE SUCCESSOR" means (a) in the case of a Midwest Assumption Event, a designee of Midwest (i) which shall be a direct or indirect wholly-owned Subsidiary of EME (other than Midwest) or another Person acceptable to the Holders (in their sole discretion), (ii) that is a "United States person" within the meaning of Section 7701(a)(30) of the Code and (iii) that is not (A) an "investment company" or a company "controlled" by and "investment company" within the meaning of the Investment Company Act of 1940, as amended or (B) subject to regulation under PUHCA except pursuant to Section 9(a)(2) or Section 32 thereof and (b) in the case of an Owner Participant Assumption Event, a direct or indirect wholly-owned Subsidiary of Public Service Enterprise Group, Inc. or another person acceptable to the Holders (in their sole discretion) (i) that is a "United States person" within the meaning of Section 7701(a)(30) of the Code and (ii) that is not (1) an "investment company" or a company "controlled" by and "investment company" within the meaning of the Investment Company Act of 1940, as amended or (2) subject to regulation under PUHCA except pursuant to Section 9(a)(2) or Section 32 thereof. "HOLDER" means a holder of a Lessor Note. "INDENTURE ESTATE" has the meaning assigned to such term in the granting clause. "INDENTURE ESTATE DOCUMENTS" has the meaning assigned to such term in the Granting Clause. "INTEREST PAYMENT DATE" has the meaning assigned to such term in Section 2.4(b) hereof. "LEASE DEFAULT" means a Lease Event of Default or any condition, occurrence or event which, with notice or lapse of time or both, would constitute a Lease Event of Default. "LEASE INDENTURE DEFAULT" means a Lease Indenture Event of Default or any condition, occurrence or event which, with notice or lapse of time or both, would constitute a Lease Indenture Event of Default. "LEASE INDENTURE EVENT OF DEFAULT" has the meaning assigned to such term in Section 4.2 hereof. "LEASE INDENTURE TRUSTEE'S ACCOUNT" has the meaning assigned to such term in Section 3.8(a) hereof. "LEASE INDENTURE TRUSTEE ACCOUNT COLLATERAL" has the meaning assigned to such term in Section 3.8(c) hereof. "LESSOR NOTE" means each Lessor Note and each Subsequent Lessor Note. "LESSOR SECURED OBLIGATIONS" has the meaning assigned to such term in the Granting Clause. "MAKE-WHOLE PREMIUM" means an amount equal to the Discounted Present Value calculated for any Lessor Note subject to mandatory prepayment pursuant to this Lease Indenture less the unpaid principal amount of such Lessor Note; provided that the Make Whole Premium shall not be less than zero. For purposes of this definition, the "Discounted Present Value" of any Lessor Note subject to mandatory prepayment pursuant to this Lease Indenture shall be equal to the discounted present value, as of the date of mandatory pre-payment, of all principal and interest payments scheduled to become due in respect of such Lessor Note after the date of such mandatory prepayment, calculated using a discount rate equal to the sum of (i) the yield to maturity on the U.S. Treasury security having an average life equal to the remaining average life of such Lessor Note and trading in the secondary market at the price closest to par PLUS (ii) 0.50%; provided, however, that if there is no U.S. Treasury security having an average life equal to the remaining average life of such Lessor Note, such discount rate shall be calculated using a yield to maturity interpolated or extrapolated on a straight-line basis (rounding to the nearest calendar month, if necessary) from the yields to maturity for the two U.S. Treasury securities having average lives most closely corresponding to the remaining life of such Lessor Note and trading in the secondary market at the price closest to par. "MIDWEST ASSUMPTION EVENT" shall mean the election of Midwest to assume the Lessor Notes pursuant to Section 10.2(b) of the Facility Lease. "NEW LESSOR NOTES" has the meaning assigned to such term in Section 2.13 hereof. "NOTE REGISTER" has the meaning assigned to such term in Section 2.9 hereof. "OWNER PARTICIPANT ASSUMPTION EVENT" shall mean (a) the occurrence and continuance of a Lease Event of Default or (b) a termination of the Facility Lease pursuant to Section 14.1 of the Facility Lease together with an election by the Owner Trust to retain the Undivided Interest pursuant to Section 14.3 of the Facility Lease. "OWNER TRUST" has the meaning assigned to such term in the Recitals. "PAYMENT DATE" has the meaning assigned to such term in Section 2.4(b) hereof. "PARTICIPATION AGREEMENT" has the meaning assigned to such term in the Section 1 hereof. "PROPERTY INTEREST" has the meaning assigned to such term in the Granting Clause. "REGISTRAR" has the meaning assigned to such term in Section 2.8 hereof. "REQUIRED HOLDERS" has the meaning assigned to such term in Section 7.14 hereof. "SUBSEQUENT LESSOR NOTE" has the meaning assigned to such term in Section 2.13 hereof. 2 EXHIBIT A TO LEASE INDENTURE --------------- DESCRIPTION OF THE FACILITY --------------------------- EXHIBIT B TO LEASE INDENTURE --------------- DESCRIPTION OF THE FACILITY SITE -------------------------------- EXHIBIT C TO LEASE INDENTURE --------------- FORM OF SERIES A LESSOR NOTE THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION IS IN EFFECT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT POWERTON TRUST I, as Owner Trust SERIES A LESSOR NOTE DUE JULY 2, 2009 No. 1 New York, New York $[__________] [__________], 20__ POWERTON TRUST I (the "OWNER TRUST") acting pursuant to that certain Amended and Restated Trust Agreement (T1) dated as of August 17, 2000 (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and, where applicable, the terms of the other Operative Documents, the "TRUST AGREEMENT") between the Owner Participant named therein and Wilmington Trust Company (the "TRUST COMPANY"), hereby promises to pay to United States Trust Company of New York, as Pass-Through Trustee, or registered assigns, the principal sum of [__________] Dollars, in installments on the Payment Dates and in the amounts set forth in Annex A hereto; PROVIDED, HOWEVER, that the final principal payment hereon shall in any and all events equal the then outstanding principal balance hereof, together with interest at the rate of 8.30% per annum (subject to the immediately following paragraph, with respect to an Illiquidity Event or a Reporting Cessation) on the unpaid principal amount hereof from time to time outstanding from and including the date hereof until such principal amount is paid in full. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Accrued interest hereon shall be payable on each Interest Payment Date and on the date this Lessor Note is paid in full. This Lessor Note shall bear interest, to the maximum extent permitted by Requirements of Law, at the Overdue Rate on any part of the principal amount hereof, and on any interest or other amounts due hereunder, not paid when due (whether at stated maturity, by acceleration or otherwise), for the period the same is past due, payable on demand of the holder hereof. The Facility Lessee and EME have entered into a Registration Rights Agreement dated August 17, 2000 (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and, where applicable, -2- the terms of the other Operative Documents, the "REGISTRATION RIGHTS AGREEMENT") with the Initial Purchasers described therein. Pursuant to such Registration Rights Agreement, the Facility Lessee and EME have agreed to use their reasonable best efforts to (a) cause to become effective on or prior to the date which is 270 days after the Closing Date (i) the Exchange Offer Registration Statement or (ii) an Initial Shelf Registration Statement (as each such term is defined in the Registration Rights Agreement) and to maintain the respective effectiveness of such Registration Statements (as defined in the Registration Rights Agreement) as described in the Registration Rights Agreement. From and after the date on which an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, additional interest (in addition to the interest otherwise payable with respect to this Lessor Note) shall accrue on this Lessor Note until but not including the date on which such Illiquidity Event shall cease to exist (and provided no other Illiquidity Event with respect to the Certificates issued on the Closing Date shall then be continuing), at the rate of 0.50% per annum, which additional interest shall be payable hereon at the times, in the manner and subject to the same terms and conditions set forth herein and in the Indenture (as defined below), as nearly as may be, as though the interest rate set forth above had been increased by 0.50% per annum. In the event that either the Facility Lessee or EME ceases to maintain its status as a reporting company under the Securities Exchange Act of 1934, as amended (such Act, the "EXCHANGE ACT" and such cessation, a "REPORTING CESSATION")(it being understood that no Reporting Cessation shall be deemed to occur if the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or any successor body will not accept the information and reports of the Facility Lessee or EME to be filed pursuant to the Exchange Act), additional interest (in addition to the interest otherwise payable with respect to this Lessor Note) shall thereafter accrue on this Lessor Note until but not including the date on which such Reporting Cessation shall cease to exist (and provided no other Reporting Cessation shall then be continuing) at the rate of 0.50% per annum, which additional interest shall be payable hereon at the times, in the manner and subject to the same terms and conditions set forth herein and in the Indenture (as defined below), as nearly as may be, as though the interest rate set forth above had been increased by 0.50% per annum. Anything in the foregoing to the contrary notwithstanding, in the event that an Illiquidity Event and a Reporting Cessation shall have occurred and be continuing at the same time, the maximum amount of additional interest to accrue on this Lessor Note as set forth above shall be 0.50% per annum. All payments of principal and interest and all other amounts to be made by the Owner Trust hereunder or under the Indenture of Trust, Mortgage and Security Agreement (T1) dated as of August 17, 2000 (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and, where applicable, the terms of the other Operative Documents, the "INDENTURE"; the defined terms therein (including by cross-reference) not otherwise defined herein being used herein with the same meanings) among the Owner Trust, and United States Trust Company of New York, as Lease Indenture Trustee shall be made (i) only from the income and proceeds from the Indenture Estate and (ii) only to the extent that the Owner Trust shall have sufficient income or proceeds from the Indenture Estate to enable such payments to be made in accordance with the terms of the Indenture. Each holder hereof, by its acceptance of this Lessor Note, agrees that (a) it will look solely to the income and proceeds from the Indenture Estate to the extent available for distribution to the holder hereof as above provided and (b) none of the Lease Indenture Trustee, Owner Participant, the Equity Investor, any OP Guarantor, the Owner Trustee, Owner Trust or the Trust Company is, or shall be, personally liable to the holder hereof for any amounts payable -3- under this Lessor Note or under the Indenture or for any liability under the Indenture, except as expressly provided in the Indenture. Principal, Make-Whole Premium (if any) and interest and other amounts due hereunder or under the Indenture shall be payable in Dollars by wire transfer of immediately available funds on the due date thereof to the Lease Indenture Trustee's Account (by wire transfer of immediately available funds if not otherwise specified) or to such other account as the holder hereof shall have designated to the Owner Trust in writing. Payment to the Lease Indenture Trustee must be received by 12:00 (noon), New York time. If any sum payable hereunder or under the Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day and, if paid on such Business Day, the payment thereof shall be without penalty or interest (unless calculation of such amount is based on actual days elapsed) or other adjustment. The holder hereof, by its acceptance of this Lessor Note, agrees that each payment of principal and interest or other amounts received by it hereunder shall be applied, FIRST, to the payment of interest on this Lessor Note (as well as any interest on overdue principal, and, to the extent permitted by law, interest and other amounts hereunder) due and payable to the date of such payment as hereinabove provided, SECOND, to the payment of the principal of, and Make-Whole Premium, if any, then due hereunder, and THIRD, to the extent permitted under the Indenture, the balance, if any, remaining thereafter, to the payment of the principal amount of, and Make-Whole Premium, if any, hereunder. This Lessor Note is one of the Lessor Notes, and one of the Initial Lessor Notes, referred to in the Indenture which have been or are to be issued by the Owner Trust pursuant to the terms of the Indenture. The Indenture Estate is held by the Lease Indenture Trustee as security for the Lessor Notes. Reference is hereby made to the Indenture for a statement of the rights and obligations of the holder of, and the nature and extent of the security for, this Lessor Note and of the rights and obligations of the holders of, and the nature and extent of the security for, the other Lessor Notes, as well as for a statement of the terms and conditions of the trusts created thereby. By its acceptance of this Lessor Note, each holder hereof agrees to all of the terms and conditions in the Indenture and in the Participation Agreement referred to therein expressed to be binding on the Lease Indenture Trustee or a holder of a Lessor Note. There shall be maintained the Note Register for the purpose of registering this Lessor Note and registering transfers and exchanges of Lessor Notes at the principal office of the Owner Trustee in the manner provided in Section 2.8 of the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the Lessor Notes are exchangeable for Lessor Notes of the same series, of any authorized denominations and of like aggregate original principal amount, as requested by the holder hereof surrendering the same. Except as otherwise provided in Section 2.8 of the Indenture, prior to the due presentment for registration of transfer of this Lessor Note, the Owner Trust and each holder hereof shall deem and treat the Person in whose name this Lessor Note is registered on the Note Register as the absolute owner and holder hereof for the purpose of receiving payment of all amounts payable with respect to this Lessor Note and for all other purposes whether or not this -4- Lessor Note is overdue, and neither the Owner Trust nor any holder hereof shall be affected by any notice to the contrary. This Lessor Note is subject to prepayment solely as required by Section 2.11 of the Indenture, to purchase by the Owner Trust, the Owner Participant or an OP Guarantor as provided in Section 2.10 of the Indenture and to assumption by an Eligible Successor in accordance with Section 2.12 of the Indenture. If at any time a Lease Indenture Event of Default shall have occurred and be continuing, this Lessor Note may be declared, and under certain circumstances shall automatically be deemed to be declared, due and payable, all upon the conditions, in the manner and with the effect provided in the Indenture. By its acceptance hereof, the holder of this Lessor Note agrees that the Owner Trustee is executing this Lessor Note on behalf of the Owner Trust solely in its capacity as Owner Trustee under the Trust Agreement and not in its individual capacity and in no case shall the Trust Company (or any entity acting as Owner Trustee under the Trust Agreement) be personally liable in respect of the obligations stated to be those of the Owner Trust or the Owner Trustee hereunder. By its acceptance hereof, the holder of this Lessor Note represents for the benefit of the Owner Trust, the Owner Participant and the Facility Lessee that either: (i) no Plan assets have been used to purchase this Lessor Note or (ii) the purchase and holding of this Lessor Note are either exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to one or more prohibited transaction statutory or administrative exemptions or do not constitute a prohibited transaction under such restrictions of ERISA and the Code. THIS LESSOR NOTE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE, WITH THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the Owner Trust has caused this Lessor Note to be executed in its name by the Owner Trustee by an officer of the Owner Trustee thereunto duly authorized, as of the date hereof. POWERTON TRUST I, as Owner Trust By: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement By: ------------------------------------------ Name: Title: This is one of the Lessor Notes referred to in the within-mentioned Indenture UNITED STATES TRUST COMPANY OF NEW YORK as Lease Indenture Trustee By: ---------------------- Authorized Officer ANNEX A to Series A Lessor Note
- ------------------------------------------------------------ A B - ------------------------------------------------------------ Payment Principal Date Payment ($) - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------
EXHIBIT D TO LEASE INDENTURE --------------- FORM OF SERIES B LESSOR NOTE THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION IS IN EFFECT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT POWERTON TRUST I, as Owner Trust SERIES B LESSOR NOTE DUE JANUARY 2, 2016 No. 1 New York, New York $[__________] [__________], 20__ POWERTON TRUST I (the "OWNER TRUST") acting pursuant to that certain Amended and Restated Trust Agreement (T1) dated as of August 17, 2000 (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and, where applicable, the terms of the other Operative Documents, the "TRUST AGREEMENT") between the Owner Participant named therein and Wilmington Trust Company (the "TRUST COMPANY"), hereby promises to pay to United States Trust Company of New York, as Pass-Through Trustee, or registered assigns, the principal sum of [__________] Dollars, in installments on the Payment Dates and in the amounts set forth in Annex A hereto; PROVIDED, HOWEVER, that the final principal payment hereon shall in any and all events equal the then outstanding principal balance hereof, together with interest at the rate of 8.56% per annum (subject to the immediately following paragraph, with respect to an Illiquidity Event or a Reporting Cessation) on the unpaid principal amount hereof from time to time outstanding from and including the date hereof until such principal amount is paid in full. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Accrued interest hereon shall be payable on each Interest Payment Date and on the date this Lessor Note is paid in full. This Lessor Note shall bear interest, to the maximum extent permitted by Requirements of Law, at the Overdue Rate on any part of the principal amount hereof, and on any interest or other amounts due hereunder, not paid when due (whether at stated maturity, by acceleration or otherwise), for the period the same is past due, payable on demand of the holder hereof. The Facility Lessee and EME have entered into a Registration Rights Agreement dated August 17, 2000 (as the same may from time to time be amended, amended and restated, -2- supplemented or otherwise modified in accordance with the terms thereof and, where applicable, the terms of the other Operative Documents, the "REGISTRATION RIGHTS AGREEMENT") with the Initial Purchasers described therein. Pursuant to such Registration Rights Agreement, the Facility Lessee and EME have agreed to use their reasonable best efforts to (a) cause to become effective on or prior to the date which is 270 days after the Closing Date (i) the Exchange Offer Registration Statement or (ii) an Initial Shelf Registration Statement (as each such term is defined in the Registration Rights Agreement) and to maintain the respective effectiveness of such Registration Statements (as defined in the Registration Rights Agreement) as described in the Registration Rights Agreement. From and after the date on which an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, additional interest (in addition to the interest otherwise payable with respect to this Lessor Note) shall accrue on this Lessor Note until but not including the date on which such Illiquidity Event shall cease to exist (and provided no other Illiquidity Event with respect to the Certificates issued on the Closing Date shall then be continuing), at the rate of 0.50% per annum, which additional interest shall be payable hereon at the times, in the manner and subject to the same terms and conditions set forth herein and in the Indenture (as defined below), as nearly as may be, as though the interest rate set forth above had been increased by 0.50% per annum. In the event that either the Facility Lessee or EME ceases to maintain its status as a reporting company under the Securities Exchange Act of 1934, as amended (such Act, the "EXCHANGE ACT" and such cessation, a "REPORTING CESSATION")(it being understood that no Reporting Cessation shall be deemed to occur if the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or any successor body will not accept the information and reports of the Facility Lessee or EME to be filed pursuant to the Exchange Act), additional interest (in addition to the interest otherwise payable with respect to this Lessor Note) shall thereafter accrue on this Lessor Note until but not including the date on which such Reporting Cessation shall cease to exist (and provided no other Reporting Cessation shall then be continuing) at the rate of 0.50% per annum, which additional interest shall be payable hereon at the times, in the manner and subject to the same terms and conditions set forth herein and in the Indenture (as defined below), as nearly as may be, as though the interest rate set forth above had been increased by 0.50% per annum. Anything in the foregoing to the contrary notwithstanding, in the event that an Illiquidity Event and a Reporting Cessation shall have occurred and be continuing at the same time, the maximum amount of additional interest to accrue on this Lessor Note as set forth above shall be 0.50% per annum. All payments of principal and interest and all other amounts to be made by the Owner Trust hereunder or under the Indenture of Trust, Mortgage and Security Agreement (T1) dated as of August 17, 2000 (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and, where applicable, the terms of the other Operative Documents, the "INDENTURE"; the defined terms therein (including by cross-reference) not otherwise defined herein being used herein with the same meanings) among the Owner Trust, and United States Trust Company of New York, as Lease Indenture Trustee shall be made (i) only from the income and proceeds from the Indenture Estate and (ii) only to the extent that the Owner Trust shall have sufficient income or proceeds from the Indenture Estate to enable such payments to be made in accordance with the terms of the Indenture. Each holder hereof, by its acceptance of this Lessor Note, agrees that (a) it will look solely to the income and proceeds from the Indenture Estate to the extent available for distribution to the holder hereof as above provided and (b) none of the Lease Indenture Trustee, Owner Participant, the Equity Investor, any OP Guarantor, the Owner Trustee, Owner Trust or -3- the Trust Company is, or shall be, personally liable to the holder hereof for any amounts payable under this Lessor Note or under the Indenture or for any liability under the Indenture, except as expressly provided in the Indenture. Principal, Make-Whole Premium (if any) and interest and other amounts due hereunder or under the Indenture shall be payable in Dollars by wire transfer of immediately available funds on the due date thereof to the Lease Indenture Trustee's Account (by wire transfer of immediately available funds if not otherwise specified) or to such other account as the holder hereof shall have designated to the Owner Trust in writing. Payment to the Lease Indenture Trustee must be received by 12:00 (noon), New York time. If any sum payable hereunder or under the Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day and, if paid on such Business Day, the payment thereof shall be without penalty or interest (unless calculation of such amount is based on actual days elapsed) or other adjustment. The holder hereof, by its acceptance of this Lessor Note, agrees that each payment of principal and interest or other amounts received by it hereunder shall be applied, FIRST, to the payment of interest on this Lessor Note (as well as any interest on overdue principal, and, to the extent permitted by law, interest and other amounts hereunder) due and payable to the date of such payment as hereinabove provided, SECOND, to the payment of the principal of, and Make-Whole Premium, if any, then due hereunder, and THIRD, to the extent permitted under the Indenture, the balance, if any, remaining thereafter, to the payment of the principal amount of, and Make-Whole Premium, if any, hereunder. This Lessor Note is one of the Lessor Notes, and one of the Initial Lessor Notes, referred to in the Indenture which have been or are to be issued by the Owner Trust pursuant to the terms of the Indenture. The Indenture Estate is held by the Lease Indenture Trustee as security for the Lessor Notes. Reference is hereby made to the Indenture for a statement of the rights and obligations of the holder of, and the nature and extent of the security for, this Lessor Note and of the rights and obligations of the holders of, and the nature and extent of the security for, the other Lessor Notes, as well as for a statement of the terms and conditions of the trusts created thereby. By its acceptance of this Lessor Note, each holder hereof agrees to all of the terms and conditions in the Indenture and in the Participation Agreement referred to therein expressed to be binding on the Lease Indenture Trustee or a holder of a Lessor Note. There shall be maintained the Note Register for the purpose of registering this Lessor Note and registering transfers and exchanges of Lessor Notes at the principal office of the Owner Trustee in the manner provided in Section 2.8 of the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the Lessor Notes are exchangeable for Lessor Notes of the same series, of any authorized denominations and of like aggregate original principal amount, as requested by the holder hereof surrendering the same. Except as otherwise provided in Section 2.8 of the Indenture, prior to the due presentment for registration of transfer of this Lessor Note, the Owner Trust and each holder hereof shall deem and treat the Person in whose name this Lessor Note is registered on the Note Register as the absolute owner and holder hereof for the purpose of receiving payment of all amounts payable with respect to this Lessor Note and for all other purposes whether or not this -4- Lessor Note is overdue, and neither the Owner Trust nor any holder hereof shall be affected by any notice to the contrary. This Lessor Note is subject to prepayment solely as required by Section 2.11 of the Indenture, to purchase by the Owner Trust, the Owner Participant or an OP Guarantor as provided in Section 2.10 of the Indenture and to assumption by an Eligible Successor in accordance with Section 2.12 of the Indenture. If at any time a Lease Indenture Event of Default shall have occurred and be continuing, this Lessor Note may be declared, and under certain circumstances shall automatically be deemed to be declared, due and payable, all upon the conditions, in the manner and with the effect provided in the Indenture. By its acceptance hereof, the holder of this Lessor Note agrees that the Owner Trustee is executing this Lessor Note on behalf of the Owner Trust solely in its capacity as Owner Trustee under the Trust Agreement and not in its individual capacity and in no case shall the Trust Company (or any entity acting as Owner Trustee under the Trust Agreement) be personally liable in respect of the obligations stated to be those of the Owner Trust or the Owner Trustee hereunder. By its acceptance hereof, the holder of this Lessor Note represents for the benefit of the Owner Trust, the Owner Participant and the Facility Lessee that either: (i) no Plan assets have been used to purchase this Lessor Note or (ii) the purchase and holding of this Lessor Note are either exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to one or more prohibited transaction statutory or administrative exemptions or do not constitute a prohibited transaction under such restrictions of ERISA and the Code. THIS LESSOR NOTE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE, WITH THE LAWS OF THE STATE OF NEW YORK. -5- IN WITNESS WHEREOF, the Owner Trust has caused this Lessor Note to be executed in its name by the Owner Trustee by an officer of the Owner Trustee thereunto duly authorized, as of the date hereof. POWERTON TRUST I, as Owner Trust By: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement By: ---------------------------------------- Name: Title: This is one of the Lessor Notes referred to in the within-mentioned Indenture UNITED STATES TRUST COMPANY OF NEW YORK as Lease Indenture Trustee By: ---------------------------- Authorized Officer ANNEX A to Series B Lessor Note
- ------------------------------------------------------------ A B - ------------------------------------------------------------ Payment Principal Date Payment ($) - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------
EXHIBIT E TO LEASE INDENTURE --------------- FORM OF CERTIFICATE OF AUTHENTICATION This is one of the Lessor Notes referred to in the within-mentioned Indenture [_____________________], as Lease Indenture Trustee By: ------------------- Authorized Officer EXHIBIT F TO LEASE INDENTURE --------------- FORM OF ASSUMPTION AGREEMENT To: The Holders (as defined below) from time to time of the Lessor Notes (as defined below) of Powerton Trust I (the "OWNER TRUST) under the Indenture of Trust, Mortgage and Security Agreement (T1) (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and the other Operative Documents (as defined below), the "INDENTURE") dated as of August 17, 2000 between the Owner Trust and the Lease Indenture Trustee referred to therein. The undersigned, [____________], a [_________] (the "ELIGIBLE SUCCESSOR") does hereby covenant and agree with the Holders and the Lease Indenture Trustee from time to time of the Lessor Notes as follows. Capitalized terms used herein shall have the meanings assigned thereto in the Indenture. SECTION 1. The Eligible Successor does hereby agree to, and does hereby assume unconditionally, (a) the payment of the principal of the Lessor Notes and of the interest and premium (including, without limitation, Make-Whole Premium) (if any) thereon, at the rates provided in the Lessor Notes, when and as the same shall become due and payable, whether at maturity or upon mandatory prepayment or upon acceleration or otherwise, according to the terms of the Lessor Notes and of the Indenture, (b) the payment of all other amounts under or with respect to the Indenture and the Lessor Notes and (c) each and every other obligation of the Owner Trust under the Indenture and the Lessor Notes. SECTION 2. The assumption herein contained shall be binding upon the Eligible Successor, its successors and assigns and shall remain in full force and effect irrespective of the power or authority of the Owner Trust to issue the Lessor Notes or to execute, acknowledge and deliver the Indenture or the validity of the Lessor Notes or the Indenture, or any defense whatsoever that the Owner Trust may or might have to the payment of the Lessor Notes (principal, interest or premium (including, without limitation, Make-Whole Premium)), or to the performance or observance of any of the provisions or conditions of the Indenture or any Lessor Note, or of the existence or continuance of the Owner Trust as a legal entity; nor shall said assumption be affected by the merger, consolidation, or other dissolution of the Owner Trust or the sale or other transfer of the property of the Owner Trust as an entirety, or substantially so, to any other person; nor shall the assumption be discharged or impaired by any act, failure or omission whatsoever on the part of any Holder of any Lessor Notes or the Lease Indenture Trustee, including, among other such acts, failures and omissions, the following: (a) any failure to present any Lessor Notes for payment or to demand payment thereof, or to give to the Eligible Successor notice of dishonor and nonpayment of any Lessor Note when and as the same may become due and payable, or notice of any failure on the part of the Owner Trust to do any act or thing or to perform or keep any covenant or agreement by it to be done, kept or performed under the terms of the Lessor Notes or the Indenture; -2- (b) any extension of the obligation of any Lessor Note, either indefinitely or for any period of time, or any other modification in the obligations under any Lessor Note or the Indenture or of the Owner Trust thereon or in connection therewith; (c) any act or failure to act with regard to any Lessor Note or the Indenture or anything which might vary the risk of the Eligible Successor; and (d) any action taken under the Indenture or the Lessor Notes in the exercise of any right or power thereby conferred or any failure or omission on the part of the Lease Indenture Trustee or the Holder of any Lessor Note to enforce any right or security given under the Indenture or any Lessor Note, or any waiver of any right or any failure or omission on the part of the Lease Indenture Trustee or any Holder of any Lessor Note to enforce any right of any Holder of any Lessor Note against the Owner Trust; PROVIDED, always, that the specific enumeration of the above-mentioned acts, failures, waivers, or omissions shall not be deemed to exclude any other acts failures, waivers or omissions though not specifically mentioned herein, it being the purpose and intent of this Assumption Agreement that the obligation of the Eligible Successor shall be absolute and unconditional to the extent herein specified and shall not be discharged, impaired or varied except by the payment of the principal of and interest on any Lessor Note and any premium (including, without limitation, Make-Whole Premium) thereon in case of prepayment, and then only to the extent of such payments. SECTION 3. The Eligible Successor does hereby consent to all of the terms and conditions of each series of Lessor Notes outstanding and of the Indenture, and hereby waives any and all rights of notice of any fact or facts or circumstance or circumstances whatsoever and consents to any extension or extensions of time of any payment or payments, or of any other act or thing which any Holder or Holders of any Lessor Note or the Owner Trust may agree to consent to, either expressly, by acquiescence or otherwise, and hereby agrees not to claim or enforce any rights of subrogation or any other right or privilege which might otherwise arise on account of any payment made by it or act or thing done by it on account of or in accordance with its assumption herein contained, unless and until all of the Lessor Notes have been fully paid and discharged. SECTION 4. The assumption herein expressed may be transferred or assigned at any time or from time to time and shall be considered to be transferred and assigned upon the transfer of any Lessor Note, whether with or without the consent of or notice to the Eligible Successor or the Owner Trust. The Eligible Successor hereby agrees to execute and deliver such instruments and to do such acts and things requested by the Lease Indenture Trustee as shall be reasonably necessary to carry out and effectuate the purposes and intents of this Assumption Agreement. This Assumption Agreement may not be amended or modified in any respect without the prior -3- written consent (evidenced as provided in the Indenture) of the Holders. The Eligible Successor agrees to file with the Lease Indenture Trustee a duplicate original of each such consent. [________________________] By: --------------------------------- Title: ATTEST: - ----------------------------- Title: EX-4.5-1 8 a2031364zex-4_51.txt EXHIBIT 4.5.1 Exhibit 4.5.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 4.5 - ------------------------------------------------------------------------- Indenture of Trust, Mortgage and Security Agreement (T2), dated as of August 17, 2000, between Powerton Trust II and the United States Trust Company of New York, as Lease Indenture Trustee. This Indenture of Trust, Mortgage and Security Agreement differs from Exhibit 4.5 in the following respects: In the Lessor Notes section (2.2), the initial aggregate principal amounts of the Series A and Series B Lessor Notes are $67,580,000 and $163,820,000, respectively. The Series B Lessor Notes have a final payment date of January 2, 2015. In the Miscellaneous section (7.16), the maximum principal amount of the Lessor Notes secured by this indenture is $285,849,200. 1 EX-4.6 9 a2031364zex-4_6.txt EXHIBIT 4.6 Exhibit 4.6 EXECUTION COUNTERPART WHEN RECORDED, RETURN TO: Ross Agre, Esq. Milbank, Tweed, Hadley & McCloy LLP 1 Chase Manhattan Plaza New York, New York 10005 ================================================================================ INDENTURE OF TRUST, MORTGAGE AND SECURITY AGREEMENT (T1) Dated as of August 17, 2000 between JOLIET TRUST I and UNITED STATES TRUST COMPANY OF NEW YORK as Lease Indenture Trustee ================================================================================ Joliet Station, Units 7 and 8 Coal-Fired Electric Generating Facility Land Located in Will County, Illinois TABLE OF CONTENTS
PAGE SECTION 1. DEFINITIONS...............................................................................................6 SECTION 2. THE LESSOR NOTES..........................................................................................6 Section 2.1 Limitation on Lessor Notes...........................................................................6 Section 2.2 Initial Lessor Notes.................................................................................6 Section 2.3 Execution and Authentication of Lessor Notes.........................................................7 Section 2.4 Issuance and Terms of the Initial Lessor Notes.......................................................7 Section 2.5 Payments from Indenture Estate Only; No Personal Liability of the Owner Trust, the Owner Participant or the Lease Indenture Trustee................................8 Section 2.6 Method of Payment....................................................................................8 Section 2.7 Application of Payments..............................................................................9 Section 2.8 Registration, Transfer and Exchange of Lessor Notes.................................................10 Section 2.9 Mutilated, Destroyed, Lost or Stolen Lessor Notes...................................................10 Section 2.10 Optional Purchase upon Lease Event of Default......................................................10 Section 2.11 Mandatory Prepayment...............................................................................11 Section 2.12 Assumption of Lessor Notes.........................................................................12 Section 2.13 Subsequent Lessor Notes............................................................................16 Section 2.14 Payment of Expenses on Transfer....................................................................17 Section 2.15 Restrictions of Transfer Resulting from Federal Securities Laws; Legend............................17 Section 2.16 Security for and Parity of Lessor Notes............................................................18 Section 2.17 Acceptance of the Lease Indenture Trustee..........................................................18 Section 2.18 Taxes; Withholding.................................................................................18 SECTION 3. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM INDENTURE ESTATE....................................18 Section 3.1 Distribution Prior to Lessor Loan Event of Default..................................................18 Section 3.2 Payments Following Event of Loss or Other Early Termination.........................................19 Section 3.3 Payments After Lease Indenture Event of Default.....................................................20 Section 3.4 Certain Payments....................................................................................21 Section 3.5 Other Payments......................................................................................21 Section 3.6 Manner of Payment to the Owner Trust................................................................22 Section 3.7 Investment of Amounts Held by Lease Indenture Trustee...............................................22 Section 3.8 Establishment of the Lease Indenture Trustee's Account; and Lien and Security Interest; Etc.........23 Section 3.9 The Account Bank; Limited Rights of the Owner Trust.................................................23 SECTION 4. COVENANTS OF THE OWNER TRUST; LEASE INDENTURE EVENTS OF DEFAULT; REMEDIES................................25 Section 4.1 Covenants of the Owner Trust........................................................................25 Section 4.2 Lease Indenture Events of Default...................................................................26 Section 4.3 Certain Rights......................................................................................28 Section 4.4 Remedies............................................................................................29 Section 4.5 Taking Possession of Indenture Estate...............................................................31 i Section 4.6 Remedies Cumulative.................................................................................32 Section 4.7 Discontinuance of Proceedings.......................................................................32 Section 4.8 Waiver of Past Defaults.............................................................................32 Section 4.9 Waiver of Stay, Extension, Moratorium Laws; Equity of Redemption....................................32 SECTION 5. DISCLAIMER OF REPRESENTATIONS; NO SEGREGATION OF MONEYS; FURTHER ASSURANCES; CERTAIN RIGHTS..............33 Section 5.1 No Representations or Warranties as to the Property Interest or other Lessor Security Documents.....33 Section 5.2 No Segregation of Moneys; No Interest...............................................................33 Section 5.3 Further Assurances; Financing Statements............................................................34 Section 5.4 Certain Rights of Owner Trust and Owner Participant.................................................34 SECTION 6. SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS.........................................36 Section 6.1 Supplements and Amendments to this Indenture and the Other Documents:...............................36 Section 6.2 Documents Furnished to Holders......................................................................39 Section 6.3 Lease Indenture Trustee Protected...................................................................39 SECTION 7. MISCELLANEOUS............................................................................................39 Section 7.1 Termination of Indenture............................................................................39 Section 7.2 Governing Law; Counterparts.........................................................................40 Section 7.3 No Legal Title to Indenture Estate in Holders.......................................................40 Section 7.4 Sale of Indenture Estate by Lease Indenture Trustee Is Binding......................................40 Section 7.5 Indenture for Benefit of the Owner Trust, the Owner Participant, the Equity Investor, any OP Guarantor and the Holders....................................................................40 Section 7.6 Notices.............................................................................................40 Section 7.7 Severability........................................................................................41 Section 7.8 No Oral Modifications or Continuing Waivers.........................................................41 Section 7.9 Successors and Assigns..............................................................................41 Section 7.10 Headings...........................................................................................41 Section 7.11 Normal Commercial Relations........................................................................41 Section 7.12 Waiver of Setoff...................................................................................41 Section 7.13 Concerning the Owner Trustee.......................................................................42 Section 7.14 Required Holders; Etc..............................................................................42 Section 7.15 The Lease Indenture Trustee........................................................................42 Section 7.16 Maximum Secured Obligations........................................................................47
ii INDENTURE OF TRUST, MORTGAGE AND SECURITY AGREEMENT (T1) This INDENTURE OF TRUST, MORTGAGE AND SECURITY AGREEMENT (T1) (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this "INDENTURE"), dated as of August 17, 2000, between JOLIET TRUST I, a Delaware business trust created for the benefit of the Owner Participant referred to below, as grantor (the "OWNER TRUST") and UNITED STATES TRUST COMPANY OF NEW YORK as grantee (the "LEASE INDENTURE TRUSTEE"). WITNESSETH: WHEREAS, the Owner Trust and the Facility Lessee will enter into that certain Facility Lease Agreement (T1), dated as of August 17, 2000 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof, the "FACILITY LEASE"), pursuant to which the Owner Trust will lease to the Facility Lessee and the Facility Lessee will lease from the Owner Trust for a term of years the Owner Trust's undivided interest equal to the Undivided Interest Percentage in and to the Joliet Station, Units 7 and 8 (the "FACILITY") with the right to nonexclusive possession thereof (the "UNDIVIDED INTEREST"); WHEREAS, the Facility Lessee will lease a corresponding interest equal to the Undivided Interest Percentage in and to the Facility Site with the right to nonexclusive possession thereof and will grant certain non-exclusive easements (such undivided leasehold interest, together with such non-exclusive easements, the "GROUND INTEREST") to the Owner Trust and the Owner Trust simultaneously therewith will sublease the Ground Interest back to the Facility Lessee; WHEREAS, the Facility is more particularly described in Exhibit A attached hereto and made a part hereof and is located on the Facility Site, which, together with certain easements, are more particularly described in Exhibit B attached hereto and made a part hereof; WHEREAS, the Owner Trust was authorized and directed in the Amended and Restated Trust Agreement (T1), dated as of August 17, 2000 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof, the "TRUST AGREEMENT"), between Wilmington Trust Company and Joliet Generation I, LLC (the "OWNER PARTICIPANT") to execute and deliver this Indenture; WHEREAS, in connection with the transactions contemplated by the Trust Agreement, the Owner Trust entered into the Participation Agreement; WHEREAS, the Owner Trust, pursuant to the Facility Deed and Bill of Sale, will purchase the Undivided Interest from Midwest and concurrently therewith will lease such Undivided Interest to Midwest pursuant to the Facility Lease; WHEREAS, in accordance with this Indenture, the Owner Trust will execute and deliver the Initial Lessor Notes, the proceeds of which will be used by the Owner Trust to finance a portion of the Purchase Price, and will grant to the Lease Indenture Trustee the liens and security interests herein provided; WHEREAS, this Indenture is regarded as a mortgage under the laws of the State of Illinois and as a security agreement under the Uniform Commercial Code of the State of New York; and WHEREAS, the Owner Trust and the Lease Indenture Trustee desire to enter into this Indenture, to, among other things, provide for (a) the issuance by the Owner Trust of the Lessor Notes, (b) the conveyance and assignment by the Owner Trust to the Lease Indenture Trustee, as part of the Indenture Estate, of the Undivided Interest, the Ground Interest, the Owner Trust's interest as tenant under the Facility Site Lease, the Owner Trust's interest as landlord and sublandlord under the Facility Lease and the Facility Site Sublease, respectively, the Owner Trust's interest under the Participation Agreement and all payments and other amounts received or receivable hereunder or thereunder in accordance herewith (excluding Excepted Payments and except as otherwise provided herein or therein) as security for, INTER ALIA, the Owner Trust's obligations to and for the benefit of the Holders and for the benefit and security of such Holders. GRANTING CLAUSE: NOW, THEREFORE, to secure the prompt payment of the principal of and interest on, and all other amounts due with respect to, the Lessor Notes from time to time outstanding hereunder, all other amounts owing hereunder by the Owner Trust and the performance and observance by the Owner Trust of all the agreements, covenants and provisions contained in the Operative Documents, and the prompt payment of all amounts from time to time due or to become due from the Owner Trust to the Lease Indenture Trustee or the Holders under any of the Operative Documents (collectively, the "LESSOR SECURED OBLIGATIONS"), and for the uses and purposes and subject to the terms and provisions hereof, and in consideration of the premises and of the covenants herein contained, and of the acceptance of the Lessor Notes by the Holders thereof, the Owner Trust does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, warrant and confirm with MORTGAGE COVENANTS, unto and for the security and benefit of, the Lease Indenture Trustee acting for and on behalf of itself and the Holders from time to time, a first priority security interest in and mortgage lien on all estate, right, title and interest now held or hereafter acquired by the Owner Trust in, to and under the following described property, rights, interests and privileges, whether now or hereafter acquired, other than Excepted Payments (such property, rights and privileges as are conveyed pursuant to this granting clause, but excluding Excepted Payments and the rights to enforce and collect the sums as set forth herein, being hereinafter referred to as the "INDENTURE ESTATE"): (1) the Undivided Interest, the Owner Trust's interest in any Components; the Owner Trust's interest in any Improvements; the Facility Site Lease and the Ground Interest thereunder; the Facility Lease and all payments of any kind by the Facility Lessee thereunder (including Rent); the Facility Site Sublease and the Sublease Ground Interest thereunder and all payments of any kind by the Facility Lessee thereunder; all tangible property located on or at or attached to the Facility Land that an interest in such tangible property arises under applicable real estate law ("FIXTURES"); the Facility Deed, the Bill of Sale, the Operation Agreement, the Shared Facilities Agreement and all and any interest in any property now or hereafter granted to the Owner Trust pursuant to any provision of the Facility Site Lease, Facility Lease or the Facility Site Sublease; the EME Guarantee and each other Operative Document (other than the Tax Indemnity Agreement, the Reimbursement Agreement and the EME OP Guarantee) to which the Owner Trust is a 2 party (the Undivided Interest, the Owner Trust's interest in any Components, the Owner Trust's interest in any fixtures, Improvements and the Ground Interest are collectively referred to as the "PROPERTY INTEREST" and the documents specifically referred to above in this paragraph (1) (excluding the Tax Indemnity Agreement, the Reimbursement Agreement and the EME OP Guarantee) are collectively referred to as the "INDENTURE ESTATE DOCUMENTS"), including, without limitation, (x) all rights of the Owner Trust or the Facility Lessee (to the extent assigned by the Facility Lessee to the Owner Trust) to receive any payments or other amounts or to exercise any election or option or to make any decision or determination or to give or receive any notice, consent, waiver or approval or to make any demand or to take any other action under or in respect of any such document, to accept surrender or redelivery of the Property Interest or any part thereof, as well as all the rights, powers and remedies on the part of the Owner Trust or the Facility Lessee (to the extent assigned by the Facility Lessee to the Owner Trust), whether acting under any such document or by statute or at law or in equity or otherwise, arising out of any Lease Default or Lease Event of Default and (y) any right to restitution from the Facility Lessee, any sublessee or any other Person in respect of any determination of invalidity of any such document; (2) all rents, royalties, issues, profits, revenues, proceeds, damages, claims and other income from the property described in this Granting Clause, including, without limitation, all payments or proceeds payable to the Owner Trust as the result of the sale of the Property Interest or the lease or other disposition of the Property Interest, and all estate, right, title and interest of every nature whatsoever of the Owner Trust in and to such rents, issues, profits, revenues and other income and every part thereof (the "REVENUES"); (3) all condemnation proceeds with respect to the Property Interest or any part thereof (to the extent of the Owner Trust's interest therein), and all proceeds (to the extent of the Owner Trust's interest therein) of all insurance maintained pursuant to Section 11 of the Facility Lease or otherwise; (4) all other property of every kind and description and interests therein now held or hereafter acquired by the Owner Trust pursuant to the terms of any Operative Document, wherever located; (5) all damages resulting from breach (including, without limitation, breach of warranty or misrepresentation) or termination of any of the Indenture Estate Documents or arising from bankruptcy, insolvency or other similar proceedings involving any party to the Indenture Estate Documents; and (6) all proceeds of the foregoing; BUT EXCLUDING from the Indenture Estate all Excepted Payments, the rights to enforce and collect the same as set forth herein and all right title and interest of the Owner Trust in, to or under the EME OP Guarantee and SUBJECT TO the rights of the Owner Trust under Section 5.4 hereof. 3 Concurrently with the delivery hereof, the Owner Trust is delivering to the Lease Indenture Trustee on behalf of itself and the other Holders from time to time the original executed counterpart of the Facility Lease to which a chattel paper receipt is attached. TO HAVE AND TO HOLD the Indenture Estate and all parts, rights, members and appurtenances thereof, to the use, benefit and on behalf of the Lease Indenture Trustee and the successors and permitted assigns of the Lease Indenture Trustee forever, and in fee simple as to all parts thereof constituting real property. This Indenture is intended to constitute a mortgage under the laws of the State of Illinois and a security agreement as required under the Uniform Commercial Code of the State of New York. This Indenture is given to secure the payment and performance of the Lessor Secured Obligations. PROVIDED HOWEVER, that if the principal, interest and any other amounts due in respect of all the Lessor Notes and all other amounts due the Holders at the time and in the manner required hereby and by the Lessor Notes, the Facility Lease and the Participation Agreement (but not including Excepted Payments) shall have been paid, then this Indenture shall be surrendered and cancelled and upon such surrender and cancellation the rights hereby and thereby granted and assigned shall terminate and cease and the Lease Indenture Trustee shall take such actions as are required to be taken by it pursuant to and as directed under Section 7.1. Subject to the terms and conditions hereof (including, without limitation, Section 5.4), the Owner Trust does hereby irrevocably constitute and appoint the Lease Indenture Trustee the true and lawful attorney of the Owner Trust (which appointment is coupled with an interest) with full power (in the name of the Owner Trust or otherwise) to ask, require, demand and receive any and all moneys and claims for moneys (in each case, including, without limitation, insurance and requisition proceeds to the extent of the Owner Trust's interest therein and guaranteed amounts under the EME Guarantee but excluding in all cases Excepted Payments) due and to become due under or arising out of the Indenture Estate Documents and all other property which now or hereafter constitutes part of the Indenture Estate and, to endorse any checks or other instruments or orders in connection therewith and to file any claims or to take any action or to institute any proceedings (other than in connection with the enforcement or collection of Excepted Payments) which the Lease Indenture Trustee may deem to be necessary or advisable. Pursuant to the Facility Lease, the Facility Lessee is directed to make all payments of Rent required to be paid or deposited with the Owner Trust (other than Excepted Payments) and all other amounts which are required to be paid to or deposited with the Owner Trust pursuant to the Facility Lease (other than Excepted Payments) directly to the Lease Indenture Trustee at such address or addresses as the Lease Indenture Trustee shall specify, for application as provided in this Indenture. Pursuant to the EME Guarantee, EME is directed to make all payments of Guaranteed Obligations (as defined in the EME Guarantee) (other than Excepted Payments) and all other amounts (other than Excepted Payments) which are required to be paid to or deposited with the Owner Trust pursuant to the EME Guarantee directly to the Lease Indenture Trustee at such address or addresses as the Lease Indenture Trustee shall specify, for application as provided in this Indenture. Further, the Owner Trust agrees that promptly on receipt thereof, it will transfer to the Lease Indenture Trustee any and all moneys from time to time received by it constituting part 4 of the Indenture Estate, whether or not expressly referred to in the immediately preceding sentence, for distribution pursuant to this Indenture. It is expressly agreed that anything herein contained to the contrary notwithstanding, the Owner Trust shall remain liable under the Indenture Estate Documents to perform all of the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and the Lease Indenture Trustee and the Holders shall have no obligation or liability under any thereof by reason of or arising out of the assignment hereunder, nor shall the Lease Indenture Trustee or the Holders be required or obligated in any manner, except as herein expressly provided, to perform or fulfill any obligations of the Owner Trust under or pursuant to any of the Indenture Estate Documents to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The Owner Trust agrees that at any time and from time to time, upon the written request of the Lease Indenture Trustee (acting on the instruction of any Holder) or any Holder, the Owner Trust will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents necessary to obtain the full benefits of the assignment hereunder and of the rights and powers herein granted; PROVIDED, HOWEVER, that the Owner Trust shall have no obligation to execute or deliver or to cause to be executed or delivered any further instruments or documents that would give the Lease Indenture Trustee or the Holders greater rights and powers than the rights and powers of the Owner Trust which have been granted herein. The Owner Trust does hereby warrant and represent that it has not assigned, pledged or granted a lien or security interest in, to or under, and hereby covenants that, so long as this Indenture shall remain in effect and the Lien hereof shall not have been released pursuant to Section 7.1 hereof, it will not assign, pledge or grant a lien or security interest in any of its estate, right, title or interest in, to or under, the Indenture Estate to anyone other than the Lease Indenture Trustee for the benefit of the Holders. The Owner Trust hereby further covenants that with respect to its estate, right, title and interest in, to or under the Indenture Estate, it will not, except as provided in this Indenture and except as to Excepted Payments, (i) and except as provided in Section 5.4 or 6.1 hereof, accept any payment from the Facility Lessee or any sublessee or EME or enter into any agreement amending, modifying or supplementing any of the Indenture Estate Documents, execute any waiver or modification of, or consent under, the terms of any of the Indenture Estate Documents or revoke or terminate any of the Indenture Estate Documents, (ii) settle or compromise any claim arising under any of the Indenture Estate Documents, or (iii) submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Indenture Estate Documents to arbitration thereunder. Subject to Sections 5.4 or 6.1 hereof, the Owner Trust hereby ratifies and confirms its obligations under the Indenture Estate Documents and does hereby agree that it will not take or omit to take any action, the taking or omission of which might result in an alteration or impairment of any of the Indenture Estate Documents or of any of the rights created by any thereof or the assignment (subject to the previous paragraph) hereunder. 5 The Lease Indenture Trustee, for itself and its successors and permitted assigns, hereby agrees that it shall hold the Indenture Estate, in trust for the benefit and security of (i) the Holders of the Lessor Notes from time to time outstanding, without any priority of any one Lessor Note over any other except as herein otherwise expressly provided and (ii) the Lease Indenture Trustee, and for the uses and purposes and subject to the terms and provisions set forth in this Indenture. Accordingly, the Owner Trust, for itself and its successors and permitted assigns, agrees that all Lessor Notes are to be issued and delivered and that all property subject or to become subject hereto is to be held subject to the further covenants, conditions, uses and trusts hereinafter set forth, and the Owner Trust, for itself and its successors and permitted assigns, hereby covenants and agrees with the Lease Indenture Trustee, for the benefit and security of the Holders from time to time of the Lessor Notes from time to time outstanding and to protect the security of this Indenture, and the Lease Indenture Trustee agrees to accept the trusts and duties hereinafter set forth, as follows: SECTION 1. DEFINITIONS Unless otherwise defined herein (including Annex A hereto), each capitalized term used in this Indenture and not otherwise defined herein shall have the respective meaning set forth in Appendix A to the Participation Agreement (T1) dated as of August 17, 2000 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof, the "PARTICIPATION AGREEMENT") among the Facility Lessee, EME, the Owner Trustee, the Owner Trust, the Owner Participant, the Lease Indenture Trustee, and United States Trust Company of New York, as Pass Through Trustees, unless the context hereof shall otherwise require. The general provisions of Appendix A to the Participation Agreement shall apply to terms used in this Indenture and specifically defined herein. SECTION 2. THE LESSOR NOTES SECTION 2.1 LIMITATION ON LESSOR NOTES. No Lessor Notes may be issued under the provisions of, or become secured by, this Indenture except in accordance with the provisions of this Section 2. The aggregate principal amount of the Lessor Notes which may be authenticated and delivered and outstanding at any one time under this Indenture shall be limited to the aggregate principal amount of the Initial Lessor Notes issued on the Closing Date to the Pass Through Trustees plus the aggregate principal amount of Additional Lessor Notes issued pursuant to Section 2.12 hereof. SECTION 2.2 INITIAL LESSOR NOTES. There are hereby created and established hereunder two series of Lessor Notes consisting of (a) Series A Lessor Notes in the aggregate principal amount of $100,900,000 with a final maturity date of July 2, 2009, in substantially the form set forth in Exhibit C to this Indenture (the "SERIES A LESSOR NOTES"), and (b) Series B Lessor Notes in the aggregate principal amount of $220,960,000 with a final maturity date of July 2, 2014, in substantially the form set forth in Exhibit D to this Indenture (the "SERIES B LESSOR NOTES" and, together with the Series A Lessor Notes, the "INITIAL LESSOR NOTES" or, individually, an "INITIAL LESSOR NOTE"). 6 SECTION 2.3 EXECUTION AND AUTHENTICATION OF LESSOR NOTES. Each Lessor Note issued hereunder shall be executed and delivered on behalf of the Owner Trust by one of its authorized signatories, be in fully registered form, be dated the date of original issuance of such Lessor Note and be in denominations of not less than $1,000. Any Lessor Note may be signed by a Person who, at the actual date of the execution of such Lessor Note, is an authorized signatory of the Owner Trust although at the nominal date of such Lessor Note such Person may not have been an authorized signatory of the Owner Trust. No Lessor Note shall be secured by or be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears thereon a certificate of authentication in the form contained in Exhibit E (or in the appropriate form provided for in any supplement hereto executed pursuant to Section 2.13 hereof), executed by the Lease Indenture Trustee by the manual signature of one of its authorized officers, and such certificate upon any Lessor Note shall be conclusive evidence that such Lessor Note has been duly authenticated and delivered hereunder. The Lease Indenture Trustee shall authenticate and deliver the Series A Lessor Note and the Series B Lessor Note for original issue in the respective aggregate principal amount specified in Section 2.2 hereof, upon a written order of the Owner Trust signed by the Owner Trustee. The Lease Indenture Trustee shall authenticate and deliver Subsequent Lessor Notes, upon a written order of the Owner Trust executed by the Owner Trustee and satisfaction of the conditions specified in Section 2.13 hereof. Such order shall specify the principal amount of the Subsequent Lessor Notes to be authenticated and the date on which the original issue of Subsequent Lessor Notes is to be authenticated. SECTION 2.4 ISSUANCE AND TERMS OF THE INITIAL LESSOR NOTES. (a) There shall be issued to the respective Pass Through Trustee the Series A Lessor Note and the Series B Lessor Note, as the case may be, dated the Closing Date. The aggregate amount of the Initial Lessor Notes shall be in the principal amount equal to the aggregate principal amount of the Lessor Notes purchased by the Pass Through Trustees from the Owner Trust pursuant to Section 2.1(c) of the Participation Agreement. (b) The principal amount of the Series A Lessor Note shall be due and payable in installments having a final payment date of July 2, 2009, and the principal amount of the Series B Lessor Note shall be due and payable in a series of installments having a final payment date of July 2, 2014. The principal of each series of Initial Lessor Notes shall be due and payable in installments on the respective dates (each such date a "PAYMENT DATE") and in the respective amounts set forth in Annex A attached to the respective Initial Lessor Note on the date of issuance and authentication thereof. Annex A to such Initial Lessor Note to the contrary notwithstanding, the last installment of principal of such Initial Lessor Note shall be equal to the then unpaid balance of the principal of such Initial Lessor Note. Each Initial Lessor Note shall bear interest on the principal from time to time outstanding, from and including the date of issuance thereof (computed on the basis of a 360-day year of twelve 30-day months) until paid in full at the rate set forth in such Initial Lessor Note. Each Initial Lessor Note shall accrue additional interest under the circumstances and at the rate per annum set forth in the second paragraph of each Initial Lessor Note. Interest on each Initial Lessor Note shall be due and payable in arrears semi-annually commencing on January 2, 2001, and on each January 2 and July 2 thereafter (each such date, an "INTEREST PAYMENT DATE") until paid in full. If any day on which principal, premium (including, without limitation, Make-Whole Premium), if any, or interest on the Initial Lessor Notes is payable is not a Business Day, payment thereof shall be made on the succeeding Business Day with the same effect as if made on the date on which such payment was due. 7 (c) Interest (computed on the basis of a 360-day year of twelve 30-day months) on any overdue principal and, to the extent permitted by Applicable Law, on overdue interest or Make-Whole Premium shall be paid on demand at the Overdue Rate. SECTION 2.5 PAYMENTS FROM INDENTURE ESTATE ONLY; NO PERSONAL LIABILITY OF THE OWNER TRUST, THE OWNER PARTICIPANT OR THE LEASE INDENTURE TRUSTEE. Except as otherwise specifically provided in this Indenture and in the Participation Agreement, all payments to be made by the Lease Indenture Trustee in respect of the Lessor Notes or under this Indenture shall be made only from the Indenture Estate, and the Owner Trust shall have no obligation for the payment thereof except to the extent that there shall be sufficient income or proceeds from the Indenture Estate to make such payments in accordance with the terms of Section 3 hereof, and the Owner Participant shall not have any obligation for payments in respect of the Lessor Notes or under this Indenture. The Lease Indenture Trustee and each Holder, by its acceptance thereof, agrees that it will look solely to the income and proceeds from the Indenture Estate to the extent available for distribution to the Lease Indenture Trustee or such Holder, as the case may be, as herein provided and that, except as expressly provided in this Indenture or the Participation Agreement, none of the Owner Participant, the Owner Trust, the Trust Company, or the Lease Indenture Trustee shall be personally liable to such Holder or the Lease Indenture Trustee for any amounts payable hereunder, under such Lessor Note or for any performance to be rendered under any Indenture Estate Document or for any liability under any Indenture Estate Document. Without prejudice to the foregoing, the Owner Trust will duly and punctually pay or cause to be paid the principal of, premium (including, without limitation, Make-Whole Premium), if any, and interest on all Lessor Notes according to their terms and the terms of this Indenture. Nothing contained in this Section 2.5 limiting the liability of the Owner Trust shall derogate from the right of the Lease Indenture Trustee and the Holders to proceed against the Indenture Estate to secure and enforce all payments and obligations due hereunder and under the Indenture Estate Documents and the Lessor Notes. In furtherance of the foregoing, to the fullest extent permitted by law, each Holder (and each assignee of such Person), by its acceptance thereof, agrees, as a condition to its being secured under this Indenture, that neither it nor the Lease Indenture Trustee will exercise any statutory right to negate the agreements set forth in this Section 2.5. Nothing herein contained shall be interpreted as affecting the representations, warranties or agreements of the Owner Trust expressly made in its individual capacity set forth in the Participation Agreement or the Trust Agreement. SECTION 2.6 METHOD OF PAYMENT. (a) The Owner Trust shall maintain an office or agency where Lessor Notes may be presented for payment (the "PAYING AGENT"). The Owner Trust may have one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Owner Trust initially appoints the Lease Indenture Trustee as Paying Agent in connection with the Lessor Notes. (b) The Owner Trust shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Owner Trust shall require each Paying Agent (other than the Lease Indenture Trustee) to agree in writing that the Paying Agent shall hold in 8 trust for the benefit of Holders or the Lease Indenture Trustee all money held by the Paying Agent for the payment of principal of or interest on the Lessor Notes and shall notify the Lease Indenture Trustee of any default by the Owner Trust in making any such payment. (c) The principal of, premium (including, without limitation, Make-Whole Premium), if any, and interest on each Lessor Note shall be paid by the Lease Indenture Trustee in Dollars from amounts available in the Indenture Estate on the dates provided in the Lessor Notes by mailing a check for such amount, payable in New York Clearing House funds, to each Holder at the last address of each such Holder appearing on the Note Register, or by whichever of the following methods shall be specified by notice from a Holder to the Lease Indenture Trustee: (a) by crediting the amount to be distributed to such Holder to an account maintained by such Holder with the Lease Indenture Trustee, (b) by making such payment to such Holder in immediately available funds at the Lease Indenture Trustee Office, or (c) in the case of the Initial Lessor Notes and in the case of other Lessor Notes, if such Holder of such other Lessor Notes is the Pass Through Trustee, or a bank or other institutional investor, by transferring such amount in immediately available funds for the account of such Holder to the banking institution having bank wire transfer facilities as shall be specified by such Holder, such transfer to be subject to telephonic confirmation of payment. Any payment made under any of the foregoing methods shall be made without any presentment or surrender of such Lessor Note, unless otherwise specified by the terms of the Lessor Note, except that, in the case of the final payment in respect of any Lessor Note, such Lessor Note shall be surrendered to the Lease Indenture Trustee. All payments in respect of the Lessor Notes shall be made (i) as soon as practicable prior to the close of business on the date the amounts to be distributed by the Lease Indenture Trustee are actually received by the Lease Indenture Trustee if such amounts are received by 2:00 p.m., New York City time, on a Business Day, or (ii) on the next succeeding Business Day if received after such time or on any day other than a Business Day. One or more of the foregoing methods of payment may be specified in a Lessor Note. Prior to due presentment for registration of transfer of any Lessor Note, the Owner Trust and the Lease Indenture Trustee may deem and treat the Person in whose name any Lessor Note is registered on the Note Register as the absolute owner and holder of such Lessor Note for the purpose of receiving payment of all amounts payable with respect to such Lessor Note and for all other purposes, and neither the Owner Trust nor the Lease Indenture Trustee shall be affected by any notice to the contrary. All payments made on any Lessor Note in accordance with the provisions of this Section 2.6 shall be valid and effective to satisfy and discharge the liability on such Lessor Note to the extent of the sums so paid and neither the Lease Indenture Trustee nor the Owner Trust shall have any liability in respect of such payment. SECTION 2.7 APPLICATION OF PAYMENTS. Each payment on any outstanding Lessor Note shall be applied, FIRST, to the payment of accrued interest (including interest on overdue principal and, to the extent permitted by Applicable Law, overdue interest) on such Lessor Note to the date of such payment, SECOND, to the payment of the principal amount of, and premium (including, without limitation, Make-Whole Premium), if any, on such Lessor Note then due (including any overdue installments of principal) thereunder and THIRD, to the extent permitted by Section 2.11 hereof, the balance, if any, remaining thereafter, to the payment of the principal amount of, and premium (including, without limitation, Make-Whole Premium), if any, on such Lessor Note. The order of application of payments prescribed by this Section 2.7 shall not be deemed to supersede any provision of Section 3 hereof regarding application of funds. 9 SECTION 2.8 REGISTRATION, TRANSFER AND EXCHANGE OF LESSOR NOTES. The Owner Trust shall maintain an office or agency where Lessor Notes may be presented for registration of transfer or for exchange (the "REGISTRAR"). The Registrar shall keep a register of the Lessor Notes and of their transfer and exchange. The Owner Trust may have one or more co-registrars. The Owner Trust initially appoints the Lease Indenture Trustee as Registrar in connection with the Lessor Notes. The Lease Indenture Trustee shall maintain at the Lease Indenture Trustee Office a register in which it will provide for the registration, registration of transfer and exchange of Lessor Notes (such register being referred to herein as the "NOTE REGISTER"). If any Lessor Note is surrendered at said office for registration of transfer or exchange (accompanied by a written instrument of transfer duly executed by or on behalf of the holder thereof, together with the amount of any applicable transfer taxes), the Owner Trust will execute and the Lease Indenture Trustee will authenticate and deliver, in the name of the designated transferee or transferees, if any, one or more new Lessor Notes (subject to the limitations specified in Sections 2.3 and 2.15 hereof) in any denomination or denominations not prohibited by this Indenture, as requested by the Person surrendering the Lessor Note, dated the same date as the Lessor Note so surrendered and of like tenor and aggregate unpaid principal amount. Any Lessor Note or Lessor Notes issued in a registration of transfer or exchange shall be entitled to the same security and benefits to which the Lessor Note or Lessor Notes so transferred or exchanged were entitled, including, without limitation, rights as to interest accrued but unpaid and to accrue so that there will not be any loss or gain of interest on the Lessor Note or Lessor Notes surrendered. Every Lessor Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Lease Indenture Trustee duly executed by the Holder thereof or his attorney duly authorized in writing, and the Lease Indenture Trustee may require opinion of counsel as to compliance of any such transfer with the Securities Act. The Lease Indenture Trustee shall make a notation on each new Lessor Note of the amount of all payments of principal previously made on the old Lessor Note or Lessor Notes with respect to which such new Lessor Note is issued and the date on which such new Lessor Note is issued and the date to which interest on such old Lessor Note or Lessor Notes shall have been paid. The Lease Indenture Trustee shall not be required to register the transfer or exchange of any Lessor Note during the 15 days preceding the due date of any payment on such Lessor Note. SECTION 2.9 MUTILATED, DESTROYED, LOST OR STOLEN LESSOR NOTES. Upon receipt by the Owner Trust and the Lease Indenture Trustee of evidence satisfactory to each of them of the loss, theft, destruction or mutilation of any Lessor Note and, in case of loss, theft or destruction, of indemnity satisfactory to each of them, and upon reimbursement to the Owner Trust and the Lease Indenture Trustee of all reasonable expenses incidental thereto and payment or reimbursement for any transfer taxes, and upon surrender and cancellation of such Lessor Note, if mutilated, the Owner Trust will execute and the Lease Indenture Trustee will authenticate and deliver in lieu of such Lessor Note, a new Lessor Note, dated the same date as such Lessor Note and of like tenor and principal amount. Any indemnity provided by the holder on a Lessor Note pursuant to this Section 2.9 must be sufficient in the judgment of the Owner Trust and the Lease Indenture Trustee to protect the Owner Trust, the Lease Indenture Trustee, the Paying Agent, the Registrar and any co-registrar or co-paying agent from any loss which any of them may suffer if a Lessor Note is replaced. SECTION 2.10 OPTIONAL PURCHASE UPON LEASE EVENT OF DEFAULT. At any time (i) while a Lease Event of Default shall have occurred and shall be continuing, (ii) after the Lessor Notes 10 shall have become due and payable as provided in Section 4.4 hereof or (iii) the Lease Indenture Trustee shall have commenced the exercise of material remedies, the Owner Trust, the Owner Participant or an OP Guarantor may, but shall not be obligated to, at any time thereafter, elect to purchase all, but not less than all, of the Lessor Notes then outstanding, or all of the Lessor Notes then outstanding not held by the Facility Lessee or an Affiliate of the Facility Lessee, in accordance with the provisions of this Section 2.10. To exercise such election the Owner Trust, the Owner Participant or an OP Guarantor, as the case may be, shall give written notice thereof to the Lease Indenture Trustee and each Holder. Such notice shall designate a date which is not more than five (5) (nor less than three (3)) Business Days thereafter as the purchase payment date. Each Holder agrees that such Holder will, upon payment to such Holder in the manner provided for in Section 2.6 from the Owner Trust, the Owner Participant or an OP Guarantor, as the case may be, of an amount equal to the aggregate unpaid principal amount of all Lessor Notes then held by such Holder, together with accrued and unpaid interest thereon to the date of payment thereof and all other sums then due and payable to such Holder hereunder and under the other Operative Documents (but excluding any Make-Whole Premium), forthwith sell, assign, transfer and convey to the Owner Trust, the Owner Participant or an OP Guarantor, as the case may be (without recourse, representation or warranty of any kind except for its own acts), all of the estate, right, title and interest of such Holder in and to the Indenture Estate, this Indenture, all Lessor Notes held by such Holder, the Participation Agreement and the other Operative Documents (excluding all estate, right, title and interest of such Holder under any of the foregoing to the extent such estate, right, title or interest is, with respect to an obligation not then due and payable or past due, with respect to any action, inaction or state of affairs occurring prior to such sale). The Owner Trust, the Owner Participant or an OP Guarantor, as the case may be, shall assume all of such Holder's obligations under the Participation Agreement and this Indenture arising subsequent to such sale (except to the extent such obligations relate solely to periods prior to such sale). If the Owner Trust, the Owner Participant or an OP Guarantor, as the case may be, shall so request, such Holder will comply with the provisions of Section 2.8 hereof to enable new Lessor Notes to be issued to the Owner Trust, the Owner Participant or such OP Guarantor, as the case may be, in such authorized denominations (as provided in said Section 2.8) as the Owner Trust, the Owner Participant or such OP Guarantor, as the case may be, shall request. All charges and expenses required pursuant to Section 2.14 hereof in connection with the issuance of any such new Lessor Note pursuant to this Section 2.10 shall be borne by the Owner Trust, the Owner Participant or such OP Guarantor, as the case may be. Any election to purchase the Lessor Notes under this Section 2.10 shall be irrevocable. For the avoidance of doubt, it is expressly understood and agreed that no Holder shall be obligated under this Section 2.10 to sell the Lessor Notes held by it unless such Holder shall have received on the specified payment date the full amount owing to such Holder under this Section 2.10. SECTION 2.11 MANDATORY PREPAYMENT. (a) Except as otherwise provided in Section 2.12(a), the Lessor Notes shall be prepaid by the Owner Trust in whole, together with accrued interest thereon to the date of prepayment, Make-Whole Premium (but only if, pursuant to Section 2.11(c), the payment of Make-Whole Premium is required to be made in connection with such prepayment), and all other amounts then payable hereunder, under the Lessor Notes and under the other Operative Documents to the Holders in immediately available funds in Dollars at the place and by the time and otherwise in the manner provided in Section 2.6, on the earliest of: 11 (i) if the Facility Lease is terminated pursuant to Section 13.1 or 13.2 thereof, on the applicable Termination Date; or (ii) if the Facility Lease is terminated pursuant to Section 14.1 thereof, on the applicable Obsolescence Termination Date; or (iii) if the Facility Lease is terminated pursuant to Section 10.2(a) thereof, on the applicable Termination Date provided in Section 10.2(a) of the Facility Lease; or (iv) if the obligations represented by the Lessor Notes shall have been refinanced in whole but not in part pursuant to Section 14.2 of the Participation Agreement, on the date of such refinancing. (b) Unless the Facility Lease or the Participation Agreement requires the Facility Lessee to give notice to the Lease Indenture Trustee of the event giving rise to a mandatory prepayment, the Owner Trust shall give a notice of prepayment (subject to revocation as provided below) under this Section 2.11 to the Lease Indenture Trustee (and the Lease Indenture Trustee shall thereupon promptly deliver such notice to each Holder) in the manner specified in Section 7.6 promptly after the Owner Trust shall have received written notice from the Facility Lessee of any event giving rise to a mandatory prepayment pursuant to Section 2.11(a) hereof. Any such notice of prepayment shall specify (i) that it is a notice of prepayment given pursuant to this Section 2.11, (ii) the date fixed for such prepayment, (iii) the clause of Section 2.11(a) hereof under which such prepayment is to be made, and (iv) the amount of and interest on each Lessor Note to be prepaid pursuant to Section 2.11(a) and the amount of the Make-Whole Premiums, if any. Any such notice given under this Section 2.11 by the Owner Trust may be withdrawn to the same extent as the corresponding notice under the Facility Lease or the Participation Agreement, as the case may be. (c) Make-Whole Premium shall be payable in connection with any mandatory prepayment of the Lessor Notes pursuant to this Section 2.11 if (i) such mandatory prepayment is required as a result of a termination of the Facility Lease pursuant to Section 14.1(a)(ii), (b) or (c) thereof or (ii) the obligations evidenced by the Lessor Notes shall have been refinanced pursuant to Section 14.2 of the Participation Agreement. Make-Whole Premium shall not be payable in connection with any mandatory prepayment of the Lessor Notes pursuant to this Section 2.11 if such mandatory prepayment is required as a result of a termination of the Facility Lease pursuant to Section 10.2(a), 13.1, 13.2 or 14.1(a)(i) thereof. (d) Except as otherwise expressly provided in this Indenture, the Lessor Notes may not be prepaid in whole or in part. SECTION 2.12 ASSUMPTION OF LESSOR NOTES. (a) Upon the occurrence of (x) a Midwest Assumption Event, the Facility Lessee may notify, or (y) an Owner Participant Assumption Event, the Owner Participant may notify, in either case, the Lease Indenture Trustee of its intention to assume the Lessor Notes pursuant to and in accordance with this Section 2.12. Upon receipt by the Lease Indenture Trustee of such notice, notwithstanding anything herein or in any other Operative Document to the contrary, neither the Lease Indenture Trustee nor any Holder shall be entitled to exercise any remedy 12 under Section 4.4 or 4.5 hereof or under Section 17.1 of the Facility Lease relating to the event giving rise to such assumption until the earlier to occur of (x) the date on which, pursuant to this Section 2.12, all of the Lessor Notes have been assumed by an Eligible Successor and (y) the date falling 30 days after the Lease Indenture Trustee's receipt of such notice; PROVIDED, that, if an Owner Participant Assumption Event of the type specified in clause (a) of the definition thereof shall have occurred and prior to the end of such 30-day period the Owner Participant shall have cured, pursuant to Section 4.3 hereof, the Lease Event of Default giving rise to such Owner Participant Assumption Event, then, solely for purposes of this Section 2.12, such Owner Participant Assumption Event shall be deemed to be continuing for a period not to exceed 90 days following the effective date of such cure so long as during such 90-day period no other Lease Indenture Event of Default shall occur and remain uncured; PROVIDED, FURTHER, that, notwithstanding anything to the contrary contained herein, such 90-day period and the 60-day period referred to clauses (vi) and (vii) below shall run concurrently and not consecutively. In the event of the occurrence of an Assumption Event and upon receipt by the Lease Indenture Trustee of the documents listed below, all the obligations and liabilities of the Owner Trust under this Indenture and each Lessor Note shall be assumed by an Eligible Successor and, in the case of a Midwest Assumption Event, the Owner Trust shall be released and discharged without further act or formality whatsoever from all obligations and liabilities under this Indenture and each Lessor Note: (i) a duly executed Assumption Agreement substantially in the form of Exhibit F to this Indenture; (ii) an opinion of counsel to the Eligible Successor (with customary qualifications and limitations), addressed to the Lease Indenture Trustee and the Holders of the Lessor Notes, to the effect that (A) the Eligible Successor is duly organized or formed, validly existing and in good standing in the jurisdiction of its organization or formation and is qualified to do business in each jurisdiction where the nature of its business requires qualification, (B) the Assumption Agreement and each other instrument, document or agreement executed and delivered by the Eligible Successor in connection with the assumption contemplated by the Assumption Agreement (collectively, the "ASSUMPTION DOCUMENTS") have been duly authorized, executed and delivered by the Eligible Successor, (C) each Assumption Document and the assumption contemplated thereby do not contravene (1) the Organic Documents of the Eligible Successor, (2) any Contractual Obligation of the Eligible Successor or (3) Requirements of Law, (D) no Governmental Approval is necessary or required in connection with any Assumption Document or the assumption contemplated thereby (or, if any such Governmental Approval is necessary or required, that the same has been duly obtained and is final and in full force and effect and any period for the filing of notice of rehearing or application for judicial review of the issuance of such Governmental Approval has expired without any such notice or application having been made), (E) each Assumption Document is a legal, valid and binding obligation of the Eligible Successor, enforceable in accordance with its terms (except as limited by bankruptcy, insolvency or similar laws of general application affecting the enforcement of creditors' rights generally and equitable principles), (F) the Eligible Successor is not (1) an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended or (2) subject to regulation under PUIICA except 13 pursuant to Section 9(a)(2) or Section 32 thereof and (G) to the knowledge of such counsel there is no pending or threatened, action, suit, investigation or proceeding against the Eligible Successor that questions the validity of any Assumption Document or the assumption contemplated thereby or which, if adversely determined, would have a material adverse effect on the ability of the Eligible Successor to perform its obligations under any Assumption Document; (iii) copies of all Governmental Approvals (if any) referred to in the opinion of counsel referred to in clause (ii) above; (iv) a supplement to this Indenture which shall, among other things, (A) in the case of a Midwest Assumption Event, confirm the release of the Owner Trust thereby effected and (B) contain provisions appropriately amending this Indenture: (1) to reflect the fact that the obligations of the Owner Trust under this Indenture have been assumed directly by the Eligible Successor; (2) in the case of an Owner Participant Assumption Event, (x) to include covenants of the Eligible Successor substantially the same as the covenants of the Facility Lessee under the Facility Lease, covenants of the Eligible Successor substantially similar to the covenants of the Facility Lessee and EME under the Participation Agreement to the extent that such covenants relate to the use, operation or maintenance of the Facility, new Indenture Events of Defaults substantially the same as Sections 16(h) and (k) of the Facility Lease relating to the Eligible Successor and a new Indenture Event of Default based upon default by the Eligible Successor in the performance by the Eligible Successor of its covenants (other than payment obligations) set forth in the rated, long-term, unsecured indebtedness of the Eligible Successor that has resulted in, or, after giving effect to applicable grace periods, would permit, the acceleration of the maturity of such indebtedness, (y) to delete Section 4.2(a) hereof and all related references herein to a Lease Event of Default and (z) to reflect a modification of Section 5.04 so as to permit the Eligible Successor (to the exclusion of the Lease Indenture Trustee) to exercise all rights of the Owner Trust under the Facility Lease and (3) as otherwise necessary to reflect the foregoing provisions and preserve, protect and maintain the Lien on the Indenture Estate; (v) a certificate of an Authorized Officer of the Eligible Successor stating that (A) the conditions precedent required by this Indenture for such assumption have been complied with, (B) there is no pending or, to the knowledge of such Eligible Successor, threatened, action, suit, investigation or proceeding against the Eligible Successor that questions the validity of any Assumption Document or the assumption contemplated thereby or which, if adversely determined, would have a material adverse effect on the ability of the Eligible Successor to perform its obligations under any Assumption Document and (C) after giving effect to the assumption by the Eligible Successor, (1) no Lease Indenture Default or Lease Indenture Event of Default has occurred and is continuing (taking into account any cure effected pursuant to Section 4.3 hereof), (2) each representation and warranty of the Eligible Successor or any of its Affiliates set forth in this Indenture and each other Operative Document to which it or any of its Affiliates is a party is true and correct in all material respects and (3) the Eligible Successor is not insolvent within the meaning of any applicable preferential transfer, fraudulent conveyance or bankruptcy law; 14 (vi) ratings letters from each of Moody's and S&P to the effect that, after giving effect to such assumption, the rating of the long-term, unsecured senior Indebtedness of the Eligible Successor shall be at least Baa2 by Moody's and BBB by S&P; PROVIDED that if, immediately prior to the assumption of such Lessor Notes, the long-term, unsecured senior Indebtedness of the Eligible Successor is not rated by Moody's and S&P or such Indebtedness of the Eligible Successor is rated Baa2 or better by Moody's and BBB or better by S&P then, subject to clause (vii)(A)(3) of this Section 2.12(a), the Eligible Successor shall not be required to deliver such ratings letters as a condition precedent to consummating such assumption; and (vii) in the case of an Owner Participant Assumption Event where immediately prior to the assumption of such Lessor Notes either (A) the long-term, unsecured senior Indebtedness of the Eligible Successor is not rated by Moody's and S&P or (B) such Indebtedness of the Eligible Successor is rated by Baa2 or better by Moody's and BBB or better by S&P, but such Eligible Successor has not delivered ratings letters that reflect the assumption of the Lessor Notes by such Eligible Successor, a supplement to this Indenture which shall effect the following modifications to the terms of each Lessor Note: (I) for the period commencing on and including the effective date of such assumption and ending on but not including the earlier to occur of (x) the date falling 60 days after such effective date and (y) the date on which initial ratings of the long-term, unsecured senior Indebtedness of the Eligible Successor are issued by each of Moody's and S&P or the date on which such Eligible Successor has delivered ratings letters that reflect the assumption of the Lessor Notes by such Eligible Successor, the interest rate payable on such Lessor Notes shall increase (in addition to the interest rate thereon in effect immediately prior to the effective date of such assumption) and additional interest reflecting such increase shall accrue with respect to such Lessor Notes at the rate of 0.50% per annum and (II) Section 4.2 hereof shall be amended to provide that it shall be a "Lease Indenture Event of Default" hereunder if (w) the initial rating on the long-term, unsecured senior Indebtedness of the Eligible Successor giving effect to such assumption from Moody's shall be lower than Baa2, (x) such initial rating from S&P shall be lower than BBB, (y) such initial ratings shall not have been issued by either of Moody's or S&P on or before the date falling 60 days after the effective date of such assumption or (z) the Eligible Successor has failed to deliver, on of before the date falling 60 days after the effective date of such assumption, ratings letters from each of S&P and Moody's to the effect that, after giving effect to such assumption of the Lessor Notes by such Eligible Successor, the rating on the long-term, unsecured senior Indebtedness of such Eligible Successor is at least equal to Baa2 by Moody's and BBB by S&P. (b) The credit rating requirements set out in clause (vi) of Section 2.12(a) hereof shall be deemed to have been satisfied with respect to an Eligible Successor if (i) the obligations of such Eligible Successor hereunder and in respect of the Lessor Notes shall have been guaranteed pursuant to an instrument in writing reasonably acceptable to each Holder by a Person that would qualify as an "Eligible Successor" hereunder whose long-term unsecured Indebtedness is rated Baa2 or better by Moody's and BBB or better by S&P at the time required under said clause (vi); and (ii) in addition to the documents required to be delivered under Section 2.12(a) hereof, the Lease Indenture Trustee shall have received on the effective date of such assumption each of the 15 documents specified in clauses (ii), (iii) and (v) of Section 2.12(a) hereof as to such Person with respect to such guarantee. (c) Notice of any assumption of Lessor Notes shall be given by the Lease Indenture Trustee to the Holders as promptly as practicable after the Lease Indenture Trustee has received written notice thereof in accordance with the first sentence of Section 2.12(a) hereof. SECTION 2.13 SUBSEQUENT LESSOR NOTES. (a) The Owner Trust may, subject to the conditions hereafter provided in this Section 2.13, issue additional Lessor Notes ("SUBSEQUENT LESSOR NOTES") under and secured by this Indenture, at any time or from time to time for the purpose of (i) providing funds for a Supplemental Financing pursuant to Section 14.1 of the Participation Agreement (Subsequent Lessor Notes issued for such purpose, the "ADDITIONAL LESSOR NOTES") or (ii) refinancing the Lessor Notes or other Subsequent Lessor Notes pursuant to Section 14.2 of the Participation Agreement (Subsequent Lessor Notes issued for such purpose, the "NEW LESSOR NOTES"). (b) Before any Subsequent Lessor Notes shall be issued under the provisions of this Section 2.13, the Facility Lessee shall have delivered to the Owner Trust, not less than 5 days nor more than 60 days (or in the case of a Supplemental Financing under Section 14.1 of the Participation Agreement, 90 days) prior to the proposed date of issuance of such Subsequent Lessor Notes, a request and authorization to issue such Subsequent Lessor Notes, which request and authorization shall (i) contain the proposed date of issuance of such Lessor Notes and the terms thereof and (ii) include a certification by the Facility Lessee that the terms of such Lessor Notes are in compliance with this Section 2.13 and Section 14.1 or 14.2 of the Participation Agreement, as the case may be. Such Subsequent Lessor Notes shall have a designation so as to distinguish such Subsequent Lessor Notes from the Lessor Notes theretofore issued, be dated their respective dates of issuance, bear interest at such rates (which may be either fixed or floating) as shall be agreed between the Facility Lessee and the Owner Trust, and shall be stated to be payable by their terms not later than the latest date permitted therefor under Section 14.1 or 14.2 of the Participation Agreement. The Subsequent Lessor Notes shall not be subject to (i) prepayment except as provided in Section 2.11 hereof, (ii) purchase by the Facility Lessee, the Owner Trust, the Owner Participant, an OP Guarantor or any Affiliate of any of them other than as provided in Section 2.10 hereof or (iii) assumption by any Person except as provided in Section 2.12 hereof. (c) Except as to any differences in the maturity dates of the Subsequent Lessor Notes or the rate or rates of interest thereon, such Subsequent Lessor Notes shall be on a parity with, and shall be entitled to the same benefits and security of this Indenture, as the other Lessor Notes issued pursuant to the terms hereof. (d) The terms, provisions and designations of such Subsequent Lessor Notes shall be set forth in a supplement to this Indenture executed by the Owner Trust and the Lease Indenture Trustee. Such Subsequent Lessor Notes shall be executed, delivered and registered as provided in this Indenture, but before such Subsequent Lessor Notes shall be delivered and registered there shall be filed with the Lease Indenture Trustee, in addition to other documents and certificates required by this Section 2.13, the following, all of which shall be dated as of the date of the supplement to this Indenture: 16 (i) a copy of such supplement (which shall include the form of such series of Subsequent Lessor Notes); (ii) in the event that, in accordance with Section 7.1 hereof, a replacement Lease Indenture Trustee has been appointed in connection with the issuance of such series of Lessor Notes, evidence of the acceptance of such replacement Lease Indenture Trustee of such appointment; (iii) unless the Subsequent Lessor Notes will, upon issuance, be the only Lessor Notes outstanding, UCC lien searches, supplemental title reports and such other evidence that may be reasonably required by the Lease Indenture Trustee demonstrating that no impairment exists to the first-priority perfected lien and security interest in the Indenture Estate; (iv) an officer's certificate of an Authorized Officer of the Facility Lessee stating that (A) no Lease Default has occurred and is continuing, (B) the conditions in respect of the issuance of such Subsequent Lessor Notes contained in this Section 2.13 have been satisfied, (C) Basic Lease Rent and the Termination Value are calculated to be sufficient to pay all the outstanding Lessor Notes, after taking into account the issuance of such Subsequent Lessor Notes and any related prepayment of Lessor Notes theretofore outstanding and (D) all conditions to the Supplemental Financing or refinancing contained in Section 14.1 or 14.2 of the Participation Agreement or in any other provision of the Operative Documents have been satisfied; (v) an officer's certificate of the Owner Trust stating that no Lease Indenture Default has occurred and is continuing; (vi) an opinion of counsel to the Owner Trust that the Subsequent Lessor Notes and the supplement to this Indenture have been duly authorized, executed and delivered by the Owner Trust and constitute the legal, valid and binding obligations of the Owner Trust enforceable in accordance with their terms; and (vii) an opinion of counsel, which may be counsel to the Facility Lessee, that all conditions of this Section 2.13 to the issuance of Subsequent Lessor Notes have been satisfied. SECTION 2.14 PAYMENT OF EXPENSES ON TRANSFER. Upon the issuance of a new Lessor Note or Lessor Notes pursuant to Section 2.8 or 2.9 hereof, the Owner Trust or the Lease Indenture Trustee may require from the party requesting such new Lessor Note or Lessor Notes payment of a sum to reimburse the Owner Trust and the Lease Indenture Trustee for, or to provide funds for, the payment of any tax or other governmental charge in connection therewith or any charges and expenses connected with such tax or governmental charge paid or payable by the Owner Trust or the Lease Indenture Trustee. SECTION 2.15 RESTRICTIONS OF TRANSFER RESULTING FROM FEDERAL SECURITIES LAWS; LEGEND. Each Lessor Note shall be delivered to the initial Holder thereof without registration of such Lessor Note under the Securities Act and without qualification of this Indenture under the Trust Indenture Act of 1939, as amended. Prior to any transfer of any such Lessor Note, in whole or in 17 part, to any Person, the Holder thereof shall furnish to the Facility Lessee, the Lease Indenture Trustee and the Owner Trust an opinion of counsel, which opinion and which counsel shall be reasonably satisfactory to the Lease Indenture Trustee, the Owner Trust and the Facility Lessee, to the effect that such transfer will not violate the registration provisions of the Securities Act or require qualification of this Indenture under the Trust Indenture Act of 1939, as amended, and all Lessor Notes issued hereunder shall be endorsed with a legend which shall read substantially as follows: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH REGISTRATION IS IN EFFECT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT. SECTION 2.16 SECURITY FOR AND PARITY OF LESSOR NOTES. All Lessor Notes issued and outstanding hereunder shall rank on a parity with each other and shall as to each other be secured equally and ratably by this Indenture, without preference, priority or distinction of any thereof over any other by reason of difference in time of issuance or otherwise. SECTION 2.17 ACCEPTANCE OF THE LEASE INDENTURE TRUSTEE. Each Holder, by its acceptance of a Lessor Note, shall be deemed to have consented to the appointment of the Lease Indenture Trustee. SECTION 2.18 TAXES; WITHHOLDING. Without limiting the indemnification obligations of EME under Section 12.1 or 12.2 of the Participation Agreement, if any amount of principal, interest or other amounts payable with respect to this Indenture or any Lessor Note becomes subject to any withholding Tax, the Owner Trust shall withhold such Tax and the Owner Trust shall pay to each Holder such additional amount so that the net amount actually received by such Holder, after reduction for such withholding Tax, shall be on an After-Tax Basis equal to the full amount otherwise due and payable without regard to whether EME pays such Tax under the Participation Agreement; PROVIDED, that, notwithstanding the foregoing, the Owner Trust shall be required to pay such additional amounts only if and to the extent that (i) EME is required to indemnify the Holder for such withholding amount under Section 12.1 or 12.2 of the Participation Agreement and (ii) EME has not paid such amount within three days after notice of nonpayment; PROVIDED, FURTHER, that, the Owner Trust shall, upon such payment to such Holder, be subrogated to the rights of the Holder in respect thereof following payment in full to such Holder of all amounts due and owing to it under Section 12.1 or 12.2 of the Participation Agreement with respect to such withholding Taxes. If any amount of principal, interest or other amount payable with respect to this Indenture or any Lessor Note becomes subject to any withholding Tax and EME is not required to indemnify the Holder for such withholding amount under Section 12.1 or 12.2 of the Participation Agreement, the Owner Trust shall withhold such Tax and the Owner Trust shall pay to such Holder the amount of such principal, interest or other amount net of such withheld Tax. SECTION 3. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM INDENTURE ESTATE SECTION 3.1 DISTRIBUTION PRIOR TO LESSOR LOAN EVENT OF DEFAULT. (a) Except as otherwise provided in Section 3.2 or 3.3 of this Indenture, each installment of Basic Lease Rent and any payment of Supplemental Lease Rent constituting 18 interest on overdue installments of Basic Lease Rent received by the Lease Indenture Trustee shall be distributed by the Lease Indenture Trustee in the following order of priority: FIRST, so much of such amounts as shall be required to pay in full the aggregate principal and accrued interest (as well as any interest on overdue principal and, to the extent permitted by Applicable Law, on overdue interest) then due and payable under the Lessor Notes shall be distributed to the Holders ratably, without priority of any Holder over any other Holder, in the proportion that the amount of such payment then due and payable under each such Lessor Note bears to the aggregate amount of the payments then due and payable under all such Lessor Notes; and SECOND, the balance, if any, of such amounts remaining shall be distributed to the Owner Trust for distribution by it in accordance with the terms of the Trust Agreement; PROVIDED, HOWEVER, that if a Lease Indenture Event of Default shall have occurred and be continuing, then such balance shall not be distributed as provided in this clause "SECOND" but shall be held by the Lease Indenture Trustee as part of the Indenture Estate until the earliest to occur of: (i) receipt by the Lease Indenture Trustee of written notice from the Required Holders stating that all Lease Indenture Events of Default shall have been cured or waived, in which event such balance shall be distributed as provided in this clause "SECOND," (ii) receipt by the Lease Indenture Trustee of written notice from the Required Holders stating that Section 3.3 hereof shall be applicable, in which event such balance shall be distributed in accordance with the provisions of said Section 3.3, or (iii) unless the Lease Indenture Trustee shall have commenced to exercise material remedies pursuant to Section 4.4 hereof, such Lease Indenture Event of Default shall have continued for a period of 180 days (such period to be extended if and for so long as the Lease Indenture Trustee shall be precluded by operation of law or by any judgment or order of any court or regulatory body of competent jurisdiction from exercising remedies under Section 4 hereof), in which event such balance shall be distributed as provided in this clause "SECOND" and so long as the Lease Indenture Trustee shall have failed to commence to exercise material remedies pursuant to Section 4.4 hereof in respect thereof such Lease Indenture Event of Default shall not thereafter be the basis of a retention of any amount under this proviso. SECTION 3.2 PAYMENTS FOLLOWING EVENT OF LOSS OR OTHER EARLY TERMINATION. (a) Except as otherwise provided in Section 3.3 hereof, any payment received by the Lease Indenture Trustee with respect to a prepayment arising pursuant to Section 2.11(a) hereof shall be distributed by the Lease Indenture Trustee in the following order of priority: FIRST, as provided in clause "SECOND" of Section 3.3 hereof; SECOND, as provided in clause "THIRD" of Section 3.3 hereof (but including all Make-Whole Premium (if any) due in respect thereof required to be paid in accordance with Sections 2.11(a) and (c) hereof); THIRD, to reimburse such Holder (to the extent not previously reimbursed) for any reasonable out-of-pocket costs or expenses incurred in connection with such prepayment; and FOURTH, as provided in clause "FIFTH" of Section 3.3 hereof. (b) Except as otherwise provided in Section 3.2(a) or 3.3 hereof, any amounts received directly or indirectly from any Governmental Authority or insurer or other party not as a result of an Event of Loss or pursuant to any provision of Section 10.3, Section 10.5 or Section 19 11 of the Facility Lease shall be applied as provided in the applicable provisions of the Facility Lease and, if and to the extent that any portion of such amounts are required to be held for the account of the Facility Lessee and are not at the time required to be paid to the Facility Lessee pursuant to the applicable provisions of Section 10.3, Section 10.5 or Section 11 of the Facility Lease, shall be promptly paid to (if not initially paid directly to the Lease Indenture Trustee) and, thereafter, held by, the Lease Indenture Trustee as security for the obligations of the Facility Lessee under the Facility Lease, and at such time as the Lease Indenture Trustee shall have received written notice from the Facility Lessee (i) stating that the conditions specified in the Facility Lease for payment of such amounts to the Facility Lessee shall have been satisfied and (ii) setting out the portion of such amounts so held by the Lease Indenture Trustee to be paid to the Facility Lessee, the Lease Indenture Trustee shall pay to the Facility Lessee the amount specified in such notice. SECTION 3.3 PAYMENTS AFTER LEASE INDENTURE EVENT OF DEFAULT. Notwithstanding Section 2.7 hereof, (a) if, during the continuance of a Lease Indenture Event of Default, the Lease Indenture Trustee (acting on the instruction of the Required Holders) has elected to pursue remedies in respect thereof or (b) the entire principal amount of the Lessor Notes shall have become due and payable as provided herein, all payments (other than Excepted Payments) received by the Lease Indenture Trustee in respect of, all amounts (other than Excepted Payments) held or realized by the Lease Indenture Trustee upon, and all other payments or amounts (other than Excepted Payments) held by the Lease Indenture Trustee as part of, the Indenture Estate shall be promptly distributed in the following order of priority: FIRST, to the Lease Indenture Trustee, so much of such payments or amounts as shall be required to reimburse the Lease Indenture Trustee for any amounts payable to it under Section 12.1 of the Participation Agreement and not previously paid to the Lease Indenture Trustee pursuant to Section 3.4 hereof; SECOND, so much of such payments or amounts, as shall be required to pay to the Holders all amounts payable to the Holders pursuant to the Operative Documents, including, without limitation, the indemnification provisions of Sections 12.1 and 12.2 of the Participation Agreement, but excluding principal and interest on the Lessor Notes, shall be distributed to the Holders as their interests may appear, and if the aggregate amount shall be insufficient to pay all such amounts in full, such amount shall be distributed ratably, without priority of any Holder over any other Holder, in the proportion that the aggregate amount due each such Holder under this clause "SECOND" bears to the aggregate amount due to all such Holders under this clause "SECOND"; THIRD, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid principal amount of all Lessor Notes and accrued but unpaid interest thereon to the date of distribution (as well as any interest on overdue principal and, to the extent permitted by Requirements of Law, overdue interest at the Overdue Rate), shall be distributed to the Holders, and if the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then such distribution shall be made, ratably, without priority of one over the other, in the proportion that the aggregate unpaid principal amount of all Lessor Notes held by each such Holder, plus the accrued but unpaid interest thereon to the date of distribution, bears to the aggregate unpaid principal 20 amount of all Lessor Notes, plus the accrued but unpaid interest thereon to the date of distribution; FOURTH, to the Holders (other than the Facility Lessee or any Affiliate thereof), so much of such payments or amounts as shall be required to reimburse each such Holder for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon, the tolls, rents, revenues, issues, products and profits of the Indenture Estate pursuant to Section 4.5 (b) hereof) incurred by such Holder (to the extent not previously reimbursed) under the Operative Documents, including, without limitation, the expenses of any sale, taking or other proceeding, reasonable attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by such Holder in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by such Holder, liquidated or otherwise, upon such Lease Indenture Event of Default shall be applied by such Holder in reimbursement of such expenses; and FIFTH, the balance, if any, of such payments or amounts remaining thereafter shall be paid to the Owner Trust for distribution in accordance with the terms of the Trust Agreement. SECTION 3.4 CERTAIN PAYMENTS. (a) Except as otherwise provided in this Indenture, any payments received by the Lease Indenture Trustee or any Holder for which provision as to the application thereof is made in any other Operative Document shall be applied forthwith to the purpose for which such payment was made in accordance with the terms of such Operative Document. (b) The Owner Trust hereby agrees that if, at any time during the term of this Indenture, it receives from the Facility Lessee, EME or any Affiliate of any of them any amount or payment (other than Excepted Payments) described in Section 3.4(c) hereof, it shall hold such amount or payment in trust for the benefit of the Lease Indenture Trustee and promptly pay such amount or payment to the Lease Indenture Trustee. The Owner Trust further agrees that the obligation to remit such amount or payment shall be secured by this Indenture. (c) Any payment of Supplemental Lease Rent received by the Owner Participant or the Lease Indenture Trustee pursuant to the fourth sentence of Section 4.3 hereof shall, so long as no Lease Indenture Event of Default shall have occurred and be continuing, and except to the extent applied as provided in Section 3.3 hereof, be retained by, or promptly distributed to, the Owner Participant. Notwithstanding anything to the contrary in this Section 3 and without regard to whether a Lease Indenture Event of Default shall have occurred and be continuing, all Excepted Payments specified as such in writing by the payor or clearly described as such by the payor, or which to the actual knowledge of an Authorized Officer of the Lease Indenture Trustee constitute Excepted Payments and received by the Lease Indenture Trustee shall be paid by the Lease Indenture Trustee forthwith to the Person or Persons entitled thereto. SECTION 3.5 OTHER PAYMENTS. Any payments in respect of the Indenture Estate received by the Lease Indenture Trustee no provision for the application of which is made in the Facility Lease or in another Operative Document or elsewhere in this Indenture shall (i) to the 21 extent received or realized at any time prior to the payment in full of all obligations to the Holders secured by the Lien of this Indenture, be deposited into the Lease Indenture Trustee's Account, and thereafter applied to the payment of principal, interest, Make-Whole Premium and other amounts as and when such principal, interest, Make-Whole Premium or other amounts come due pursuant to priority "FIRST" specified in Section 3.1 hereof or, if applicable at such time, pursuant to Section 3.2 or 3.3 hereof and (ii) to the extent received or realized at any time after payment in full of all obligations to the Holders secured by the Lien of this Indenture, in the following order of priority: FIRST, to reimburse the Lease Indenture Trustee and the Holders (to the extent not previously reimbursed) for any reasonable out-of-pocket costs or expenses to which it is entitled to reimbursement pursuant to an Operative Document; and SECOND, in the manner provided in clause "FIFTH" of Section 3.3 hereof. SECTION 3.6 MANNER OF PAYMENT TO THE OWNER TRUST. Any amounts distributed hereunder by the Lease Indenture Trustee to the Owner Trust shall be paid by the Lease Indenture Trustee to the Owner Trust by wire transfer of funds of the type received by the Lease Indenture Trustee at such offices and to such account or accounts of such entity or entities as shall be designated in advance by written notice from the Owner Trust to the Lease Indenture Trustee from time to time. The Lease Indenture Trustee shall, whether or not the Lien of this Indenture shall have been discharged in accordance herewith, act as paying agent for the Owner Trust, in connection with the Lease Indenture Trustee's duties to make distributions to or for the benefit of the Owner Trust pursuant to this Section 3 and to accept all revenues, payments, securities, investments and other amounts received by the Lease Indenture Trustee and to be distributed to the Owner Trust pursuant thereto or held in trust for the benefit of the Owner Trust pursuant to the terms of this Indenture. The Owner Trust hereby notifies and instructs the Lease Indenture Trustee that unless and until the Lease Indenture Trustee receives written notice to the contrary from the Owner Trust, all amounts to be distributed to the Owner Trust pursuant to clause "SECOND" of Section 3.1 hereof shall be distributed by wire transfer of funds of the type received by the Lease Indenture Trustee to the Owner Participant. In the event that the Lease Indenture Trustee is unable to distribute any amounts to the Owner Trust or the Owner Participant on the same day such amounts are received by the Lease Indenture Trustee, the Lease Indenture Trustee agrees that such amounts shall be held in trust for the benefit of the Owner Trust or the Owner Participant, as the case may be, and shall be invested by the Lease Indenture Trustee for and at the expense and risk of the Owner Trust or the Owner Participant, as the case may be, in Permitted Investments identified in written instructions to the Lease Indenture Trustee from the Owner Trust or the Owner Participant, as the case may be, if such investments are reasonably available. SECTION 3.7 INVESTMENT OF AMOUNTS HELD BY LEASE INDENTURE TRUSTEE. Any amounts held by the Lease Indenture Trustee pursuant to the proviso to clause "SECOND" of Section 3.1 hereof, pursuant to Section 3.2 hereof, or pursuant to Section 10 or 11 of the Facility Lease shall be invested by the Lease Indenture Trustee from time to time in Permitted Investments identified in written instructions to the Lease Indenture Trustee from the Owner Trust, at the expense of the Owner Trust, or, so long as no Lease Event of Default shall have occurred and be continuing, from the Facility Lessee acting on behalf of the Owner Trust, at the expense of the Facility Lessee, if such investments are reasonably available. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment and any payments by the Facility Lessee pursuant to the Facility Lease in respect of any losses or expenses, net of the Lease Indenture Trustee's reasonable fees and expenses in making such investment, shall be held 22 and applied by the Lease Indenture Trustee in the same manner as the principal amount of such investment is to be applied, and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Lease Indenture Trustee shall not be liable for any loss resulting from any investment required to be made by it under this Indenture other than by reason of its willful misconduct or gross negligence as determined by a court of competent jurisdiction in receiving, handling or disbursing funds, and any such investment may be sold (without regard to its maturity) by it without instructions whenever it reasonably believes such sale is necessary to make a distribution required by this Indenture. SECTION 3.8 ESTABLISHMENT OF THE LEASE INDENTURE TRUSTEE'S ACCOUNT; AND LIEN AND SECURITY INTEREST; ETC. (a) The Account Bank hereby confirms that it has established at its office in New York, New York located at 114 West 47th Street, New York, NY 10036 a securities account entitled the "Lease Indenture Trustee's Account" (the "LEASE INDENTURE TRUSTEE'S ACCOUNT"), which Lease Indenture Trustee's Account shall be maintained by the Account Bank until the date this Indenture is terminated pursuant to Section 7.1 hereof. The account number of the Lease Indenture Trustee's Account established hereunder is 049 66100. The Lease Indenture Trustee's Account shall not be evidenced by passbooks or similar writings. (b) All amounts from time to time held in the Lease Indenture Trustee's Account shall be maintained (i) in the name of the Owner Trust subject to the lien and security interest of the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each of the Holders as set forth herein and (ii) in the custody of the Account Bank for and on behalf of the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each of the Holders for the purposes and on the terms set forth in this Indenture. All such amounts shall constitute a part of the Lease Indenture Trustee Account Collateral and shall not constitute payment of any Indebtedness or any other obligation of the Owner Trust until applied as hereinafter provided. (c) As collateral security for the prompt payment in full when due of the Lessor Secured Obligations owed to the Lease Indenture Trustee and each Holder, the Owner Trust hereby pledges, assigns, hypothecates and transfers to the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each of the Holders, and hereby grants to the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each of the Holders, a lien on and security interest in and to, (i) the Lease Indenture Trustee's Account and any successor account thereto and (ii) all cash, investments, investment property, securities or other property at any time on deposit in or credited to the Lease Indenture Trustee's Account, including all income or gain earned thereon and any proceeds thereof (the "LEASE INDENTURE TRUSTEE ACCOUNT COLLATERAL"). SECTION 3.9 THE ACCOUNT BANK; LIMITED RIGHTS OF THE OWNER TRUST. (a) THE ACCOUNT BANK. (i) ESTABLISHMENT OF SECURITIES ACCOUNT. The Account Bank hereby agrees and confirms that (A) the Account Bank has established the Lease Indenture Trustee's Account as set forth in Section 3.8, (B) the Lease Indenture Trustee's Account is and will be maintained as a "securities account" (within the meaning of 23 Section 8-501(a) of the UCC), (C) the Owner Trust is the "entitlement holder" (within the meaning of Section 8-102(a)(7) of the UCC) in respect of the "financial assets" (within the meaning of Section 8-102(a)(9) of the UCC) credited to the Lease Indenture Trustee's Account, (D) all property delivered to the Account Bank pursuant to this Indenture or any other Operative Document will be held by the Account Bank and promptly credited to the Lease Indenture Trustee's Account by an appropriate entry in its records in accordance with this Indenture, (E) all "financial assets" (within the meaning of Section 8-102(a)(9) of the UCC) in registered form or payable to or to the order and credited to the Lease Indenture Trustee's Account shall be registered in the name of, payable to or to the order of, or indorsed to, the Account Bank or in blank, or credited to another securities account maintained in the name of the Account Bank, and in no case will any financial asset credited to the Lease Indenture Trustee's Account be registered in the name of, payable to or to the order of, or indorsed to, the Owner Trust except to the extent the foregoing have been subsequently indorsed by the Owner Trust to the Account Bank or in blank and (F) the Account Bank shall not change the name or account number of the Lease Indenture Trustee's Account without the prior written consent of the Lease Indenture Trustee. (ii) FINANCIAL ASSETS ELECTION. The Account Bank agrees that each item of property (including any security, instrument or obligation, share, participation, interest or other property whatsoever) credited to the Lease Indenture Trustee's Account shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the UCC. (iii) ENTITLEMENT ORDERS. Notwithstanding anything in this Indenture to the contrary, if at any time the Account Bank shall receive any "entitlement order" (within the meaning of Section 8-102(a)(8) of the UCC) or any other order from the Lease Indenture Trustee directing the transfer or redemption of any financial asset relating to the Lease Indenture Trustee's Account, the Account Bank shall comply with such entitlement order or other order without further consent by the Owner Trust or any other Person. The parties hereto hereby agree that the Lease Indenture Trustee shall have "control" (within the meaning of Section 8-106(d) of the UCC) of the Owner Trust's "security entitlements" (within the meaning of Section 8-102(a)(17) of the UCC) with respect to the financial assets credited to the Lease Indenture Trustee's Account and the Owner Trust hereby disclaims any entitlement to claim "control" of such "security entitlements". Unless a Lease Indenture Event of Default shall have occurred and is continuing, the Lease Indenture Trustee shall not deliver any entitlement order directing the transfer or redemption of any financial asset relating to the Lease Indenture Trustee's Account. (iv) SUBORDINATION OF LIEN; WAIVER OF SET-OFF. In the event that the Account Bank has or subsequently obtains by agreement, operation of law or otherwise a lien or security interest in the Lease Indenture Trustee's Account or any security entitlement credited thereto, the Account Bank agrees that such lien or security interest shall be subordinate to the lien and security interest of the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each Holder. The financial assets standing to the credit of the Lease Indenture Trustee's Account will not be subject to deduction, set-off, banker's lien, or any other right in favor of any Person other than the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each Holder (except for the 24 face amount of any checks which have been credited to the Lease Indenture Trustee's Account but are subsequently returned unpaid because of uncollected or insufficient funds). (v) NO OTHER AGREEMENTS. The Account Bank and the Owner Trust have not entered into any agreement with respect to the Lease Indenture Trustee's Account or any financial assets credited to the Lease Indenture Trustee's Account other than this Indenture. The Account Bank has not entered into any agreement with the Owner Trust or any other Person purporting to limit or condition the obligation of the Account Bank to comply with entitlement orders originated by the Lease Indenture Trustee in accordance with Section 3.9(a)(iii) hereof. In the event of any conflict between this Section 3.9 or any other agreement now existing or hereafter entered into, the terms of this Section 3.9 shall prevail. (vi) NOTICE OF ADVERSE CLAIMS. Except for the claims and interest of the Lease Indenture Trustee for the benefit of the Lease Indenture Trustee and each Holder and the Owner Trust in the Lease Indenture Trustee's Account, the Account Bank does not know of any claim to, or interest in, the Lease Indenture Trustee's Account or in any financial asset credited thereto. If any Person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Lease Indenture Trustee's Account or in any financial asset credited thereto, the Account Bank will promptly notify the Lease Indenture Trustee and the Owner Trust in writing thereof. (vii) RIGHTS AND POWERS OF THE LEASE INDENTURE TRUSTEE. The rights and powers granted by the Lease Indenture Trustee to the Account Bank have been granted in order to perfect its lien and security interests in the Lease Indenture Trustee's Account, are powers coupled with an interest and will neither be affected by the bankruptcy of the Owner Trust nor the lapse of time. (b) LIMITED RIGHTS OF THE OWNER TRUST. The Owner Trust shall not have any rights against or to monies held in the Lease Indenture Trustee's Account, as third party beneficiary or otherwise, or any right to direct the Account Bank or the Lease Indenture Trustee to apply or transfer monies in the Lease Indenture Trustee's Account, except the right to receive or make requisitions of monies held in the Lease Indenture Trustee's Account, as expressly provided in this Indenture, and to direct the investment of monies held in the Lease Indenture Trustee's Account as expressly provided in Section 3.7 hereof. Except as expressly provided in this Indenture, in no event shall any amounts or Cash Equivalent Investments deposited in or credited to the Lease Indenture Trustee's Account be registered in the name of the Owner Trust, payable to the order of the Owner Trust or specially indorsed to the Owner Trust except to the extent that the foregoing have been specially indorsed to the Lease Indenture Trustee or in blank. SECTION 4. COVENANTS OF THE OWNER TRUST; LEASE INDENTURE EVENTS OF DEFAULT; REMEDIES SECTION 4.1 COVENANTS OF THE OWNER TRUST. The Owner Trust hereby covenants and agrees as follows: 25 (i) the Owner Trust will duly and punctually pay the principal of and interest on and other amounts (including any Make-Whole Premium) due under the Lessor Notes and this Indenture in accordance with the terms hereof and thereof and all amounts payable by it to the Lease Indenture Trustee and the Holders under any other Operative Document; (ii) in the event that an Authorized Officer of the Owner Trust shall have actual knowledge of a Lease Indenture Event of Default or a Lease Indenture Default, the Owner Trust will give prompt written notice of such Lease Indenture Event of Default or Lease Indenture Default to the Facility Lessee, the Owner Participant and the Lease Indenture Trustee (and the Lease Indenture Trustee shall thereupon promptly deliver a copy of such notice to each Holder); (iii) in the event that an Authorized Officer of the Owner Trust shall have actual knowledge of an Event of Loss, then, to the extent that the Facility Lessee is not required, pursuant to the Facility Lease, to give notice of such event to the Lease Indenture Trustee, the Owner Trust will give prompt written notice of such Event of Loss to the Lease Indenture Trustee, (and the Lease Indenture Trustee shall thereupon promptly deliver a copy of such notice to each Holder) and the Owner Participant; (iv) the Owner Trust will furnish to the Lease Indenture Trustee true and correct duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trust under the Facility Lease, to the extent that the same shall not have been (or are not required to be) furnished to the Lease Indenture Trustee or the Holders pursuant to the Facility Lease or the Participation Agreement; and (v) except as contemplated by the Operative Documents, the Owner Trust will not incur any Indebtedness or engage in any business or activity except with the prior written consent of the Lease Indenture Trustee (acting on the instructions of Required Holders). SECTION 4.2 LEASE INDENTURE EVENTS OF DEFAULT. "LEASE INDENTURE EVENT OF DEFAULT" means any of the following events (whatever the reason for such Lease Indenture Event of Default and whether such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority): (a) any Lease Event of Default (other than with respect to Excepted Payments unless the Facility Lease has been declared in default pursuant to Section 16(a) thereof) shall have occurred and be continuing; or (b) the failure of the Owner Trust to pay when due any payment of principal of, premium (including, without limitation, Make-Whole Premium) (if any) or interest on, or any scheduled fees or other amounts due and payable under or with respect to, any Lessor Note and such failure shall continue for five Business Days; or the failure of the Owner Trust to pay when due any other amounts under or with respect to, any Lessor Note or this Indenture and such failure shall continue for 30 Business Days after the 26 Owner Trust and the Owner Participant receive written demand therefor from the Lease Indenture Trustee or any Holder; or (c) any material representation or warranty made by the Owner Participant or the Owner Trust in this Indenture or in any other Operative Document to which it is a party or by any OP Guarantor in its Owner Participant Guaranty, as the case may be, shall prove to have been inaccurate when made or deemed made in any material respect; and such misrepresentation or breach of warranty shall not have been corrected within a period of 30 days following notice thereof being given to the Owner Trust and the Owner Participant or such OP Guarantor, as the case may be, by any Holder (through the Lease Indenture Trustee); PROVIDED that, if such misrepresentation or breach of warranty is capable of correction but cannot with diligence be corrected within such 30-day period, such failure will not constitute a Lease Indenture Event of Default so long as the party whose representation or warranty was inaccurate (i) promptly institutes corrective action within such 30-day period and diligently pursues such corrective action and (ii) the continuation of such inaccuracy beyond such 30-day period would not have a Material Adverse Effect (but in no event shall the total period permitted to correct such misrepresentation or breach of warranty extend beyond 90 days from the date such notice was provided); or (d) any failure (i) by the Owner Trust to observe or perform any other material covenant or obligation of the Owner Trust contained in this Indenture or in any Operative Document to which it is a party (other than as provided in clause (a) above) in any material respect, or (ii) by the Owner Participant to observe or perform any material covenant or obligation of the Owner Participant contained in any Operative Document to which it is a party or (iii) by any OP Guarantor to observe or perform any material covenant or obligation of such OP Guarantor contained in any Owner Participant Guaranty, is not remedied within a period of 30 days following notice of such failure being given to the Owner Trust and the Owner Participant or such OP Guarantor, as the case may be, by any Holder (through the Lease Indenture Trustee); PROVIDED that, if such failure is capable of remedy but cannot with diligence be remedied within such 30-day period, such failure will not constitute a Lease Indenture Event of Default so long as (A) the party failing to perform promptly commences remedial action within such 30-day period and diligently pursues such action and (B) the continuation of such failure beyond such 30-day period would not have a Material Adverse Effect (but in no event shall the total period permitted to cure such default extend beyond 120 days from the date such notice was provided); or (e) the Owner Participant, the Owner Trust or any OP Guarantor shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for the Owner Trust, the Owner Participant or such OP Guarantor or any substantial part of the property of any of the foregoing, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a 27 general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due, or (vii) take corporate action for the purpose of effecting any of the foregoing; or (f) an involuntary proceeding is commenced or an involuntary petition is filed in a court of competent jurisdiction seeking (i) relief in respect of the Owner Participant, any OP Guarantor or the Owner Trust under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency or similar law now or hereafter in effect, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for the Owner Participant, such OP Guarantor or the Owner Trust or any substantial part of the property of the foregoing or (iii) the winding-up or liquidation of the Owner Trust, such OP Guarantor or the Owner Participant and such proceeding or petition continues undismissed for 60 days or an order or decree approving or ordering any of the foregoing continues unstayed and in effect for 60 days. SECTION 4.3 CERTAIN RIGHTS. In the event of any Lease Default or Lease Event of Default in the payment of any installment of Basic Lease Rent due under the Facility Lease, the Owner Trust or the Owner Participant may, but shall not be obligated to, within ten Business Days after the earlier of (a) receipt by the Owner Trust of notice of or (b) the Owner Trust acquiring actual knowledge of the occurrence of such Lease Default or Lease Event of Default, without the consent or concurrence of the Lease Indenture Trustee or any Holder, pay, as provided in Section 2.6 hereof, for application in accordance with Section 3.1 hereof, a sum equal to the amount of all (but not less than all) of the principal of, interest on and other amounts payable under or in respect of, the Lessor Notes as shall then be due and payable on the Lessor Notes (without giving effect to any acceleration pursuant to Section 4.4(b) or (c) hereof). If any other Lease Default or other Lease Event of Default occurs and the Owner Trust shall have been furnished (by or for the account of the Owner Participant) with all funds necessary for remedying such Lease Default or Lease Event of Default, the Owner Participant may, within ten Business Days after the earlier of (a) receipt by the Owner Trust of notice of or (b) the Owner Trust acquiring actual knowledge of the occurrence of such Lease Default or Lease Event of Default, without the consent or concurrence of the Lease Indenture Trustee or any Holder, instruct the Owner Trust to exercise the Owner Trust's rights under Section 20 of the Facility Lease to perform such obligation on behalf of the Facility Lessee. Solely for the purpose of determining whether there exists a Lease Indenture Event of Default, (a) any payment by the Owner Participant or the Owner Trust pursuant to, and in compliance with, the first sentence of this Section 4.3 shall be deemed to remedy any Lease Default or Lease Event of Default in the payment of installments of Basic Lease Rent theretofore due and payable and to remedy any default by the Owner Trust in the payment of any amount due and payable under the Lessor Notes or hereunder, and (b) any performance by the Owner Trust of any obligation of the Facility Lessee under the Facility Lease pursuant to, and in compliance with, the second sentence of this Section 4.3 shall be deemed to remedy any Lease Default or Lease Event of Default to the same extent that like performance by the Facility Lessee itself would have remedied such Lease Default or Lease Event of Default (but any such payment or performance shall not relieve the Facility Lessee of its duty to pay all Rent and perform all of its obligations pursuant to the Facility Lease). If, on the basis specified in the preceding sentence, such Lease Default or Lease Event of Default shall have been remedied, then any determination that the Facility Lease, and any declaration pursuant to this Indenture that the Lessor Notes are due and payable or that a 28 Lease Indenture Default or Lease Indenture Event of Default exists hereunder, based upon such Lease Default or Lease Event of Default shall be deemed to be rescinded, and the Owner Participant shall (to the extent of any such payments made by or for the account of the Owner Trust) be subrogated to the rights of the Holders hereunder to receive such payment of Rent from the Facility Lessee (and the payment of interest on account of such Rent from the Facility Lessee being overdue), and shall be entitled, so long as no other Lease Indenture Default or Lease Indenture Event of Default shall have occurred or would result therefrom, to receive and retain such payment from the Facility Lessee; PROVIDED, HOWEVER, that the Owner Participant shall not, so long as this Indenture shall not have terminated, otherwise attempt to recover any such amount paid by it or for its account on behalf of the Facility Lessee pursuant to this Section 4.3 except by demanding of the Facility Lessee payment of such amount or by commencing an action at law and obtaining and enforcing a judgment against the Facility Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Facility Lessee and the Owner Participant will not obtain any Lien on any part of the Indenture Estate on account of such payment nor will any claim of the Owner Participant against the Facility Lessee or any other party for the repayment thereof impair the prior right and security interest of the Lease Indenture Trustee and the Holders in and to the Indenture Estate, as the case may be; PROVIDED, FURTHER, however, that (a) this Section 4.3 shall not apply with respect to any cure of any default in the payment of Basic Lease Rent if such cure shall have previously been effected with respect to (A) four consecutive payments of Basic Lease Rent immediately preceding the date of such default, or (B) more than eight payments of Basic Lease Rent; and (b) neither the Owner Trust nor the Owner Participant shall (without the prior written consent of the Required Holders) have the right to cure any Lease Default or Lease Event of Default except as specified in this Section 4.3. SECTION 4.4 REMEDIES. (a) Subject to the second sentence of Section 2.12(a) hereof, if a Lease Indenture Event of Default shall have occurred and so long as the same shall be continuing unremedied and, except as provided in the proviso at the end of this sentence, if the Lessor Notes shall have been accelerated pursuant to Section 4.4(b) or 4.4(c) hereof, then and in every such case the Lease Indenture Trustee (acting on the instructions of the Required Holders) may, if not precluded by law or otherwise, consistent with this Section 4.4(a), exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Section 4 and shall have and may exercise all of the rights and remedies of a secured party under Requirements of Law and, in the event such Lease Indenture Event of Default arises as a result of an event described in clause (a) of Section 4.2 hereof and is continuing unremedied and Section 4.3 hereof shall either not apply or shall have ceased to apply with respect to such Lease Indenture Event of Default, any and all of the remedies pursuant to Section 17 of the Facility Lease) and may take possession of all or any part of the Indenture Estate covered or intended to be covered by the Lien created pursuant hereto and may exclude the Owner Participant, the Owner Trust, the Facility Lessee (to the extent permitted by Section 17 of the Facility Lease and all Persons claiming under any thereof or wholly or partly therefrom; PROVIDED, HOWEVER, that, under no circumstances shall the Lease Indenture Trustee sell any of the Property Interest or exercise other remedies against the Property Interest seeking to deprive the Owner Trust or the Owner Participant of their respective interests therein unless the Lessor Notes have been accelerated. It 29 is understood and agreed that, subject to the provisions of this Section 4.4, the Lease Indenture Trustee (acting on the instructions of the Required Holders) may exercise any right of sale of the Property Interest available to it, even though it shall not have taken possession of the Property Interest and shall not have possession thereof at the time of such sale. It is further agreed and understood that if the Lease Indenture Trustee (acting on the instructions of the Required Holders) shall proceed to foreclose on the Lien of this Indenture or exercise any other material remedy with respect to the Property Interest, the Lease Indenture Trustee shall substantially simultaneously therewith, to the extent the Lease Indenture Trustee is then entitled to do so hereunder and under the Facility Lease proceed (to the extent it has not already done so) to exercise one or more of the remedies with respect to the Property Interest referred to in clause (e) or (f) of Section 17.1 of the Facility Lease; PROVIDED that in the event the Lease Indenture Trustee is stayed or otherwise prevented by operation of any law from exercising such remedies for a continuous period of 180 days following the commencement of such stay or other prevention, it may (acting on the instruction of the Required Holders), upon the expiration of such 180-day period, exercise any remedy available to it under this Indenture. For the avoidance of doubt, it is expressly understood and agreed that the above-described inability of the Lease Indenture Trustee to exercise any right or remedy under the Facility Lease shall not prevent the Lease Indenture Trustee from exercising any of its other rights, powers and remedies under this Indenture. (b) If a Lease Indenture Event of Default referred to in clause (e) or (f) of Section 4.2 shall have occurred, then and in every such case the unpaid principal of all Lessor Notes then outstanding, together with interest accrued but unpaid thereon and all other amounts due thereunder or with respect thereto (but excluding any Make-Whole Premium), shall immediately and without further act become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Lease Indenture Event of Default (other than a Lease Indenture Event of Default referred to in clause (e) or (f) of Section 4.2) shall have occurred and be continuing, then and in every such case the Lease Indenture Trustee (acting on the instruction of the Required Holders) may at any time declare the Lessor Notes to be due and payable, whereupon the unpaid principal of all Lessor Notes then outstanding, together with accrued but unpaid interest thereon and other amounts due thereunder or respect thereto (but excluding any Make-Whole Premium), shall immediately become due and payable without presentment, demand, protest or notice, all of which are hereby waived. (d) Each Holder shall be entitled, at any sale pursuant to Section 17.1 of the Facility Lease, to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder and secured by the Lien of this Indenture. (e) Notwithstanding anything to the contrary contained herein, if all Lessor Notes are held by the Facility Lessee or an Affiliate of the Facility Lessee, then (i) upon a Lease Indenture Event of Default that is caused by a Lease Default or Lease Event of Default, the remedies hereunder may be exercised only with the written consent of the Owner Trust and (ii) only the Owner Trust may exercise any or all of the remedies under the Facility Lease with respect to any such Lease Default or Lease Event of Default. 30 (f) In addition to all other remedies provided for herein if a Lease Indenture Event of Default shall have occurred and be continuing, the Lease Indenture Trustee shall have the right to exercise any STATUTORY POWER OF SALE and sell the Indenture Estate or any part of the Indenture Estate at public sale or sales, in order to pay the Lessor Secured Obligations, and all impositions, if any, with accrued interest thereon, and all expenses of the sale and of all proceedings in connection therewith, including reasonable attorney's fees, if incurred. SECTION 4.5 TAKING POSSESSION OF INDENTURE ESTATE. (a) Subject to the rights of the Owner Trust and the Owner Participant under Section 4.3 hereof, and unless an OP Guarantor, the Owner Participant or the Owner Trust shall have purchased the Lessor Notes pursuant to Section 2.10 hereof, if a Lease Indenture Event of Default shall have occurred and be continuing and the Lessor Notes shall have been accelerated pursuant to Section 4.4(b) or 4.4(c) hereof, at the request of the Required Holders, the Owner Trust shall promptly execute and deliver or cause to be delivered to the Lease Indenture Trustee and the Holders such instruments and other documents as the Required Holders may deem necessary or advisable to enable the Lease Indenture Trustee at such time or times and place or places as the Lease Indenture Trustee (acting on the instruction of the Required Holders) may specify, to obtain possession of all or any part of the Indenture Estate to which the Holders shall at the time be entitled hereunder. If the Owner Trust shall for any reason fail to execute and deliver or cause to be delivered such instruments and documents after such request by the Lease Indenture Trustee, the Lease Indenture Trustee (acting on the instruction of the Required Holders) may (i) obtain a judgment conferring on the Lease Indenture Trustee the right to immediate possession and requiring the Owner Trust to execute and deliver or cause to be delivered such instruments and documents to the Lease Indenture Trustee and the Owner Trust hereby specifically consents to the entry of such judgment to the fullest extent it may lawfully do so, and (ii) to the extent permitted by law, pursue all or part of such Indenture Estate, as applicable, wherever it may be found, subject to Section XIII of the Participation Agreement and Section 4.2 of the Facility Lease, if applicable. All expenses (including those of the Lease Indenture Trustee) of obtaining such judgment or of pursuing, searching for and taking such property shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession in connection with a Lease Event of Default, the Lease Indenture Trustee (acting on the instruction of the Required Holders) may, from time to time at the expense of the Indenture Estate, make all such expenditures for maintenance, insurance, repairs, replacements, alterations, additions and improvements to and of the Indenture Estate as the Required Holders may deem proper. In each such case, the Lease Indenture Trustee (acting on the instructions of the Required Holders) or its designee shall have the right to maintain, use, operate, store, lease, control or manage the Indenture Estate and to carry on the business and to exercise all rights and powers of the Owner Trust relating to the Indenture Estate, as the Required Holders shall deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of the Indenture Estate or any part thereof as the Required Holders may determine; and the Lease Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits constituting part of the Indenture Estate and every part thereof, except Excepted Payments, without prejudice, however, to the right of the Lease Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Lease 31 Indenture Trustee hereunder. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of use, operation, storage, subleasing, control, management or disposition of the Indenture Estate and of conducting the business thereof, and of all maintenance, repairs, replacements, alterations, additions and improvements, and to make all payments which the Lease Indenture Trustee may be required or may elect (acting on the instruction of the Required Holders) to make, if any, for taxes, assessments, insurance or other proper charges upon the Indenture Estate or any part thereof (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trust), and all other payments which the Lease Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as reasonable compensation for the services of the Lease Indenture Trustee, and of all Persons properly engaged and employed by the Lease Indenture Trustee. SECTION 4.6 REMEDIES CUMULATIVE. Except as provided herein, each and every right, power and remedy given to the Lease Indenture Trustee on behalf of the Holders or any of them specifically or otherwise in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Lease Indenture Trustee (acting on the instruction of the Required Holders), and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by the Lease Indenture Trustee in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trust or the Facility Lessee or to be an acquiescence therein. SECTION 4.7 DISCONTINUANCE OF PROCEEDINGS. In case the Lease Indenture Trustee (acting on the instruction of the Required Holders) shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Holders, then and in every such case the Owner Trust, the Owner Participant, the Lease Indenture Trustee and the Facility Lessee shall, subject to any determination in such proceedings, be restored to their former positions and rights hereunder with respect to the Indenture Estate, as the case may be, and all rights, remedies and powers of the Lease Indenture Trustee shall continue in effect as if no such proceedings had been instituted. SECTION 4.8 WAIVER OF PAST DEFAULTS. Upon the instruction of the Required Holders, the Lease Indenture Trustee shall waive any past default hereunder and its consequences and upon any such waiver such default shall cease to exist and any Lease Indenture Event of Default (as well as any Lease Event of Default giving rise to such Lease Indenture Event of Default) or Lease Indenture Default (as well as any Lease Default giving rise to such Lease Indenture Default) arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 4.9 WAIVER OF STAY, EXTENSION, MORATORIUM LAWS; EQUITY OF REDEMPTION. To the maximum extent permitted by law, the Owner Trust shall not at any time insist upon, or plead, or in any manner whatever claim or take any benefit or advantage of any applicable present or future stay, extension or moratorium law, that may affect observance or performance of the 32 provisions of this Indenture; nor claim, take or insist upon any benefit or advantage of any present or future law providing for the valuation or appraisal of the Indenture Estate or any portion thereof prior to any sale or sales thereof that may be made under or by virtue of Section 4.2 or 4.3 hereof; and the Owner Trust, to the extent that it lawfully may, hereby waives all benefit or advantage of any such law or laws. The Owner Trust for itself and all who may claim under it, hereby waives, to the maximum extent permitted by applicable law, any and all rights and equities of redemption from sale under the power of sale created hereunder or from sale under any order or decree of foreclosure of this Indenture and (if a Lease Indenture Default shall have occurred) all notice or notices of seizure, and all right to have the Indenture Estate marshalled upon any foreclosure hereof. The Indenture Trustee shall not be obligated to pursue or exhaust its rights or remedies as against any other part of the Indenture Estate and the Owner Trust hereby waives any right or claim of right to have the Indenture Trustee proceed in any particular order. SECTION 5. DISCLAIMER OF REPRESENTATIONS; NO SEGREGATION OF MONEYS; FURTHER ASSURANCES; CERTAIN RIGHTS SECTION 5.1 NO REPRESENTATIONS OR WARRANTIES AS TO THE PROPERTY INTEREST OR OTHER LESSOR SECURITY DOCUMENTS. NONE OF THE OWNER TRUST, THE OWNER TRUSTEE, THE TRUST COMPANY OR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, WORKMANSHIP, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, QUALITY, DURABILITY, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE PROPERTY INTEREST OR ANY PART OF THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, INCLUDING ANY ENVIRONMENTAL LIABILITY, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROPERTY INTEREST OR ANY PART THEREOF WHATSOEVER, except that the Owner Trust warrants that on the Closing Date it shall have received such rights and interests that were conveyed to it with respect to the Property Interest pursuant to the Facility Deed, the Bill of Sale and the Facility Site Lease subject to the rights of the parties to this Indenture and to Permitted Liens and Permitted Encumbrances, and the Trust Company warrants that on the Closing Date the Property Interest shall be free and clear of Owner Trust's Liens attributable to the Trust Company. None of the Owner Trustee or the Trust Company makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement or the Lessor Notes or as to the correctness of any statement contained in any thereof, except for the representations and warranties of the Owner Trust, the Owner Trustee or the Trust Company in its individual capacity made under this Indenture or in the Participation Agreement. SECTION 5.2 NO SEGREGATION OF MONEYS; NO INTEREST. Any moneys paid to or retained by the Lease Indenture Trustee pursuant to any provision hereof and not then required to be distributed to any Holder, the Facility Lessee or the Owner Trust or the Owner Participant as provided in Section 3 hereof need not be segregated in any manner except to the extent provided herein or as otherwise required by Requirements of Law, and may, except as aforesaid, be 33 deposited under such general conditions as may be prescribed by Requirements of Law, and the Lease Indenture Trustee shall not (except as otherwise provided in Section 3.7 hereof) be liable for any interest thereon or any losses resulting from the investment thereof. SECTION 5.3 FURTHER ASSURANCES; FINANCING STATEMENTS. At any time and from time to time, upon the request of any Holder (through the Lease Indenture Trustee), the Facility Lessee or the Owner Participant, the Owner Trust shall, at the expense of the Owner Trust, promptly and duly execute and deliver any and all such further instruments and documents presented to it in execution form as may be specified in such request and as are necessary or desirable to perfect, preserve or protect the mortgage, first priority security interests and assignments created or intended to be created hereby, or to obtain for the Lease Indenture Trustee and the Holders the full benefit of the specific rights and powers herein granted, including, without limitation, the execution and delivery of Uniform Commercial Code financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the mortgage, security interests or assignments created or intended to be created hereby. SECTION 5.4 CERTAIN RIGHTS OF OWNER TRUST AND OWNER PARTICIPANT. (a) Notwithstanding any other provisions of this Indenture other than Sections 4.4(e) and 5.4(b) hereof, including the Granting Clause, the following rights (the "SECTION 5.4 RIGHTS") shall be exercisable by the Owner Trust or the Lease Indenture Trustee (acting on the instruction of the Required Holders): (i) at all times the Owner Trust shall have the right, together with or independently of the Lease Indenture Trustee, (A) to receive from the Facility Lessee all notices, certificates, reports, filings, opinions of counsel and other documents and all information which the Facility Lessee is permitted or required to give or furnish to the Owner Trust pursuant to any Operative Document, (B) to exercise inspection rights granted to the Owner Trust pursuant to Section 12 of the Facility Lease, (C) to exercise, to the extent necessary to enable it to exercise its rights under Section 4.3 hereof, the rights of the Owner Trust under Section 20 of the Facility Lease, (D) to request from the Facility Lessee such further documents or assurances, or request that the Facility Lessee take such further actions in respect of such party's interests, as shall be required to be delivered or taken by the Facility Lessee pursuant to Section 5.7 or 18.14 of the Participation Agreement, and (E) to give notice of a Lease Default or a Lease Event of Default pursuant to Section 17 of the Facility Lease; PROVIDED, HOWEVER, that the rights excepted and reserved by this Section 5.4(a)(i) shall not be deemed to include the exercise of any remedies provided for in Section 17.1 of the Facility Lease, except that the Owner Trust and the Owner Participant may proceed by appropriate court action or actions, either at law or in equity, to enforce performance by the Facility Lessee of the applicable covenants and terms of Excepted Payments or to recover damages for the breach thereof but not to terminate the Facility Lease; (ii) so long as a Lease Indenture Event of Default under clauses (c), (d), (e) or (f) of Section 4.2 hereof shall not have occurred and be continuing and the Lease Indenture Trustee shall not have commenced the exercise of material remedies under this Indenture, the Owner Trust shall have the right, together with the Lease Indenture Trustee and to the extent permitted by the Operative Documents and Requirements of Law, (A) to seek specific performance of the covenants of the Facility Lessee under the Operative Documents relating to the protection, insurance, maintenance, possession and use of the 34 Property Interest or (B) to enforce any manufacturer's warranty pursuant to any of the Operative Documents; (iii) so long as a Lease Indenture Event of Default under clauses (c), (d), (e) or (f) of Section 4.2 hereof shall not have occurred and be continuing and the Lease Indenture Trustee shall not have commenced the exercise of material remedies under this Indenture, neither the Owner Trust nor the Lease Indenture Trustee shall have any right, without the prior consent of the other (A) to amend, supplement, modify or waive any return condition in Section 5 of the Facility Lease, or (B) to exercise any rights with respect to the Facility Lessee's use and operation, modification or maintenance of the Property Interest which the Facility Lease specifically confers on the Owner Trust; and (iv) so long as a Lease Indenture Event of Default under clauses (c), (d), (e) or (f) of Section 4.2 hereof shall not have occurred and be continuing and the Lease Indenture Trustee shall not have commenced the exercise of material remedies under this Indenture, neither the Owner Trust nor the Lease Indenture Trustee shall have any right, without the prior written consent of the other except as otherwise provided in Section 6.1, subject to the limitations contained in Section 3.4 of the Facility Lease, to exercise the rights, elections and options of the Owner Trust (other than the right to receive payment), to make any decision or determination and to give any notice, consent, waiver or approval with respect to any adjustments of Basic Lease Rent or Termination Value under Section 3.4 of the Facility Lease. (b) Notwithstanding the foregoing provisions of this Section 5.4 but subject to Section 4 hereof, the Lease Indenture Trustee (acting on the instructions of the Required Holders) shall at all times have the right, to the exclusion of the Owner Trust and the Owner Participant, to exercise the remedies set forth in Section 17.1 of the Facility Lease and in Section 4.4 and 4.5 hereof. Notwithstanding anything herein or in any other Operative Document to the contrary, so long as the Facility Lessee of any Affiliate of the Facility Lessee is a Holder, neither the Facility Lessee nor any such Affiliate, in its capacity as Holder, shall have any rights to approve, consent to, vote on or ratify any action, inaction or determination taken or made or to be taken or made hereunder; PROVIDED, HOWEVER, that this sentence shall not apply to the Facility Lessee or any such Affiliate with respect to those matters set forth in Section 6.1 requiring the consent of all Holders. (c) Notwithstanding any other provision of this Indenture: (1) The Owner Trust shall at all times, to the exclusion of the Lease Indenture Trustee, (i) retain all rights to demand and receive payment of, and to commence an action for payment of, Excepted Payments but the Owner Trust shall have no remedy or right with respect to any such payment against the Indenture Estate nor any right to collect any such payment by the exercise of any of the remedies under Section 17 of the Facility Lease; (ii) retain all rights to exercise the rights granted it under the EME OP Guarantee; to give all notices (including, without limitation, the right to give notice of a breach by EME of its covenants contained therein) under the EME OP Guarantee, to agree to any amendment, supplement or modification to the EME OP Guarantee; and to take any other action permitted to be taken by it under or otherwise with respect to the 35 EME OP Guarantee; (iii) to declare a Lease Event of Default arising under Section 16(p) of the Facility Lease and to declare the Facility Lease to be in default as a result thereof; and (iv) except in connection with the exercise of remedies pursuant to the Facility Lease, retain all rights to exercise the Owner Trust's rights relating to the Appraisal Procedure and to confer and agree with the Facility Lessee on Fair Market Rental Value, or any Renewal Lease Term; (2) So long as the Lessor Notes have not been accelerated pursuant to Section 4.2 hereof (or, if accelerated, such acceleration has theretofore been rescinded) or the Lease Indenture Trustee shall not have exercised any of its rights pursuant to Section 4 hereof to take possession of, foreclose, sell or otherwise take control of all or any part of the Indenture Estate, the Owner Trust shall retain the right to the exclusion of the Lease Indenture Trustee to exercise the rights of the Owner Trust under, and to determine compliance by the Facility Lessee, with the provisions of Section 10 (other than Section 10.2 and Section 10.4 thereof), 13, 14 and 15 of the Facility Lease; PROVIDED, HOWEVER, that if a Lease Indenture Event of Default shall have occurred and be continuing, the Owner Trust shall cease to retain such rights upon notice from the Lease Indenture Trustee (acting on the instruction of the Required Holders) stating that such rights shall no longer be retained by the Owner Trust. SECTION 6. SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS SECTION 6.1 SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND THE OTHER DOCUMENTS: (a) WITHOUT CONSENT OF HOLDERS. Subject to the provisions of the Participation Agreement, at any time and from time to time the Owner Trust (but only on the written request of the Owner Participant) and the Lease Indenture Trustee may, from time to time and at any time, enter into a supplement hereto without the consent of the Holders or the Required Holders for one or more of the following purposes: (i) to convey, transfer, assign, mortgage or pledge to the Lease Indenture Trustee as security for the Lessor Notes any property or assets; (ii) to evidence the succession of another corporation to the Trust Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trust; (iii) to add to the covenants of the Owner Trust for the benefit of the Holders of all or any series of Lessor Notes (and if such covenants are to be for the benefit of less than all series of Lessor Notes, stating that such covenants are expressly being included solely for the benefit of such series) such further covenants, restrictions, conditions or provisions as the Owner Trust and the Lease Indenture Trustee shall consider to be for the protection of the Holders of any series, and to make the occurrence, or the occurrence and continuance, of a default in complying with any such additional covenant, restriction, condition or provision a Lease Indenture Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; in respect of any such additional covenant, restriction, condition or provision, such 36 supplement may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such a Lease Indenture Event of Default or may limit the remedies available to the Lease Indenture Trustee upon such a Lease Indenture Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Lessor Notes of such series to waive such a Lease Indenture Event of Default; (iv) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplement which may be defective or inconsistent with any other provision contained herein or in any supplement, or to make such other provisions as the Owner Trust may deem necessary or desirable, with respect to matters or questions arising under this Indenture, PROVIDED that no such action shall adversely affect the interests of the Holders of the Lessor Notes of any series; (v) to establish the form and terms of the Lessor Notes of any series, as permitted by Section 2.13; (vi) to effect an assumption of the Lessor Notes, as permitted by Section 2.12; (vii) to evidence and provide for the acceptance of appointment hereunder by a successor Lease Indenture Trustee with respect to the Lessor Notes and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, all as provided in Section 7.15; and (viii) subject to Section 6.1(b) with respect to the provisions of the Indenture Estate Documents referred to therein, to effect any amendment, modification, supplement, waiver or consent with respect to any Indenture Estate Document, provided that no such action shall, in the judgment of the Lease Indenture Trustee, materially and adversely affect the interests of the Holders of any of the Lessor Notes of any series. The Lease Indenture Trustee is hereby authorized to join with the Owner Trust in the execution of any such supplement, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property or assets thereunder, but the Lease Indenture Trustee shall not be obligated to enter into any such supplement which affects the Lease Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. (b) INSTRUCTIONS OF REQUIRED HOLDERS; LIMITATIONS. Subject to the provisions of the Participation Agreement, at any time and from time to time, (i) the Owner Trust (but only on the written request of the Owner Participant) and the Lease Indenture Trustee (but only if so directed by the Required Holders to the extent that the same is not expressly permitted by Section 6.1(a)), may execute a supplement hereto for the purpose of adding provisions to, or changing or eliminating provisions of, this Indenture as specified in such request, (ii) the Owner Trust (but only on the written request of the Owner Participant) and, except with respect to Excepted Payments, the Lease Indenture Trustee (but only if so directed by the Required Holders to the extent that the same is not expressly permitted by Section 6.1(a)), may enter into such written amendment of or 37 supplement to any Indenture Estate Document as may be specified in such request and (iii) the Owner Trust shall not revoke or otherwise terminate the Trust Agreement or, if such amendment or supplement would impair the rights of the Lease Indenture Trustee or any Holder, amend or supplement the Trust Agreement; PROVIDED, HOWEVER, that, without the consent of each Holder, except with respect to Excepted Payments, no such amendment of or supplement to any Indenture Estate Document, and no waiver or modification of the terms of any thereof, shall, except to the extent pertaining to the Excepted Payments, (1) modify (A) any of the provisions of this Section 6.1 or Sections 2.6, 2.8, 2.10, 2.11 or 2.12 hereof, Section 3 hereof (other than Sections 3.6 and 3.7 hereof) or Section 4 hereof (other than Sections 4.1 and 4.2 hereof), (B) any of the provisions of Sections 2.3, IV, XII or XIV of the Participation Agreement to the extent applicable to the Lease Indenture Trustee or any Holder (including, without limitation, any Pass-Through Trustee or any Certificateholder), (C) any of the provisions of Section 3.4, 14, 15, 18 or 20 of the Facility Lease or (D) the definitions of the terms "EXCEPTED PAYMENTS", "PURCHASE PRICE", "OPERATIVE DOCUMENTS", "REQUIRED HOLDER", "TERMINATION VALUE", "BASIC LEASE RENT", "SUPPLEMENTAL LEASE RENT", "EVENT OF LOSS", "OWNER TRUST'S LIEN", "RENT", "MAKE-WHOLE PREMIUM" or any components thereof contained herein or in any Indenture Estate Document (except to change default definitions by providing for additional events of default), (2) reduce the amount or extend the time of payment of any amount owing or payable under any Lessor Note or reduce the interest payable on any Lessor Note, or alter or modify the provisions of Section 3 hereof with respect to the order of priorities in which distribution thereunder shall be made as between the Holders and the Owner Trust or the Owner Participant or with respect to the amount or time of payment of any such distribution, (3) reduce, modify or amend any indemnities or other payment provisions resulting in Supplemental Lease Rent in favor of any Holder (except as consented to by each Person adversely affected thereby), (4) reduce the amount or extend the time of payment of Rent or Termination Value (or any other amounts payable therewith other than such amounts that constitute Excepted Payments) as set forth in the Facility Lease, (5) modify, amend or supplement the Facility Lease with respect to, or consent to any assignment of the Facility Lease, releasing the Facility Lessee from its obligations in respect of the payment of Rent or Termination Value (or other amounts payable therewith other than such amounts that constitute Excepted Payments) or altering the absolute and unconditional character of such obligations as set forth in Section 9 of the Facility Lease or change any of the circumstances under which Termination Value (or other amounts payable therewith) is payable or (6) take any action which would reduce or extend the term of the Facility Lease. Notwithstanding the foregoing, (A) without the consent of the Lease Indenture Trustee (acting with the consent of each Holder), no such supplement to this Indenture or waiver or modification of the terms hereof or of any other agreement or document shall permit the creation of any Lien on the Indenture Estate or any part thereof, or deprive the Lease Indenture Trustee or any Holder of the benefit of the Lien of this Indenture on the Indenture Estate, except as provided in Section 14.2 of the Participation Agreement or in connection with the exercise of remedies under Section 4 hereof; (B) except as provided in Section 9.3 of the Participation Agreement, the sections of this Indenture set forth or referred to in such Section 9.3 may not be amended without the prior written consent of the Facility Lessee; (C) subject always to the provisions of Section 3.4(a) of the Facility 38 Lease, no amendment of Exhibits of the Facility Lease to give effect to adjustments in accordance with Section 3.4(a) of the Facility Lease shall be deemed to be an amendment to the Facility Lease which requires the consent of the Holders hereunder; (D) without the necessity of the consent of any of the Lease Indenture Trustee or any Holder, (I) any indemnities solely in favor of the Equity Investor, any OP Guarantor, the Owner Participant, the Owner Trust, the Trust Company or any of their Affiliates may be modified, amended, or changed in such manner as shall be agreed to by the Equity Investor, such OP Guarantor, the Owner Participant, the Owner Trust or the Trust Company, as the case may be, and the Facility Lessee, (II) the Owner Participant and EME may enter into any amendment or supplement to the Tax Indemnity Agreement and (III) the Owner Trust, the Owner Participant, the Equity Investor and EME may enter into any amendment or supplement to the EME OP Guarantee; and (E) each Holder shall not unreasonably withhold its consent to an amendment to Section 5 or 13 of the Facility Lease which amendment does not change or otherwise affect the timing or the amount of the payments due thereunder or otherwise adversely affect the Holders. SECTION 6.2 DOCUMENTS FURNISHED TO HOLDERS. Promptly after the execution by the Owner Trust or the Lease Indenture Trustee of any document entered into pursuant to Section 6.1, the Lease Indenture Trustee shall furnish a copy thereof to the Holders but the failure of the Lease Indenture Trustee to deliver such conformed copy, or the failure of the Holders to receive such conformed copies, shall not impair or affect the validity of such document. SECTION 6.3 LEASE INDENTURE TRUSTEE PROTECTED. Notwithstanding anything to the contrary contained herein, if, in the opinion of the Lease Indenture Trustee, any document required to be executed by it pursuant to Section 6.1 adversely affects any right, duty, immunity or indemnity of or in favor of the Lease Indenture Trustee under any Lessor Security Document or under any other Operative Document, the Lease Indenture Trustee may in its discretion decline to execute such document unless the Person or Persons requesting any related action shall provide an indemnity that is reasonably satisfactory to the Lease Indenture Trustee. SECTION 7. MISCELLANEOUS SECTION 7.1 TERMINATION OF INDENTURE. Upon (or at any time after) receipt by the Lease Indenture Trustee of a certificate from each Holder to the effect that the principal of and interest on, and all other amounts payable to the Holders hereunder, under all Lessor Notes and under the Operative Documents otherwise secured hereby have been paid in full, the Lease Indenture Trustee shall execute and deliver to the Owner Trust an appropriate instrument releasing the Indenture Estate from the Lien of this Indenture and releasing the Indenture Estate Documents from the assignment and pledge thereof hereunder, and the Lease Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trust's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trust to give effect to such release; PROVIDED, HOWEVER, that this Indenture shall earlier terminate and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Lease Indenture Trustee of all property constituting part of the Indenture Estate and the final distribution by the Lease Indenture Trustee of all moneys or other property or proceeds constituting part of the Indenture Estate in accordance with the terms hereof. Further, upon the purchase or prepayment in full of the Lessor Notes pursuant to Section 2.10 or 2.11 hereof, and receipt by the Lease Indenture Trustee of a certificate from each Holder to the effect that all other sums payable to the Holders hereunder and under the Operative Documents, the Lease 39 Indenture Trustee shall execute and deliver to the Owner Trust an appropriate instrument releasing the Indenture Estate from the Lien of this Indenture and releasing the Indenture Estate Documents from the assignment and pledge hereunder, and the Lease Indenture Trustee shall execute and deliver such instruments as aforesaid. Except as otherwise provided in this Section 7.1, this Indenture and the Lien created by this Indenture shall continue in full force and effect in accordance with the terms hereof. Promptly upon receipt by a Holder of payment in full of the principal of and interest on the Lessor Notes held by it, and all other amounts payable to it hereunder, under the Lessor Notes and under the Operative Documents such Holder shall deliver the appropriate certificate contemplated by the foregoing sentences of this Section 7.1 to be delivered by it. SECTION 7.2 GOVERNING LAW; COUNTERPARTS. THIS INDENTURE AND THE LESSOR NOTES SHALL BE IN ALL RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THE LAWS OF THE STATE OF ILLINOIS ARE MANDATORILY APPLICABLE UNDER THE LAWS OF THE STATE OF ILLINOIS. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Regardless of any provision in any other agreement, for purposes of the Uniform Commercial Code (as in effect from time to time in the State of New York), the "Securities Intermediary's Jurisdiction" of the Account Bank with respect to the Lease Indenture Trustee's Account is the State of New York. SECTION 7.3 NO LEGAL TITLE TO INDENTURE ESTATE IN HOLDERS. No Holder shall have legal title to any part of the Indenture Estate except as may result from the exercise of remedies hereunder. No transfer, by operation of law or otherwise, of any Lessor Note or other right, title and interest of any Holder in and to the Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Indenture Estate. SECTION 7.4 SALE OF INDENTURE ESTATE BY LEASE INDENTURE TRUSTEE IS BINDING. Any sale or other conveyance of the Indenture Estate or any interest therein by the Lease Indenture Trustee made pursuant to the terms of this Indenture shall be effective to transfer or convey all right, title and interest of the Lease Indenture Trustee, the Owner Trust, the Owner Participant and the Holders in and to the Indenture Estate. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Lease Indenture Trustee. SECTION 7.5 INDENTURE FOR BENEFIT OF THE OWNER TRUST, THE OWNER PARTICIPANT, THE EQUITY INVESTOR, ANY OP GUARANTOR AND THE HOLDERS. Nothing in this Indenture, whether express or implied, shall be construed to give to any Person, other than the Owner Trust, the Owner Participant, the Equity Investor, any OP Guarantor, the Lease Indenture Trustee, the Holders (including, without limitation, any pledgee of the Lessor Notes) and the Facility Lessee, any legal or equitable right, remedy or claim under or in respect of this Indenture. SECTION 7.6 NOTICES. All notices, instructions or demands required or permitted by the terms hereof shall be in English and, unless otherwise specifically provided herein, in writing and must be given in the manner hereinafter specified. Any written notice instruction or demand shall be given by United States mail (certified or registered, postage pre-paid, return receipt requested), by hand-delivery (including overnight mail or courier service), or, if followed and 40 confirmed by hand delivery (including overnight mail or courier service) or United States mail, by facsimile. Any notice, instruction or demand delivered by hand (including overnight mail or courier service) shall become effective when delivered. Any notice, instruction or demand delivered by United States mail shall become effective on the date of receipt. Any notice, instruction or demand delivered by facsimile shall become effective on the date such facsimile is sent, as established by evidence of proper receipt of such transmission. Any notice to any party to the Participation Agreement shall be directed to such party at its address or facsimile numbers set forth in the Participation Agreement or to such other address or number as any such party may designate by notice given to the other parties hereto. Any notice to any Holder shall be directed to such Holder at its address or facsimile numbers as set forth in the Note Register. Each Person delivering a notice hereunder shall deliver a copy thereof to the Facility Lessee; PROVIDED that no such Person shall have any liability for failing to deliver such copy to the Facility Lessee and all notices otherwise properly delivered pursuant to this Section 7.6 shall be effective against the Owner Trust regardless of whether the Person delivering such notice delivers a copy thereof to the Facility Lessee. SECTION 7.7 SEVERABILITY. Any provision of this Indenture 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. SECTION 7.8 NO ORAL MODIFICATIONS OR CONTINUING WAIVERS. No terms or provisions of this Indenture or the Lessor Notes may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other Person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Lessor Note shall be effective only in the specific instance and for the specific purpose given. SECTION 7.9 SUCCESSORS AND ASSIGNS. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. SECTION 7.10 HEADINGS. The headings of the various Sections herein and in the table of contents hereto are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 7.11 NORMAL COMMERCIAL RELATIONS. Anything contained in this Indenture to the contrary notwithstanding, the Lease Indenture Trustee, any Holder or any Affiliate of any of them may conduct any banking or other financial transactions, and have banking, trustee, custody, administrative support or other commercial relationships, with any Holder, Facility Lessee, the Owner Trust, the Owner Participant, the Equity Investor and any OP Guarantor fully to the same extent as if this Indenture were not in effect, including, without limitation, the making of loans or other extensions of credit to any Holder, the Facility Lessee, the Owner Trust, the Owner Participant, the Equity Investor or such OP Guarantor for any purpose whatsoever, related to any of the transactions contemplated hereby or otherwise. SECTION 7.12 WAIVER OF SETOFF. Each of the Holders hereby irrevocably waives any and all rights of set-off that it may have in connection with this Indenture or the Lessor Notes against the Owner Trust, the Facility Lessee or any other Person by reason of Requirements of Law or 41 otherwise. The Owner Trust hereby irrevocably waives any and all rights of set-off that it may have in connection with this Indenture or the Lessor Notes against any Holder, the Facility Lessee, the Facility Sublessee or any other Person by reason of Requirements of Law or otherwise. SECTION 7.13 CONCERNING THE OWNER TRUSTEE. The Owner Trustee is executing this Indenture on behalf of the Owner Trust solely in its capacity as Owner Trustee under the Trust Agreement and not in its individual capacity (except as expressly stated herein) and in no case shall the Trust Company (or any entity acting as Owner Trustee under the Trust Agreement) be personally liable for or on account of any of the statements, representations, warranties, covenants or obligations stated to be those of the Owner Trust or the Owner Trustee hereunder, all such liability, if any, being expressly waived by the parties hereto and any Person claiming by, through, or under such party; PROVIDED, HOWEVER, that the Trust Company (or any such successor Owner Trustee) shall be personally liable hereunder for its own gross negligence or willful misconduct or for its breach of its covenants, representations and warranties contained herein, to the extent covenanted or made in its individual capacity. SECTION 7.14 REQUIRED HOLDERS; ETC. As used in this Indenture and the other Lessor Security Documents, the term "REQUIRED HOLDERS" means Holders holding at least 50.1% of the principal amount of Lessor Notes outstanding (disregarding for such computation any Lessor Notes held directly or beneficially by the Facility Lessee, the Owner Trust, the Owner Participant, the Equity Investor, any OP Guarantor or any Affiliate of any of them, unless such Person owns all of the Lessor Notes in accordance with the provisions of this Indenture). In the event that any Holder has pledged its interests in any of its Lessor Notes, upon registration in the Note Register, the pledgee will, upon delivery of a written request of such pledgee to the Lease Indenture Trustee and the Owner Trust, be treated as the Holder of such Lessor Notes for all purposes under this Indenture. SECTION 7.15 THE LEASE INDENTURE TRUSTEE. (a) Each of the Holders hereby designates and appoints United States Trust Company of New York to act as the Lease Indenture Trustee under this Indenture, and each of the Holders hereby acknowledges such appointment and the rights and powers of the Lease Indenture Trustee under this Indenture. The Lease Indenture Trustee may take such actions on its behalf under the provisions of this Indenture and may exercise such powers and perform such duties as are expressly delegated to the Lease Indenture Trustee by the terms of this Indenture or which duties have been instructed or directed in writing, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Indenture, the Lease Indenture Trustee shall not have any duties or responsibilities, except those expressly set forth in this Indenture, nor shall the Lease Indenture Trustee have any fiduciary relationship with any Holder, and no implied covenants, functions or responsibilities shall be read into this Indenture or otherwise exist against the Lease Indenture Trustee. The Lease Indenture Trustee shall not be responsible or liable for any action taken, suffered or omitted to be taken by it in good faith hereunder, or in connection herewith, or in connection with the Indenture Estate, unless caused by its gross negligence or willful misconduct as determined by a court of competent jurisdiction. (b) In the administration of its duties hereunder, the Lease Indenture Trustee may perform such duties directly or through agents or attorneys and may consult with counsel, accountants and other relevant experts to be selected with due care and employed by it, and the Lease Indenture Trustee shall not be responsible or liable for any action taken, suffered or 42 omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other relevant experts (which shall be complete authorization and protection to the Lease Indenture Trustee) and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture and shall not be responsible or liable for any act or omission on the part of any agent or attorney appointed with due care by it hereunder. (c) Neither the Lease Indenture Trustee nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall (i) be liable for any action lawfully taken, suffered or omitted to be taken by it under or in connection with this Indenture (except for its gross negligence or willful misconduct as determined by a court of competent jurisdiction) or (ii) be responsible or liable in any manner to any of the Holders for any recitals, statements, representations or warranties made by Owner Trust or any other Person or any representative of any thereof contained in this Indenture or in any certificate, report, statement or other document referred to or provided for in, or received by the Lease Indenture Trustee under or in connection with this Indenture or for the accuracy, value, validity, effectiveness, genuineness, enforceability or sufficiency of this Indenture or for any failure of any of the Owner Trust, the Owner Trustee, the Equity Investor, any OP Guarantor, the Facility Lessee or Facility Sublessee to perform their respective obligations hereunder. The Lease Indenture Trustee shall not be responsible for perfecting or continuing the perfection of any security interest or Lien granted under this Indenture or for filing, re-filing, recording or re-recording any document, instrument or notice in any public office at any time or times. The Lease Indenture Trustee shall not be under any obligation to any Holder to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Indenture, or to inspect the properties, books or records of the Owner Trust or any other Person. (d) The Lease Indenture Trustee shall be entitled to rely conclusively, and shall be fully authorized and protected in so relying, upon any Lessor Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and purported to have been signed, sent or made by the proper Person or Persons. In connection with any request of the Required Holders or making any determinations under this Indenture, the Lease Indenture Trustee shall be fully authorized and protected in so relying on a certificate of any Person, purportedly signed by an Authorized Officer of such Person, setting forth the Lessor Notes held by such Person as of the date of such certificate, which certificate shall state that the Person signing such certificate is an Authorized Officer of such Person and shall state specifically the provision hereof pursuant to which the Lease Indenture Trustee is being directed to act. The Lease Indenture Trustee shall be entitled to rely conclusively, and shall be fully authorized and protected in so relying on such certificate. In the absence of bad faith on its part (as determined by a court of competent jurisdiction), the Lease Indenture Trustee may rely conclusively, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates, advice or opinions furnished to the Lease Indenture Trustee hereunder and conforming to the respective requirements hereof. The Lease Indenture Trustee shall be fully justified and protected in failing or refusing to take any action under this Indenture (i) if such action would, in the opinion of the Lease Indenture Trustee (upon consultation with counsel), be contrary to Requirements of Law or the terms of this Indenture, (ii) if such action is not specifically provided for in this Indenture, and it shall not have received such advice or 43 concurrence of the Required Holders, (iii) while waiting for advice or instructions requested by the Lease Indenture Trustee from the Holders or (iv) if, in connection with the taking of any such action that would constitute an exercise of remedies under this Indenture, it shall not first be indemnified to its satisfaction 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 Lease Indenture Trustee shall in all cases be fully protected in acting, or in refraining from acting, under this Indenture in accordance with a request of the Required Holders (except to the extent the consent of each Holder is required hereunder, in which case the Lease Indenture Trustee shall be fully protected in acting or refraining from acting in accordance with the direction of the Holders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Holders. (e) If, with respect to a proposed action to be taken by it, the Lease Indenture Trustee shall determine in good faith that the provisions of this Indenture relating to the functions or responsibilities or powers of the Lease Indenture Trustee are or may be ambiguous or inconsistent, the Lease Indenture Trustee shall notify the Holders, identifying the proposed action and the provisions that it considers are or may be ambiguous or inconsistent, and shall not perform such function or responsibility or exercise such power unless it shall have received the written confirmation from each of the Holders that such Holder concurs in the circumstances that the action proposed to be taken by the Lease Indenture Trustee is consistent with the terms of this Indenture or is otherwise appropriate. The Lease Indenture Trustee shall be fully authorized and protected in acting or refraining from acting upon such confirmation received by it from each of the Holders in this respect, and such confirmation shall be binding upon each such Holder and the Lease Indenture Trustee. Each Holder may consult with counsel in determining the appropriateness of the proposed action. (f) The Lease Indenture Trustee shall not be deemed to have actual, constructive, direct or indirect knowledge or notice of the occurrence of any Lease Default, Lease Event of Default, Lease Indenture Default or Lease Indenture Event of Default or of the acceleration of any Lessor Note by the Holder thereof unless and until an Authorized Officer of the Lease Indenture Trustee has received an officer's certificate from an Authorized Officer of such Holder stating that such an event has occurred. The Lease Indenture Trustee shall have no obligation whatsoever either prior to or after receiving such certificate to inquire whether any Lease Default, Lease Event of Default, Lease Indenture Default or Lease Indenture Event of Default has in fact occurred and shall be entitled to rely conclusively, and shall be fully authorized and protected in so relying, on any such certificate so furnished to it. No provision of this Indenture shall require the Lease Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers. In the event that the Lease Indenture Trustee receives such a certificate regarding the occurrence of any Lease Default, Lease Event of Default, Lease Indenture Default or Lease Indenture Event of Default, the Lease Indenture Trustee shall give notice thereof to the Holders. The Lease Indenture Trustee shall take such action with respect to such Event of Default as so requested by the Required Holders pursuant to this Indenture. (g) The Owner Trust shall pay upon demand to the Lease Indenture Trustee (but only to the extent that the Owner Trust has received such amounts from the Facility Lessee or EME) the amount of any and all reasonable fees, costs and expenses (including disbursements), 44 including the reasonable fees and expenses of its counsel (and any local counsel) and of any experts and agents, which the Lease Indenture Trustee may incur in connection with (i) without duplication of amounts payable in accordance with any fee letter with the Lease Indenture Trustee expressly with respect to the administration of this Indenture, the preparation, execution, delivery and administration of this Indenture (including any amendments hereto), (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Indenture Estate, (iii) the exercise or enforcement (whether through negotiations, legal proceedings or otherwise) of any of the rights or remedies of the Lease Indenture Trustee or the Holders hereunder or (iv) the failure by the Owner Trust or any other Person to perform or observe any of the provisions hereof or of any of the other Lessor Security Documents or Indenture Estate Documents. Each of the Owner Trust and the Lease Indenture Trustee agrees that the fees set forth in the fee letter dated August 4, 2000 cover the services of the Lease Indenture Trustee enumerated therein assuming that no Lease Default, Lease Event of Default, Lease Indenture Default, Lease Indenture Event of Default or other extraordinary event has occurred. At any time any Lease Default, Lease Event of Default, Lease Indenture Default or Lease Indenture Event of Default has occurred and is continuing, the Lease Indenture Trustee shall be entitled to receive additional fees commensurate with the time spent by the Lease Indenture Trustee in connection with its duties hereunder. The Lease Indenture Trustee shall from time to time determine such fees and send Midwest, EME and the Owner Trust notice thereof, and such fees shall be payable upon demand. The Owner Trust and the Lease Indenture Trustee may from time to time agree in writing to modify the fees payable to the Lease Indenture Trustee and no consent of any other Person shall be required in order to so modify such fees. (h) Each of the Holders expressly acknowledges that neither the Lease Indenture Trustee nor any of its officers, directors, employees, agents or attorneys has made any representations or warranties to it and that no act by the Lease Indenture Trustee hereinafter taken, including, without limitation, any review of the Indenture Estate Documents or of the affairs of the Owner Trust or any other Person, shall be deemed to constitute any representation or warranty by the Lease Indenture Trustee to any Holder. Each Holder represents to the Lease Indenture Trustee that it (i) has, independently and without reliance upon the Lease Indenture Trustee or any other Holder, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Indenture Estate or any obligor under any Indenture Estate Document and (ii) has no obligation to make any such appraisals, investigations or credit analyses under this Indenture and has not relied upon the Lease Indenture Trustee for any information, appraisal, investigation or credit analyses in entering into this Indenture or acquiring any Lessor Note. Each Holder also represents that (i) it will, independently and without reliance upon the Lease Indenture Trustee or any other Holder, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Indenture Estate or any obligor under any Indenture Estate Document and (ii) it will not rely upon the Lease Indenture Trustee to provide any investigation or analyses relating to the Indenture Estate or any obligor under any Indenture Estate Document. Except for notices, reports and other documents expressly required to be furnished to the Holders by the Lease Indenture Trustee hereunder, the Lease Indenture Trustee shall not have any duty or responsibility to provide any Holder with any 45 credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Indenture Estate or any obligor under any Indenture Estate Document which may come into the possession of the Lease Indenture Trustee or any of its officers, directors, employees, agents or attorneys-in-fact. (i) Either of the Lease Indenture Trustee or the Account Bank may resign its appointment upon 30 days' notice to the Holders and may be removed at any time with or without cause by the Required Holders, with any such resignation or removal to become effective only upon the acceptance of appointment of a successor Lease Indenture Trustee or Account Bank that (i) has an office in New York, New York, (ii) has capital, surplus and undivided profits of at least $100,000,000 and (iii) is experienced in administering sophisticated financing transactions; PROVIDED, HOWEVER, that if no successor Lease Indenture Trustee or Account Bank shall have been so appointed within 30 days, the resigning Lease Indenture Trustee or Account Bank may, at the expense of Owner Trust, petition any court of competent jurisdiction for the appointment of a new Lease Indenture Trustee or Account Bank. If the Lease Indenture Trustee or the Account Bank shall resign or be removed as Lease Indenture Trustee or Account Bank by the Required Holders then the Required Holders shall (and if no such successor shall have been appointed within 30 days of the Lease Indenture Trustee's or Account Bank's resignation or removal, the Lease Indenture Trustee may) appoint a successor that (i) has an office in New York, New York, (ii) has capital, surplus and undivided profits of at least $100,000,000 and (iii) is experienced in administering sophisticated financing transactions, whereupon such successor shall succeed to the rights, powers and duties of the "Lease Indenture Trustee" or "Account Bank", and the term "Lease Indenture Trustee" or "Account Bank" shall mean such successor effective upon its acceptance of appointment, and the former Lease Indenture Trustee's or Account Bank's rights, powers and duties as Lease Indenture Trustee or Account Bank shall be terminated, without any other or further act or deed on the part of such former Lease Indenture Trustee or Account Bank (except that the resigning Lease Indenture Trustee or Account Bank shall deliver all Indenture Estate then in its possession to the successor Lease Indenture Trustee or Account Bank) or any of the other Holders. Such former Lease Indenture Trustee or Account Bank shall give notice of its resignation or removal to the Owner Trust and all Holders. After any retiring Lease Indenture Trustee's or Account Bank's resignation or removal hereunder as Lease Indenture Trustee or Account Bank, the provisions of this Indenture shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Lease Indenture Trustee or Account Bank. (j) The Lease Indenture Trustee and each Holder hereby irrevocably designate and appoint United States Trust Company of New York, as the Account Bank under this Indenture. The Account Bank hereby agrees to act as "securities intermediary" (within the meaning of Section 8-102(a)(14) of the UCC) with respect to the Lease Indenture Trustee's Account. The Owner Trust hereby acknowledges that the Account Bank shall act as securities intermediary with respect to the Lease Indenture Trustee's Account pursuant to this Indenture. The Account Bank shall not have duties or responsibilities except those expressly set forth in Sections 3.8 and 3.9 of this Indenture. The Lease Indenture Trustee, at the written direction of the Required Holders, may remove and replace the Account Bank pursuant to the terms and conditions of Section 7.15(i) and direct such Account Bank according to the terms of this Indenture. 46 SECTION 7.16 MAXIMUM SECURED OBLIGATIONS. The principal amount of the Lessor Notes initially secured hereby is $321,860,000; the maximum principal amount, including the principal amount of the initial and, subject to the provisions of Section 2.5, future Lessor Notes, which may be secured hereby at any one time is $369,961,200, plus interest and Make-Whole Premium (if any), plus any disbursements for taxes and insurance on the Facility, plus interest thereon, and any other sums advanced in accordance with the terms hereof or any of the other Operative Documents to protect the security of this Indenture. 47 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed on the day and year first above written. JOLIET TRUST I, By: Wilmington Trust Company, not in its individual capacity but solely as the Owner Trustee under the Trust Agreement By: /s/ James P. Lawler ------------------------- Name: James P. Lawler Title: Vice President UNITED STATES TRUST COMPANY OF NEW YORK, as Lease Indenture Trustee, By: /s/ Christopher J. Grell --------------------------- Name: Christopher J. Grell Title: Assistant Vice President 48 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this 24th day of August, 2000, by James P. Lawler, Vice President of WILMINGTON TRUST COMPANY, a Delaware banking corporation, to be the free act and deed on behalf of the banking corporation as the Owner Trustee under the Amended and Restated Trust Agreement dated as of August 17, 2000. /s/ John Beaulieu ------------------------ Notary Public My Commission Expires April 1, 2001 - ----------------------- STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this the 24th day of August, 2000, by Christopher J. Grell, Assistant Vice President of United States Trust Company of New York, a New York banking corporation, to be the free act and deed on behalf of the corporation. /s/ Peter W. Kim -------------------------- Notary Public My Commission Expires May 1, 2002 - ------------------------ 49 ANNEX A TO LEASE INDENTURE DEFINED TERMS Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Indenture shall have such meanings when used in each notice and other communication delivered from time to time in connection with this Indenture. "ACCOUNT BANK" means United States Trust Company of New York, in its capacity as Account Bank hereunder, together with its successors and assigns in such capacity. "ADDITIONAL LESSOR NOTES" has the meaning assigned to such term in Section 2.13 hereof. "ASSUMPTION AGREEMENT" means an Assumption Agreement executed and delivered by an Eligible Successor substantially in the form of Exhibit F hereto. "ASSUMPTION DOCUMENTS" has the meaning assigned to such term in Section 2.12(a). "ASSUMPTION EVENT" shall mean a Midwest Assumption Event or an Owner Participant Assumption Event. "ELIGIBLE SUCCESSOR" means (a) in the case of a Midwest Assumption Event, a designee of Midwest (i) which shall be a direct or indirect wholly-owned Subsidiary of EME (other than Midwest) or another Person acceptable to the Holders (in their sole discretion), (ii) that is a "United States person" within the meaning of Section 7701(a)(30) of the Code and (iii) that is not (A) an "investment company" or a company "controlled" by and "investment company" within the meaning of the Investment Company Act of 1940, as amended or (B) subject to regulation under PUHCA except pursuant to Section 9(a)(2) or Section 32 thereof and (b) in the case of an Owner Participant Assumption Event, a direct or indirect wholly-owned Subsidiary of Public Service Enterprise Group, Inc. or another person acceptable to the Holders (in their sole discretion) (i) that is a "United States person" within the meaning of Section 7701(a)(30) of the Code and (ii) that is not (1) an "investment company" or a company "controlled" by and "investment company" within the meaning of the Investment Company Act of 1940, as amended or (2) subject to regulation under PUHCA except pursuant to Section 9(a)(2) or Section 32 thereof. "HOLDER" means a holder of a Lessor Note. "INDENTURE ESTATE" has the meaning assigned to such term in the granting clause. "INDENTURE ESTATE DOCUMENTS" has the meaning assigned to such term in the Granting Clause. "INTEREST PAYMENT DATE" has the meaning assigned to such term in Section 2.4(b) hereof. "LEASE DEFAULT" means a Lease Event of Default or any condition, occurrence or event which, with notice or lapse of time or both, would constitute a Lease Event of Default. "LEASE INDENTURE DEFAULT" means a Lease Indenture Event of Default or any condition, occurrence or event which, with notice or lapse of time or both, would constitute a Lease Indenture Event of Default. "LEASE INDENTURE EVENT OF DEFAULT" has the meaning assigned to such term in Section 4.2 hereof. "LEASE INDENTURE TRUSTEE'S ACCOUNT" has the meaning assigned to such term in Section 3.8(a) hereof. "LEASE INDENTURE TRUSTEE ACCOUNT COLLATERAL" has the meaning assigned to such term in Section 3.8(c) hereof. "LESSOR NOTE" means each Lessor Note and each Subsequent Lessor Note. "LESSOR SECURED OBLIGATIONS" has the meaning assigned to such term in the Granting Clause. "MAKE-WHOLE PREMIUM" means an amount equal to the Discounted Present Value calculated for any Lessor Note subject to mandatory prepayment pursuant to this Lease Indenture less the unpaid principal amount of such Lessor Note; provided that the Make Whole Premium shall not be less than zero. For purposes of this definition, the "Discounted Present Value" of any Lessor Note subject to mandatory prepayment pursuant to this Lease Indenture shall be equal to the discounted present value, as of the date of mandatory pre-payment, of all principal and interest payments scheduled to become due in respect of such Lessor Note after the date of such mandatory prepayment, calculated using a discount rate equal to the sum of (i) the yield to maturity on the U.S. Treasury security having an average life equal to the remaining average life of such Lessor Note and trading in the secondary market at the price closest to par PLUS (ii) 0.50%; provided, however, that if there is no U.S. Treasury security having an average life equal to the remaining average life of such Lessor Note, such discount rate shall be calculated using a yield to maturity interpolated or extrapolated on a straight-line basis (rounding to the nearest calendar month, if necessary) from the yields to maturity for the two U.S. Treasury securities having average lives most closely corresponding to the remaining life of such Lessor Note and trading in the secondary market at the price closest to par. "MIDWEST ASSUMPTION EVENT" shall mean the election of Midwest to assume the Lessor Notes pursuant to Section 10.2(b) of the Facility Lease. "NEW LESSOR NOTES" has the meaning assigned to such term in Section 2.13 hereof. "NOTE REGISTER" has the meaning assigned to such term in Section 2.9 hereof. "OWNER PARTICIPANT ASSUMPTION EVENT" shall mean (a) the occurrence and continuance of a Lease Event of Default or (b) a termination of the Facility Lease pursuant to Section 14.1 of the Facility Lease together with an election by the Owner Trust to retain the Undivided Interest pursuant to Section 14.3 of the Facility Lease. "OWNER TRUST" has the meaning assigned to such term in the Recitals. "PAYMENT DATE" has the meaning assigned to such term in Section 2.4(b) hereof. "PARTICIPATION AGREEMENT" has the meaning assigned to such term in the Section 1 hereof. "PROPERTY INTEREST" has the meaning assigned to such term in the Granting Clause. "REGISTRAR" has the meaning assigned to such term in Section 2.8 hereof. "REQUIRED HOLDERS" has the meaning assigned to such term in Section 7.14 hereof. "SUBSEQUENT LESSOR NOTE" has the meaning assigned to such term in Section 2.13 hereof. 2 EXHIBIT A TO LEASE INDENTURE DESCRIPTION OF THE FACILITY EXHIBIT B TO LEASE INDENTURE DESCRIPTION OF THE FACILITY SITE EXHIBIT C TO LEASE INDENTURE FORM OF SERIES A LESSOR NOTE THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION IS IN EFFECT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT JOLIET TRUST I, as Owner Trust SERIES A LESSOR NOTE DUE JULY 2, 2009 No. 1 New York, New York $[__________] [__________], 20__ JOLIET TRUST I (the "OWNER TRUST") acting pursuant to that certain Amended and Restated Trust Agreement (T1) dated as of August 17, 2000 (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and, where applicable, the terms of the other Operative Documents, the "TRUST AGREEMENT") between the Owner Participant named therein and Wilmington Trust Company (the "TRUST COMPANY"), hereby promises to pay to United States Trust Company of New York, as Pass-Through Trustee, or registered assigns, the principal sum of [__________] Dollars, in installments on the Payment Dates and in the amounts set forth in Annex A hereto; PROVIDED, HOWEVER, that the final principal payment hereon shall in any and all events equal the then outstanding principal balance hereof, together with interest at the rate of 8.30% per annum (subject to the immediately following paragraph, with respect to an Illiquidity Event or a Reporting Cessation) on the unpaid principal amount hereof from time to time outstanding from and including the date hereof until such principal amount is paid in full. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Accrued interest hereon shall be payable on each Interest Payment Date and on the date this Lessor Note is paid in full. This Lessor Note shall bear interest, to the maximum extent permitted by Requirements of Law, at the Overdue Rate on any part of the principal amount hereof, and on any interest or other amounts due hereunder, not paid when due (whether at stated maturity, by acceleration or otherwise), for the period the same is past due, payable on demand of the holder hereof. The Facility Lessee and EME have entered into a Registration Rights Agreement dated August 17, 2000 (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and, where applicable, the terms of the other Operative Documents, the "REGISTRATION RIGHTS AGREEMENT") with the -2- Initial Purchasers described therein. Pursuant to such Registration Rights Agreement, the Facility Lessee and EME have agreed to use their reasonable best efforts to (a) cause to become effective on or prior to the date which is 270 days after the Closing Date (i) the Exchange Offer Registration Statement or (ii) an Initial Shelf Registration Statement (as each such term is defined in the Registration Rights Agreement) and to maintain the respective effectiveness of such Registration Statements (as defined in the Registration Rights Agreement) as described in the Registration Rights Agreement. From and after the date on which an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, additional interest (in addition to the interest otherwise payable with respect to this Lessor Note) shall accrue on this Lessor Note until but not including the date on which such Illiquidity Event shall cease to exist (and provided no other Illiquidity Event with respect to the Certificates issued on the Closing Date shall then be continuing), at the rate of 0.50% per annum, which additional interest shall be payable hereon at the times, in the manner and subject to the same terms and conditions set forth herein and in the Indenture (as defined below), as nearly as may be, as though the interest rate set forth above had been increased by 0.50% per annum. In the event that either the Facility Lessee or EME ceases to maintain its status as a reporting company under the Securities Exchange Act of 1934, as amended (such Act, the "EXCHANGE ACT" and such cessation, a "REPORTING CESSATION")(it being understood that no Reporting Cessation shall be deemed to occur if the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or any successor body will not accept the information and reports of the Facility Lessee or EME to be filed pursuant to the Exchange Act), additional interest (in addition to the interest otherwise payable with respect to this Lessor Note) shall thereafter accrue on this Lessor Note until but not including the date on which such Reporting Cessation shall cease to exist (and provided no other Reporting Cessation shall then be continuing) at the rate of 0.50% per annum, which additional interest shall be payable hereon at the times, in the manner and subject to the same terms and conditions set forth herein and in the Indenture (as defined below), as nearly as may be, as though the interest rate set forth above had been increased by 0.50% per annum. Anything in the foregoing to the contrary notwithstanding, in the event that an Illiquidity Event and a Reporting Cessation shall have occurred and be continuing at the same time, the maximum amount of additional interest to accrue on this Lessor Note as set forth above shall be 0.50% per annum. All payments of principal and interest and all other amounts to be made by the Owner Trust hereunder or under the Indenture of Trust, Mortgage and Security Agreement (T1) dated as of August 17, 2000 (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and, where applicable, the terms of the other Operative Documents, the "INDENTURE"; the defined terms therein (including by cross-reference) not otherwise defined herein being used herein with the same meanings) among the Owner Trust, and United States Trust Company of New York, as Lease Indenture Trustee shall be made (i) only from the income and proceeds from the Indenture Estate and (ii) only to the extent that the Owner Trust shall have sufficient income or proceeds from the Indenture Estate to enable such payments to be made in accordance with the terms of the Indenture. Each holder hereof, by its acceptance of this Lessor Note, agrees that (a) it will look solely to the income and proceeds from the Indenture Estate to the extent available for distribution to the holder hereof as above provided and (b) none of the Lease Indenture Trustee, Owner Participant, the Equity Investor, any OP Guarantor, the Owner Trustee, Owner Trust or the Trust Company is, or shall be, personally liable to the holder hereof for any amounts payable -3- under this Lessor Note or under the Indenture or for any liability under the Indenture, except as expressly provided in the Indenture. Principal, Make-Whole Premium (if any) and interest and other amounts due hereunder or under the Indenture shall be payable in Dollars by wire transfer of immediately available funds on the due date thereof to the Lease Indenture Trustee's Account (by wire transfer of immediately available funds if not otherwise specified) or to such other account as the holder hereof shall have designated to the Owner Trust in writing. Payment to the Lease Indenture Trustee must be received by 12:00 (noon), New York time. If any sum payable hereunder or under the Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day and, if paid on such Business Day, the payment thereof shall be without penalty or interest (unless calculation of such amount is based on actual days elapsed) or other adjustment. The holder hereof, by its acceptance of this Lessor Note, agrees that each payment of principal and interest or other amounts received by it hereunder shall be applied, FIRST, to the payment of interest on this Lessor Note (as well as any interest on overdue principal, and, to the extent permitted by law, interest and other amounts hereunder) due and payable to the date of such payment as hereinabove provided, SECOND, to the payment of the principal of, and Make-Whole Premium, if any, then due hereunder, and THIRD, to the extent permitted under the Indenture, the balance, if any, remaining thereafter, to the payment of the principal amount of, and Make-Whole Premium, if any, hereunder. This Lessor Note is one of the Lessor Notes, and one of the Initial Lessor Notes, referred to in the Indenture which have been or are to be issued by the Owner Trust pursuant to the terms of the Indenture. The Indenture Estate is held by the Lease Indenture Trustee as security for the Lessor Notes. Reference is hereby made to the Indenture for a statement of the rights and obligations of the holder of, and the nature and extent of the security for, this Lessor Note and of the rights and obligations of the holders of, and the nature and extent of the security for, the other Lessor Notes, as well as for a statement of the terms and conditions of the trusts created thereby. By its acceptance of this Lessor Note, each holder hereof agrees to all of the terms and conditions in the Indenture and in the Participation Agreement referred to therein expressed to be binding on the Lease Indenture Trustee or a holder of a Lessor Note. There shall be maintained the Note Register for the purpose of registering this Lessor Note and registering transfers and exchanges of Lessor Notes at the principal office of the Owner Trustee in the manner provided in Section 2.8 of the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the Lessor Notes are exchangeable for Lessor Notes of the same series, of any authorized denominations and of like aggregate original principal amount, as requested by the holder hereof surrendering the same. Except as otherwise provided in Section 2.8 of the Indenture, prior to the due presentment for registration of transfer of this Lessor Note, the Owner Trust and each holder hereof shall deem and treat the Person in whose name this Lessor Note is registered on the Note Register as the absolute owner and holder hereof for the purpose of receiving payment of all amounts payable with respect to this Lessor Note and for all other purposes whether or not this -4- Lessor Note is overdue, and neither the Owner Trust nor any holder hereof shall be affected by any notice to the contrary. This Lessor Note is subject to prepayment solely as required by Section 2.11 of the Indenture, to purchase by the Owner Trust, the Owner Participant or an OP Guarantor as provided in Section 2.10 of the Indenture and to assumption by an Eligible Successor in accordance with Section 2.12 of the Indenture. If at any time a Lease Indenture Event of Default shall have occurred and be continuing, this Lessor Note may be declared, and under certain circumstances shall automatically be deemed to be declared, due and payable, all upon the conditions, in the manner and with the effect provided in the Indenture. By its acceptance hereof, the holder of this Lessor Note agrees that the Owner Trustee is executing this Lessor Note on behalf of the Owner Trust solely in its capacity as Owner Trustee under the Trust Agreement and not in its individual capacity and in no case shall the Trust Company (or any entity acting as Owner Trustee under the Trust Agreement) be personally liable in respect of the obligations stated to be those of the Owner Trust or the Owner Trustee hereunder. By its acceptance hereof, the holder of this Lessor Note represents for the benefit of the Owner Trust, the Owner Participant and the Facility Lessee that either: (i) no Plan assets have been used to purchase this Lessor Note or (ii) the purchase and holding of this Lessor Note are either exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to one or more prohibited transaction statutory or administrative exemptions or do not constitute a prohibited transaction under such restrictions of ERISA and the Code. THIS LESSOR NOTE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE, WITH THE LAWS OF THE STATE OF NEW YORK. -5- IN WITNESS WHEREOF, the Owner Trust has caused this Lessor Note to be executed in its name by the Owner Trustee by an officer of the Owner Trustee thereunto duly authorized, as of the date hereof. JOLIET TRUST I, as Owner Trust By: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement By: ----------------------------------------- Name: Title: This is one of the Lessor Notes referred to in the within-mentioned Indenture UNITED STATES TRUST COMPANY OF NEW YORK as Lease Indenture Trustee By: -------------------- Authorized Officer ANNEX A to Series A Lessor Note
- ------------------------------------------------------------ A B - ----------------------------------------------------------- Payment Principal Date Payment ($) - ----------------------------------------------------------- - ---------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - ----------------------------------------------------------- - -----------------------------------------------------------
EXHIBIT D TO LEASE INDENTURE FORM OF SERIES B LESSOR NOTE THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION IS IN EFFECT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT JOLIET TRUST I, as Owner Trust SERIES B LESSOR NOTE DUE JULY 2, 2014 No. 1 New York, New York $[__________] [_________], 20__ JOLIET TRUST I (the "OWNER TRUST") acting pursuant to that certain Amended and Restated Trust Agreement (T1) dated as of August 17, 2000 (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and, where applicable, the terms of the other Operative Documents, the "TRUST AGREEMENT") between the Owner Participant named therein and Wilmington Trust Company (the "TRUST COMPANY"), hereby promises to pay to United States Trust Company of New York, as Pass-Through Trustee, or registered assigns, the principal sum of [__________] Dollars, in installments on the Payment Dates and in the amounts set forth in Annex A hereto; PROVIDED, HOWEVER, that the final principal payment hereon shall in any and all events equal the then outstanding principal balance hereof, together with interest at the rate of 8.56% per annum (subject to the immediately following paragraph, with respect to an Illiquidity Event or a Reporting Cessation) on the unpaid principal amount hereof from time to time outstanding from and including the date hereof until such principal amount is paid in full. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Accrued interest hereon shall be payable on each Interest Payment Date and on the date this Lessor Note is paid in full. This Lessor Note shall bear interest, to the maximum extent permitted by Requirements of Law, at the Overdue Rate on any part of the principal amount hereof, and on any interest or other amounts due hereunder, not paid when due (whether at stated maturity, by acceleration or otherwise), for the period the same is past due, payable on demand of the holder hereof. The Facility Lessee and EME have entered into a Registration Rights Agreement dated August 17, 2000 (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and, where applicable, -2- the terms of the other Operative Documents, the "REGISTRATION RIGHTS AGREEMENT") with the Initial Purchasers described therein. Pursuant to such Registration Rights Agreement, the Facility Lessee and EME have agreed to use their reasonable best efforts to (a) cause to become effective on or prior to the date which is 270 days after the Closing Date (i) the Exchange Offer Registration Statement or (ii) an Initial Shelf Registration Statement (as each such term is defined in the Registration Rights Agreement) and to maintain the respective effectiveness of such Registration Statements (as defined in the Registration Rights Agreement) as described in the Registration Rights Agreement. From and after the date on which an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, additional interest (in addition to the interest otherwise payable with respect to this Lessor Note) shall accrue on this Lessor Note until but not including the date on which such Illiquidity Event shall cease to exist (and provided no other Illiquidity Event with respect to the Certificates issued on the Closing Date shall then be continuing), at the rate of 0.50% per annum, which additional interest shall be payable hereon at the times, in the manner and subject to the same terms and conditions set forth herein and in the Indenture (as defined below), as nearly as may be, as though the interest rate set forth above had been increased by 0.50% per annum. In the event that either the Facility Lessee or EME ceases to maintain its status as a reporting company under the Securities Exchange Act of 1934, as amended (such Act, the "EXCHANGE ACT" and such cessation, a "REPORTING CESSATION")(it being understood that no Reporting Cessation shall be deemed to occur if the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or any successor body will not accept the information and reports of the Facility Lessee or EME to be filed pursuant to the Exchange Act), additional interest (in addition to the interest otherwise payable with respect to this Lessor Note) shall thereafter accrue on this Lessor Note until but not including the date on which such Reporting Cessation shall cease to exist (and provided no other Reporting Cessation shall then be continuing) at the rate of 0.50% per annum, which additional interest shall be payable hereon at the times, in the manner and subject to the same terms and conditions set forth herein and in the Indenture (as defined below), as nearly as may be, as though the interest rate set forth above had been increased by 0.50% per annum. Anything in the foregoing to the contrary notwithstanding, in the event that an Illiquidity Event and a Reporting Cessation shall have occurred and be continuing at the same time, the maximum amount of additional interest to accrue on this Lessor Note as set forth above shall be 0.50% per annum. All payments of principal and interest and all other amounts to be made by the Owner Trust hereunder or under the Indenture of Trust, Mortgage and Security Agreement (T1) dated as of August 17, 2000 (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and, where applicable, the terms of the other Operative Documents, the "INDENTURE"; the defined terms therein (including by cross-reference) not otherwise defined herein being used herein with the same meanings) among the Owner Trust, and United States Trust Company of New York, as Lease Indenture Trustee shall be made (i) only from the income and proceeds from the Indenture Estate and (ii) only to the extent that the Owner Trust shall have sufficient income or proceeds from the Indenture Estate to enable such payments to be made in accordance with the terms of the Indenture. Each holder hereof, by its acceptance of this Lessor Note, agrees that (a) it will look solely to the income and proceeds from the Indenture Estate to the extent available for distribution to the holder hereof as above provided and (b) none of the Lease Indenture Trustee, Owner Participant, the Equity Investor, any OP Guarantor, the Owner Trustee, Owner Trust or the Trust Company is, or shall be, personally liable to the holder hereof for any amounts payable -3- under this Lessor Note or under the Indenture or for any liability under the Indenture, except as expressly provided in the Indenture. Principal, Make-Whole Premium (if any) and interest and other amounts due hereunder or under the Indenture shall be payable in Dollars by wire transfer of immediately available funds on the due date thereof to the Lease Indenture Trustee's Account (by wire transfer of immediately available funds if not otherwise specified) or to such other account as the holder hereof shall have designated to the Owner Trust in writing. Payment to the Lease Indenture Trustee must be received by 12:00 (noon), New York time. If any sum payable hereunder or under the Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day and, if paid on such Business Day, the payment thereof shall be without penalty or interest (unless calculation of such amount is based on actual days elapsed) or other adjustment. The holder hereof, by its acceptance of this Lessor Note, agrees that each payment of principal and interest or other amounts received by it hereunder shall be applied, FIRST, to the payment of interest on this Lessor Note (as well as any interest on overdue principal, and, to the extent permitted by law, interest and other amounts hereunder) due and payable to the date of such payment as hereinabove provided, SECOND, to the payment of the principal of, and Make-Whole Premium, if any, then due hereunder, and THIRD, to the extent permitted under the Indenture, the balance, if any, remaining thereafter, to the payment of the principal amount of, and Make-Whole Premium, if any, hereunder. This Lessor Note is one of the Lessor Notes, and one of the Initial Lessor Notes, referred to in the Indenture which have been or are to be issued by the Owner Trust pursuant to the terms of the Indenture. The Indenture Estate is held by the Lease Indenture Trustee as security for the Lessor Notes. Reference is hereby made to the Indenture for a statement of the rights and obligations of the holder of, and the nature and extent of the security for, this Lessor Note and of the rights and obligations of the holders of, and the nature and extent of the security for, the other Lessor Notes, as well as for a statement of the terms and conditions of the trusts created thereby. By its acceptance of this Lessor Note, each holder hereof agrees to all of the terms and conditions in the Indenture and in the Participation Agreement referred to therein expressed to be binding on the Lease Indenture Trustee or a holder of a Lessor Note. There shall be maintained the Note Register for the purpose of registering this Lessor Note and registering transfers and exchanges of Lessor Notes at the principal office of the Owner Trustee in the manner provided in Section 2.8 of the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the Lessor Notes are exchangeable for Lessor Notes of the same series, of any authorized denominations and of like aggregate original principal amount, as requested by the holder hereof surrendering the same. Except as otherwise provided in Section 2.8 of the Indenture, prior to the due presentment for registration of transfer of this Lessor Note, the Owner Trust and each holder hereof shall deem and treat the Person in whose name this Lessor Note is registered on the Note Register as the absolute owner and holder hereof for the purpose of receiving payment of all amounts payable with respect to this Lessor Note and for all other purposes whether or not this -4- Lessor Note is overdue, and neither the Owner Trust nor any holder hereof shall be affected by any notice to the contrary. This Lessor Note is subject to prepayment solely as required by Section 2.11 of the Indenture, to purchase by the Owner Trust, the Owner Participant or an OP Guarantor as provided in Section 2.10 of the Indenture and to assumption by an Eligible Successor in accordance with Section 2.12 of the Indenture. If at any time a Lease Indenture Event of Default shall have occurred and be continuing, this Lessor Note may be declared, and under certain circumstances shall automatically be deemed to be declared, due and payable, all upon the conditions, in the manner and with the effect provided in the Indenture. By its acceptance hereof, the holder of this Lessor Note agrees that the Owner Trustee is executing this Lessor Note on behalf of the Owner Trust solely in its capacity as Owner Trustee under the Trust Agreement and not in its individual capacity and in no case shall the Trust Company (or any entity acting as Owner Trustee under the Trust Agreement) be personally liable in respect of the obligations stated to be those of the Owner Trust or the Owner Trustee hereunder. By its acceptance hereof, the holder of this Lessor Note represents for the benefit of the Owner Trust, the Owner Participant and the Facility Lessee that either: (i) no Plan assets have been used to purchase this Lessor Note or (ii) the purchase and holding of this Lessor Note are either exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to one or more prohibited transaction statutory or administrative exemptions or do not constitute a prohibited transaction under such restrictions of ERISA and the Code. THIS LESSOR NOTE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE, WITH THE LAWS OF THE STATE OF NEW YORK. -5- IN WITNESS WHEREOF, the Owner Trust has caused this Lessor Note to be executed in its name by the Owner Trustee by an officer of the Owner Trustee thereunto duly authorized, as of the date hereof. JOLIET TRUST I, as Owner Trust By: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement By: ----------------------------------------- Name: Title: This is one of the Lessor Notes referred to in the within-mentioned Indenture UNITED STATES TRUST COMPANY OF NEW YORK as Lease Indenture Trustee By: -------------------- Authorized Officer -1- ANNEX A to Series B Lessor Note
- ---------------------------------------------------------- A B - ---------------------------------------------------------- Payment Principal Date Payment ($) - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ----------------------------------------------------------
-1- EXHIBIT E TO LEASE INDENTURE FORM OF CERTIFICATE OF AUTHENTICATION This is one of the Lessor Notes referred to in the within-mentioned Indenture [--------------------], as Lease Indenture Trustee By:____________________ Authorized Officer EXHIBIT F TO LEASE INDENTURE FORM OF ASSUMPTION AGREEMENT To: The Holders (as defined below) from time to time of the Lessor Notes (as defined below) of Joliet Trust I (the "OWNER TRUST) under the Indenture of Trust, Mortgage and Security Agreement (T1) (as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof and the other Operative Documents (as defined below), the "INDENTURE") dated as of August 17, 2000 between the Owner Trust and the Lease Indenture Trustee referred to therein. The undersigned, [____________], a [_________] (the "ELIGIBLE SUCCESSOR") does hereby covenant and agree with the Holders and the Lease Indenture Trustee from time to time of the Lessor Notes as follows. Capitalized terms used herein shall have the meanings assigned thereto in the Indenture. SECTION 1. The Eligible Successor does hereby agree to, and does hereby assume unconditionally, (a) the payment of the principal of the Lessor Notes and of the interest and premium (including, without limitation, Make-Whole Premium) (if any) thereon, at the rates provided in the Lessor Notes, when and as the same shall become due and payable, whether at maturity or upon mandatory prepayment or upon acceleration or otherwise, according to the terms of the Lessor Notes and of the Indenture, (b) the payment of all other amounts under or with respect to the Indenture and the Lessor Notes and (c) each and every other obligation of the Owner Trust under the Indenture and the Lessor Notes. SECTION 2. The assumption herein contained shall be binding upon the Eligible Successor, its successors and assigns and shall remain in full force and effect irrespective of the power or authority of the Owner Trust to issue the Lessor Notes or to execute, acknowledge and deliver the Indenture or the validity of the Lessor Notes or the Indenture, or any defense whatsoever that the Owner Trust may or might have to the payment of the Lessor Notes (principal, interest or premium (including, without limitation, Make-Whole Premium)), or to the performance or observance of any of the provisions or conditions of the Indenture or any Lessor Note, or of the existence or continuance of the Owner Trust as a legal entity; nor shall said assumption be affected by the merger, consolidation, or other dissolution of the Owner Trust or the sale or other transfer of the property of the Owner Trust as an entirety, or substantially so, to any other person; nor shall the assumption be discharged or impaired by any act, failure or omission whatsoever on the part of any Holder of any Lessor Notes or the Lease Indenture Trustee, including, among other such acts, failures and omissions, the following: (a) any failure to present any Lessor Notes for payment or to demand payment thereof, or to give to the Eligible Successor notice of dishonor and nonpayment of any Lessor Note when and as the same may become due and payable, or notice of any failure on the part of the Owner Trust to do any act or thing or to perform or keep any covenant or agreement by it to be done, kept or performed under the terms of the Lessor Notes or the Indenture; -2- (b) any extension of the obligation of any Lessor Note, either indefinitely or for any period of time, or any other modification in the obligations under any Lessor Note or the Indenture or of the Owner Trust thereon or in connection therewith; (c) any act or failure to act with regard to any Lessor Note or the Indenture or anything which might vary the risk of the Eligible Successor; and (d) any action taken under the Indenture or the Lessor Notes in the exercise of any right or power thereby conferred or any failure or omission on the part of the Lease Indenture Trustee or the Holder of any Lessor Note to enforce any right or security given under the Indenture or any Lessor Note, or any waiver of any right or any failure or omission on the part of the Lease Indenture Trustee or any Holder of any Lessor Note to enforce any right of any Holder of any Lessor Note against the Owner Trust; PROVIDED, always, that the specific enumeration of the above-mentioned acts, failures, waivers, or omissions shall not be deemed to exclude any other acts failures, waivers or omissions though not specifically mentioned herein, it being the purpose and intent of this Assumption Agreement that the obligation of the Eligible Successor shall be absolute and unconditional to the extent herein specified and shall not be discharged, impaired or varied except by the payment of the principal of and interest on any Lessor Note and any premium (including, without limitation, Make-Whole Premium) thereon in case of prepayment, and then only to the extent of such payments. SECTION 3. The Eligible Successor does hereby consent to all of the terms and conditions of each series of Lessor Notes outstanding and of the Indenture, and hereby waives any and all rights of notice of any fact or facts or circumstance or circumstances whatsoever and consents to any extension or extensions of time of any payment or payments, or of any other act or thing which any Holder or Holders of any Lessor Note or the Owner Trust may agree to consent to, either expressly, by acquiescence or otherwise, and hereby agrees not to claim or enforce any rights of subrogation or any other right or privilege which might otherwise arise on account of any payment made by it or act or thing done by it on account of or in accordance with its assumption herein contained, unless and until all of the Lessor Notes have been fully paid and discharged. SECTION 4. The assumption herein expressed may be transferred or assigned at any time or from time to time and shall be considered to be transferred and assigned upon the transfer of any Lessor Note, whether with or without the consent of or notice to the Eligible Successor or the Owner Trust. The Eligible Successor hereby agrees to execute and deliver such instruments and to do such acts and things requested by the Lease Indenture Trustee as shall be reasonably necessary to carry out and effectuate the purposes and intents of this Assumption Agreement. This Assumption Agreement may not be amended or modified in any respect without the prior -3- written consent (evidenced as provided in the Indenture) of the Holders. The Eligible Successor agrees to file with the Lease Indenture Trustee a duplicate original of each such consent. [______________] By: ---------------------------------- Title: ATTEST: - ----------------------------- Title: EX-4.6-1 10 a2031364zex-4_61.txt EXHIBIT 4.6.1 Exhibit 4.6.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 4.6 - ------------------------------------------------------------------------- Indenture of Trust, Mortgage and Security Agreement (T2), dated as of August 17, 2000, between Joliet Trust II and the United States Trust Company of New York, as Lease Indenture Trustee. This Indenture of Trust, Mortgage and Security Agreement differs from Exhibit 4.6 in the following respects: In the Lessor Notes section (2.2), the initial aggregate principal amounts of the Series A and Series B Lessor Notes are $57,270,000 and $125,410,000, respectively. In the Miscellaneous section (7.16), the maximum principal amount of the Lessor Notes secured by this indenture is $211,738,800. 1 EX-4.7 11 a2031364zex-4_7.txt EXHIBIT 4.7 Exhibit 4.7 ================================================================================ FACILITY LEASE AGREEMENT (T1) Dated as of August 17, 2000 between POWERTON TRUST I, as Owner Lessor and MIDWEST GENERATION, LLC, as Facility Lessee POWERTON STATION COAL-FIRED ELECTRIC GENERATING FACILITY ================================================================================ CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE OWNER LESSOR IN AND TO THIS LEASE AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF UNITED STATES TRUST COMPANY OF NEW YORK POWERTON FACILITY LEASE (T1) NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS LEASE INDENTURE TRUSTEE UNDER AN INDENTURE OF TRUST, MORTGAGE AND SECURITY AGREEMENT, DATED AS OF AUGUST 17, 2000 BETWEEN SAID LEASE INDENTURE TRUSTEE, AS SECURED PARTY, FOR THE BENEFIT OF THE HOLDERS THEREUNDER, AND THE OWNER LESSOR, AS DEBTOR. SEE SECTION 21 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF. 2 TABLE OF CONTENTS
PAGE SECTION 1. DEFINITIONS.............................................................................2 SECTION 2. LEASE OF THE UNDIVIDED INTEREST.........................................................2 SECTION 3. FACILITY LEASE TERM AND RENT............................................................2 Section 3.1. Basic Lease Term............................................................2 Section 3.2. Rent........................................................................2 Section 3.3. Supplemental Lease Rent.....................................................3 Section 3.4. Adjustment of Basic Lease Rent and Termination Value........................3 Section 3.5. Manner of Payments..........................................................5 SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT......................................6 Section 4.1. Disclaimer of Warranties....................................................6 Section 4.2. Quiet Enjoyment.............................................................7 SECTION 5. RETURN OF UNDIVIDED INTEREST............................................................7 Section 5.1. Return......................................................................7 Section 5.2. Condition Upon Return.......................................................8 Section 5.3. Expenses....................................................................9 Section 5.4. Freight and Crate...........................................................9 SECTION 6. LIENS..................................................................................10 SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS................................................10 Section 7.1. Maintenance................................................................10 Section 7.2. Replacement of Components..................................................10 Section 7.3. Environmental Matters......................................................11 SECTION 8. IMPROVEMENTS...........................................................................12 Section 8.1. Required Improvements......................................................12 Section 8.2. Optional Improvements......................................................12 Section 8.3. Title to Improvements......................................................12 Section 8.4. Financing of Improvements..................................................13 i TABLE OF CONTENTS (CONTINUED) SECTION 9. NET LEASE..............................................................................13 SECTION 10. EVENTS OF LOSS........................................................................14 Section 10.1. Occurrence of Events of Loss..............................................14 Section 10.2. Payment Upon Termination; Special Lessee Transfer.........................15 Section 10.3. Application of Proceeds...................................................17 Section 10.4. Rebuild...................................................................17 Section 10.5. Application of Payments Not Relating to an Event of Loss......................................................................................19 SECTION 11. INSURANCE.............................................................................20 Section 11.1. Property Insurance........................................................20 Section 11.2. Liability Insurance.......................................................20 Section 11.3. Provisions With Respect to Insurance......................................20 Section 11.4. Reports...................................................................21 Section 11.5. Additional Insurance......................................................21 Section 11.6. Amendment of Insurance Requirements.......................................22 Section 11.7. Application of Insurance Proceeds.........................................22 SECTION 12. INSPECTION............................................................................24 SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS..............................................24 Section 13.1. Termination for Illegality................................................24 Section 13.2. Termination for Burdensome Indemnity......................................24 Section 13.3. Procedure for Exercise of Termination Option..............................25 Section 13.4. Assumption of the Lessor Notes; Special Lessee Transfers.................................................................................26 SECTION 14. TERMINATION FOR OBSOLESCENCE..........................................................27 Section 14.1. Termination...............................................................27 Section 14.2. Solicitation of Offers....................................................28 Section 14.3. Right of Owner Lessor to Retain the Undivided Interest....................28 Section 14.4. Procedure for Exercise of Termination Option..............................29 ii TABLE OF CONTENTS (CONTINUED) SECTION 15. LEASE RENEWAL.........................................................................30 Section 15.1. Wintergreen Renewal Lease Terms...........................................30 Section 15.2. Fair Market Value Renewal Lease Terms.....................................32 Section 15.3. Renewal Lease Rent and Termination Value for Renewal Lease Term...........32 Section 15.4. Determination of Fair Market Rental Value.................................32 SECTION 16. EVENTS OF DEFAULT.....................................................................33 SECTION 17. REMEDIES..............................................................................36 Section 17.1. Remedies for Lease Event of Default.......................................36 Section 17.2. Limitation on Recourse....................................................39 Section 17.3. Cumulative Remedies.......................................................40 Section 17.4. No Delay or Omission to be Construed as Waiver............................40 SECTION 18. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS....................................40 SECTION 19. RIGHT TO SUBLEASE.....................................................................40 Section 19.1. Sublease..................................................................40 SECTION 20. OWNER LESSOR'S RIGHT TO PERFORM.......................................................42 SECTION 1. SECTION 21. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE LEASE INDENTURE TRUSTEE....42 SECTION 22. MISCELLANEOUS.........................................................................43 Section 22.1. Amendments and Waivers....................................................43 Section 22.2. Notices...................................................................43 Section 22.3. Survival..................................................................44 Section 22.4. Successors and Assigns....................................................45 Section 22.5. "True Lease"..............................................................47 Section 22.6. Governing Law.............................................................47 Section 22.7. Severability..............................................................47 iii TABLE OF CONTENTS (CONTINUED) Section 22.8. Counterparts.............................................................47 Section 22.9. Headings and Table of Contents...........................................48 Section 22.10. Further Assurances.......................................................48 Section 22.11. Effectiveness............................................................48 Section 22.12. Limitation of Liability..................................................48 Section 22.13. Measuring Life...........................................................48
iv TABLE OF CONTENTS (CONTINUED)
EXHIBITS AND SCHEDULES Exhibit A Description of Facility Site Exhibit B Description of Facility Schedule 1-1 Basic Lease Rent Schedule 1-2 Allocation of Basic Lease Rent Schedule 1-3 467 Rent Allocation Schedule 2 Termination Values
v FACILITY LEASE AGREEMENT (T1) This FACILITY LEASE AGREEMENT (T1), dated as of August 17, 2000 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions hereof, this "FACILITY LEASE"), between Powerton Trust I, a Delaware business trust (the "OWNER LESSOR" or the "OWNER TRUST") created for the benefit of Powerton Generation I, LLC, a Delaware limited liability company (the "OWNER PARTICIPANT"), and Midwest Generation, LLC, a Delaware limited liability company (the "FACILITY LESSEE"). WITNESSETH: WHEREAS, the Owner Lessor is governed by the Amended and Restated Trust Agreement (T1), dated as of August 17, 2000 (the "TRUST AGREEMENT"), between Wilmington Trust Company (the "OWNER TRUSTEE") and the Owner Participant; WHEREAS, the Facility Lessee owns the Facility Site which is more particularly described in Exhibit A hereto, such Exhibit A being attached to this Facility Lease as a part hereof; WHEREAS, pursuant to the Facility Site Lease, Midwest has leased the Ground Interest to the Owner Lessor and granted certain non-exclusive easements to the Owner Lessor; WHEREAS, pursuant to the Facility Site Sublease, the Owner Lessor has leased the Ground Interest to Midwest for the term equal to the term of this Facility Lease, including any renewals hereof; WHEREAS, the Facility is located on the Facility Site and is more particularly described in Exhibit B hereto, such Exhibit B being attached to this Facility Lease as a part hereof; WHEREAS, pursuant to the Facility Deed and the Bill of Sale, the Owner Lessor has acquired from the Facility Lessee an undivided ownership interest in the Facility equal to the Undivided Interest Percentage as tenant - in - common with the other owner of an undivided interest in the Facility, with the right to nonexclusive possession of the Facility including an entitlement share in the electrical capacity and output of the Facility equal to the Undivided Interest Percentage (such undivided ownership interest and entitlement share together, the "UNDIVIDED INTEREST"); WHEREAS, the Facility does not include the Facility Site or any part thereof, and the Facility Site is being leased to the Owner Lessor pursuant to the Facility Site Lease and is being subleased to the Facility Lessee pursuant to the Facility Site Sublease; and WHEREAS, pursuant to this Facility Lease, the Owner Trust will lease the Undivided Interest to the Facility Lessee for the Basic Lease Term and the Renewal Lease Terms, if any, provided herein. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS Capitalized terms used in this Facility Lease, including the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A to the Participation Agreement (T1), dated as of August 17, 2000 (the "PARTICIPATION AGREEMENT"), among the Facility Lessee, the Owner Lessor, the Owner Trustee, the Owner Participant, Edison Mission Energy ("EME"), United States Trust Company of New York as Pass Through Trustees and United States Trust Company of New York, as Lease Indenture Trustee unless the context hereof shall otherwise require. The general provisions of Appendix A to the Participation Agreement shall apply to the terms used in this Facility Lease and not specifically defined herein. SECTION 2. LEASE OF THE UNDIVIDED INTEREST Upon the terms and conditions set forth herein, the Owner Lessor hereby leases the Undivided Interest to the Facility Lessee, and the Facility Lessee hereby leases the Undivided Interest from the Owner Lessor, for the Basic Lease Term and, subject to the Facility Lessee's exercise of any of its option to renew the Facility Lease as provided in Section 15, one or more Renewal Lease Terms. The Facility Lessee and the Owner Lessor understand and agree that this Facility Lease is subject to those encumbrances set forth in the Title Policies. The Undivided Interest shall be 2 subject to the terms of this Facility Lease from the date on which this Facility Lease is executed and delivered. SECTION 3. FACILITY LEASE TERM AND RENT SECTION 3.1. BASIC LEASE TERM. The basic lease term of this Facility Lease (the "BASIC LEASE TERM") shall commence on the Closing Date and shall end on the date 33.75 years following the Closing Date, subject to earlier termination pursuant to Section 10, 13, 14 or 17 hereof. SECTION 3.2. RENT. The Facility Lessee hereby agrees to pay to the Owner Lessor pursuant to Section 3.5 hereof, periodic rent for the lease of the Undivided Interest during the Basic Lease Term ("BASIC LEASE RENT") in installments in the amounts shown on Schedule 1-1 hereto on each Rent Payment Date. Basic Lease Rent is allocable in arrears over the Basic Lease Term as set forth in Schedule 1-2 hereto. Basic Lease Rent may be adjusted from time to time in accordance with Section 3.4 hereof. SECTION 3.3. SUPPLEMENTAL LEASE RENT. The Facility Lessee also agrees to pay to the Owner Lessor, or to any other Person entitled thereto as expressly provided herein or in any other Operative Document, as appropriate, any and all Supplemental Lease Rent, promptly as the same shall become due and owing, or where no due date is specified, promptly after demand by the Person entitled thereto, and in the event of any failure on the part of the Facility Lessee to pay any Supplemental Lease Rent, the Owner Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise for the failure to pay Basic Lease Rent. The Facility Lessee agrees to pay, as Supplemental Lease Rent, when due any and all Make-Whole Premiums or other prepayment premiums due under the Lease Indenture or the Lessor Notes. The Facility Lessee will also pay as Supplemental Lease Rent, to the extent permitted by Requirement of Law, an amount equal to interest at the applicable Overdue Rate (computed on the basis of a 360-day year of twelve 30-day months) on any part of any payment of Basic Lease Rent not paid when due for any period for which the same shall be overdue and on any Supplemen tal Lease Rent not paid when due (whether on demand or otherwise) for the period from such due date until the same shall be paid. All Supplemental Lease Rent to be paid pursuant to this Section 3.3 shall be payable in the manner set forth in Section 3.5. 3 SECTION 3.4. ADJUSTMENT OF BASIC LEASE RENT AND TERMINATION VALUE. (a) The Facility Lessee and the Owner Lessor agree that Basic Lease Rent, Termination Values, the Equity Portion of Basic Lease Rent, the Equity Portion of Termination Value and allocations of Basic Lease Rent and 467 Fixed Rent may be adjusted, either upwards or downwards, at the request of the Facility Lessee, the Owner Lessor or the Owner Participant in the following situations: to reflect (A) the principal amount, amortization and interest rate on any New Lessor Notes issued pursuant to Section 2.13 of the Lease Indenture in connection with a refinancing or refunding of the Lessor Notes pursuant to Section 14.2 of the Participation Agreement, (B) the principal amount, amortization and interest rate on any Additional Lessor Notes issued pursuant to Section 2.13 of the Lease Indenture in connection with the financing of Improvements to the Facility pursuant to Section 8 herein and (C) a change in the interest rate on the Initial Lessor Notes during or after the calendar year 2001, under the circumstances set forth in the second paragraph of each Initial Lessor Note. Any adjustments pursuant to this Section 3.4 shall be calculated, FIRST so as not to negatively impact the Owner Participant's Expected Return through the end of the Basic Lease Term (except that with respect to GAAP earnings the Owner Participant shall also not have to record a book loss or reduce earnings by more than ten percent in the year of adjustment) and, SECOND at the option of the Facility Lessee (x) to minimize, to the extent possible, the average annual Basic Lease Rent over the Basic Lease Term for GAAP accounting purposes of the Facility Lessee, and/or (y) to minimize, to the extent possible, the present value to the Facility Lessee of the Basic Lease Rent; PROVIDED, that no adjustment pursuant to this Section 3.4 shall result in a book loss to the Owner Participant in the year such adjustment is made. Adjustments shall be computed by the Owner Participant, or, if prior to the Closing Date, the Equity Investor, using the same method of computation, assumptions and pricing constraints originally used (other than those that have changed as the result of the event giving rise to the adjustment) in the calculation of Basic Lease Rent and Termination Values set forth in Schedule 1-1 and Schedule 2 hereto and shall be subject to the verification procedure described in Section 3.4(c). Adjustments to Basic Lease Rent contemplated by this Section 3.4 shall result in corresponding adjustments to Termination Values. All Basic Lease Rent adjustments shall comply (in case of the adjustment in connection with the event set forth in Section 3.4(a)(C) above, such compliance shall be with respect to all of the Basic Lease Term from the Closing Date, as a single lease term, taking into account the Basic Rent allocations for the period of the Basic Lease Term prior to the date of adjustment) with Revenue Procedures 75-21 and 75-28 and 467 of the Code and any proposed, temporary, or 4 final regulations thereunder, in each case as modified and in effect on the date of such adjustment and shall be calculated in such a manner so that, if the Facility Lease were determined to be a "disqualified leaseback or long-term agreement" within the meaning of Section 467 of the Code, the result would be an increase in the Owner Participant's Expected Return (when contrasted with the Owner Participant's Ex pected Return computed on the assumption that the Facility Lease is not a "disqualified leaseback or long-term agreement"). (b) Anything herein or in any other Operative Document to the contrary notwithstanding, each installment of Basic Lease Rent (excluding any Equity Portion of Basic Lease Rent included in such installment) payable hereunder, whether or not adjusted in accordance with this Section 3.4, shall be in an amount at least sufficient to pay in full principal and interest payable on the Lessor Notes on each Rent Payment Date. Anything herein or in any other Operative Document to the contrary notwithstanding, Termination Values (excluding the Equity Portion of Termination Value) payable on any date under this Facility Lease, whether or not adjusted in accordance with this Section 3.4, shall, together with all other Rent due and owing on such date, exclusive of any portion thereof that is an Excepted Pay ment, be in an amount at least sufficient to pay in full the principal of, premium, if any, and accrued interest on the Lessor Notes payable on such date. (c) Any adjustment pursuant to this Section 3.4 shall initially be computed by the Owner Participant or, if prior to the Closing Date, by the Equity Investor, subject to the verification procedure described in this Section 3.4(c). Once computed, the results of such computation shall promptly be delivered by the Owner Participant or, if prior to the Closing Date, the Equity Investor to the Facility Lessee. Within 20 days after the receipt of the results of any such adjustment, the Facility Lessee may request that Warren & Selbert, Inc. or a nationally recognized firm of accountants or lease advisors selected by the Owner Participant, or if prior to the Closing Date, the Equity Investor, and reasonably satisfactory to the Facility Lessee (the "VERIFIER") verify, on a confidential basis, after consultation with the Owner Participant or the Equity Investor, as the case may be, and the Facility Lessee, the accuracy of such adjustment in accordance with this Section 3.4. The Owner Participant or the Equity Investor, as the case may be, hereby agrees, subject to the execution of an appropriate confidentiality agreement, to provide the Verifier with all necessary information and materials (other than the Owner Participant's income tax returns and accounting records) as shall be necessary in connection with such verification. Each of the Owner Participant or the Equity Investor, as the case may be, and the Facility Lessee shall have the right to communicate with the Verifier and 5 to submit supporting information and data. If the Verifier confirms that such adjustment is in accordance with this Section 3.4, it shall so certify to the Facility Lessee, the Owner Lessor and the Owner Participant or the Equity Investor, as the case may be, and such certification shall be final, binding and conclusive on the Facility Lessee, the Owner Participant or the Equity Investor, as the case may be, and the Owner Lessor. If the Verifier concludes that such adjustment is not in accor dance with this Section 3.4, and the adjustments to Basic Lease Rent and Termina tion Value calculated by the Verifier are different from those calculated by the Owner Participant or the Equity Investor, as the case may be, then it shall so certify to the Facility Lessee, the Owner Lessor and the Owner Participant or the Equity Investor, as the case may be, and the Verifier's calculation shall be final, binding and conclusive on the Facility Lessee, the Owner Lessor and the Owner Participant or the Equity Investor, as the case may be. The final determination of any adjustment hereunder shall be set forth in an amendment to this Facility Lease, executed and delivered by the Owner Lessor and the Facility Lessee and consented to by the Owner Participant or the Equity Investor, as the case may be. The reasonable costs of the Verifier in verifying an adjustment pursuant to this Section 3.4 shall be paid by the Facility Lessee; PROVIDED, HOWEVER, that in the event that such Verifier deter mines that the present value of the remaining Basic Lease Rent to be made under this Facility Lease as calculated by the Owner Participant or the Equity Investor, as the case may be, is greater than the present value of the correct Basic Lease Rent as certified by the Verifier, in each case, discounted annually at the Discount Rate, by more than ten basis points, then such reasonable costs of the Verifier shall be paid by the Owner Participant or the Equity Investor, as the case may be. Notwithstanding anything herein to the contrary, the sole responsibility of the Verifier shall be to verify the calculations hereunder and matters of interpretation of this Facility Lease or any other Operative Document shall not be within the scope of the Verifier's responsibilities. SECTION 3.5. MANNER OF PAYMENTS. All Rent (whether Basic Lease Rent or Supplemental Lease Rent) and all Termination Value payments shall be paid by the Facility Lessee in lawful currency of the United States of America in immediately available funds to the recipient not later than 11:00 a.m. (New York City time) on the date due. If any Rent is due on a day which is not a Business Day, payment thereof shall be made on the next succeeding Business Day with the same effect as if made on the date on which such payment was due. All Rent payments payable to the Owner Lessor (other than Excepted Payments) shall be paid by the Facility Lessee to the Owner Lessor at its account at Wilmington Trust Company (Account No. 52412- 0), or to such other place as the Owner Lessor shall notify the Facility Lessee in 6 writing; PROVIDED, HOWEVER, that so long as the Lessor Notes are outstanding and the Lien created under the Lease Indenture has not been discharged, the Owner Lessor hereby irrevocably directs (it being agreed and understood that such direction shall be deemed to have been revoked after the Lien created under the Lease Indenture shall have been fully discharged in accordance with its terms), and the Facility Lessee agrees, that all payments of Rent (other than Excepted Payments) payable to the Owner Lessor shall be paid by "wire" transfer directly to the Lease Indenture Trustee's Account or to such other place as the Lease Indenture Trustee shall notify the Facility Lessee in writing pursuant to the Participation Agreement. On each Rent Payment Date, Rent shall be paid by transferring funds in the amount equal to the Rent payment (in the amount notified by the Facility Lessee to the Owner Lessor and the Lease Indenture Trustee) into the Lease Indenture Trustee's Account. Payments constituting Excepted Payments shall be made to the Person entitled thereto at the address for such Person set forth in the Participation Agreement, or to such other place as such Person shall notify the Facility Lessee in writing. SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT SECTION 4.1. DISCLAIMER OF WARRANTIES. (a) Without waiving any claim the Facility Lessee may have against any manufacturer, vendor or contractor, THE FACILITY LESSEE ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF THE OWNER LESSOR AND THE OWNER PARTICIPANT THAT (i) THE FACILITY AND EACH COMPONENT THEREOF ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO THE FACIL ITY LESSEE, (ii) THE FACILITY LESSEE IS SATISFIED THAT THE FACIL ITY AND EACH COMPONENT THEREOF ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, (iii) NEITHER THE OWNER LESSOR NOR THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROP ERTY OF SUCH KIND, (iv) THE UNDIVIDED INTEREST IS LEASED HERE UNDER TO THE EXTENT PROVIDED HEREBY FOR THE BASIC LEASE TERM AND THE RENEWAL LEASE TERMS, IF ANY, SPECIFIED HEREIN SUBJECT TO ALL REQUIREMENTS OF LAW NOW IN EFFECT OR HEREAF TER ADOPTED, INCLUDING WITHOUT LIMITATION (1) ZONING REGULA TIONS, (2) ENVIRONMENTAL LAWS OR (3) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION OF EVERY PART THEREOF "WHEN" THE SAME FIRST BECAME SUBJECT TO THIS FACILITY LEASE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE OWNER LESSOR OR THE OWNER PARTICIPANT AND (v) THE OWNER LESSOR 7 LEASES FOR THE BASIC LEASE TERM AND THE RENEWAL LEASE TERMS, IF ANY, SPECIFIED HEREIN AND THE FACILITY LESSEE TAKES THE UNDIVIDED INTEREST UNDER THIS FACILITY LEASE "AS-IS," "WHERE-IS" AND "WITH ALL FAULTS," AND THE FACILITY LESSEE ACKNOWLEDGES THAT NEITHER THE OWNER LESSOR, NOR THE OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE TITLE OF THE FACILITY, THE QUALITY OF THE MATERIAL OR WORK MANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGE MENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGA TIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the Owner Lessor represents and warrants that on the Closing Date, the Undivided Interest will be free of Owner Lessor's Liens. It is agreed that all such risks, as between the Owner Lessor and the Owner Participant on the one hand and the Facility Lessee on the other hand are to be borne by the Facility Lessee with respect to acts, occurrences or omissions during the Facility Lease Term. Neither the Owner Lessor nor the Owner Participant shall have any responsibility or liability to the Facility Lessee or any other Person with respect to any of the follow ing: (x) any liability, loss or damage caused or alleged to be caused directly or indirectly by the Facility or any Component or by any inadequacy thereof or defi ciency or defect therein or by any other circumstances in connection therewith; (y) the use, operation or performance of the Facility or any Component or any risks relating thereto; or (z) the delivery, operation, servicing, maintenance, repair, improvement, replacement or decommissioning of the Facility or any Component. The provisions of this paragraph (a) of this Section 4.1 have been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties of the Owner Lessor, express or implied, with respect to the Facility, any Component thereof or the Undivided Interest that may arise pursuant to any Requirement of Law now or hereafter in effect, or otherwise. (b) During the Facility Lease Term, so long as no Lease Event of Default shall have occurred and be continuing, the Owner Lessor hereby appoints 8 irrevocably and constitutes the Facility Lessee its agent and attorney-in-fact, coupled with an interest, to assert and enforce, from time to time, in the name and for the account of the Owner Lessor and the Facility Lessee, as their interests may appear, but in all cases at the sole cost and expense of the Facility Lessee, whatever claims and rights the Owner Lessor may have in respect of the Facility, any Compo nent or the Undivided Interest against any manufacturer, vendor or contractor, or under any express or implied warranties relating to the Facility, any Component or the Undivided Interest. SECTION 4.2. QUIET ENJOYMENT. The Owner Lessor agrees that, notwithstand ing any provision of any other Operative Document, so long as no Lease Event of Default shall have occurred and be continuing, neither it nor any party acting by, through or under the Owner Lessor shall interfere with or interrupt the quiet enjoy ment of the use, operation and possession by the Facility Lessee of the interest in the Facility or the Undivided Interest conveyed by this Facility Lease subject to the terms of this Facility Lease. SECTION 5. RETURN OF UNDIVIDED INTEREST SECTION 5.1. RETURN. Unless the Undivided Interest is being transferred to the Facility Lessee (or its designee) pursuant to Section 10 or 13 of this Facility Lease, the Facility Lessee shall return the Undivided Interest (together with all Required Improvements and Non-Severable Improvements, if any, title to which shall vest in the Owner Lessor) to the Owner Lessor or any permitted transferee or assignee of the Owner Lessor at the expiration of the Facility Lease Term (or earlier than such date if required pursuant to the provisions of this Facility Lease) by surrendering the Undivided Interest into the possession of the Owner Lessor or such transferee or assignee at the location of the Facility on the Facility Land. SECTION 5.2. CONDITION UPON RETURN. At the time of any return of the Undivided Interest by the Facility Lessee pursuant to Section 5.1, the Facility Lessee agrees that: (a) the Facility Lease and the Facility Site Sublease shall cease and terminate; (b) the Facility will be in at least as good condition as if it had been maintained during the Facility Lease Term in compliance with the provisions of this Facility Lease (including, without limitation the provisions of Section 7) 9 ordinary wear and tear excepted, as determined in accordance with the Return Acceptance Tests; (c) the Facility Lessee shall assign an undivided interest equal to the Owner Lessor's Percentage in any and all licenses and permits of any Govern mental Authorities or other Persons that are required to be obtained in connection with the use, operation or maintenance of the Undivided Interest that are not already in the name of the Owner Lessor to the Owner Lessor or a transferee or designee of the Owner Lessor, to the extent permitted by Requirements of Law and the provi sions of such licenses or permits; (d) the Facility Lessee, at the request of the Owner Lessor, shall sell to the Owner Lessor or its designee or transferee at the then fair market value thereof, determined by agreement between the Facility Lessee and the Owner Lessor or, absent such agreement, by an appraisal conducted according to the Appraisal Procedure, an undivided interest equal to the Owner Lessor's Percentage in any or each Severable Improvement made to the Facility that is owned by the Facility Lessee, subject to any existing encumbrances. The fees and expenses incurred in connection with the appraisal required by this subsection (d) shall be paid by the Owner Lessor; (e) the Facility Lessee, or an Affiliate thereof, shall enter into an agreement or other arrangements reasonably acceptable to the Owner Lessor (the "SUPPORT ARRANGEMENTS") to provide, from and after expiration or early termination of the Facility Site Sublease, the Facility Lessor with the Support Services; PROVIDED, that the Facility Lessee, or its Affiliate, as the case may be, shall be bound to provide Support Services only to the extent the Facility Lessee (or its Affiliate) is capable of, and is still in the business of, providing such Support Services, and only to the extent that such services are necessary for the operation of the Facility and cannot reason ably and timely be obtained from third parties. Support Arrangements shall provide for the provision of all Support Services during and after expiration of the Facility Lease, and will provide for fair market value compensation to the Facility Lessee, or an Affiliate thereof, for such Support Services, payable periodically in advance on no less than a monthly basis, for such rights and other services provided under such arrangements and shall terminate upon expiration or early termination of the Facility Site Lease or at the Facility Lessor's option; and (f) the Facility Lessee shall arrange, at its sole cost and expense, for a Phase I Environmental Survey of the Facility and the Facility Site, which shall 10 be in form, scope and substance reasonably satisfactory to the Owner Participant, not later than 180 days prior to a return of the Undivided Interest pursuant to Section 5.1 or, in connection with a return other than pursuant to Section 5.1, not later than the date of return; PROVIDED that, if as a result of the Phase I Environmental Survey, facts are revealed that would reasonably necessitate a Phase II Environmental Survey, such Phase I Environmental Survey shall be expanded to a Phase II Environmental Survey, which shall be in form, scope and substance reasonably satisfactory to the Owner Participant. Each such survey shall be conducted, with appropriate diligence and good faith, by an environmental consulting firm selected by the Facility Lessee and reasonably acceptable to the Owner Participant. Any reports prepared by such consulting firm documenting the surveys shall be provided promptly upon receipt by the Facility Lessee to the Owner Participant. If, as a result of the environmental surveys conducted pursuant to this Section 5.2(f), further investigation, or abatement, corrective action, removal, monitoring, clean-up, remediation or other response actions relating to Environmental Conditions at, on, under or migrating from the Facility or the Facility Site are required to ensure that the Facility and the Facility Site comply in all material respects with all applicable Environmental Laws, the Facility Lessee shall, at its sole cost and expense, as promptly as is reasonably practical and without materially affecting the continued operation of the Facility or the Facility Site, make arrangements reasonably satisfactory to the Owner Participant for conducting and completing any such clean-up, remediation or other response action in relation to the Environmental Conditions identified in such environmental surveys as required to ensure that the Facility and the Facility Site comply with all applicable Environmental Laws. Nothing in this Section 5.2(f) shall relieve EME of its indemnification obligations under the Participation Agreement. The obligations of the Facility Lessee set forth in this Section 5.2(f) shall survive the termination of this Facility Lease and the expiration of the Facility Lease Term. SECTION 5.3. EXPENSES. Except as provided in Section 5.2(d), the Facility Lessee agrees to pay or reimburse or to cause to be paid or reimbursed, on an After- Tax Basis, on demand, all costs and expenses incurred in connection with any return contemplated by this Section 5. SECTION 5.4. FREIGHT AND CRATE. At the expiration of the Facility Site Lease, the Owner Lessor shall have the right to require the Facility Lessee (i) at the Facility Lessee's sole risk and expense, to dismantle the Facility, to remove the dismantled components of the Facility from the Facility Land and to cause such components to be delivered to a railhead or other suitable common carrier or (ii) at the Owner Lessor's risk and expense, to dismantle the Facility and keep and store such compo- 11 nents at the Facility Land for a period not to exceed 180 days; PROVIDED, HOWEVER, the Facility Lessee shall not be so required if it has chosen to purchase the Facility from the Owner Lessor at a price equal to the greater of (a) $1.00 and (b) the Fair Market Sales Value thereof (MINUS the estimated costs of such decommissioning, disman tling, removal and shipment and the estimated cost of restoring the Facility Land to its original condition). The Facility Lessee's obligation to dismantle the Facility under this Section 5.4 shall survive the termination of the Facility Lease. SECTION 6. LIENS The Facility Lessee hereby covenants that it will not directly or indirectly create, incur, assume or suffer to exist any Lien or other encumbrance on or with respect to the Undivided Interest, the Facility, the Facility Site or any Component, or on the Owner Lessor's or the Owner Participant's interest in or under any Operative Document, except Lease Permitted Liens. SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS SECTION 7.1. MAINTENANCE. The Facility Lessee, at its own expense, will (i) cause the Facility to be maintained in as good condition, repair and working order as when delivered on the Closing Date, ordinary wear and tear excepted, without discrimination as compared to other facilities of similar type owned or operated by the Facility Lessee or any of its Affiliates, and in any event, in all material respects (a) in accordance with Prudent Industry Practice, (b) in compliance with all Require ments of Law, including without limitation, all Environmental Laws and (c) in accordance with the terms of all insurance policies required to be maintained pursuant to Section 11 and (ii) cause to be made all repairs, renewals, replacements, betterments and improvements to the Facility, all as in the reasonable judgment of the Facility Lessee may be necessary to operate the Facility in accordance with the Operative Documents. SECTION 7.2. REPLACEMENT OF COMPONENTS. In the ordinary course of mainte nance, service, repair or testing the Facility or any Component, the Facility Lessee, at no cost to the Owner Lessor, may remove or cause to be removed from the Facility any Component; PROVIDED, HOWEVER, that the Facility Lessee shall cause such Component to be replaced by a replacement Component which shall be free and clear of all Liens (except Lease Permitted Liens) and shall be in as good operating condition as that of the Component replaced, assuming such replaced Component was maintained in accordance with the terms of this Facility Lease, and does not 12 diminish, other than in an immaterial respect, the current and residual value, remain ing useful life or utility of the Facility as measured immediately prior to such replacement, assuming the Facility shall then be in the condition required to have been maintained by the terms of this Facility Lease, or cause the Facility to become "limited use" property within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647 (each such replacement Component being herein referred to as a "REPLACEMENT COMPONENT"). An undivided interest equal to the Owner Lessor's Percentage in each Component at any time removed from the Facility shall remain subject to this Facility Lease, wherever located, until such time as such Component shall be replaced by a Replacement Component which has been incorporated in the Facility and which meets the requirements for Replacement Components specified above. Immediately upon any Replacement Component becoming incorporated in the Facility, without further act (and with no adjustment to the Purchase Price or Basic Lease Rent), (i) the replaced Component shall no longer be subject to this Facility Lease, (ii) title to the Owner Lessor's undivided interest in the removed Component shall thereupon vest in the Facility Lessee or such other Person as shall be designated by the Facility Lessee, free and clear of all rights of the Owner Lessor and the Lease Indenture Trustee, (iii) title to an undivided interest equal to the Owner Lessor's Percentage in the Replacement Component shall thereupon vest with the Owner Lessor and such undivided interest shall (a) become subject to this Facility Lease and the Lien of the Lease Indenture, and (b) be deemed a part of the Undivided Interest for all purposes of this Facility Lease. Notwithstand ing anything in this Section 7.2 to the contrary, if the Facility Lessee has determined that any part, Component or portion of the Facility is surplus or obsolete, it shall have the right to remove such part, Component or portion of the Facility without replacing it if such removal would not, other than in an immaterial respect, diminish the current or residual value, the utility or the remaining useful life of the Facility, as measured immediately prior to such replacement, assuming the Facility shall then be in the condition required to have been maintained by the terms of this Facility Lease or cause the Facility to become "limited use" property within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647. SECTION 7.3. ENVIRONMENTAL MATTERS. The Facility Lessee will (i) comply in all material respects and make all reasonable efforts to cause all other Persons to comply in all material respects with all Environmental Laws applicable to the Facility or the Facility Site, and the Facility Lessee shall have the sole responsibility for any and all costs and expenses associated with such compliance; 13 (ii) obtain, comply in all material respects with and maintain all necessary Governmental Approvals required under any applicable Environmental Law in connection with the use, operation and maintenance of the Facility and the Facility Site; (iii) conduct and complete, at its sole cost and expense, any investigation, study, sampling, monitoring and testing and undertake any cleanup, removal, remedial, corrective, mitigation, response or other action necessary or advisable to abate, correct, remove and clean up or remediate all Hazardous Materials Released at, on, in, under or from the Facility or the Facility Site, to the extent required by and in material compliance with applicable Environmental Laws; and (iv) as soon as possible and in any event within fifteen Business Days of the Facility Lessee obtaining knowledge thereof, provide the Owner Lessor with written notice of, and copies of all written communications relating to, any pending or threatened material Environmental Claim involving the Facility or the Facility Site. To the extent possible, all such notices shall describe in reasonable detail the nature of the Environmental Claim. SECTION 8. IMPROVEMENTS SECTION 8.1. REQUIRED IMPROVEMENTS. The Facility Lessee, without expense to the Owner Lessor and without the consent of any other Lease Financing Party, shall make or cause to be made any Improvements to the Facility as it relates to the Undivided Interest as are required (w) by Requirements of Law or any Governmental Authority having jurisdiction thereon, (x) by any insurance policy required to be maintained by the Facility Lessee under any Operative Document, (y) by the terms of the Operative Documents or (z) to meet Return Acceptance Tests as set forth in Section 5.1 (each, a "REQUIRED IMPROVEMENT"); PROVIDED, HOWEVER, that the Facility Lessee may, in good faith and by appropriate proceedings, diligently contest the validity or application of any Requirement of Law in any reasonable manner which does not involve any risk of (i) foreclosure, sale, forfeiture or loss of, or imposition of a Lien (other than a Lease Permitted Lien) on any part of the Facility or impair the use, operation or maintenance of the Facility in any material respect, or (ii) any criminal liability being incurred by, or any material adverse effect on the interests of, the Owner Participant, the Equity Investor, the Owner Lessor, the Trust Company, 14 the Pass Through Trustees, the Pass Through Company, the Lease Indenture Trustee, the Lease Indenture Company, any Certificateholder or the Facility Lessee, including, without limitation, subjecting any such Person to regulation as a public utility (or similar regulation) under Requirement of Law; PROVIDED FURTHER, that no such contest may extend beyond the expiration or earlier termination of this Facility Lease. SECTION 8.2. OPTIONAL IMPROVEMENTS. The Facility Lessee at any time may, without expense to the Owner Lessor and without the consent of any other Lease Financing Party, make or cause to be made any Improvement to the Facility as the Facility Lessee considers necessary or desirable in the proper conduct of its business (any such non-Required Improvement being referred to as an "OPTIONAL IMPROVEMENT"); PROVIDED that no Optional Improvement to the Facility shall, other than in an immaterial respect, diminish the current or residual value, remaining useful life or utility of the Facility below the current or residual value, remaining useful life or utility thereof immediately prior to such Optional Improvement, assuming the Facility shall then be in the condition required to have been maintained by the terms of this Facility Lease, or cause the Undivided Interest to become "limited use" property, within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647. SECTION 8.3. TITLE TO IMPROVEMENTS. Title to an undivided interest equal to the Owner Lessor's Percentage in (i) all Required Improvements and (ii) all Non-Severable Improvements shall automatically vest in the Owner Lessor upon being affixed to or incorporated into the Facility, and such undivided interest shall immediately (a) become subject to this Facility Lease and (b) be deemed part of the Undivided Interest for all purposes of this Facility Lease. No interest in any Optional Improvement which is a Severable Improvement (other than Severable Improvements which are financed by the Owner Lessor by an Additional Equity Investment or a Supplemental Financing pursuant to Section 14.1 of the Participation Agreement) shall vest in the Owner Lessor or become subject to this Facility Lease; PROVIDED, HOWEVER, that if the Facility Lessee shall, at its cost and expense, cause such Optional Improvements which are Severable Improvements to be made to the Facility, the Owner Lessor shall have the right, prior to the return of the Undivided Interest to the Owner Lessor hereunder, to purchase an undivided interest equal to the Owner Lessor's Percentage in any such Optional Improvements which are Severable Improvements. The purchase price for such undivided interest shall be the then Fair Market Sales Value of such undivided interest. If the Owner Lessor does not elect to purchase such Optional Improvements which are Severable Improvements, the 15 Facility Lessee may, and at the request of the Owner Lessor shall, remove such Improvements at the end of the Facility Lease Term. SECTION 8.4. FINANCING OF IMPROVEMENTS. The Facility Lessee shall at all times have the right to finance Improvements other than through the Facility Lease, so long as no Liens on the Facility, the Facility Site or any portion thereof are granted or created in connection with such financing; PROVIDED, HOWEVER that, in the case of a financing of a Severable Improvement which is not a Required Improvement, a Lien on such Severable, non-Required Improvement may be granted or created in connection with such financing. The Facility Lessee may elect to finance Improvements to the Facility through the Facility Lease in accordance with Section 14.1 of the Participation Agreement. SECTION 9. NET LEASE This Facility Lease is a "net lease." The Facility Lessee's obligation to make all payments payable hereunder (and all amounts, including, without limitation, Termination Value, following termination of this Facility Lease) shall be absolute and unconditional under any and all circumstances and shall not be terminated, extinguished, diminished, lost or otherwise impaired by any circumstance of any character, including, without limitation, by (i) any setoff, counterclaim, recoupment, defense or other right which the Facility Lessee may have against the Owner Lessor, the Owner Participant, the Lease Indenture Trustee or any other Person, including, without limitation, any claim as a result of any breach by any of said parties of any covenant or provision in this Facility Lease or any other Operative Document, (ii) any lack or invalidity of title or any defect in the title, condition, design, operation, merchantability or fitness for use of the Facility or any Component, or any eviction by paramount title or otherwise, or any unavailability of the Facility, the Facility Site, any Component, any other portion of the Undivided Interest, or any part thereof, (iii) any loss or destruction of, or damage to, the Facility or any Component or interruption or cessation in the use or possession thereof or any part thereof by the Facility Lessee for any reason whatsoever and of whatever duration, (iv) the condemnation, requisitioning, expropriation, seizure or other taking of title to or use of the Facility, the Facility Site, any Component, or any other portion of the Undivided Interest by any Governmental Authority or otherwise, (v) the invalidity or unenforceability or lack of due authorization or other infirmity of this Facility Lease or any other Operative Document, (vi) the lack of right, power or authority of the Owner Lessor to enter into this Facility Lease or any other Operative Document, (vii) any ineligibility of the Facility or any Component for any particular use, whether or 16 not due to any failure of the Facility Lessee to comply with any Requirement of Law, (viii) any event of "force majeure" or any frustration, (ix) any legal requirement similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, (x) any insolvency, bankruptcy, reorganization or similar proceeding by or against the Facility Lessee or any other Person, (xi) any Lien of any Person with respect to the Facility, the Facility Site, any Component, any other portion of the Undivided Interest or any part thereof, or (xii) any other cause, whether similar or dissimilar to the foregoing, any present or future law notwithstanding, except as expressly set forth herein or in any other Operative Document, it being the intention of the parties hereto that all Basic Lease Rent (and all amounts, including, without limitation, Termination Value, in lieu of Basic Lease Rent following termination of this Facility Lease) payable by the Facility Lessee hereunder shall continue to be payable in all events in the manner and at times provided for herein. Such Basic Lease Rent (and all amounts, including, without limitation, Termination Value, in lieu of Basic Lease Rent following termination of this Facility Lease) shall not be subject to any abatement and the payments thereof shall not be subject to any setoff or reduction for any reason whatsoever, including any present or future claims of the Facility Lessee or any other Person against the Owner Lessor or any other Person under this Facility Lease or otherwise. To the extent permitted by Requirements of Law, the Facility Lessee hereby waives any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Facility Lease with respect to the Undivided Interest except in accordance with Section 10, 13, 14 or 17. If for any reason whatsoever this Facility Lease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, the Facility Lessee none the less agrees, to the extent permitted by Requirements of Law, to pay to the Owner Lessor an amount equal to each installment of Basic Lease Rent and all Supplemental Lease Rent due and owing, at the time such payment would have become due and payable in accordance with the terms hereof had this Facility Lease not been so terminated. Nothing contained herein shall be construed to waive any claim which the Facility Lessee might have under any of the Operative Documents or otherwise or to limit the right of the Facility Lessee to make any claim it might have against the Owner Lessor or any other Person or to pursue such claim in such manner as the Facility Lessee shall deem appropriate. 17 SECTION 10. EVENTS OF LOSS SECTION 10.1. OCCURRENCE OF EVENTS OF LOSS. (a) Each of the Owner Participant and the Owner Lessor will promptly notify the Facility Lessee of any event of which it is aware that would result in a Regulatory Event of Loss; PROVIDED, HOWEVER, that the failure to provide such notice shall not result in any liability with respect to the Owner Participant or the Owner Lessor and shall not in any way relieve the Facility Lessee of any of its obligations under this Facility Lease, including the obligations under this Section 10. (b) If an Event of Loss described in clauses (i) or (ii) of the definition of Event of Loss shall occur, then, no later than six months following the date that the Facility Lessee has actual knowledge of such occurrence, the Facility Lessee shall notify the Owner Lessor and the other Lease Financing Parties of its election to either (1) subject to the satisfaction of the conditions set forth in Section 10.3 and the terms of the other Operative Documents, rebuild the Facility so that the Facility shall have a current and residual value, remaining useful life and utility at least equal to that of the Facility prior to such Event of Loss, assuming the Facility was in the condition and repair required to be maintained by this Facility Lease, or (2) terminate this Facility Lease and purchase the Facility from the Owner Lessor by paying to the Owner Lessor an amount equal to the applicable Termination Value and causing EME to pay to the parties entitled thereto all other amounts payable pursuant to Section 10.2. If the Facility Lessee fails to make an election as provided above, the Facility Lessee will be deemed to have made the election to terminate this Facility Lease pursuant to clause (2) of this Section 10.1(b) as of the end of the six month period referred to in the first sentence of this Section 10.1(b). SECTION 10.2. PAYMENT UPON TERMINATION; SPECIAL LESSEE TRANSFER. (a) If either of the following shall occur: (x) the Facility Lessee shall elect (or be deemed to have elected) to terminate this Facility Lease pursuant to clause (2) of Section 10.1(b) following an Event of Loss described in clause (i) or (ii) of the definition of Event of Loss, or 18 (y) an Event of Loss described in clause (iii) or (iv) of the definition of Event of Loss shall occur, then in the case of either (x) or (y), the Facility Lessee shall pay to the Owner Lessor the sum of (A) the Termination Value determined as of the relevant Termination Date, PLUS (B) if the Termination Date is also a Rent Payment Date, any Basic Lease Rent or Renewal Lease Rent, as the case may be, payable on such Termination Date, PLUS (C) all other payments of Rent under this Facility Lease or under any Operative Document which are due and unpaid on the Termination Date under any other Operative Document (the "EVENT OF LOSS PAYMENT") and EME shall pay (X) all reasonable documented out-of-pocket costs and expenses of the other Lease Financing Parties incurred in connection with such Event of Loss and (Y) and any fees and expenses of the Lease Indenture Trustee and Pass Through Trustees. The Facility Lessee shall pay such Event of Loss Payment, in the case of clause (x) above, on the next Termination Date immediately following the earlier of (1) the date of the Facility Lessee's notice of its election to terminate this Facility Lease and (2) the date which is six months following the occurrence of such Event of Loss, and in the case of clause (y) above, on a Termination Date occurring no later than six months following such Event of Loss. Concurrently with the payment of all amounts required to be paid pursuant to this Section 10.2(a), (i) Basic Lease Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Lessee shall cease to have any liability to the Owner Lessor with respect to the Undivided Interest, except for Supplemental Lease Rent and other obligations surviving pursuant to the express terms of any Operative Document, (iii) the Owner Lessor will prepay all amounts of principal and interest, any other amounts owing under the Lessor Notes, pursuant to Section 2.11 of the Lease Indenture, (iv) subject to the EME having paid all amounts owed by EME to the Lease Financing Parties under the Operative Documents, the Owner Lessor shall transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessor and prepared and recorded at the Facility Lessee's expense) the Undivided Interest to the Facility Lessee (or its designee), on an "as is," "where is" basis, without warranty other than a warranty as to the absence of Owner Lessor's Liens and Owner Participant's Liens, (v) each of this Facility Lease, the Facility Site Lease and the Facility Site Sublease shall terminate and (vi) the Owner Lessor shall execute and deliver appropriate releases and other documents or 19 instruments necessary or reasonably requested by the Facility Lessee to effect the foregoing (including, but not limited to, termination of this Facility Lease) all to be prepared, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. (b) Notwithstanding the foregoing provisions of Section 10.2(a), in the case of a Regulatory Event of Loss, at the option of the Facility Lessee or its designee, if (i) the Facility Lessee shall have executed and delivered an assumption agreement to assume the Lessor Notes as permitted by and in accordance with Section 2.12 of the Lease Indenture, (ii) all other conditions contained in such Section 2.12 of the Lease Indenture shall have been satisfied and (iii) no Lease Event of Default shall have occurred and be continuing and shall not be cured by such assumption, the obligation of the Facility Lessee to make the Event of Loss Payment shall be reduced by the outstanding principal amount of the Lessor Notes so assumed by the Facility Lessee; PROVIDED, HOWEVER, for so long as the Lessor Notes are outstanding, if the Facility Lessee shall have chosen to assume the Lessor Notes pursuant to this Section 10.2(b), the Facility Lessee (or its designee) shall acquire the Undivided Interest from the Owner Lessor subject to the Lien of the Lease Indenture. (c) Notwithstanding the foregoing provisions of Sections 10.2(a) and (b) to the contrary, in the case of a Regulatory Event of Loss, the Facility Lessee (or its designee) so long as the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and all other payments hereunder in full, and in all respects in accordance with Section 17 of the Participation Agreement, may purchase the Owner Participant's Beneficial Interest in lieu of purchasing the Undivided Interest pursuant to Sections 10.2 (a) and (b) and keep the Facility Lease (and Lessor Notes) in place. SECTION 10.3. APPLICATION OF PROCEEDS. Any payments with respect to the Undivided Interest received at any time by the Owner Lessor or the Facility Lessee from any Governmental Authority or from insurance proceeds as a result of the occurrence of an Event of Loss shall be applied as follows: (a) all such payments received at any time by the Facility Lessee shall be promptly paid to the Owner Lessor or, so long as the Lessor Notes are outstanding, to the Lease Indenture Trustee, for application pursuant to the following provisions of this 10.3, except that, the Facility Lessee may retain any amounts that the Owner Lessor would at the time be obligated to pay to the Facility Lessee as reimbursement pursuant to Section 10.3(b); 20 (b) so much of such payments as shall not exceed the Event of Loss Payment required to be paid by the Facility Lessee pursuant to Section 10.2(a) shall be applied in reduction of the Facility Lessee's obligation to pay such amount if not already paid by the Facility Lessee or, if already paid by the Facility Lessee, shall be applied to reimburse the Facility Lessee for its payment of such amount; and (c) the balance, if any, of such payments remaining thereafter shall be apportioned between the Owner Lessor and the Facility Lessee in accordance with their respective interests in the Facility. Notwithstanding the foregoing, if the Facility Lessee shall have elected to rebuild the Facility pursuant to Section 10.1(b), any insurance proceeds received by the Owner Lessor, the Lease Indenture Trustee or the Facility Lessee as a result of the occurrence of an Event of Loss described in clause (i) or (ii) of the definition of Event of Loss shall be applied as provided in Section 11.7. SECTION 10.4. REBUILD. The Facility Lessee's right to rebuild the Facility pursuant to Section 10.1(b) shall be subject to the fulfillment, at the Facility Lessee's sole cost and expense, in addition to the conditions contained in Section 10.1(b), of the following conditions: (a) no Material Lease Default or Lease Event of Default shall have occurred and be continuing; (b) on the date the Facility Lessee shall give notice pursuant to Section 10.1(b) of its election to rebuild the Facility in accordance with this Section 10.4, either (i) the Owner Participant shall have received an opinion reasonably satisfactory to it from Hunton & Williams, or a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee, to the effect that, assuming the proposed rebuilding is accomplished in the manner and within the time proposed, such rebuilding would not result in any material indemnified incremental tax risk, or any unindemnified incremental tax risk to the Owner Participant or (ii) the Owner Participant shall have received an opinion of Hunton & Williams, or another nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee to the effect that it is more likely than not that such proposed rebuilding would not result in any unindemnified incremental tax risk or any material indemnified incremental tax risk and the Owner Participant shall have received collateral or other security for the 21 indemnification obligations with respect to any such incremental tax risk, such collateral or other security to be acceptable to the Owner Participant in its sole discretion exercised in good faith; (c) on the date the Facility Lessee shall give notice pursuant to Section 10.1(b) of its election to rebuild the Facility in accordance with this Section 10.4, the Facility Lessee shall deliver to the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and the Pass Through Trustees (i) a report of the Engineering Consultant, or such other independent engineer reasonably satisfactory to the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee, to the effect that it is reasonable to expect that such rebuilding of the Facility is technologically feasible and economically viable and that such rebuilding can be completed by a date that is 36 months prior to the end of the Basic Lease Term or any Renewal Lease Term then in effect or already elected by the Facility Lessee, and (ii) an appraisal of an Independent Appraiser reasonably acceptable to the Owner Participant, and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee to the effect that the rebuilt Facility will have at least the same value, residual value, utility and useful life as the Facility immediately prior to the Event of Loss, assuming the Facility was then in the condition required to have been maintained by the terms of the Facility Lease; (d) on the date the Facility Lessee shall notify the Owner Lessor pursuant to Section 10.1(b) of its election to rebuild the Facility in accordance with this Section 10.4, the Facility Lessee shall demonstrate to the reasonable satisfaction of the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee, adequate financial resources, from insurance proceeds or other wise, to complete such rebuilding and to pay Basic Lease Rent while the Facility is being rebuilt; (e) the Facility Lessee shall cause the rebuilding of the Facility to commence as soon as reasonably practicable after notifying the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and the Pass Through Trustees, of its election to rebuild the Facility in accordance with this Section 10.4 and in all events within 18 months of the occurrence of the event that caused such Event of Loss and will cause work on such rebuilding to proceed diligently thereafter. As the rebuilding of the Facility progresses, title to an undivided interest equal to the Owner Lessor's Percentage in such rebuilt Facility shall vest in the Owner Lessor and such Undivided Interest shall become subject to this Facility Lease and, so long as the Lessor Notes are outstanding, the Lien of the Lease 22 Indenture, and be deemed a part of the Undivided Interest for all purposes of this Facility Lease and the other Operative Documents, automatically and without any further act by any Person; (f) on the date of the completion of such rebuilding of the Facility (the "REBUILDING CLOSING DATE") the following documents shall be duly authorized, executed and delivered and, if appropriate, filed for recordation by the respective party or parties thereto and shall be in full force and effect, and an executed counterpart of each shall be delivered to the Owner Lessor, the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and the Pass Through Trustees: (i) supplements to this Facility Lease subjecting an undivided interest equal to the Owner Lessor's Percentage in the rebuilt Facility to this Facility Lease (with no change in Purchase Price or the Basic Lease Rent as a result of such rebuilding), (ii) so long as the Lessor Notes are outstanding, supplements to the Lease Indenture subjecting such undivided interest in the Facility to the Lien of the Lease Indenture, (iii) such recordings and filings, as may be reasonably requested by the Owner Participant or the Lease Indenture Trustee to be made or filed, (iv) an opinion of counsel to the Facility Lessee, such counsel and such opinion to be reasonably satisfactory to the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee, to the effect that (x) the supplements to this Facility Lease required by clause (i) above constitute effective instruments for subjecting such undivided interest in the rebuilt Facility to this Facility Lease, (y) the supplements to the Lease Indenture required by clause (ii) above, if any, constitute effective instruments for subjecting such undivided interest in the rebuilt Facility to the Lien of the Lease Indenture and (z) all filings and other action necessary to perfect and protect the Owner Lessor's interest in an undivided interest equal to the Owner Lessor's Percentage in the rebuilt Facility have been accomplished, (v) an appraisal by an Independent Appraiser, certifying that the Facility as so rebuilt has a current and residual value, remaining useful life and utility at least equal to the current and residual value, remaining useful life and utility of the Facility immediately prior to such rebuilding (assuming the Facility was in the condition and repair required to be maintained by the terms of this Facility Lease), (vi) a report by an independent engineer (selected by the Owner Lessor and reasonably satisfactory to the Facility Lessee) certifying that the Facility as so rebuilt is in a state of repair and condition required by this Facility Lease, (vii) an Officer's Certificate of the Facility Lessee as to compliance with this Section 10.4 and certifying that no Lease Event of Default shall have occurred as a result of the rebuilding, and (viii) satisfactory evidence as to the compliance with Section 11 of this Facility Lease with respect to the Facility, as so rebuilt; and 23 (g) there shall be no material adverse accounting effect under GAAP on the Owner Participant as a result of such rebuilding and the other transactions contemplated by this Section 10.4. SECTION 10.5. APPLICATION OF PAYMENTS NOT RELATING TO AN EVENT OF LOSS. (a) In the event that during the Facility Lease Term title to, or the use of, all or any portion of the Undivided Interest, the Facility or the Facility Site is requisitioned or taken by or pursuant to a request of any Governmental Authority under the power of eminent domain or otherwise for a period or in a manner which does not constitute an Event of Loss, the Facility Lessee's obligation to pay all installments of Basic Lease Rent shall continue for the duration of such requisitioning or taking. The Facility Lessee shall be entitled to receive and retain for its own account all sums payable for any such period by such Governmental Authority as compensation for such requisition or taking of possession; PROVIDED, THAT if at the time of such payment a Material Lease Default or a Lease Event of Default shall have occurred and be continuing, such amounts shall be paid to and held by the Owner Lessor unless the Lessor Notes are outstanding, in which case such amounts shall be paid to and held by the Lease Indenture Trustee, as security for the obligations of the Facility Lessee under this Facility Lease until such time as no Material Lease Default or Lease Event of Default is continuing. (b) Any insurance proceeds with respect to the Undivided Interest received at any time by the Owner Lessor, the Lease Indenture Trustee or the Facility Lessee under any of the insurance policies required to be maintained by the Facility Lessee under Section 11 as a result of any damage to the Facility or any part thereof which does not constitute an Event of Loss shall be applied as follows: (i) in accordance with Section 11.7, and (ii) the balance, if any, of such insurance proceeds remaining thereafter shall be paid to the Facility Lessee. SECTION 11. INSURANCE SECTION 11.1. PROPERTY INSURANCE. Subject to Section 11.6, the Facility Lessee will maintain (or cause to be maintained) all risk property insurance, including coverage for boiler and machinery and the peril of flood and the peril of earthquake, customarily carried by prudent operators of coal-fired and oil/gas-fired electric generating facilities of comparable size and risk as the Facility, and, in any case, subject to availability of said insurance on commercially reasonable terms and in an amount equal to the Probable Maximum Loss of the Facility. 24 SECTION 11.2. LIABILITY INSURANCE. Subject to Section 11.6, the Facility Lessee will maintain (or caused to be maintained) liability insurance, including contractual liability coverage, insuring against claims for bodily injury (including death) and property damage to third parties arising out of the ownership, operation, maintenance, condition and use of the Facility and the Facility Site, with limits of not less than (i) $35,000,000 in the aggregate per occurrence if such insurance also covers any of the Other Facilities and (ii) $25,000,000 if such insurance covers solely the Facility and the Facility Site. The Facility Lessee will at least annually review the liability insurance maintained by it or on its behalf and will, if necessary, increase such coverage in order that the liability insurance maintained by it or on its behalf is consistent with that maintained by prudent operators of similar facilities of comparable size and risk to the Facility. Such liability insurance may be purchased either in a single limit or in combination with a general and an excess policy. SECTION 11.3. PROVISIONS WITH RESPECT TO INSURANCE. Subject to Section 11.6, the Facility Lessee will place the insurance maintained pursuant to this Section 11 with companies having an A.M. Best rating of at least "A-" or, if not so rated, with comparable financial strength. All insurance policies required to be maintained pursuant to Sections 11.1 and 11.2 shall name each of the Owner Participant, the Equity Investor, the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee, the Pass Through Trustees and holders of the Lessor Notes, as additional insureds, as their respective interests may appear (the "ADDITIONAL INSUREDS"). All insurance policies required to be maintained pursuant to the terms hereof shall also provide for at least 30 days' prior written notice (10 days if as a result of non-payment) by the insurance carrier to each Additional Insured in the event of cancellation, non-renewal, termination, expiration or material change. The Facility Lessee will place the insurance required by the terms of this Section 11 with insurance companies which agree to waive all claims for premiums from, and all subrogation rights against, the Additional Insureds. All the insurance maintained pursuant to this Section 11 shall be primary without right of contribution of any other insurance carried by or on behalf of each of the Additional Insureds with respect to its interests in the Facility and the Facility Site. Subject to Section 11.6, to the extent available on commercially reasonable terms, the Facility Lessee will use its best efforts to provide that the respective interests of the Additional Insureds shall not be invalidated by any act or neglect of the Facility Lessee, or any breach or violation by the Facility Lessee of any warranties, declarations or conditions contained in such policies or by the use of the Facility 25 for purposes more hazardous than permitted by such policies. Additionally, to the extent available on commercially reasonable terms, the Facility Lessee will use its best efforts to provide that such policies shall be endorsed to provide that, inasmuch as the policies are written to cover more than one insured, all terms, conditions, insuring agreements and endorsements, with the exception of limits of liability, shall operate in the manner as if there were a separate policy covering each insured. The Facility Lessee shall, at its own expense, make or cause to be made all proofs of loss and take all other steps necessary to collect the proceeds of such insurance. SECTION 11.4. REPORTS. Within 15 days after the expiration and renewal of any insurance policy required to be maintained pursuant to the terms of this Section 11, the Facility Lessee shall furnish each Additional Insured with an executed broker letter identifying all insurance coverage in place and certifying that all premiums in respect of such policies are current. Certificates of insurance shall accompany said letter documenting insurance coverage and the Additional Insured status as required. SECTION 11.5. ADDITIONAL INSURANCE. At any time any Additional Insured may at its own expense and for its own account carry insurance with respect to its interest in the Undivided Interest, PROVIDED, that such insurance does not in any way interfere with the Facility Lessee's ability to obtain insurance with respect thereto as required in this Section 11. Any insurance payments received from policies maintained by an Additional Insured pursuant to the previous sentence shall be retained by such Additional Insured without reducing or otherwise affecting the Facility Lessee's obligations hereunder. SECTION 11.6. AMENDMENT OF INSURANCE REQUIREMENTS. (a) If any insurance required to be maintained by the Facility Lessee pursuant to the Operative Documents (including the limits or deductibles or any other terms under policies for such insurance) ceases to be available on a commercially reasonable basis at the time of renewal, the Facility Lessee shall provide written notice to each Additional Insured accompanied by a letter from the Facility Lessee's insurance broker stating that such insurance is unavailable on a commercially reasonable basis. Such notice shall be given not less than 30 days prior to the scheduled date for renewal of any such policy. Upon receipt of such notice, the Facility Lessee and each Additional Insured shall immediately enter into good faith negotiations in order to agree upon an alternative to such insurance. 26 (b) In the event that a resolution acceptable to the Facility Lessee and all Additional Insureds cannot be reached within 10 days from the date of the notice referred to in paragraph (a) above, the Additional Insureds shall make arrangements for the formation of an insurance panel consisting of the Facility Lessee's insurance advisor (or broker), the Facility Lessor's insurance advisor (or broker), and an independent insurance expert from an internationally recognized insurance brokerage firm, chosen by the Facility Lessee and reasonably acceptable to the Additional Insureds. Such independent expert shall conduct a separate review of the relevant insurance requirements of the Operative Documents and the market for such insurance at the time, giving due consideration to the representations of both insurance advisors, and upon conclusion of such review shall issue a written report stating whether such insurance is available, or unavailable, on a commercially reasonable basis. (c) If the insurance expert concludes that such insurance is not available on a commercially reasonable basis, the insurance expert shall provide a written recommendation (which shall include the amount and type of insurance which is available upon a commercially reasonable basis) not less than 15 days before the date for renewal of such insurance. The Facility Lessee shall, prior to the expiration of the insurance then in effect, obtain such insurance that is available on a commercially reasonable basis. The recommendation of the insurance expert shall be conclusive and binding upon the Additional Insureds, and the Facility Lessee shall, for the immediately succeeding one-year policy period, only be required to carry the insurance that the expert has certified is available on a commercially reasonable basis. (d) All fees, costs and expenses associated with the insurance panel (including review by the insurance expert) shall be paid by the Facility Lessee. SECTION 11.7. APPLICATION OF INSURANCE PROCEEDS. (a) All insurance proceeds up to $5,000,000 on account of any damage to or destruction of the Facility or any part thereof (in each case less the actual costs, fees and expenses incurred in the collection thereof), shall, subject to Section 11.7(d), be paid to or retained by the Facility Lessee for application in repair or replacement of the affected property. If the insurance proceeds on account of such damage or destruction to the Facility exceed $5,000,000 but are less than $25,000,000, then all such insurance proceeds shall, subject to Section 11.7(d), be paid to or retained by the Facility Lessee for application in repair or replacement of the affected property for so long as the EME long-term unsecured indebtedness shall be rated at least BBB- and Baa3 by S&P and 27 Moody's, respectively. In all other situations, all insurance proceeds on account of such damage or destruction to the Facility, shall be paid to the Owner Lessor or, if the Lessor Notes are outstanding, the Lease Indenture Trustee and be applied and dealt with as provided in Section 11.7(b) below. (b) All such proceeds actually received on account of any such damage or destruction other than in connection with an Event of Loss shall, unless a Material Lease Default or a Lease Event of Default shall have occurred and continuing, be paid over to the Facility Lessee or as it may direct from time to time as restoration progresses, to pay (or reimburse the Facility Lessee for) the cost of restoration, if the amount of such proceeds received by the Lease Indenture Trustee or the Owner Lessor, together with such additional amounts, if any, theretofore expended by the Facility Lessee out of its own funds for such restoration, are sufficient to pay the estimated cost of completing such restoration, but only upon receipt by the Owner Lessor and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee of a written application of the Facility Lessee accompanied by an Officer's Certificate of the Facility Lessee setting forth in reasonable detail the nature of such restoration, the actual cash expenditures made to date for such restoration and the estimated cost to complete such restoration and stating that no Lease Event of Default has occurred and is continuing. (c) All such proceeds received or payable on account of an Event of Loss shall, unless the Facility Lessee has elected to rebuild or restore the Facility pursuant to Section 10.2, be dealt with in accordance with Section 10.3. (d) Notwithstanding the foregoing provisions of this Section 11 or Section 10, so long as a Material Lease Default or a Lease Event of Default shall have occurred and be continuing, the proceeds of any insurance required to be maintained pursuant to this Section 11 that would otherwise be payable to or for the account of, or that would otherwise be retained by, the Facility Lessee pursuant to this Section 11 or Section 10.3 will be held as security for the obligations of the Facility Lessee under this Facility Lease by the Owner Lessor or, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and at such time thereafter as no Material Lease Default or a Lease Event of Default shall be continuing, such amount shall be paid promptly to the Facility Lessee. 28 SECTION 12. INSPECTION During the Facility Lease Term, each of the Lease Financing Parties and their respective representatives shall have the right, during normal business hours, upon reasonable notice to the Facility Lessee and at no expense (except when a Material Lease Default or a Lease Event of Default has occurred and is continuing) or risk to the Facility Lessee, to inspect the Facility and the records with respect to the operations and maintenance thereof in the Facility Lessee's custody or to which the Facility Lessee has access; PROVIDED, HOWEVER, that any such inspection shall be conducted in accordance with the Operative Documents and so as not to interfere with the operation or maintenance of the Facility or the conduct by the Facility Lessee of its business and shall be in accordance with the Facility Lessee's safety and insurance programs. The Lease Financing Parties shall attempt to conduct their inspections at the same time and, except during the continuance of a Material Lease Default or a Lease Event of Default or during the last 24 months of the Facility Lease Term (unless the Facility Lessee shall have exercised its option to renew the Facility Lease), no more than one inspection a year shall be conducted by any Lease Financing Party. SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS SECTION 13.1. TERMINATION FOR ILLEGALITY. If, as a result of change in Requirements of Law, it shall have become illegal for the Facility Lessee to continue this Facility Lease or for the Facility Lessee to make payments under this Facility Lease or any other Operative Document, and the transactions contemplated by the Operative Documents cannot be restructured to comply with such change in law in a manner reasonably acceptable to the Lease Financing Parties, the Facility Lessee shall have the right, at its option, by giving notice to the Owner Lessor no later than twelve months after the date the Facility Lessee receives notice or first has actual knowledge of such illegality, to terminate this Facility Lease on the Termination Date specified in such notice (which shall be a date occurring not more than 60 days after the date of such notice) and purchase the Undivided Interest by paying to the Owner Lessor the Termination Value determined as of such Termination Date and causing EME to pay to the Persons entitled thereto all other amounts required to be paid under Section 13.3; PROVIDED, that all amounts owed by EME to the Lease Financing Parties under the Operative Documents at such time, shall have been paid to such Persons. It shall be a condition to the termination of this Facility Lease pursuant to this Section 13.1 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to 29 terminate any and all Other Facility Leases to which each such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. SECTION 13.2. TERMINATION FOR BURDENSOME INDEMNITY. If (i) one or more events outside the control of the Facility Lessee or its Affiliates shall have occurred which will, or could reasonably be expected to, give rise to an obligation by the Facility Lessee or EME to pay or incur an indemnity obligation under Section 12 of the Participation Agreement (except for tax indemnity obligations expected on the Closing Date to be incurred) or pursuant to the Tax Indemnity Agreement, (ii) such payment or indemnity obligation (and the underlying cost or tax) can be avoided in whole or in part if the Facility Lessee purchases the Undivided Interest and (iii) the amount of such avoided payments, together with the amount of any indemnity payments made during the Burdensome Buyout Period that could have been avoided if the Facility had been purchased by the Facility Lessee would exceed (on a present value basis, discounted at the Discount Rate, compounded on an annual basis to the date of the termination) 2.5% of the Purchase Price (unless the Owner Participant has waived its right to indemnity payments in excess of 2.5% of the Purchase Price or arranged for its own account for the payment thereof), the Facility Lessee shall have the right, at its option, no later than 24 months after the date the Facility Lessee receives notice or actual knowledge of such event referred to in clause (i) above, to terminate this Facility Lease on the Termination Date specified in the notice provided pursuant to Section 13.1 (which shall be a date occurring not more than 60 days after the date of such notice), and purchase the Undivided Interest by paying to the Owner Lessor the Termination Value determined as of such Termination Date and causing EME to pay to the Persons entitled thereto all other amounts required to be paid under Section 13.3; PROVIDED, that all amounts owed by EME to the Lease Financing Parties under the Operative Documents at such time, shall have been paid to such Persons. It shall be a condition to the termination of this Facility Lease pursuant to this Section 13.2 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to terminate any and all Other Facility Leases to which each such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. SECTION 13.3. PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the Facility Lessee shall have exercised its option under Section 13.1 or 13.2 (each, a "BURDEN- 30 SOME BUYOUT OPTION"), on the Termination Date specified in the Facility Lessee's notice of such exercise, the Facility Lessee shall pay the Termination Value to the Owner Lessor, and shall pay (or in the case of clause (b) below, cause EME to pay) the following amounts to the Owner Lessor or the Person entitled thereto, without duplication, (a) all amounts of Basic Lease Rent or Renewal Lease Rent, as the case may be, due and payable on or prior to such Termination Date PLUS (b) all reasonable documented out-of-pocket costs and expenses incurred by the Lease Financing Parties, other than Affiliates of the Facility Lessee, in connection with the exercise of the Burdensome Buyout Option due and payable on or prior to the Termination Date and any fees and expenses of the Lease Indenture Trustee and Pass Through Trustees due and unpaid on such Termination Date PLUS (c) any other Rent payments under the Facility Lease or under the Lease Indenture or under any other Operative Document. Concurrently with the payment of all sums specified in Section 13.1 or 13.2, as the case may be, and this Section 13.3, (1) Basic Lease Rent for the Undivided Interest shall cease to accrue, (2) the Facility Lessee shall cease to have any liability to the Owner Lessor with respect to the Undivided Interest, except for Supplemental Lease Rent and other obligations surviving pursuant to the express terms of any Operative Document, (3) subject to EME having paid all amounts owed by EME to the Lease Financing Parties under the Operative Documents, the Owner Lessor will in connection with a sale of the Facility pursuant to Section 13.1 or 13.2 transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessee and prepared and recorded at the Facility Lessee's expense), the Undivided Interest to the Facility Lessee (or its designee) on an "as is" and "where is" basis, without representations or warranties other than a warranty as to the absence of Owner Lessor's Liens and Owner Participant's Liens, (4) this Facility Lease shall terminate and (5) the Owner Lessor shall deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepared, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. It shall be a condition of the termination of this Facility Lease pursuant to this Section 13 that the Facility Lessee shall pay all amounts it is obligated to pay under Section 13.1 or 13.2, as the case may be, and this Section 13.3 and all other amounts due by the Facility Lessee under this Facility Lease and the other Operative Documents and that EME shall pay all amounts owed by EME to the Lease Financ ing Parties under the Operative Documents. The Burdensome Buyout Option must be exercised within the 24 month period (the "BURDENSOME BUYOUT PERIOD") after actual knowledge by the Facility Lessee of the event or illegality, as the case may be, giving rise thereto, and if the Burdensome Buyout Option is not exercised within the Burdensome Buyout Period, the Facility Lessee shall be deemed to have irrevocably waived its right to exercise the Burdensome Buyout Option with respect to such 31 event. If the Facility Lessee fails to consummate the Burdensome Buyout Option under this Section 13 after giving notice of its intention to do so (other than in consequence of a failure of the Owner Lessor or Owner Participant to fulfill their obligations, if any, under Section 13), (i) the Facility Lease shall continue, (ii) such failure to consummate shall not constitute a default under the Facility Lease, and (iii) the Facility Lessee will lose its right to terminate this Facility Lease pursuant to this Section 13.3 as a result of the event or condition giving rise to such Burdensome Buyout Option during the remainder of the Facility Lease Term. The Facility Lessee hereby acknowledges the Lien of the Lease Indenture and agrees for the benefit of the Lease Indenture Trustee that any transfer effected pursuant to this Section 13.3 will be subject to said Lien unless the same has been released or discharged in accordance with the terms of the Lease Indenture. SECTION 13.4. ASSUMPTION OF THE LESSOR NOTES; SPECIAL LESSEE TRANSFERS. (a) Notwithstanding the foregoing provisions of Section 13.3 to the contrary, at the option of the Facility Lessee, if (i) the Facility Lessee shall have executed and delivered an assumption agreement to assume the Lessor Notes on a fully recourse basis, as permitted by and in accordance with Section 2.12 of the Lease Indenture, (ii) all other conditions contained in such Section 2.12 of the Lease Indenture shall have been satisfied, (iii) no Lease Event of Default shall have occurred and be continuing and shall not be cured by such assumption, (iv) the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and to make other payments under the Facility Lease in full and (v) the Facility Lessee shall purchase the Facility pursuant to Section 13.1 or 13.2, as the case may be, then, the obligation of the Facility Lessee to pay Termination Value shall be reduced by the outstanding principal amount of the Lessor Notes so assumed by the Facility Lessee; PROVIDED, HOWEVER, for so long as the Lessor Notes are outstanding, if the Facility Lessee shall have chosen to assume the Lessor Notes pursuant to this Section 13.4(a), the Facility Lessee (or its designee) shall acquire the Undivided Interest from the Owner Lessor subject to the Lien of the Lease Indenture; PROVIDED, FURTHER, that if the Facility Lessee assumes the Lessor Notes, then the EME Guarantee shall be re-executed in favor of the Lease Indenture Trustee or its successor, and for the benefit of the Pass Through Trustees. (b) Notwithstanding the foregoing provisions of Section 13.3 to the contrary, in the case of a Burdensome Buyout Event, the Facility Lessee (or its designee) so long as the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and all other payments hereunder in full, and in all respects 32 in accordance with Section 17 of the Participation Agreement, may purchase the Owner Participant's Beneficial Interest or all of the outstanding membership interests in the Owner Participant, in lieu of purchasing the Undivided Interest pursuant to Sections 13.1 and 13.2, and keep the Facility Lease (and Lessor Notes) in place. SECTION 14. TERMINATION FOR OBSOLESCENCE SECTION 14.1. TERMINATION. Upon at least six months' prior written notice to the Owner Lessor, (which notice shall be accompanied by a certification by the board of directors of the Facility Lessee as to one or more of the matters described in clauses (a) and (b) below), the Facility Lessee shall have the option, so long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing on the date of such notice or the proposed Obsolescence Termination Date (as defined below), to terminate this Facility Lease on any Termination Date occurring on or after the seventh anniversary of the Closing Date and not less than 180 days after such notice (the date of termination selected by the Facility Lessee being the "OBSOLESCENCE TERMINATION DATE") which proposed Obsolescence Termination Date shall be set forth in the notice, on the terms and conditions set forth in this Section 14, if (a) the Facility is economically or technologically obsolete as a result of (i) a change in Requirements of Law, regulation or tariff of general application or imposition by the FERC or any other Governmental Authority having or claiming jurisdiction over the Facility Lessee or the Facility of any conditions or requirements (including, without limitation, requiring significant capital improvements to the Facility) relating to the availability, continued effectiveness or renewal of any license or permit required for the operation or ownership of the Facility, or (ii) as a result of any change in the markets for the wholesale purchase and/or sale of energy or any material abrogation of power purchase agreements; (b) an event has occurred that, in the Facility Lessee's good faith judgment, will cause the Facility to become obsolete; or (c) the Facility is surplus to the Facility Lessee's needs or is no longer useful in its trade or business. It shall be a condition to the termination of this Facility Lease pursuant to this Section 14.1 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to terminate any and all Other Facility Leases to which such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. SECTION 14.2. SOLICITATION OF OFFERS. If the Facility Lessee shall give the Owner Lessor notice pursuant to Section 14.1 and the Owner Lessor shall not have 33 elected to retain the Undivided Interest pursuant to Section 14.3 hereof, the Facility Lessee shall (i) as non-exclusive agent for the Owner Lessor, use commercially reasonable efforts to obtain bids from third parties unaffiliated with the Facility Lessee and sell the Owner Lessor's Interest on the Obsolescence Termination Date and (ii) covenant that it will not sell the Owner Lessor's Interest to any third party with whom the Facility Lessee or an Affiliate thereof has an arrangement to use or operate the Facility to generate power for the benefit of the Facility Lessee or any Affiliate thereof after the termination of this Facility Lease. All of the proceeds of any such sale will be for the account of the Owner Lessor; PROVIDED that, so long as the Lessor Notes are outstanding, the proceeds of such sale shall be paid directly to the Lease Indenture Trustee. SECTION 14.3. RIGHT OF OWNER LESSOR TO RETAIN THE UNDIVIDED INTEREST. The Owner Lessor may irrevocably elect to retain, rather than sell, the Undivided Interest by giving notice to the Facility Lessee at least 90 days prior to the Obsolescence Termination Date. If the Owner Lessor elects to retain the Undivided Interest pursuant to this Section 14.3, on the Obsolescence Termination Date the Facility Lessee shall pay (or, in the case of clauses (iii) and (iv) below, cause EME to pay) to the Owner Lessor (i) any Basic Rent or Renewal Lease Rent, as the case may be, payable on the Obsolescence Termination Date, PLUS (ii) the amount set forth under the column headed "Excess of the Cumulative Allocated 467 Fixed Rent and Interest on 467 Fixed Rent over Basic Lease Rent Paid" set forth in Schedule 2 for such Obsolescence Termination Dates (PROVIDED that the amount, if any, set forth in Schedule 2 under the column headed "Excess of Basic Lease Rent Paid over the Cumulative Allocated 467 Fixed Rent and Interest on 467 Fixed Rent" shall be credited against the amount payable under this Section 14.3 and any excess payable under this Section 14.3 after such crediting shall be payable by the Owner Lessor to the Facility Lessee), PLUS (iii) all reasonable documented out-of-pocket costs and expenses incurred in connection with exercise by the Facility Lessee of the termination option pursuant to this Section 14 by the other Lease Financing Parties (but excluding the fees and costs of any broker unless engaged by the Facility Lessee on behalf of the Owner Lessor), PLUS (iv) any other Rent payments under this Facility Lease due and unpaid on the Obsolescence Termination Date including the reimbursement of any fees or expenses of the Lease Indenture Trustee under the Lease Indenture, but not including the outstanding amount of the Lessor Notes on such date, under any other Operative Document. Concurrently with the payment of all sums required to be paid pursuant to this Section 14.3, (i) Basic Lease Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Lessee shall cease to have any liability hereunder or any other Operative Document with respect to the Undi- 34 vided Interest, except for Supplemental Lease Rent and other obligations surviving pursuant to the express terms of any Operative Document, (iii) the Owner Lessor shall pay all outstanding principal and accrued interest on the Lessor Notes and all other amounts due under the Lease Indenture including the reimbursement of any fees or expenses of the Lease Indenture Trustee, (iv) the Facility Lessee will return the Undivided Interest to the Owner Lessor in accordance with Section 5.1, (v) this Facility Lease shall terminate and (vi) subject to EME having paid all amounts owed by EME to the Lease Financing Parties under the Operative Documents, the Owner Lessor shall execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. It shall be a condition precedent to the termination of this Facility Lease pursuant to this Section 14.3, that the Owner Lessor and the Facility Lessee shall each pay all amounts that each is obligated to pay under this Section 14.3. SECTION 14.4. PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the Owner Lessor has not elected to retain the Undivided Interest in accordance with Section 14.3 hereof, on the Obsolescence Termination Date the Owner Lessor shall sell the Owner Lessor's Undivided Interest under this Section 14.4 and its interest in the Ground Interest under Section 6 of the Facility Site Lease and Section 6 of the Facility Site Sublease to the bidder or bidders (which shall not be the Facility Lessee, any Affiliate thereof or any third party with whom the Facility Lessee or an Affiliate thereof has an arrangement to use or operate the Facility to generate power for the benefit of the Facility Lessee or any Affiliate after the termination of this Facility Lease), that shall have submitted the highest cash bid or bids with respect to the Owner Lessor's Interest. On the Obsolescence Termination Date, the Facility Lessee shall pay (or in the case of clause (c) and (d) below, cause EME to pay to the appropriate Lease Financing Party (a) the excess, if any, of Termination Value plus, in the case of a termination of this Facility Lease pursuant to Section 14.1(a)(ii), (b) or (c) hereof, Make-Whole Premium, if any, in each case as determined as of such Obsolescence Termination Date over the proceeds of the sale of the Undivided Interest paid to or retained by the Owner Lessor in connection with such sale, PLUS (b) if such Obsolescence Termination Date shall be a Rent Payment Date, any Basic Lease Rent or Renewal Lease Rent due and payable on such Rent Payment Date, PLUS (c) all reasonable out-of-pocket costs and expenses of the Lease Financing Parties (excluding the fees and costs of any broker unless engaged by the Facility Lessee on the Owners Lessor's behalf) incurred in connection with the exercise of the termination option pursuant to this Section 14 due and payable on such Obsolescence Termination Date, PLUS (d) any other Rent payments under this Facility Lease due 35 and unpaid on the Obsolescence Termination Date. If the proceeds from the sale of the Owner Lessor's Interest paid to or retained by the Owner Lessor exceeds the Termination Value PLUS, in the case of a termination of the Facility Lease pursuant to Section 14.1(a)(ii), (b) or (c) hereof, Make-Whole Premium, if any, in each case as determined as of the Obsolescence Termination Date, the Owner Lessor shall reimburse the Facility Lessee for the amount of the Termination Value paid by the Facility Lessee, if any. Concurrently with the payment of all sums required to be paid pursuant to this Section 14.4, (i) Basic Lease Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Lessee shall cease to have any liability hereun der to the Owner Lessor with respect to the Undivided Interest, except for Supplemental Lease Rent and other obligations surviving pursuant to the express terms of any Operative Document, (iii) subject to EME having paid all amounts owed by EME to the Lease Financing Parties under the Operative Documents, the Owner Lessor will transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessor and prepared and recorded at the Facility Lessee's expense) the Owner Lessor's Interest under this Section 14.4, to the purchaser on an "as is" and "where is" basis, without representations or warranties other than a warranty as to the absence of Owner Lessor's Liens and Owner Participant's Liens, (iv) this Facility Lease shall terminate and (v) the Owner Lessor shall execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. The Facility Lessee may, at its election, revoke its notice of termination on at least 30 days' prior notice to the Owner Lessor, in which event this Facility Lease shall continue with respect to the Undivided Interest; PROVIDED, HOWEVER, that the Facility Lessee shall not be permitted to reissue a notice to terminate pursuant to Section 14.1 more than once in any five year period. The Owner Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Facility Lessee to obtain bids or otherwise take any action in arranging any such sale of the Owner Lessor's Interest other than, if the Owner Lessor has not elected to retain the Undivided Interest, to transfer the Owner Lessor's Interest in accordance with clause (iv) of the second preceding sentence. It shall be a condition of the Owner Lessor's obligation to consummate a sale of the Owner Lessor's Interest that the Facility Lessee shall pay all amounts it is obligated to pay under this Section 14.4 and that EME shall have paid all amounts owed by EME to the Lease Financing Parties under the Operative Documents. If no sale shall occur on the Obsolescence Termination Date, the notice of termination shall be deemed revoked and this Facility Lease shall continue as to the Undivided Interest in full force and effect in accordance with its terms (without prejudice to the Facility Lessee's right to exercise its rights under this Section 14). It shall be a condition to 36 the termination of this Facility Lease pursuant to this Section 14.4 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to terminate any and all Other Facility Leases to which each such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. The Facility Lessee hereby acknowledges the Lien of the Lease Indenture and agrees for the benefit of the Lease Indenture Trustee that any transfer effected pursuant to this Section 14.4 will be subject to said Lien unless the same has been released or discharged in accordance with the terms of the Lease Indenture. SECTION 15. LEASE RENEWAL SECTION 15.1. WINTERGREEN RENEWAL LEASE TERMS. (a) Not earlier than 42 months prior to, but not less than 18 months prior to, the expiration of the Basic Lease Term, so long as no Lease Event of Default shall have occurred and be continuing on the date any notice is given pursuant to this Section 15.1(a) and no Lease Event of Default or Material Lease Default shall have occurred and be continuing on the date the lease renewal proposed pursuant to this Section 15.1(a) is to commence, the Facility Lessee may deliver to the Owner Lessor a notice (which notice may be in addition to a notice of the Facility Lessee's interest in electing a FMV Renewal Lease Term under Section 15.2) of the Facility Lessee's interest in renewing this Facility Lease at the end of the Basic Lease Term for a term (the "FIRST WINTERGREEN RENEWAL LEASE TERM") selected by the Facility Lessee, which term shall satisfy the following criteria: (i) on the last date of such proposed First Wintergreen Renewal Lease Term, the estimated Fair Market Sales Value of the Facility shall be no less than 20% of the Purchase Price (without taking into account inflation or deflation subsequent to the Closing Date), (ii) the aggregate of the proposed First Wintergreen Renewal Lease Term and the Basic Lease Term shall be no greater than 80% of the estimated remaining useful life of the Facility, measured from the Closing Date and (iii) the First Wintergreen Renewal Lease Term will be for a period of not less than 3.25 years and items (i), (ii) and (iii) shall be determined not more than 36 months prior to the expiration of the Basic Lease Term by an Independent Appraiser selected by the Facility Lessee and reasonably acceptable to the Owner Lessor. The Facility Lessee may withdraw any notice given in accordance with this Section 15.1(a) by written notice of such withdrawal to the Owner Lessor, on or prior to the date which is 18 months before 37 the commencement of the proposed First Wintergreen Renewal Lease Term and if such notice is not so withdrawn, the Facility Lessee shall be deemed to have irrevocably elected to renew the Facility Lease for the First Wintergreen Renewal Term. (b) Not earlier than 42 months prior to, but not less than 18 months prior to, the expiration of the First Wintergreen Renewal Term, so long as no Lease Event of Default shall have occurred and be continuing on the date any notice is given pursuant to this Section 15.1(b) and no Lease Event of Default or Material Lease Default shall have occurred and be continuing on the date the lease renewal proposed pursuant to this Section 15.1(b) is to commence, the Facility Lessee may deliver to the Owner Lessor a notice (which notice may be in addition to a notice of the Facility Lessee's interest in electing a FMV Renewal Lease Term under Section 15.2) of the Facility Lessee's interest in renewing this Facility Lease at the end of the First Wintergreen Renewal Lease Term for a term (the "SECOND WINTERGREEN RENEWAL LEASE TERM") selected by the Facility Lessee, which term shall satisfy the following criteria: (i) on the last date of such proposed Second Wintergreen Renewal Lease Term, the estimated Fair Market Sales Value of the Facility shall be no less than 20% of the Purchase Price (without taking into account inflation or deflation subsequent to the Closing Date) and (ii) the aggregate of the proposed Second Wintergreen Renewal Lease Term, the First Wintergreen Renewal Lease Term and the Basic Lease Term shall be no greater than 80% of the estimated remaining useful life of the Facility, measured from the Closing Date and both (i) and (ii) determined not more than 36 months prior to the expiration of the First Wintergreen Renewal Lease Term by an Independent Appraiser selected by the Facility Lessee and reasonably acceptable to the Owner Lessor. The Facility Lessee may withdraw any notice given in accordance with this Section 15.1(b) by written notice of such withdrawal to the Owner Lessor on or prior to 18 months before commencement of the proposed Second Wintergreen Renewal Lease Term and if such notice is not so withdrawn, the Facility Lessee shall be deemed to have irrevocably elected to renew the Facility Lease for the Second Wintergreen Renewal Term. SECTION 15.2. FAIR MARKET VALUE RENEWAL LEASE TERMS. Not earlier than 42 months prior to, but not less than 18 months prior to, the expiration of the Basic Lease Term or any Renewal Lease Term, so long as no Lease Event of Default shall have occurred and be continuing on the date any notice is given pursuant to this Section 15.2 and no Lease Event of Default or Material Lease Default shall have occurred and be continuing on the date the lease renewal proposed pursuant to this Section 15.2 is to commence, the Facility Lessee may deliver to the Owner Lessor a notice (which notice may be in addition to a notice of the Facility Lessee's interest in 38 electing the First Wintergreen Renewal Lease Term or the Second Wintergreen Renewal Lease Term) of the Facility Lessee's interest in renewing this Facility Lease for a term (each such term, a "FMV RENEWAL LEASE TERM") commencing upon expiration of the Basic Lease Term or the Renewal Lease Term otherwise expiring and extending for no less than two years and no more than five years; PROVIDED that, unless such FMV Renewal Lease Term extends to the end of the useful life of the Facility, no Renewal Lease Term shall extend beyond the date that is 36 months prior to the end of the useful life of the Facility (as set forth in the most recent of the Closing Date Appraisal, the appraisal obtained by the Facility Lessee in connection with the determination of the First Wintergreen Renewal Lease Term and the appraisal obtained by the Facility Lessee in connection with the determination of the Second Wintergreen Renewal Lease Term). The Facility Lessee may withdraw any notice given in accordance with this Section 15.2 by written notice of such withdrawal to the Owner Lessor and if such notice is not so withdrawn, the Facility Lessee shall be deemed to have irrevocably elected to renew the Facility Lease for the FMV Renewal Term. SECTION 15.3. RENEWAL LEASE RENT AND TERMINATION VALUE FOR RENEWAL LEASE TERM. During each Renewal Lease Term, Renewal Lease Rent shall be paid on the Rent Payment Dates. The installment of Renewal Lease Rent payable on each such Rent Payment Date during the First Wintergreen Renewal Lease Term and the Second Wintergreen Renewal Lease Term shall be equal to the lesser of (i) the Fair Market Rental Value of the Undivided Interest determined not more than 36 months prior to the expiration of the Basic Lease Term, in the case of rent payable during the First Wintergreen Renewal Term, or the First Wintergreen Renewal Lease Term, in the case of rent payable during the Second Wintergreen Renewal Term, and (ii) 50% of the average Basic Lease Rent payable with respect to the Basic Lease Term. Renewal Lease Rent payable on each Rent Payment Date during any FMV Renewal Lease Term for the Undivided Interest shall be equal to 105% of the Fair Market Rental Value of the Undivided Interest determined not more than 36 months before the commencement of such FMV Renewal Lease Term. SECTION 15.4. DETERMINATION OF FAIR MARKET RENTAL VALUE. The Fair Market Rental Value of the Undivided Interest as of the commencement of any Renewal Lease Term shall be determined by agreement of the Owner Lessor and the Facility Lessee within six months after receipt by the Owner Lessor of the notice from the Facility Lessee of its election to renew pursuant to Section 15.1 or 15.2 (but not more than 36 months before the commencement of such Renewal Lease Term) or, if they shall fail to agree within such six month period, shall be determined by an appraisal 39 conducted by an Independent Appraiser according to the Appraisal Procedure. The Facility Lessee shall be responsible for such Independent Appraiser's fees and expenses. SECTION 16. EVENTS OF DEFAULT Each of the following events shall constitute a "LEASE EVENT OF DEFAULT" hereunder (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority): (a) the Facility Lessee shall fail to make any payment of Basic Lease Rent, Renewal Lease Rent, Termination Value, Make-Whole Premium or other prepayment premium or other costs (but in no event interest or principal), fees and expenses associated with the Lessor Notes (other than costs, fees and expenses in respect of the Lessor Notes incurred as a result of the Lease Indenture Event of Default which is not a Lease Event of Default) when due, and such failure shall continue unremedied for five (5) Business Days; or (b) the Facility Lessee shall fail to make or cause EME to make any other payment required to be made by the Facility Lessee under this Facility Lease, or under any other Operative Document (other than Excepted Payments, unless the Owner Participant shall have declared a default with respect thereto) when due, and such failure shall have continued unremedied for 30 days after receipt by the Facility Lessee of written notice of such failure; or (c) the Facility Lessee shall fail to maintain insurance in the amounts and on the terms set forth in the Operative Documents, including Section 11 hereof, and such failure shall continue unremedied for 10 Business Days after receipt by the Facility Lessee of written notice thereof; or (d) the Facility Lessee shall fail to perform or observe any other material covenant set forth in this Facility Lease or any other covenant set forth in the Participation Agreement or in any other Operative Document and such failure shall continue unremedied for 30 days after receipt by the Facility Lessee of written notice thereof; PROVIDED, HOWEVER, that if such failure cannot be remedied within such 30-day period, then the period within which to remedy such failure shall be extended up to an additional 180 days, so long as the Facility Lessee diligently 40 pursues such remedy, such failure is reasonably capable of being remedied within such additional 180-day period and the continuation of such failure during the period of such extension would not have a Material Adverse Effect on the Facility Lessee or the Guarantor; PROVIDED, FURTHER, that in the case of the Facility Lessee's obligation set forth in clause (b) of Section 7.1, to the extent and for so long as a test, challenge, appeal or proceeding to review with respect to such non-compliance shall be prosecuted in good faith by the Facility Lessee, the failure by the Facility Lessee to comply with the requirements thereof shall not constitute a Lease Event of Default if such test, challenge, appeal or proceeding shall not involve (i) a risk of foreclosure, sale, forfeiture or loss of, or imposition of a Lien on, the Facility or any part thereof or of impairment of the use, operation or maintenance of the Facility, or (ii) a risk of criminal liability being incurred by, or of a material adverse effect on the interests of, any other Lease Financing Party, including, without limitation, subjecting any such person to regulation as a public utility under Requirements of Law; and PROVIDED, FURTHER, also in the case of the Facility Lessee's obligation set forth in clause (b) of Section 7.1, if such noncompliance is not a type that can be immediately remedied, the failure to comply shall not be a Lease Event of Default if the Facility Lessee is taking all reasonable action to remedy such noncompliance and if, but only if, such noncompliance shall not involve any danger described in clause (i) or (ii) of the preceding proviso; and PROVIDED, FURTHER, such noncompliance, or such test, challenge, appeal or proceeding to review with respect to such noncompliance shall not extend beyond the date that is 36 months prior to the scheduled expiration of the Basic Lease Term or any Renewal Lease Term then in effect or already elected by the Facility Lessee; or (e) any representation or warranty of the Facility Lessee or the Guarantor set forth in the Operative Documents (other than a tax representation set forth in the Tax Indemnity Agreement) shall prove to have been incorrect in any material respect when made and the facts or circumstances upon which such breach of representation or warranty is based continue to be material and unremedied for a period of 30 days after receipt by the Facility Lessee of written notice thereof; PROVIDED, HOWEVER, that if such condition cannot be remedied within such 30-day period, then the period within which to remedy such condition shall be extended up to an additional 60 days, so long as the Facility Lessee diligently pursues such remedy, such condition is reasonably capable of being remedied within such additional 60-day period and the continuation of such condition during the period of such extension would not have a Material Adverse Effect on the Facility Lessee or the Guarantor; or 41 (f) the Facility Lessee or the Guarantor shall (i) commence a voluntary case or other proceeding seeking relief under Title 11 of the Bankruptcy Code or liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or apply for or consent to the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) consent to, or fail to controvert in a timely manner, any such relief or the appointment of or taking possession by any such official in any voluntary case or other proceeding commenced against it, or (iii) file an answer admitting the material allegations of a petition filed against it in any such proceeding, or (iv) make a general assignment for the benefit of creditors; or (g) an involuntary case or other proceeding shall be commenced against the Facility Lessee or the Guarantor, seeking (i) liquidation, reorganization or other relief with respect to it or its debts under Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other similar law now or hereafter in effect, or (ii) the appointment of a trustee, receiver, liquidator, custodian or other similar official with respect to it or any substantial part of its property or (iii) the winding-up or liquidation of the Facility Lessee or the Guarantor, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days; or (h) default under any bond, debenture, note or other evidence of Indebtedness (but excluding obligations arising under the Operative Documents and non-recourse Indebtedness) for money borrowed by the Facility Lessee or the Guarantor under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Facility Lessee or the Guarantor, whether such indebtedness now exists or shall hereafter be created, which Indebtedness is in an aggregate principal amount exceed ing $20,000,000 at all other times and which default shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such Indebtedness having been discharged, or such acceleration having been rescinded or annulled; or (i) failure by the Facility Lessee to comply in all material respects with the restrictions on transfer imposed on it by Section 22.4 herein; or (j) any of the Operative Documents (including the Lease Indenture) to which the Facility Lessee or the Guarantor is a party are declared unenforceable, are terminated, cease to be in full force and effect or fail to constitute valid and 42 perfected first priority security interests (in each case, other than in accordance with their terms) or either the Facility Lessee or the Guarantor fails to comply with its respective obligations under Sections 5.7, or 7.5 of the Participation Agreement; or (k) judgments or orders for the payment of money against either of the Facility Lessee or the Guarantor, which judgments or orders, as the case may be, are in excess of $20,000,000 in the aggregate (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without reservation) and which are not vacated, discharged or effectively stayed or bonded within 60 days from the entry thereof; or (l) the Guarantor fails to make any payment under the EME Guarantee, the EME OP Guarantee or any other Operative Document (other than payments pursuant to the Reimbursement Agreement and other than Excepted Payments, unless the Owner Participant shall have declared a default with respect to such Excepted Payments) when due, and such failure shall continue unremedied for five (5) Business Days after receipt by the Guarantor of written notice of such failure; (m) occurrence of a Regulatory Violation with respect to the Facility Lessee; or (n) (i) any Reportable Event shall occur; (ii) there shall be initiated any action by the Guarantor or any member of the Controlled Group to terminate a Plan; (iii) there shall be initiated proceedings by the PBGC under Section 4042 of ERISA to terminate a Plan or to appoint a trustee to administer a Plan; (iv) any Plan shall incur an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), unless waived; (v) the imposition upon the Guarantor or any member of the Controlled Group or any Plan fiduciary of a material liability resulting from either the engagement by any such party in a transaction prohibited under Section 4975 of the Code or Section 406 of ERISA or any other violation of Title I of ERISA; (vi) the Guarantor or any member of the Controlled Group suffers a partial or complete withdrawal from a Multiemployer Plan, which, with respect to clauses (i) through (vi) above, results in a liability, individually or in the aggregate, of at least $20,000,000; (o) the Guarantor shall fail to perform or observe any other material covenant set forth in the Participation Agreement or in any other Operative Document (other than the EME OP Guarantee) and such failure shall continue 43 unremedied for 30 days after receipt by the Guarantor of written notice thereof; PROVIDED, HOWEVER, that if such failure cannot be remedied within such 30-day period, then the period within which to remedy such failure shall be extended up to an additional 180 days, so long as the Guarantor diligently pursues such remedy, such failure is reasonably capable of being remedied within such additional 180-day period and the continuation of such failure during the period of such extension would not have a Material Adverse Effect on the Guarantor; or (p) the Guarantor shall fail to perform or observe any other material covenant set forth in the EME OP Guarantee, the Owner Participant shall have declared a default thereunder with respect to such failure and such failure shall continue unremedied for 30 days after such declaration; PROVIDED, HOWEVER, that if such failure cannot be remedied within such 30-day period, then the period within which to remedy such failure shall be extended up to an additional 180 days, so long as the Guarantor diligently pursues such remedy, such failure is reasonably capable of being remedied within such additional 180-day period and the continuation of such failure during the period of such extension would not have a Material Adverse Effect on the Guarantor. SECTION 17. REMEDIES SECTION 17.1. REMEDIES FOR LEASE EVENT OF DEFAULT. Upon the occurrence of any Lease Event of Default and at any time thereafter so long as the same shall be continuing, the Owner Lessor may, at its option, declare this Facility Lease to be in default by written notice to the Facility Lessee (PROVIDED, that this Facility Lease shall automatically be in default without such declaration or delivery of such notice upon the occurrence of a Lease Event of Default in clause (f) or (g) of Section 16); and at any time thereafter, so long as the Facility Lessee shall not have remedied all outstanding Lease Events of Default, the Owner Lessor may do one or more of the following as the Owner Lessor in its sole discretion shall elect, to the extent permit ted by, and subject to compliance with any mandatory Requirements of Law then in effect and subject to Section 17.2 below: (a) proceed by appropriate court action or actions, either at law or in equity, to enforce performance by the Facility Lessee of the applicable covenants and terms of this Facility Lease or to recover damages for breach thereof; (b) by notice in writing to the Facility Lessee, terminate this Facility Lease whereupon all right of the Facility Lessee to the possession and use of 44 the Undivided Interest under this Facility Lease shall absolutely cease and terminate but the Facility Lessee shall remain liable as hereinafter provided; and thereupon, the Owner Lessor may demand that the Facility Lessee, and the Facility Lessee shall, upon written demand of the Owner Lessor, forthwith return possession of the Undivided Interest to the Owner Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of Section 5, except those provisions relating to periods of notice; and the Owner Lessor may thenceforth hold, possess and enjoy the same free from any right of the Facility Lessee, or its successor or assigns, to use the Undivided Interest for any purpose whatever; (c) sell the Owner Lessor's Interest at public or private sale, as the Owner Lessor may determine, free and clear of any rights of the Facility Lessee under this Facility Lease and without any duty to account to the Facility Lessee with respect to such sale or for the proceeds thereof (except to the extent required by paragraph (f) below if the Owner Lessor elects to exercise its rights under said paragraph and by Requirements of Law), in which event the Facility Lessee's obligation to pay Basic Lease Rent hereunder due for any periods subsequent to the date of such sale shall terminate (except to the extent that Basic Lease Rent is to be included in computations under paragraph (f) below if the Owner Lessor elects to exercise its rights under said paragraph); (d) hold, keep idle or lease to others the Owner Lessor's Interest as the Owner Lessor in its sole discretion may determine, free and clear of any rights of the Facility Lessee under this Facility Lease and without any duty to account to the Facility Lessee with respect to such action or inaction or for any proceeds with respect thereto, except that the Facility Lessee's obligation to pay Basic Lease Rent with respect to the Undivided Interest due for any periods subsequent to the date upon which the Facility Lessee shall have been deprived of possession and use of the Undivided Interest pursuant to this Section 17 shall be reduced by the net proceeds, if any, received by the Owner Lessor from leasing the Undivided Interest to any Person other than the Facility Lessee; (e) whether or not the Owner Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights under paragraph (b) above with respect to the Undivided Interest, the Owner Lessor, by written notice to the Facility Lessee specifying a Termination Date that shall be not earlier than 10 days after the date of such notice, may demand that the Facility Lessee pay to the Owner Lessor, and the Facility Lessee shall pay to the Owner Lessor, on the Termination Date specified in such notice (or immediately upon the occurrence of a Lease Event of 45 Default described in clause (f) or (g) of Section 16, in which case no such written notice or demand shall be required under this Section 17.1(e) for the amounts described in this Section 17.1(e) to become due and payable by the Facility Lessee), any unpaid Basic Lease Rent due before such Termination Date and, if such Termination Date shall be a Rent Payment Date, any Basic Lease Rent due and payable on such Rent Payment Date, any Supplemental Lease Rent due and unpaid as of the payment date specified in such notice, plus as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Lease Rent due after the Termination Date specified in such notice), (i) an amount equal to the excess, if any, of the Termination Value computed as of the Termination Date specified in such notice over the Fair Market Sales Value of the Owner Lessor's Interest as of the Termination Date specified in such notice; or (ii) an amount equal to the excess, if any, of Termination Value computed as of the Termination Date specified in such notice over the Fair Market Rental Value of the Owner Lessor's Interest until the end of the Basic Lease Term or the then current Renewal Lease Term, after discounting such Fair Market Rental Value quarterly to present value as of the Termination Date specified in such notice at a rate equal to the Discount Rate; or (iii) an amount equal to the Termination Value computed as of the Termination Date specified in such notice and, upon payment of such Termination Value by the Facility Lessee pursuant to this clause (iii) and all other Rent then due and unpaid by the Facility Lessee, the Owner Lessor will forthwith transfer to the Facility Lessee (or its designee) in accordance with this Section 17.1(e) and Section 6 of the Facility Site Lease on an "as is," "where is" and "with all faults" basis, without representation or warranty other than a warranty as to the absence of Owner Lessor's Liens accompanied by a warranty of the Owner Participant as to the absence of the Owner Participant's Liens, all of its interest in the Owner Lessor's Interest and execute, acknowledge and deliver, and record and file (as appropriate), appropriate releases, including a release from the Lien of the Lease Indenture, and all other documents or instructions necessary or desirable to effect the foregoing all in form and substance reasonably satisfactory to the Owner Lessor and at the cost and expense of the Facility Lessee, and upon payment of such amounts under either clauses (i) and (ii) of this paragraph (e), this Facility Lease, and the Facility Lessee's obligation to pay Basic Lease Rent hereunder due for any periods subsequent to the date of such payment shall terminate; and (f) if the Owner Lessor shall have sold the Owner Lessor's Interest pursuant to paragraph (c) above, the Owner Lessor may, if it shall so elect, demand that the Facility Lessee pay to the Owner Lessor, and the Facility Lessee shall pay to the Owner Lessor, as liquidated damages for loss of a bargain and not as 46 a penalty (in lieu of the Basic Lease Rent due for any periods subsequent to the date of such sale), an amount equal to (A) any unpaid Basic Lease Rent due before the date of such sale PLUS (B) if that date is a Rent Payment Date, the Basic Lease Rent due on that date, PLUS (C) the amount, if any, by which the Termination Value computed as of the Termination Date next preceding the date of such sale or, if such sale occurs on a Rent Payment Date or a Termination Date then computed as of such date, exceeds the net proceeds of such sale, and, upon payment of such amount, this Facility Lease and the Facility Lessee's obligation to pay Basic Lease Rent for any periods subsequent to the date of such payment shall terminate. In addition, the Facility Lessee shall be liable, except as otherwise provided above, for (i) any and all unpaid Basic Lease Rent due hereunder before, or during the exercise of any of the foregoing remedies, and (ii) on an After-Tax Basis, for legal fees and other costs and expenses incurred by reason of the occurrence of any Lease Event of Default or the exercise of the Owner Lessor's remedies with respect thereto, including the repayment in full of any costs and expenses necessary to be expended in connection with the return of the Undivided Interest in accordance with Section 5.2 hereof, including, without limitation, any costs and expenses incurred by the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and other Lease Financing Parties in connection with retaking constructive possession of, or in repairing, the Undivided Interest in order to cause it to be in compliance with all maintenance standards imposed by this Facility Lease. SECTION 17.2. LIMITATION ON RECOURSE. Notwithstanding anything herein to the contrary, at any time during the Basic Lease term only, if Rent (including Termination Value) and Other Midwest Liabilities due and unpaid at such time is greater than the aggregate Free Cashflow amount attributable to the Fiscal Quarters during which Rent and Other Midwest Liabilities became due and are undischarged, any claim against the Facility Lessee for the amount by which such Rent and Other Midwest Liabilities due and unpaid exceed the aggregate Free Cashflow amount attributable to the Fiscal Quarters during which Rent and Other Midwest Liabilities became due and are undischarged shall be subordinated to the claims of the holders of Specified Midwest Indebtedness on the terms and conditions set forth in the Subordination Agreement; PROVIDED that such subordination shall not impair or otherwise restrict any right or ability of the Owner Participant, the Owner Trustee, the Equity Investor, the Lease Indenture Trustee or either Pass Through Trustee to make a claim under the EME Guarantee or the EME OP Guarantee, as the case may be, in respect of such excess or to retain any amount paid by EME under the EME Guarantee or the EME OP Guarantee, as the case may be, in respect of such excess. 47 Notwithstanding the foregoing, no provision of this Facility Lease (including this Section 17.2) or the Subordination Agreement shall limit or impair, or be deemed to limit or impair, in any way the right of the Owner Lessor to take (or cause to be taken) any of the following actions: (i) the giving of any notice necessary to cause a default, breach, failure or misrepresentation to become a Lease Event of Default, (ii) the declaration of this Facility Lease to be in default; (iii) the election or exercise of any remedy arising out of or in connection with a Lease Event of Default (including making any demand for payment of Termination Value, terminating this Facility Lease, exercising the rights of the Owner Lessor as owner of the Undivided Interest or any other remedy under Section 17 hereof); (iv) the making of demand for payment of any claim required to be subordinated pursuant this Section 17.2 and Section 18.19 of the Participation Agreement; and (v) the exercise of any other right or remedy in the Operative Documents or at law with respect to any claim not constituting a claim required to be subordinated pursuant this Section 17.2 and Section 18.19 of the Participation Agreement; PROVIDED, HOWEVER, that in no event shall the Owner Lessor be entitled to seek to collect or enforce payment of any amount constituting a claim required to be subordinated pursuant to this Section 17.2 and Section 18.19 of the Participation Agreement. SECTION 17.3. CUMULATIVE REMEDIES. The remedies in this Facility Lease provided in favor of the Owner Lessor shall not be deemed exclusive, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law or in equity; and the exercise or beginning of exercise by the Owner Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Owner Lessor of any or all of such other remedies. To the extent permitted by Requirements of Law, the Facility Lessee hereby waives any rights now or hereafter conferred by statute or otherwise which may require the Owner Lessor to sell, lease or otherwise use the Undivided Interest or any Component thereof in mitigation of Owner Lessor's damages as set forth in this Section 17 or which may otherwise limit or modify any of Owner Lessor's rights and remedies in this Section 17. SECTION 17.4. NO DELAY OR OMISSION TO BE CONSTRUED AS WAIVER. No delay or omission to exercise any right, power or remedy accruing to the Owner Lessor upon any breach or default by the Facility Lessee under this Facility Lease shall impair any such right, power or remedy of the Owner Lessor, nor shall any such delay or omission be construed as a waiver of any breach or default, or of any similar breach or default hereafter occurring; nor shall any waiver of a single breach or default be deemed a waiver of any subsequent breach or default. 48 SECTION 18. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS Any moneys received by the Owner Lessor or the Lease Indenture Trustee pursuant to Section 10.3, 10.5 or 11.7 shall, until paid to the Facility Lessee as provided in accordance with such Sections, be held by the Owner Lessor or the Lease Indenture Trustee, as the case may be, as security for the Facility Lessee's obligations under this Facility Lease and be invested in Permitted Investments by the Owner Lessor or the Lease Indenture Trustee, as the case may be, at the sole risk of the Facility Lessee, from time to time as directed in writing by the Facility Lessee if such investments are reasonably available for purchase. Any gain (including interest received) realized as the result of any such Permitted Investment (net of any fees, commissions, taxes and other expenses, if any, incurred in connection with such Permitted Investment) shall be applied or remitted to the Facility Lessee in the same manner as the principal invested. SECTION 19. RIGHT TO SUBLEASE SECTION 19.1. SUBLEASE. Except as provided in this Section 19.1, the Facility Lessee shall not assign, transfer or sublease all or any portion of its rights in the Owner Lessor's Undivided Interest under this Facility Lease. Pursuant to the provisions of the Operative Documents, the Facility Lessee shall have the right to sublease the Undivided Interest without the consent of any other Lease Financing Party if: (a) the EME Guarantee, the Reimbursement Agreement and the EME OP Guarantee remain in full force and effect; (b) the sublessee (i) is a solvent corporation, partnership, business trust, limited liability company or other entity (but not individuals) not subject to bankruptcy proceedings, (ii) is not involved in material litigation with the Owner Participant, and (iii) is, or its operating, maintenance and use obligations under the sublease are guaranteed by, or such obligations are contracted to be performed by, an experienced, reputable operator of electric generating assets similar to the Facility; (c) the sublease does not extend beyond the scheduled expiration of the applicable Basic Lease Term or any Renewal Lease Term then in effect or 49 already elected by the Facility Lessee (and may be terminated upon early termination of the Facility Lease) and is expressly subject and subordinate to the Facility Lease; (d) all terms and conditions of the Facility Lease and the other Operative Documents remain in effect and the Facility Lessee remains fully and primarily liable for its obligations thereunder but subject to Section 17.2 of this Facility Lease and Section 18.19 of the Participation Agreement; (e) no Lease Event of Default under the Facility Lease shall have occurred and be continuing; (f) the sublease prohibits further assignment or subletting; (g) the sublease requires the sublessee to operate and maintain the Undivided Interest in a manner not less favorable than that required under the Facility Lease and the other Operative Documents; (h) the sublessee does not cause the Facility to become "tax-exempt use property" within the meaning of Section 168(h) of the Code (unless the Facility sublessee shall make a payment to the Owner Participant contemporaneously with the execution of the sublease that, in reasonable judgement of the Owner Participant, compensates such Owner Participant for the adverse tax consequences resulting from the classification of the Facility as "tax-exempt use property"); (i) the Owner Lessor (and so long as the Lessor Notes are outstanding, the Pass-Through Trustee and the Lease Indenture Trustee) shall have received an opinion of counsel, which opinion of counsel shall be reasonably acceptable to each such recipient, to the effect that all regulatory approvals required to enter into such sublease shall have been obtained; (j) the Facility sublessee shall pay all reasonable documented out-of-pocket expenses incurred by the other Lease Financing Parties in connection with such sublease; and (k) the Owner Participant shall have received an opinion reasonably satisfactory to it from Hunton & Williams or from a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee, to the effect that such sublease would not result in any material indemnified, or any unindemnified, incremental tax risk to the Owner Participant. 50 As a condition precedent to such sublease, the Facility Lessee shall provide the Owner Lessor, the Owner Participant, and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and Pass Through Trustees with all documentation in respect of such sublease and an opinion of counsel to the effect that such sublease complies with the provisions of this Section 19.1 (such documentation, counsel and opinion to be reasonably satisfactory to such recipients). SECTION 20. OWNER LESSOR'S RIGHT TO PERFORM If the Facility Lessee fails to make any payment required to be made by it hereunder or fails to perform or comply with any of its other agreements contained herein after notice to the Facility Lessee and failure of the Facility Lessee to so perform or comply within 10 days thereafter, the Owner Lessor or the Owner Participant may itself make such payment or perform or comply with such agreement in a reasonable manner, but shall not be obligated hereunder to do so, and the amount of such payment and of the reasonable expenses of the Owner Lessor or the Owner Participant incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, shall be deemed to be Supplemental Lease Rent, payable by the Facility Lessee to the Owner Lessor on demand. SECTION 21. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE LEASE INDENTURE TRUSTEE In order to secure the Lessor Notes, the Owner Lessor will assign and grant a Lien to the Lease Indenture Trustee of all of the Owner Lessor's right, title and interest in, to and under this Facility Lease, and the Undivided Interest (other than Excepted Payments and the rights to enforce and collect the same). The Facility Lessee hereby consents to such assignment and to the creation of such Lien and security interest and acknowledges receipt of copies of the Lease Indenture, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent of the Facility Lessee under any other circumstances. Unless and until the Facility Lessee shall have received written notice from the Lease Indenture Trustee that the Lien of the Lease Indenture has been fully terminated, the Lease Indenture Trustee shall have the right to exercise the rights of the Owner Lessor under this Facility Lease (other than the rights to enforce and collect the same) to the extent set forth in and subject in each case to the exceptions set forth in the Lease Indenture. TO THE EXTENT, IF ANY, THAT THIS FACILITY LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE 51 UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS FACILITY LEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE LEASE INDENTURE TRUSTEE ON THE SIGNATURE PAGE THEREOF. SECTION 22. MISCELLANEOUS SECTION 22.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition of this Facility Lease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. SECTION 22.2. NOTICES. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or shall be produced by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, PROVIDED such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to such party and any copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other party: If to the Owner Lessor: Powerton Trust I c/o Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Facsimile No.: (302) 651-8882 Attention: Corporate Trust Administration 52 with a copy to the Owner Participant: Powerton Generation I, LLC c/o PSEG Resources Inc. 80 Park Plaza, Suite T-22 Newark, NJ 07101 Telephone No.: (973) 456-3560 Facsimile No.: (973) 456-3569 Attention: President and to the Lease Indenture Trustee: United States Trust Company of New York, 114 West 47th Street, 25th floor New York, NY 10036 Facsimile No.: (212) 852-1625 Attention: Christopher J. Grell, Vice President If to the Facility Lessee: Midwest Generation, LLC One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Facsimile No. : (312) 583-6111 Attention: President with copy to: Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612 Facsimile No.: (949) 752-1420 Attention: General Counsel SECTION 22.3. SURVIVAL. Except for the provisions of Sections 3.3, 3.5, 5, 9 and 17, which shall survive, the warranties and covenants made by each party hereto 53 shall not survive the expiration or termination of this Facility Lease in accordance with its terms. SECTION 22.4. SUCCESSORS AND ASSIGNS. (a) This Facility Lease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided in Section 22.4(c), the Facility Lessee may not assign the Facility Lease or any other Operative Document, or any interest therein, without the prior written consent of the Owner Lessor and the Owner Participant. (c) The Facility Lessee may, upon satisfaction of the conditions set forth herein and in Section 22.4(d), without the consent of any other Lease Financing Party, so long as the Owner Lessor or Owner Participant does not become regulated as a "public utility" or "public utility holding company" as a result of such assignment, assign the Facility Lease and the other Operative Documents, or any interest therein. In addition to the conditions set forth in the preceding sentence, the Facility Lessee may assign the Facility Lease and the other Operative Documents, or any interest therein, under the following circumstances: (i) to any entity; PROVIDED that such entity's long term senior unsecured Indebtedness is rated equal to or greater than BBB+ from S&P and Baa1 from Moody's or, if higher, the rating by S & P and Moody's of EME's long term senior unsecured Indebtedness (but not to exceed A - by S & P or A3 by Moody's); or (ii) to any entity; PROVIDED that the Facility Lessee shall remain secondarily liable under the Facility Lease and all other Operative Documents, subject to Section 17.2 of this Facility Lease and Section 18.19 of the Participation Agreement such that the Facility Lessee would be directly obligated to pay or perform any obligation not paid or performed by the assignee when due, and the EME Guarantee, the Reimbursement Agreement and the EME OP Guarantee shall remain in full force and effect. In the case of an assignment pursuant to clause (i) above, the Facility Lessee shall, upon the transferee's assumption of the Facility Lessee's obligations under the Facility Lease and the other Operative Documents in accordance with the terms of 54 this Section 22.4(c) and Section 22.4(d), have no further liability or obligation thereunder, arising after such transfer and the obligations of the Facility Lessee and the Guarantor, as the case may be, under the other Operative Documents shall be assumed by the transferee, including, without limitation, the EME indemnity obligations set forth in Section 12 of the Participation Agreement and the parties shall execute and deliver amendments to the Operative Documents necessary to effect the release of EME from such obligations. Notwithstanding the foregoing, so long as the Lessor Notes are outstanding, no such assignment shall be permitted unless each of S&P and Moody's shall have confirmed that such assumption shall not result in a downgrade of the then existing credit rating of the Certificates. (d) Any assignment by the Facility Lessee pursuant to Section 22.4(c) shall be subject to satisfaction of the following additional conditions: (i) the Owner Lessor and the Owner Participant (and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and the Pass-Through Trustees) shall have received an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to each recipient thereof, to the effect that all regulatory approvals required in connection with such transfer or necessary to assume the Facility Lessee's obligations under the Operative Documents shall have been obtained; (ii) such transfer shall be pursuant to an assignment and assumption agreement in form and substance reasonably satisfactory to the Owner Participant (and the Lease Indenture Trustee and the Pass-Through Trustees, so long as the Lessor Notes are outstanding); (iii) the Owner Lessor and the Owner Participant (and the Lease Indenture Trustee and the Pass-Through Trustees, so long as the Lessor Notes are outstanding) shall have received an opinion of counsel, which opinion and counsel are reasonably satisfactory to each recipient thereof, as to the validity and enforceability of such assignment and assumption agreement required pursuant to (ii) above; (iv) the Owner Participant shall have received an opinion reasonably satisfactory to it from Hunton & Williams, or from a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee, to the effect that such transfer would not 55 result in any material indemnified incremental tax risk, or any unindemnified, incremental tax risk to the Owner Participant; (v) no Material Lease Default or no Lease Event of Default shall have occurred and be continuing; (vi) such transfer by the Facility Lessee shall not result in a Regulatory Event of Loss; (vii) the transferee shall not be involved in material litigation with the Owner Participant; (viii) the Facility Lessee shall pay all reasonable documented out-of-pocket expenses incurred by the other Lease Financing Parties in connection with such assignment; and (ix) the transferee, or the operator of the Facility retained by the transferee, shall be experienced in operating facilities such as the Facility. The Facility Lessee acknowledges that the Owner Participant is a third party beneficiary of this Section 22.4 and should be entitled to enforce its rights hereunder as if it were a party to this Facility Lease. SECTION 22.5. "TRUE LEASE." This Facility Lease shall constitute an agreement of lease and nothing herein shall be construed as conveying to the Facility Lessee any right, title or interest in or to the Undivided Interest except as lessee only. The parties hereto hereby agree that the Facility Lessee's obligation to make Excepted Payments is a separate and independent obligation from its obligation to make other Rent payments, and that the Lessee's obligation to make Excepted Payments may be assigned, pledged or otherwise transferred separately from the Lessee's obligations to make other Rent payments. The obligation to make Excepted Payments has been included herein for the convenience of the parties. SECTION 22.6. GOVERNING LAW. This Facility Lease was negotiated in the State of New York which the Facility Lessee and the Owner Lessor agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and, in accordance with Section 5-1401 of the New York General Obligations Law, in all respects, including matters of construction, validity and performance, this 56 Facility Lease shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America, EXCEPT that the provisions for the creation and enforcement of the leasehold interest created hereby shall be governed by and construed according to the law of the state in which the Facility is located, it being understood that, to the fullest extent permitted by the law of the state in which the Facility is located, the law of the State of New York shall govern the validity and the enforceability of the representations, warranties, covenants and obligations of the Facility Lessee and the Owner Lessor under this Facility Lease and all other Operative Documents and all of the indebtedness arising hereunder or thereunder. To the fullest extent permitted by law, the Facility Lessee and the Owner Lessor hereby unconditionally and irrevocably waive any claim to assert that the law of any other jurisdiction governs this Facility Lease, except as expressly otherwise provided above. SECTION 22.7. SEVERABILITY. Any provision of this Facility Lease that 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. SECTION 22.8. COUNTERPARTS. This Facility Lease may be executed by the parties hereto in separate counterparts, each of which, subject to Section 21, when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 22.9. HEADINGS AND TABLE OF CONTENTS. The headings of the sections of this Facility Lease and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. SECTION 22.10. FURTHER ASSURANCES. Each party hereto will promptly and duly execute and deliver such further documents and assurances for and take such further action reasonably requested by the other party, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Facility Lease. 57 SECTION 22.11. EFFECTIVENESS. This Facility Lease has been dated as of the date first above written for convenience only. This Facility Lease shall be effective on the date of execution and delivery by the Facility Lessee and the Owner Lessor. SECTION 22.12. LIMITATION OF LIABILITY. It is expressly understood and agreed by the parties hereto that (a) this Facility Lease is executed and delivered by Wilmington Trust Company ("WILMINGTON"), not individually or personally but solely as trustee of the Owner Trust under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it pursuant thereto, (b) each of the representations, undertakings and agreements herein made on the part of the Owner Lessor is made and intended not as personal representations, undertakings and agreements by Wilmington but is made and intended for the purpose for binding only the Owner Lessor, (c) nothing herein contained shall be construed as creating any liability on Wilmington individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto or by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall Wilmington be personally liable for the payment of any indebtedness or expenses of the Owner Lessor or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Owner Lessor under this Facility Lease. SECTION 22.13. MEASURING LIFE. If and to the extent that any of the rights and privileges granted under this Facility Lease, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Facility Lease, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Facility Lease of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Facility Lease, whichever of (a) and (b) is shorter. 58 IN WITNESS WHEREOF, the Owner Lessor and the Facility Lessee have caused this Facility Lease to be duly executed and delivered under seal by their respective officers thereunto duly authorized. POWERTON TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ James P. Lawler ------------------------------ Name: James P. Lawler Title: Vice President Date: August 24, 2000 MIDWEST GENERATION, LLC By: /s/ John P. Finneran, Jr. ------------------------------ Name: John P. Finneran, Jr. Title: Vice President Date: August 24, 2000 EXHIBIT A TO FACILITY LEASE DESCRIPTION OF FACILITY SITE A-1 EXHIBIT B TO FACILITY LEASE DESCRIPTION OF FACILITY A-2 A-3 SCHEDULE 1-1 TO FACILITY LEASE BASIC LEASE RENT Schedule 1-1-1 SCHEDULE 1-2 TO FACILITY LEASE ALLOCATION OF BASIC LEASE RENT Schedule 1-2-1 SCHEDULE 1-3 TO FACILITY LEASE 467 RENT ALLOCATION SUM OF 467 FIXED RENT RENTAL PERIOD 467 INTEREST ON AND 467 ENDING ON 467 FIXED RENT FIXED RENT INTEREST ON FIXED RENT - ---------------------------- ----------------------- ----------------------- -----------------------------
Schedule 1-3-1 SCHEDULE 2 TO FACILITY LEASE TERMINATION VALUES Schedule 1-3-1 EX-4.7-1 12 a2031364zex-4_71.txt EXHIBIT 4.7.1 Exhibit 4.7.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 4.7 - ------------------------------------------------------------------------- Facility Lease Agreement (T2), dated as of August 17, 2000, by and between Powerton Trust II, as Owner Lessor, and Midwest Generation, LLC, as Facility Lessee. 1 EX-4.8 13 a2031364zex-4_8.txt EXHIBIT 4.8 Exhibit 4.8 ================================================================================ FACILITY LEASE AGREEMENT (T1) Dated as of August 17, 2000 between JOLIET TRUST I, as Owner Lessor and MIDWEST GENERATION, LLC, as Facility Lessee JOLIET STATION, UNITS 7 AND 8 COAL-FIRED ELECTRIC GENERATING FACILITY ================================================================================ CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE OWNER LESSOR IN AND TO THIS LEASE AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF UNITED STATES TRUST COMPANY OF NEW YORK JOLIET FACILITY LEASE (T1) NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS LEASE INDENTURE TRUSTEE UNDER AN INDENTURE OF TRUST, MORTGAGE AND SECURITY AGREEMENT, DATED AS OF AUGUST 17, 2000 BETWEEN SAID LEASE INDENTURE TRUSTEE, AS SECURED PARTY, FOR THE BENEFIT OF THE HOLDERS THEREUNDER, AND THE OWNER LESSOR, AS DEBTOR. SEE SECTION 21 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF. 2 TABLE OF CONTENTS
PAGE SECTION 1. DEFINITIONS.............................................................................2 SECTION 2. LEASE OF THE UNDIVIDED INTEREST.........................................................2 SECTION 3. FACILITY LEASE TERM AND RENT............................................................2 Section 3.1. Basic Lease Term............................................................2 Section 3.2. Rent........................................................................2 Section 3.3. Supplemental Lease Rent.....................................................3 Section 3.4. Adjustment of Basic Lease Rent and Termination Value........................3 Section 3.5. Manner of Payments..........................................................5 SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT......................................6 Section 4.1. Disclaimer of Warranties....................................................6 Section 4.2. Quiet Enjoyment.............................................................7 SECTION 5. RETURN OF UNDIVIDED INTEREST............................................................7 Section 5.1. Return......................................................................7 Section 5.2. Condition Upon Return.......................................................8 Section 5.3. Expenses....................................................................9 Section 5.4. Freight and Crate...........................................................9 SECTION 6. LIENS..................................................................................10 SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS................................................10 Section 7.1. Maintenance................................................................10 Section 7.2. Replacement of Components..................................................10 Section 7.3. Environmental Matters......................................................11 SECTION 8. IMPROVEMENTS...........................................................................12 Section 8.1. Required Improvements......................................................12 Section 8.2. Optional Improvements......................................................12 Section 8.3. Title to Improvements......................................................12 Section 8.4. Financing of Improvements..................................................13 i TABLE OF CONTENTS (CONTINUED) SECTION 9. NET LEASE..............................................................................13 SECTION 10. EVENTS OF LOSS.........................................................................14 Section 10.1. Occurrence of Events of Loss..............................................14 Section 10.2. Payment Upon Termination; Special Lessee Transfer.........................15 Section 10.3. Application of Proceeds...................................................17 Section 10.4. Rebuild...................................................................17 Section 10.5. Application of Payments Not Relating to an Event of Loss..................19 SECTION 11. INSURANCE.............................................................................20 Section 11.1. Property Insurance........................................................20 Section 11.2. Liability Insurance.......................................................20 Section 11.3. Provisions With Respect to Insurance......................................20 Section 11.4. Reports...................................................................21 Section 11.5. Additional Insurance......................................................21 Section 11.6. Amendment of Insurance Requirements.......................................22 Section 11.7. Application of Insurance Proceeds.........................................22 SECTION 12. INSPECTION.............................................................................24 SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS...............................................24 Section 13.1. Termination for Illegality................................................24 Section 13.2. Termination for Burdensome Indemnity......................................24 Section 13.3. Procedure for Exercise of Termination Option..............................25 Section 13.4. Assumption of the Lessor Notes; Special Lessee Transfers..................26 SECTION 14. TERMINATION FOR OBSOLESCENCE...........................................................27 Section 14.1. Termination...............................................................27 Section 14.2. Solicitation of Offers....................................................28 Section 14.3. Right of Owner Lessor to Retain the Undivided Interest....................28 Section 14.4. Procedure for Exercise of Termination Option..............................29 ii TABLE OF CONTENTS (CONTINUED) SECTION 15. LEASE RENEWAL.........................................................................30 Section 15.1. Wintergreen Renewal Lease Terms...........................................30 Section 15.2. Fair Market Value Renewal Lease Terms.....................................32 Section 15.3. Renewal Lease Rent and Termination Value for Renewal Lease Term...........32 Section 15.4. Determination of Fair Market Rental Value.................................32 SECTION 16. EVENTS OF DEFAULT......................................................................33 SECTION 17. REMEDIES...............................................................................36 Section 17.1. Remedies for Lease Event of Default.......................................36 Section 17.2. Limitation on Recourse....................................................39 Section 17.3. Cumulative Remedies.......................................................40 Section 17.4. No Delay or Omission to be Construed as Waiver............................40 SECTION 18. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS.....................................40 SECTION 19. RIGHT TO SUBLEASE......................................................................40 Section 19.1. Sublease..................................................................40 SECTION 20. OWNER LESSOR'S RIGHT TO PERFORM........................................................42 SECTION 21. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE LEASE INDENTURE TRUSTEE..................42 SECTION 22. MISCELLANEOUS.........................................................................43 Section 22.1. Amendments and Waivers....................................................43 Section 22.2. Notices...................................................................43 Section 22.3. Survival..................................................................44 Section 22.4. Successors and Assigns....................................................45 Section 22.5. "True Lease...............................................................47 Section 22.6. Governing Law.............................................................47 Section 22.7. Severability..............................................................47 Section 22.8. Counterparts..............................................................47 iii TABLE OF CONTENTS (CONTINUED) Section 22.9. Headings and Table of Contents............................................48 Section 22.10. Further Assurances........................................................48 Section 22.11. Effectiveness.............................................................48 Section 22.12. Limitation of Liability...................................................48 Section 22.13. Measuring Life............................................................48
iv TABLE OF CONTENTS (CONTINUED)
EXHIBITS AND SCHEDULES Exhibit A Description of Facility Site Exhibit B Description of Facility Schedule 1-1 Basic Lease Rent Schedule 1-2 Allocation of Basic Lease Rent Schedule 1-3 467 Rent Allocation Schedule 2 Termination Values
v FACILITY LEASE AGREEMENT (T1) This FACILITY LEASE AGREEMENT (T1), dated as of August 17, 2000 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions hereof, this "FACILITY LEASE"), between Joliet Trust I, a Delaware business trust (the "OWNER LESSOR" or the "OWNER TRUST") created for the benefit of Joliet Generation I, LLC, a Delaware limited liability company (the "OWNER PARTICIPANT"), and Midwest Generation, LLC, a Delaware limited liability company (the "FACILITY LESSEE"). WITNESSETH: WHEREAS, the Owner Lessor is governed by the Amended and Restated Trust Agreement (T1), dated as of August 17, 2000 (the "TRUST AGREEMENT"), between Wilmington Trust Company (the "OWNER TRUSTEE") and the Owner Participant; WHEREAS, the Facility Lessee owns the Facility Site which is more particularly described in Exhibit A hereto, such Exhibit A being attached to this Facility Lease as a part hereof; WHEREAS, pursuant to the Facility Site Lease, Midwest has leased the Ground Interest to the Owner Lessor and granted certain non-exclusive easements to the Owner Lessor; WHEREAS, pursuant to the Facility Site Sublease, the Owner Lessor has leased the Ground Interest to Midwest for the term equal to the term of this Facility Lease, including any renewals hereof; WHEREAS, the Facility is located on the Facility Site and is more particularly described in Exhibit B hereto, such Exhibit B being attached to this Facility Lease as a part hereof; WHEREAS, pursuant to the Facility Deed and the Bill of Sale, the Owner Lessor has acquired from the Facility Lessee an undivided ownership interest in the Facility equal to the Undivided Interest Percentage as tenant - in - common with the other owner of an undivided interest in the Facility, with the right to nonexclusive possession of the Facility including an entitlement share in the electrical capacity and output of the Facility equal to the Undivided Interest Percentage (such undivided ownership interest and entitlement share together, the "UNDIVIDED INTEREST"); WHEREAS, the Facility does not include the Facility Site or any part thereof, and the Facility Site is being leased to the Owner Lessor pursuant to the Facility Site Lease and is being subleased to the Facility Lessee pursuant to the Facility Site Sublease; and WHEREAS, pursuant to this Facility Lease, the Owner Trust will lease the Undivided Interest to the Facility Lessee for the Basic Lease Term and the Renewal Lease Terms, if any, provided herein. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS Capitalized terms used in this Facility Lease, including the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A to the Participation Agreement (T1), dated as of August 17, 2000 (the "PARTICIPATION AGREEMENT"), among the Facility Lessee, the Owner Lessor, the Owner Trustee, the Owner Participant, Edison Mission Energy ("EME"), United States Trust Company of New York as Pass Through Trustees and United States Trust Company of New York, as Lease Indenture Trustee unless the context hereof shall otherwise require. The general provisions of Appendix A to the Participation Agreement shall apply to the terms used in this Facility Lease and not specifically defined herein. SECTION 2. LEASE OF THE UNDIVIDED INTEREST Upon the terms and conditions set forth herein, the Owner Lessor hereby leases the Undivided Interest to the Facility Lessee, and the Facility Lessee hereby leases the Undivided Interest from the Owner Lessor, for the Basic Lease Term and, 2 subject to the Facility Lessee's exercise of any of its option to renew the Facility Lease as provided in Section 15, one or more Renewal Lease Terms. The Facility Lessee and the Owner Lessor understand and agree that this Facility Lease is subject to those encumbrances set forth in the Title Policies. The Undivided Interest shall be subject to the terms of this Facility Lease from the date on which this Facility Lease is executed and delivered. SECTION 3. FACILITY LEASE TERM AND RENT SECTION 3.1. BASIC LEASE TERM. The basic lease term of this Facility Lease (the "BASIC LEASE TERM") shall commence on the Closing Date and shall end on the date 30 years following the Closing Date, subject to earlier termination pursuant to Section 10, 13, 14 or 17 hereof. SECTION 3.2. RENT. The Facility Lessee hereby agrees to pay to the Owner Lessor pursuant to Section 3.5 hereof, periodic rent for the lease of the Undivided Interest during the Basic Lease Term ("BASIC LEASE RENT") in installments in the amounts shown on Schedule 1-1 hereto on each Rent Payment Date. Basic Lease Rent is allocable in arrears over the Basic Lease Term as set forth in Schedule 1-2 hereto. Basic Lease Rent may be adjusted from time to time in accordance with Section 3.4 hereof. SECTION 3.3. SUPPLEMENTAL LEASE RENT. The Facility Lessee also agrees to pay to the Owner Lessor, or to any other Person entitled thereto as expressly pro vided herein or in any other Operative Document, as appropriate, any and all Supplemental Lease Rent, promptly as the same shall become due and owing, or where no due date is specified, promptly after demand by the Person entitled thereto, and in the event of any failure on the part of the Facility Lessee to pay any Supplemental Lease Rent, the Owner Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise for the failure to pay Basic Lease Rent. The Facility Lessee agrees to pay, as Supplemental Lease Rent, when due any and all Make-Whole Premiums or other prepayment premiums due under the Lease Indenture or the Lessor Notes. The Facility Lessee will also pay as Supplemental Lease Rent, to the extent permitted by Requirement of Law, an amount equal to interest at the applicable Overdue Rate (computed on the basis of a 360-day year of twelve 30-day months) on any part of any payment of Basic Lease Rent not paid when due for any period for which the same shall be overdue and on any Supplemen- 3 tal Lease Rent not paid when due (whether on demand or otherwise) for the period from such due date until the same shall be paid. All Supplemental Lease Rent to be paid pursuant to this Section 3.3 shall be payable in the manner set forth in Section 3.5. SECTION 3.4. ADJUSTMENT OF BASIC LEASE RENT AND TERMINATION VALUE. (a) The Facility Lessee and the Owner Lessor agree that Basic Lease Rent, Termination Values, the Equity Portion of Basic Lease Rent, the Equity Portion of Termination Value and allocations of Basic Lease Rent and 467 Fixed Rent may be adjusted, either upwards or downwards, at the request of the Facility Lessee, the Owner Lessor or the Owner Participant in the following situations: to reflect (A) the principal amount, amortization and interest rate on any New Lessor Notes issued pursuant to Section 2.13 of the Lease Indenture in connection with a refinancing or refunding of the Lessor Notes pursuant to Section 14.2 of the Participation Agreement, (B) the principal amount, amortization and interest rate on any Additional Lessor Notes issued pursuant to Section 2.13 of the Lease Indenture in connection with the financing of Improvements to the Facility pursuant to Section 8 herein and (C) a change in the interest rate on the Initial Lessor Notes during or after the calendar year 2001, under the circumstances set forth in the second paragraph of each Initial Lessor Note. Any adjustments pursuant to this Section 3.4 shall be calculated, FIRST so as not to negatively impact the Owner Participant's Expected Return through the end of the Basic Lease Term (except that with respect to GAAP earnings the Owner Participant shall also not have to record a book loss or reduce earnings by more than ten percent in the year of adjustment) and, SECOND at the option of the Facility Lessee (x) to minimize, to the extent possible, the average annual Basic Lease Rent over the Basic Lease Term for GAAP accounting purposes of the Facility Lessee, and/or (y) to minimize, to the extent possible, the present value to the Facility Lessee of the Basic Lease Rent; PROVIDED, that no adjustment pursuant to this Section 3.4 shall result in a book loss to the Owner Participant in the year such adjustment is made. Adjustments shall be computed by the Owner Participant, or, if prior to the Closing Date, the Equity Investor, using the same method of computation, assumptions and pricing constraints originally used (other than those that have changed as the result of the event giving rise to the adjustment) in the calculation of Basic Lease Rent and Termination Values set forth in Schedule 1-1 and Schedule 2 hereto and shall be subject to the verification procedure described in Section 3.4(c). Adjustments to 4 Basic Lease Rent contemplated by this Section 3.4 shall result in corresponding adjustments to Termination Values. All Basic Lease Rent adjustments shall comply (in case of the adjustment in connection with the event set forth in Section 3.4(a)(C) above, such compliance shall be with respect to all of the Basic Lease Term from the Closing Date, as a single lease term, taking into account the Basic Rent allocations for the period of the Basic Lease Term prior to the date of adjustment) with Revenue Procedures 75-21 and 75-28 and 467 of the Code and any proposed, temporary, or final regulations thereunder, in each case as modified and in effect on the date of such adjustment and shall be calculated in such a manner so that, if the Facility Lease were determined to be a "disqualified leaseback or long-term agreement" within the meaning of Section 467 of the Code, the result would be an increase in the Owner Participant's Expected Return (when contrasted with the Owner Participant's Expected Return computed on the assumption that the Facility Lease is not a "disqualified leaseback or long-term agreement"). (b) Anything herein or in any other Operative Document to the contrary notwithstanding, each installment of Basic Lease Rent (excluding any Equity Portion of Basic Lease Rent included in such installment) payable hereunder, whether or not adjusted in accordance with this Section 3.4, shall be in an amount at least sufficient to pay in full principal and interest payable on the Lessor Notes on each Rent Payment Date. Anything herein or in any other Operative Document to the contrary notwithstanding, Termination Values (excluding the Equity Portion of Termination Value) payable on any date under this Facility Lease, whether or not adjusted in accordance with this Section 3.4, shall, together with all other Rent due and owing on such date, exclusive of any portion thereof that is an Excepted Payment, be in an amount at least sufficient to pay in full the principal of, premium, if any, and accrued interest on the Lessor Notes payable on such date. (c) Any adjustment pursuant to this Section 3.4 shall initially be computed by the Owner Participant or, if prior to the Closing Date, by the Equity Investor, subject to the verification procedure described in this Section 3.4(c). Once computed, the results of such computation shall promptly be delivered by the Owner Participant or, if prior to the Closing Date, the Equity Investor to the Facility Lessee. Within 20 days after the receipt of the results of any such adjustment, the Facility Lessee may request that Warren & Selbert, Inc. or a nationally recognized firm of accountants or lease advisors selected by the Owner Participant, or if prior to the Closing Date, the Equity Investor, and reasonably satisfactory to the Facility Lessee 5 (the "VERIFIER") verify, on a confidential basis, after consultation with the Owner Participant or the Equity Investor, as the case may be, and the Facility Lessee, the accuracy of such adjustment in accordance with this Section 3.4. The Owner Participant or the Equity Investor, as the case may be, hereby agrees, subject to the execution of an appropriate confidentiality agreement, to provide the Verifier with all necessary information and materials (other than the Owner Participant's income tax returns and accounting records) as shall be necessary in connection with such verification. Each of the Owner Participant or the Equity Investor, as the case may be, and the Facility Lessee shall have the right to communicate with the Verifier and to submit supporting information and data. If the Verifier confirms that such adjustment is in accordance with this Section 3.4, it shall so certify to the Facility Lessee, the Owner Lessor and the Owner Participant or the Equity Investor, as the case may be, and such certification shall be final, binding and conclusive on the Facility Lessee, the Owner Participant or the Equity Investor, as the case may be, and the Owner Lessor. If the Verifier concludes that such adjustment is not in accordance with this Section 3.4, and the adjustments to Basic Lease Rent and Termination Value calculated by the Verifier are different from those calculated by the Owner Participant or the Equity Investor, as the case may be, then it shall so certify to the Facility Lessee, the Owner Lessor and the Owner Participant or the Equity Investor, as the case may be, and the Verifier's calculation shall be final, binding and conclusive on the Facility Lessee, the Owner Lessor and the Owner Participant or the Equity Investor, as the case may be. The final determination of any adjustment hereunder shall be set forth in an amendment to this Facility Lease, executed and delivered by the Owner Lessor and the Facility Lessee and consented to by the Owner Participant or the Equity Investor, as the case may be. The reasonable costs of the Verifier in verifying an adjustment pursuant to this Section 3.4 shall be paid by the Facility Lessee; PROVIDED, HOWEVER, that in the event that such Verifier determines that the present value of the remaining Basic Lease Rent to be made under this Facility Lease as calculated by the Owner Participant or the Equity Investor, as the case may be, is greater than the present value of the correct Basic Lease Rent as certified by the Verifier, in each case, discounted annually at the Discount Rate, by more than ten basis points, then such reasonable costs of the Verifier shall be paid by the Owner Participant or the Equity Investor, as the case may be. Notwithstanding anything herein to the contrary, the sole responsibility of the Verifier shall be to verify the calculations hereunder and matters of interpretation of this Facility Lease or any other Operative Document shall not be within the scope of the Verifier's responsibilities. 6 SECTION 3.5. MANNER OF PAYMENTS. All Rent (whether Basic Lease Rent or Supplemental Lease Rent) and all Termination Value payments shall be paid by the Facility Lessee in lawful currency of the United States of America in immediately available funds to the recipient not later than 11:00 a.m. (New York City time) on the date due. If any Rent is due on a day which is not a Business Day, payment thereof shall be made on the next succeeding Business Day with the same effect as if made on the date on which such payment was due. All Rent payments payable to the Owner Lessor (other than Excepted Payments) shall be paid by the Facility Lessee to the Owner Lessor at its account at Wilmington Trust Company (Account No. 52414-0), or to such other place as the Owner Lessor shall notify the Facility Lessee in writing; PROVIDED, HOWEVER, that so long as the Lessor Notes are outstanding and the Lien created under the Lease Indenture has not been discharged, the Owner Lessor hereby irrevocably directs (it being agreed and understood that such direction shall be deemed to have been revoked after the Lien created under the Lease Indenture shall have been fully discharged in accordance with its terms), and the Facility Lessee agrees, that all payments of Rent (other than Excepted Payments) payable to the Owner Lessor shall be paid by "wire" transfer directly to the Lease Indenture Trustee's Account or to such other place as the Lease Indenture Trustee shall notify the Facility Lessee in writing pursuant to the Participation Agreement. On each Rent Payment Date, Rent shall be paid by transferring funds in the amount equal to the Rent payment (in the amount notified by the Facility Lessee to the Owner Lessor and the Lease Indenture Trustee) into the Lease Indenture Trustee's Account. Payments constituting Excepted Payments shall be made to the Person entitled thereto at the address for such Person set forth in the Participation Agreement, or to such other place as such Person shall notify the Facility Lessee in writing. SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT SECTION 4.1. DISCLAIMER OF WARRANTIES. (a) Without waiving any claim the Facility Lessee may have against any manufacturer, vendor or contractor, THE FACILITY LESSEE ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF THE OWNER LESSOR AND THE OWNER PARTICIPANT THAT (i) THE FACILITY AND EACH COMPONENT THEREOF ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO THE FACILITY LESSEE, (ii) THE FACILITY LESSEE IS SATISFIED THAT THE FACIL- 7 ITY AND EACH COMPONENT THEREOF ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, (iii) NEITHER THE OWNER LESSOR NOR THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (iv) THE UNDIVIDED INTEREST IS LEASED HEREUNDER TO THE EXTENT PROVIDED HEREBY FOR THE BASIC LEASE TERM AND THE RENEWAL LEASE TERMS, IF ANY, SPECIFIED HEREIN SUBJECT TO ALL REQUIREMENTS OF LAW NOW IN EFFECT OR HEREAFTER ADOPTED, INCLUDING WITHOUT LIMITATION (1) ZONING REGULATIONS, (2)ENVIRONMENTAL LAWS OR (3) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION OF EVERY PART THEREOF "WHEN" THE SAME FIRST BECAME SUBJECT TO THIS FACILITY LEASE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE OWNER LESSOR OR THE OWNER PARTICIPANT AND (v) THE OWNER LESSOR LEASES FOR THE BASIC LEASE TERM AND THE RENEWAL LEASE TERMS, IF ANY, SPECIFIED HEREIN AND THE FACILITY LESSEE TAKES THE UNDIVIDED INTEREST UNDER THIS FACILITY LEASE "AS-IS," "WHERE-IS" AND "WITH ALL FAULTS," AND THE FACILITY LESSEE ACKNOWLEDGES THAT NEITHER THE OWNER LESSOR, NOR THE OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE TITLE OF THE FACILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the Owner Lessor represents and warrants that on the Closing Date, the Undivided Interest will be free of Owner Lessor's Liens. It is agreed that all such risks, as between the Owner Lessor and the Owner Participant on the one hand and the Facility Lessee on the other hand are to be borne by the Facility Lessee with respect to acts, occurrences or omissions during the Facility Lease Term. Neither the Owner Lessor nor the Owner Participant shall have any responsibility or liability to the Facility Lessee or any other Person with respect to any of the follow- 8 ing: (x) any liability, loss or damage caused or alleged to be caused directly or indirectly by the Facility or any Component or by any inadequacy thereof or deficiency or defect therein or by any other circumstances in connection therewith; (y) the use, operation or performance of the Facility or any Component or any risks relating thereto; or (z) the delivery, operation, servicing, maintenance, repair, improvement, replacement or decommissioning of the Facility or any Component. The provisions of this paragraph (a) of this Section 4.1 have been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties of the Owner Lessor, express or implied, with respect to the Facility, any Component thereof or the Undivided Interest that may arise pursuant to any Requirement of Law now or hereafter in effect, or otherwise. (b) During the Facility Lease Term, so long as no Lease Event of Default shall have occurred and be continuing, the Owner Lessor hereby appoints irrevocably and constitutes the Facility Lessee its agent and attorney-in-fact, coupled with an interest, to assert and enforce, from time to time, in the name and for the account of the Owner Lessor and the Facility Lessee, as their interests may appear, but in all cases at the sole cost and expense of the Facility Lessee, whatever claims and rights the Owner Lessor may have in respect of the Facility, any Component or the Undivided Interest against any manufacturer, vendor or contractor, or under any express or implied warranties relating to the Facility, any Component or the Undivided Interest. SECTION 4.2. QUIET ENJOYMENT. The Owner Lessor agrees that, notwithstanding any provision of any other Operative Document, so long as no Lease Event of Default shall have occurred and be continuing, neither it nor any party acting by, through or under the Owner Lessor shall interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Facility Lessee of the interest in the Facility or the Undivided Interest conveyed by this Facility Lease subject to the terms of this Facility Lease. SECTION 5. RETURN OF UNDIVIDED INTEREST SECTION 5.1. RETURN. Unless the Undivided Interest is being transferred to the Facility Lessee (or its designee) pursuant to Section 10 or 13 of this Facility Lease, the Facility Lessee shall return the Undivided Interest (together with all 9 Required Improvements and Non-Severable Improvements, if any, title to which shall vest in the Owner Lessor) to the Owner Lessor or any permitted transferee or assignee of the Owner Lessor at the expiration of the Facility Lease Term (or earlier than such date if required pursuant to the provisions of this Facility Lease) by surrendering the Undivided Interest into the possession of the Owner Lessor or such transferee or assignee at the location of the Facility on the Facility Land. SECTION 5.2. CONDITION UPON RETURN. At the time of any return of the Undivided Interest by the Facility Lessee pursuant to Section 5.1, the Facility Lessee agrees that: (a) the Facility Lease and the Facility Site Sublease shall cease and terminate; (b) the Facility will be in at least as good condition as if it had been maintained during the Facility Lease Term in compliance with the provisions of this Facility Lease (including, without limitation the provisions of Section 7) ordinary wear and tear excepted, as determined in accordance with the Return Acceptance Tests; (c) the Facility Lessee shall assign an undivided interest equal to the Owner Lessor's Percentage in any and all licenses and permits of any Governmental Authorities or other Persons that are required to be obtained in connection with the use, operation or maintenance of the Undivided Interest that are not already in the name of the Owner Lessor to the Owner Lessor or a transferee or designee of the Owner Lessor, to the extent permitted by Requirements of Law and the provisions of such licenses or permits; (d) the Facility Lessee, at the request of the Owner Lessor, shall sell to the Owner Lessor or its designee or transferee at the then fair market value thereof, determined by agreement between the Facility Lessee and the Owner Lessor or, absent such agreement, by an appraisal conducted according to the Appraisal Procedure, an undivided interest equal to the Owner Lessor's Percentage in any or each Severable Improvement made to the Facility that is owned by the Facility Lessee, subject to any existing encumbrances. The fees and expenses incurred in connection with the appraisal required by this subsection (d) shall be paid by the Owner Lessor; 10 (e) the Facility Lessee, or an Affiliate thereof, shall enter into an agreement or other arrangements reasonably acceptable to the Owner Lessor (the "SUPPORT ARRANGEMENTS") to provide, from and after expiration or early termination of the Facility Site Sublease, the Facility Lessor with the Support Services; PROVIDED, that the Facility Lessee, or its Affiliate, as the case may be, shall be bound to provide Support Services only to the extent the Facility Lessee (or its Affiliate) is capable of, and is still in the business of, providing such Support Services, and only to the extent that such services are necessary for the operation of the Facility and cannot reasonably and timely be obtained from third parties. Support Arrangements shall provide for the provision of all Support Services during and after expiration of the Facility Lease, and will provide for fair market value compensation to the Facility Lessee, or an Affiliate thereof, for such Support Services, payable periodically in advance on no less than a monthly basis, for such rights and other services provided under such arrangements and shall terminate upon expiration or early termination of the Facility Site Lease or at the Facility Lessor's option; and (f) the Facility Lessee shall arrange, at its sole cost and expense, for a Phase I Environmental Survey of the Facility and the Facility Site, which shall be in form, scope and substance reasonably satisfactory to the Owner Participant, not later than 180 days prior to a return of the Undivided Interest pursuant to Section 5.1 or, in connection with a return other than pursuant to Section 5.1, not later than the date of return; PROVIDED that, if as a result of the Phase I Environmental Survey, facts are revealed that would reasonably necessitate a Phase II Environmental Survey, such Phase I Environmental Survey shall be expanded to a Phase II Environmental Survey, which shall be in form, scope and substance reasonably satisfactory to the Owner Participant. Each such survey shall be conducted, with appropriate diligence and good faith, by an environmental consulting firm selected by the Facility Lessee and reasonably acceptable to the Owner Participant. Any reports prepared by such consulting firm documenting the surveys shall be provided promptly upon receipt by the Facility Lessee to the Owner Participant. If, as a result of the environmental surveys conducted pursuant to this Section 5.2(f), further investigation, or abatement, corrective action, removal, monitoring, clean-up, remediation or other response actions relating to Environmental Conditions at, on, under or migrating from the Facility or the Facility Site are required to ensure that the Facility and the Facility Site comply in all material respects with all applicable Environmental Laws, the Facility Lessee shall, at its sole cost and expense, as promptly as is reasonably practical and without materially affecting the continued operation of the Facility or 11 the Facility Site, make arrangements reasonably satisfactory to the Owner Participant for conducting and completing any such clean-up, remediation or other response action in relation to the Environmental Conditions identified in such environmental surveys as required to ensure that the Facility and the Facility Site comply with all applicable Environmental Laws. Nothing in this Section 5.2(f) shall relieve EME of its indemnification obligations under the Participation Agreement. The obligations of the Facility Lessee set forth in this Section 5.2(f) shall survive the termination of this Facility Lease and the expiration of the Facility Lease Term. SECTION 5.3. EXPENSES. Except as provided in Section 5.2(d), the Facility Lessee agrees to pay or reimburse or to cause to be paid or reimbursed, on an After-Tax Basis, on demand, all costs and expenses incurred in connection with any return contemplated by this Section 5. SECTION 5.4. FREIGHT AND CRATE. At the expiration of the Facility Site Lease, the Owner Lessor shall have the right to require the Facility Lessee (i) at the Facility Lessee's sole risk and expense, to dismantle the Facility, to remove the dismantled components of the Facility from the Facility Land and to cause such components to be delivered to a railhead or other suitable common carrier or (ii) at the Owner Lessor's risk and expense, to dismantle the Facility and keep and store such components at the Facility Land for a period not to exceed 180 days; PROVIDED, HOWEVER, the Facility Lessee shall not be so required if it has chosen to purchase the Facility from the Owner Lessor at a price equal to the greater of (a) $1.00 and (b) the Fair Market Sales Value thereof (MINUS the estimated costs of such decommissioning, dismantling, removal and shipment and the estimated cost of restoring the Facility Land to its original condition). The Facility Lessee's obligation to dismantle the Facility under this Section 5.4 shall survive the termination of the Facility Lease. SECTION 6. LIENS The Facility Lessee hereby covenants that it will not directly or indirectly create, incur, assume or suffer to exist any Lien or other encumbrance on or with respect to the Undivided Interest, the Facility, the Facility Site or any Component, or on the Owner Lessor's or the Owner Participant's interest in or under any Operative Document, except Lease Permitted Liens. 12 SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS SECTION 7.1. MAINTENANCE. The Facility Lessee, at its own expense, will (i) cause the Facility to be maintained in as good condition, repair and working order as when delivered on the Closing Date, ordinary wear and tear excepted, without discrimination as compared to other facilities of similar type owned or operated by the Facility Lessee or any of its Affiliates, and in any event, in all material respects (a) in accordance with Prudent Industry Practice, (b) in compliance with all Requirements of Law, including without limitation, all Environmental Laws and (c) in accordance with the terms of all insurance policies required to be maintained pursuant to Section 11 and (ii) cause to be made all repairs, renewals, replacements, betterments and improvements to the Facility, all as in the reasonable judgment of the Facility Lessee may be necessary to operate the Facility in accordance with the Operative Documents. SECTION 7.2. REPLACEMENT OF COMPONENTS. In the ordinary course of maintenance, service, repair or testing the Facility or any Component, the Facility Lessee, at no cost to the Owner Lessor, may remove or cause to be removed from the Facility any Component; PROVIDED, HOWEVER, that the Facility Lessee shall cause such Component to be replaced by a replacement Component which shall be free and clear of all Liens (except Lease Permitted Liens) and shall be in as good operating condition as that of the Component replaced, assuming such replaced Component was maintained in accordance with the terms of this Facility Lease, and does not diminish, other than in an immaterial respect, the current and residual value, remaining useful life or utility of the Facility as measured immediately prior to such replacement, assuming the Facility shall then be in the condition required to have been maintained by the terms of this Facility Lease, or cause the Facility to become "limited use" property within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647 (each such replacement Component being herein referred to as a "REPLACEMENT COMPONENT"). An undivided interest equal to the Owner Lessor's Percentage in each Component at any time removed from the Facility shall remain subject to this Facility Lease, wherever located, until such time as such Component shall be replaced by a Replacement Component which has been incorporated in the Facility and which meets the requirements for Replacement Components specified above. Immediately upon any Replacement Component becoming incorporated in the Facility, without further act (and with no adjustment to the Purchase Price or Basic Lease Rent), (i) the replaced Component shall no longer 13 be subject to this Facility Lease, (ii) title to the Owner Lessor's undivided interest in the removed Component shall thereupon vest in the Facility Lessee or such other Person as shall be designated by the Facility Lessee, free and clear of all rights of the Owner Lessor and the Lease Indenture Trustee, (iii) title to an undivided interest equal to the Owner Lessor's Percentage in the Replacement Component shall thereupon vest with the Owner Lessor and such undivided interest shall (a) become subject to this Facility Lease and the Lien of the Lease Indenture, and (b) be deemed a part of the Undivided Interest for all purposes of this Facility Lease. Notwithstanding anything in this Section 7.2 to the contrary, if the Facility Lessee has determined that any part, Component or portion of the Facility is surplus or obsolete, it shall have the right to remove such part, Component or portion of the Facility without replacing it if such removal would not, other than in an immaterial respect, diminish the current or residual value, the utility or the remaining useful life of the Facility, as measured immediately prior to such replacement, assuming the Facility shall then be in the condition required to have been maintained by the terms of this Facility Lease or cause the Facility to become "limited use" property within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647. SECTION 7.3. ENVIRONMENTAL MATTERS. The Facility Lessee will (i) comply in all material respects and make all reasonable efforts to cause all other Persons to comply in all material respects with all Environmental Laws applicable to the Facility or the Facility Site, and the Facility Lessee shall have the sole responsibility for any and all costs and expenses associated with such compliance; (ii) obtain, comply in all material respects with and maintain all necessary Governmental Approvals required under any applicable Environmental Law in connection with the use, operation and maintenance of the Facility and the Facility Site; (iii) conduct and complete, at its sole cost and expense, any investigation, study, sampling, monitoring and testing and undertake any cleanup, removal, remedial, corrective, mitigation, response or other action necessary or advisable to abate, correct, remove and clean up or remediate all Hazardous Materials Released at, on, in, under or from the Facility or the 14 Facility Site, to the extent required by and in material compliance with applicable Environmental Laws; and (iv) as soon as possible and in any event within fifteen Business Days of the Facility Lessee obtaining knowledge thereof, provide the Owner Lessor with written notice of, and copies of all written communications relating to, any pending or threatened material Environmental Claim involving the Facility or the Facility Site. To the extent possible, all such notices shall describe in reasonable detail the nature of the Environmental Claim. SECTION 8. IMPROVEMENTS SECTION 8.1. REQUIRED IMPROVEMENTS. The Facility Lessee, without expense to the Owner Lessor and without the consent of any other Lease Financing Party, shall make or cause to be made any Improvements to the Facility as it relates to the Undivided Interest as are required (w) by Requirements of Law or any Governmental Authority having jurisdiction thereon, (x) by any insurance policy required to be maintained by the Facility Lessee under any Operative Document, (y) by the terms of the Operative Documents or (z) to meet Return Acceptance Tests as set forth in Section 5.1 (each, a "REQUIRED IMPROVEMENT"); PROVIDED, HOWEVER, that the Facility Lessee may, in good faith and by appropriate proceedings, diligently contest the validity or application of any Requirement of Law in any reasonable manner which does not involve any risk of (i) foreclosure, sale, forfeiture or loss of, or imposition of a Lien (other than a Lease Permitted Lien) on any part of the Facility or impair the use, operation or maintenance of the Facility in any material respect, or (ii) any criminal liability being incurred by, or any material adverse effect on the interests of, the Owner Participant, the Equity Investor, the Owner Lessor, the Trust Company, the Pass Through Trustees, the Pass Through Company, the Lease Indenture Trustee, the Lease Indenture Company, any Certificateholder or the Facility Lessee, including, without limitation, subjecting any such Person to regulation as a public utility (or similar regulation) under Requirement of Law; PROVIDED FURTHER, that no such contest may extend beyond the expiration or earlier termination of this Facility Lease. SECTION 8.2. OPTIONAL IMPROVEMENTS. The Facility Lessee at any time may, without expense to the Owner Lessor and without the consent of any other Lease 15 Financing Party, make or cause to be made any Improvement to the Facility as the Facility Lessee considers necessary or desirable in the proper conduct of its business (any such non-Required Improvement being referred to as an "OPTIONAL IMPROVEMENT"); PROVIDED that no Optional Improvement to the Facility shall, other than in an immaterial respect, diminish the current or residual value, remaining useful life or utility of the Facility below the current or residual value, remaining useful life or utility thereof immediately prior to such Optional Improvement, assuming the Facility shall then be in the condition required to have been maintained by the terms of this Facility Lease, or cause the Undivided Interest to become "limited use" property, within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647. SECTION 8.3. TITLE TO IMPROVEMENTS. Title to an undivided interest equal to the Owner Lessor's Percentage in (i) all Required Improvements and (ii) all Non-Severable Improvements shall automatically vest in the Owner Lessor upon being affixed to or incorporated into the Facility, and such undivided interest shall immediately (a) become subject to this Facility Lease and (b) be deemed part of the Undivided Interest for all purposes of this Facility Lease. No interest in any Optional Improvement which is a Severable Improvement (other than Severable Improvements which are financed by the Owner Lessor by an Additional Equity Investment or a Supplemental Financing pursuant to Section 14.1 of the Participation Agreement) shall vest in the Owner Lessor or become subject to this Facility Lease; PROVIDED, HOWEVER, that if the Facility Lessee shall, at its cost and expense, cause such Optional Improvements which are Severable Improvements to be made to the Facility, the Owner Lessor shall have the right, prior to the return of the Undivided Interest to the Owner Lessor hereunder, to purchase an undivided interest equal to the Owner Lessor's Percentage in any such Optional Improvements which are Severable Improvements. The purchase price for such undivided interest shall be the then Fair Market Sales Value of such undivided interest. If the Owner Lessor does not elect to purchase such Optional Improvements which are Severable Improvements, the Facility Lessee may, and at the request of the Owner Lessor shall, remove such Improvements at the end of the Facility Lease Term. SECTION 8.4. FINANCING OF IMPROVEMENTS. The Facility Lessee shall at all times have the right to finance Improvements other than through the Facility Lease, so long as no Liens on the Facility, the Facility Site or any portion thereof are granted or created in connection with such financing; PROVIDED, HOWEVER that, in the 16 case of a financing of a Severable Improvement which is not a Required Improvement, a Lien on such Severable, non-Required Improvement may be granted or created in connection with such financing. The Facility Lessee may elect to finance Improvements to the Facility through the Facility Lease in accordance with Section 14.1 of the Participation Agreement. SECTION 9. NET LEASE This Facility Lease is a "net lease." The Facility Lessee's obligation to make all payments payable hereunder (and all amounts, including, without limitation, Termination Value, following termination of this Facility Lease) shall be absolute and unconditional under any and all circumstances and shall not be terminated, extinguished, diminished, lost or otherwise impaired by any circumstance of any character, including, without limitation, by (i) any setoff, counterclaim, recoupment, defense or other right which the Facility Lessee may have against the Owner Lessor, the Owner Participant, the Lease Indenture Trustee or any other Person, including, without limitation, any claim as a result of any breach by any of said parties of any covenant or provision in this Facility Lease or any other Operative Document, (ii) any lack or invalidity of title or any defect in the title, condition, design, operation, merchantability or fitness for use of the Facility or any Component, or any eviction by paramount title or otherwise, or any unavailability of the Facility, the Facility Site, any Component, any other portion of the Undivided Interest, or any part thereof, (iii) any loss or destruction of, or damage to, the Facility or any Component or interruption or cessation in the use or possession thereof or any part thereof by the Facility Lessee for any reason whatsoever and of whatever duration, (iv) the condemnation, requisitioning, expropriation, seizure or other taking of title to or use of the Facility, the Facility Site, any Component, or any other portion of the Undivided Interest by any Governmental Authority or otherwise, (v) the invalidity or unenforceability or lack of due authorization or other infirmity of this Facility Lease or any other Operative Document, (vi) the lack of right, power or authority of the Owner Lessor to enter into this Facility Lease or any other Operative Document, (vii) any ineligibility of the Facility or any Component for any particular use, whether or not due to any failure of the Facility Lessee to comply with any Requirement of Law, (viii) any event of "force majeure" or any frustration, (ix) any legal requirement similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, (x) any insolvency, bankruptcy, reorganization or similar proceeding by or against the Facility Lessee or any other Person, (xi) any Lien of any Person 17 with respect to the Facility, the Facility Site, any Component, any other portion of the Undivided Interest or any part thereof, or (xii) any other cause, whether similar or dissimilar to the foregoing, any present or future law notwithstanding, except as expressly set forth herein or in any other Operative Document, it being the intention of the parties hereto that all Basic Lease Rent (and all amounts, including, without limitation, Termination Value, in lieu of Basic Lease Rent following termination of this Facility Lease) payable by the Facility Lessee hereunder shall continue to be payable in all events in the manner and at times provided for herein. Such Basic Lease Rent (and all amounts, including, without limitation, Termination Value, in lieu of Basic Lease Rent following termination of this Facility Lease) shall not be subject to any abatement and the payments thereof shall not be subject to any setoff or reduction for any reason whatsoever, including any present or future claims of the Facility Lessee or any other Person against the Owner Lessor or any other Person under this Facility Lease or otherwise. To the extent permitted by Requirements of Law, the Facility Lessee hereby waives any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Facility Lease with respect to the Undivided Interest except in accordance with Section 10, 13, 14 or 17. If for any reason whatsoever this Facility Lease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, the Facility Lessee nonetheless agrees, to the extent permitted by Requirements of Law, to pay to the Owner Lessor an amount equal to each installment of Basic Lease Rent and all Supplemental Lease Rent due and owing, at the time such payment would have become due and payable in accordance with the terms hereof had this Facility Lease not been so terminated. Nothing contained herein shall be construed to waive any claim which the Facility Lessee might have under any of the Operative Documents or otherwise or to limit the right of the Facility Lessee to make any claim it might have against the Owner Lessor or any other Person or to pursue such claim in such manner as the Facility Lessee shall deem appropriate. SECTION 10. EVENTS OF LOSS SECTION 10.1. OCCURRENCE OF EVENTS OF LOSS. (a) Each of the Owner Participant and the Owner Lessor will promptly notify the Facility Lessee of any event of which it is aware that would result in a Regulatory Event of Loss; PROVIDED, HOWEVER, that the failure to provide 18 such notice shall not result in any liability with respect to the Owner Participant or the Owner Lessor and shall not in any way relieve the Facility Lessee of any of its obligations under this Facility Lease, including the obligations under this Section 10. (b) If an Event of Loss described in clauses (i) or (ii) of the definition of Event of Loss shall occur, then, no later than six months following the date that the Facility Lessee has actual knowledge of such occurrence, the Facility Lessee shall notify the Owner Lessor and the other Lease Financing Parties of its election to either (1) subject to the satisfaction of the conditions set forth in Section 10.3 and the terms of the other Operative Documents, rebuild the Facility so that the Facility shall have a current and residual value, remaining useful life and utility at least equal to that of the Facility prior to such Event of Loss, assuming the Facility was in the condition and repair required to be maintained by this Facility Lease, or (2) terminate this Facility Lease and purchase the Facility from the Owner Lessor by paying to the Owner Lessor an amount equal to the applicable Termination Value and causing EME to pay to the parties entitled thereto all other amounts payable pursuant to Section 10.2. If the Facility Lessee fails to make an election as provided above, the Facility Lessee will be deemed to have made the election to terminate this Facility Lease pursuant to clause (2) of this Section 10.1(b) as of the end of the six month period referred to in the first sentence of this Section 10.1(b). SECTION 10.2. PAYMENT UPON TERMINATION; SPECIAL LESSEE TRANSFER. (a) If either of the following shall occur: (x) the Facility Lessee shall elect (or be deemed to have elected) to terminate this Facility Lease pursuant to clause (2) of Section 10.1(b) following an Event of Loss described in clause (i) or (ii) of the definition of Event of Loss, or (y) an Event of Loss described in clause (iii) or (iv) of the definition of Event of Loss shall occur, then in the case of either (x) or (y), the Facility Lessee shall pay to the Owner Lessor the sum of (A) the Termination Value determined as of the relevant Termination Date, PLUS (B) if the Termi- 19 nation Date is also a Rent Payment Date, any Basic Lease Rent or Renewal Lease Rent, as the case may be, payable on such Termination Date, PLUS (C) all other payments of Rent under this Facility Lease or under any Operative Document which are due and unpaid on the Termination Date under any other Operative Document (the "EVENT OF LOSS PAYMENT") and EME shall pay (X) all reasonable documented out-of-pocket costs and expenses of the other Lease Financing Parties incurred in connection with such Event of Loss and (Y) and any fees and expenses of the Lease Indenture Trustee and Pass Through Trustees. The Facility Lessee shall pay such Event of Loss Payment, in the case of clause (x) above, on the next Termination Date immediately following the earlier of (1) the date of the Facility Lessee's notice of its election to terminate this Facility Lease and (2) the date which is six months following the occurrence of such Event of Loss, and in the case of clause (y) above, on a Termination Date occurring no later than six months following such Event of Loss. Concurrently with the payment of all amounts required to be paid pursuant to this Section 10.2(a), (i) Basic Lease Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Lessee shall cease to have any liability to the Owner Lessor with respect to the Undivided Interest, except for Supplemental Lease Rent and other obligations surviving pursuant to the express terms of any Operative Document, (iii) the Owner Lessor will prepay all amounts of principal and interest, any other amounts owing under the Lessor Notes, pursuant to Section 2.11 of the Lease Indenture, (iv) subject to the EME having paid all amounts owed by EME to the Lease Financing Parties under the Operative Documents, the Owner Lessor shall transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessor and prepared and recorded at the Facility Lessee's expense) the Undivided Interest to the Facility Lessee (or its designee), on an "as is," "where is" basis, without warranty other than a warranty as to the absence of Owner Lessor's Liens and Owner Participant's Liens, (v) each of this Facility Lease, the Facility Site Lease and the Facility Site Sublease shall terminate and (vi) the Owner Lessor shall execute and deliver appropriate releases and other documents or instruments necessary or reasonably requested by the Facility Lessee to effect the foregoing (including, but not limited to, termination of this Facility Lease) all to be prepared, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. 20 (b) Notwithstanding the foregoing provisions of Section 10.2(a), in the case of a Regulatory Event of Loss, at the option of the Facility Lessee or its designee, if (i) the Facility Lessee shall have executed and delivered an assumption agreement to assume the Lessor Notes as permitted by and in accordance with Section 2.12 of the Lease Indenture, (ii) all other conditions contained in such Section 2.12 of the Lease Indenture shall have been satisfied and (iii) no Lease Event of Default shall have occurred and be continuing and shall not be cured by such assumption, the obligation of the Facility Lessee to make the Event of Loss Payment shall be reduced by the outstanding principal amount of the Lessor Notes so assumed by the Facility Lessee; PROVIDED, HOWEVER, for so long as the Lessor Notes are outstanding, if the Facility Lessee shall have chosen to assume the Lessor Notes pursuant to this Section 10.2(b), the Facility Lessee (or its designee) shall acquire the Undivided Interest from the Owner Lessor subject to the Lien of the Lease Indenture. (c) Notwithstanding the foregoing provisions of Sections 10.2(a) and (b) to the contrary, in the case of a Regulatory Event of Loss, the Facility Lessee (or its designee) so long as the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and all other payments hereunder in full, and in all respects in accordance with Section 17 of the Participation Agreement, may purchase the Owner Participant's Beneficial Interest in lieu of purchasing the Undivided Interest pursuant to Sections 10.2 (a) and (b) and keep the Facility Lease (and Lessor Notes) in place. SECTION 10.3. APPLICATION OF PROCEEDS. Any payments with respect to the Undivided Interest received at any time by the Owner Lessor or the Facility Lessee from any Governmental Authority or from insurance proceeds as a result of the occurrence of an Event of Loss shall be applied as follows: (a) all such payments received at any time by the Facility Lessee shall be promptly paid to the Owner Lessor or, so long as the Lessor Notes are outstanding, to the Lease Indenture Trustee, for application pursuant to the following provisions of this 10.3, except that, the Facility Lessee may retain any amounts that the Owner Lessor would at the time be obligated to pay to the Facility Lessee as reimbursement pursuant to Section 10.3(b); (b) so much of such payments as shall not exceed the Event of Loss Payment required to be paid by the Facility Lessee pursuant to Section 10.2(a) 21 shall be applied in reduction of the Facility Lessee's obligation to pay such amount if not already paid by the Facility Lessee or, if already paid by the Facility Lessee, shall be applied to reimburse the Facility Lessee for its payment of such amount; and (c) the balance, if any, of such payments remaining thereafter shall be apportioned between the Owner Lessor and the Facility Lessee in accordance with their respective interests in the Facility. Notwithstanding the foregoing, if the Facility Lessee shall have elected to rebuild the Facility pursuant to Section 10.1(b), any insurance proceeds received by the Owner Lessor, the Lease Indenture Trustee or the Facility Lessee as a result of the occurrence of an Event of Loss described in clause (i) or (ii) of the definition of Event of Loss shall be applied as provided in Section 11.7. SECTION 10.4. REBUILD. The Facility Lessee's right to rebuild the Facility pursuant to Section 10.1(b) shall be subject to the fulfillment, at the Facility Lessee's sole cost and expense, in addition to the conditions contained in Section 10.1(b), of the following conditions: (a) no Material Lease Default or Lease Event of Default shall have occurred and be continuing; (b) on the date the Facility Lessee shall give notice pursuant to Section 10.1(b) of its election to rebuild the Facility in accordance with this Section 10.4, either (i) the Owner Participant shall have received an opinion reasonably satisfactory to it from Hunton & Williams, or a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee, to the effect that, assuming the proposed rebuilding is accomplished in the manner and within the time proposed, such rebuilding would not result in any material indemnified incremental tax risk, or any unindemnified incremental tax risk to the Owner Participant or (ii) the Owner Participant shall have received an opinion of Hunton & Williams, or another nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee to the effect that it is more likely than not that such proposed rebuilding would not result in any unindemnified incremental tax risk or any material indemnified incremental tax risk and the Owner Participant shall have received collateral or other security for the indemnification obligations with respect to any such incremental tax risk, such 22 collateral or other security to be acceptable to the Owner Participant in its sole discretion exercised in good faith; (c) on the date the Facility Lessee shall give notice pursuant to Section 10.1(b) of its election to rebuild the Facility in accordance with this Section 10.4, the Facility Lessee shall deliver to the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and the Pass Through Trustees (i) a report of the Engineering Consultant, or such other independent engineer reasonably satisfactory to the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee, to the effect that it is reasonable to expect that such rebuilding of the Facility is technologically feasible and economically viable and that such rebuilding can be completed by a date that is 36 months prior to the end of the Basic Lease Term or any Renewal Lease Term then in effect or already elected by the Facility Lessee, and (ii) an appraisal of an Independent Appraiser reasonably acceptable to the Owner Participant, and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee to the effect that the rebuilt Facility will have at least the same value, residual value, utility and useful life as the Facility immediately prior to the Event of Loss, assuming the Facility was then in the condition required to have been maintained by the terms of the Facility Lease; (d) on the date the Facility Lessee shall notify the Owner Lessor pursuant to Section 10.1(b) of its election to rebuild the Facility in accordance with this Section 10.4, the Facility Lessee shall demonstrate to the reasonable satisfaction of the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee, adequate financial resources, from insurance proceeds or otherwise, to complete such rebuilding and to pay Basic Lease Rent while the Facility is being rebuilt; (e) the Facility Lessee shall cause the rebuilding of the Facility to commence as soon as reasonably practicable after notifying the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and the Pass Through Trustees, of its election to rebuild the Facility in accordance with this Section 10.4 and in all events within 18 months of the occurrence of the event that caused such Event of Loss and will cause work on such rebuilding to proceed diligently thereafter. As the rebuilding of the Facility progresses, title to an undivided interest equal to the Owner Lessor's Percentage in such rebuilt Facility shall vest in the Owner Lessor and such Undivided Interest shall become subject to this 23 Facility Lease and, so long as the Lessor Notes are outstanding, the Lien of the Lease Indenture, and be deemed a part of the Undivided Interest for all purposes of this Facility Lease and the other Operative Documents, automatically and without any further act by any Person; (f) on the date of the completion of such rebuilding of the Facility (the "REBUILDING CLOSING DATE") the following documents shall be duly authorized, executed and delivered and, if appropriate, filed for recordation by the respective party or parties thereto and shall be in full force and effect, and an executed counterpart of each shall be delivered to the Owner Lessor, the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and the Pass Through Trustees: (i) supplements to this Facility Lease subjecting an undivided interest equal to the Owner Lessor's Percentage in the rebuilt Facility to this Facility Lease (with no change in Purchase Price or the Basic Lease Rent as a result of such rebuilding), (ii) so long as the Lessor Notes are outstanding, supplements to the Lease Indenture subjecting such undivided interest in the Facility to the Lien of the Lease Indenture, (iii) such recordings and filings, as may be reasonably requested by the Owner Participant or the Lease Indenture Trustee to be made or filed, (iv) an opinion of counsel to the Facility Lessee, such counsel and such opinion to be reasonably satisfactory to the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee, to the effect that (x) the supplements to this Facility Lease required by clause (i) above constitute effective instruments for subjecting such undivided interest in the rebuilt Facility to this Facility Lease, (y) the supplements to the Lease Indenture required by clause (ii) above, if any, constitute effective instruments for subjecting such undivided interest in the rebuilt Facility to the Lien of the Lease Indenture and (z) all filings and other action necessary to perfect and protect the Owner Lessor's interest in an undivided interest equal to the Owner Lessor's Percentage in the rebuilt Facility have been accomplished, (v) an appraisal by an Independent Appraiser, certifying that the Facility as so rebuilt has a current and residual value, remaining useful life and utility at least equal to the current and residual value, remaining useful life and utility of the Facility immediately prior to such rebuilding (assuming the Facility was in the condition and repair required to be maintained by the terms of this Facility Lease), (vi) a report by an independent engineer (selected by the Owner Lessor and reasonably satisfactory to the Facility Lessee) certifying that the Facility as so rebuilt is in a state of repair and condition required by this Facility Lease, (vii) an Officer's Certificate of the Facility Lessee as to compliance with this Section 10.4 and certifying that no Lease Event of 24 Default shall have occurred as a result of the rebuilding, and (viii) satisfactory evidence as to the compliance with Section 11 of this Facility Lease with respect to the Facility, as so rebuilt; and (g) there shall be no material adverse accounting effect under GAAP on the Owner Participant as a result of such rebuilding and the other transactions contemplated by this Section 10.4. SECTION 10.5. APPLICATION OF PAYMENTS NOT RELATING TO AN EVENT OF LOSS. (a) In the event that during the Facility Lease Term title to, or the use of, all or any portion of the Undivided Interest, the Facility or the Facility Site is requisitioned or taken by or pursuant to a request of any Governmental Authority under the power of eminent domain or otherwise for a period or in a manner which does not constitute an Event of Loss, the Facility Lessee's obligation to pay all installments of Basic Lease Rent shall continue for the duration of such requisitioning or taking. The Facility Lessee shall be entitled to receive and retain for its own account all sums payable for any such period by such Governmental Authority as compensation for such requisition or taking of possession; PROVIDED, THAT if at the time of such payment a Material Lease Default or a Lease Event of Default shall have occurred and be continuing, such amounts shall be paid to and held by the Owner Lessor unless the Lessor Notes are outstanding, in which case such amounts shall be paid to and held by the Lease Indenture Trustee, as security for the obligations of the Facility Lessee under this Facility Lease until such time as no Material Lease Default or Lease Event of Default is continuing. (b) Any insurance proceeds with respect to the Undivided Interest received at any time by the Owner Lessor, the Lease Indenture Trustee or the Facility Lessee under any of the insurance policies required to be maintained by the Facility Lessee under Section 11 as a result of any damage to the Facility or any part thereof which does not constitute an Event of Loss shall be applied as follows: (i) in accordance with Section 11.7, and (ii) the balance, if any, of such insurance proceeds remaining thereafter shall be paid to the Facility Lessee. 25 SECTION 11. INSURANCE SECTION 11.1. PROPERTY INSURANCE. Subject to Section 11.6, the Facility Lessee will maintain (or cause to be maintained) all risk property insurance, including coverage for boiler and machinery and the peril of flood and the peril of earthquake, customarily carried by prudent operators of coal-fired and oil/gas-fired electric generating facilities of comparable size and risk as the Facility, and, in any case, subject to availability of said insurance on commercially reasonable terms and in an amount equal to the Probable Maximum Loss of the Facility. SECTION 11.2. LIABILITY INSURANCE. Subject to Section 11.6, the Facility Lessee will maintain (or caused to be maintained) liability insurance, including contractual liability coverage, insuring against claims for bodily injury (including death) and property damage to third parties arising out of the ownership, operation, maintenance, condition and use of the Facility and the Facility Site, with limits of not less than (i) $35,000,000 in the aggregate per occurrence if such insurance also covers any of the Other Facilities and (ii) $25,000,000 if such insurance covers solely the Facility and the Facility Site. The Facility Lessee will at least annually review the liability insurance maintained by it or on its behalf and will, if necessary, increase such coverage in order that the liability insurance maintained by it or on its behalf is consistent with that maintained by prudent operators of similar facilities of comparable size and risk to the Facility. Such liability insurance may be purchased either in a single limit or in combination with a general and an excess policy. SECTION 11.3. PROVISIONS WITH RESPECT TO INSURANCE. Subject to Section 11.6, the Facility Lessee will place the insurance maintained pursuant to this Section 11 with companies having an A.M. Best rating of at least "A-" or, if not so rated, with comparable financial strength. All insurance policies required to be maintained pursuant to Sections 11.1 and 11.2 shall name each of the Owner Participant, the Equity Investor, the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee, the Pass Through Trustees and holders of the Lessor Notes, as additional insureds, as their respective interests may appear (the "ADDITIONAL INSUREDS"). All insurance policies required to be maintained pursuant to the terms hereof shall also provide for at least 30 days' prior written notice (10 days if as a result of non-payment) by the insurance carrier to each Additional Insured in the event of cancellation, non-renewal, termination, expiration or material change. The Facility Lessee will place the insurance required by the terms of this Section 11 with insurance companies 26 which agree to waive all claims for premiums from, and all subrogation rights against, the Additional Insureds. All the insurance maintained pursuant to this Section 11 shall be primary without right of contribution of any other insurance carried by or on behalf of each of the Additional Insureds with respect to its interests in the Facility and the Facility Site. Subject to Section 11.6, to the extent available on commercially reasonable terms, the Facility Lessee will use its best efforts to provide that the respective interests of the Additional Insureds shall not be invalidated by any act or neglect of the Facility Lessee, or any breach or violation by the Facility Lessee of any warranties, declarations or conditions contained in such policies or by the use of the Facility for purposes more hazardous than permitted by such policies. Additionally, to the extent available on commercially reasonable terms, the Facility Lessee will use its best efforts to provide that such policies shall be endorsed to provide that, inasmuch as the policies are written to cover more than one insured, all terms, conditions, insuring agreements and endorsements, with the exception of limits of liability, shall operate in the manner as if there were a separate policy covering each insured. The Facility Lessee shall, at its own expense, make or cause to be made all proofs of loss and take all other steps necessary to collect the proceeds of such insurance. SECTION 11.4. REPORTS. Within 15 days after the expiration and renewal of any insurance policy required to be maintained pursuant to the terms of this Section 11, the Facility Lessee shall furnish each Additional Insured with an executed broker letter identifying all insurance coverage in place and certifying that all premiums in respect of such policies are current. Certificates of insurance shall accompany said letter documenting insurance coverage and the Additional Insured status as required. SECTION 11.5. ADDITIONAL INSURANCE. At any time any Additional Insured may at its own expense and for its own account carry insurance with respect to its interest in the Undivided Interest, PROVIDED, that such insurance does not in any way interfere with the Facility Lessee's ability to obtain insurance with respect thereto as required in this Section 11. Any insurance payments received from policies maintained by an Additional Insured pursuant to the previous sentence shall be retained by such Additional Insured without reducing or otherwise affecting the Facility Lessee's obligations hereunder. 27 SECTION 11.6. AMENDMENT OF INSURANCE REQUIREMENTS. (a) If any insurance required to be maintained by the Facility Lessee pursuant to the Operative Documents (including the limits or deductibles or any other terms under policies for such insurance) ceases to be available on a commercially reasonable basis at the time of renewal, the Facility Lessee shall provide written notice to each Additional Insured accompanied by a letter from the Facility Lessee's insurance broker stating that such insurance is unavailable on a commercially reasonable basis. Such notice shall be given not less than 30 days prior to the scheduled date for renewal of any such policy. Upon receipt of such notice, the Facility Lessee and each Additional Insured shall immediately enter into good faith negotiations in order to agree upon an alternative to such insurance. (b) In the event that a resolution acceptable to the Facility Lessee and all Additional Insureds cannot be reached within 10 days from the date of the notice referred to in paragraph (a) above, the Additional Insureds shall make arrangements for the formation of an insurance panel consisting of the Facility Lessee's insurance advisor (or broker), the Facility Lessor's insurance advisor (or broker), and an independent insurance expert from an internationally recognized insurance brokerage firm, chosen by the Facility Lessee and reasonably acceptable to the Additional Insureds. Such independent expert shall conduct a separate review of the relevant insurance requirements of the Operative Documents and the market for such insurance at the time, giving due consideration to the representations of both insurance advisors, and upon conclusion of such review shall issue a written report stating whether such insurance is available, or unavailable, on a commercially reasonable basis. (c) If the insurance expert concludes that such insurance is not available on a commercially reasonable basis, the insurance expert shall provide a written recommendation (which shall include the amount and type of insurance which is available upon a commercially reasonable basis) not less than 15 days before the date for renewal of such insurance. The Facility Lessee shall, prior to the expiration of the insurance then in effect, obtain such insurance that is available on a commercially reasonable basis. The recommendation of the insurance expert shall be conclusive and binding upon the Additional Insureds, and the Facility Lessee shall, for the immediately succeeding one-year policy period, only be required to carry the 28 insurance that the expert has certified is available on a commercially reasonable basis. (d) All fees, costs and expenses associated with the insurance panel (including review by the insurance expert) shall be paid by the Facility Lessee. SECTION 11.7. APPLICATION OF INSURANCE PROCEEDS. (a) All insurance proceeds up to $5,000,000 on account of any damage to or destruction of the Facility or any part thereof (in each case less the actual costs, fees and expenses incurred in the collection thereof), shall, subject to Section 11.7(d), be paid to or retained by the Facility Lessee for application in repair or replacement of the affected property. If the insurance proceeds on account of such damage or destruction to the Facility exceed $5,000,000 but are less than $25,000,000, then all such insurance proceeds shall, subject to Section 11.7(d), be paid to or retained by the Facility Lessee for application in repair or replacement of the affected property for so long as the EME long-term unsecured indebtedness shall be rated at least BBB- and Baa3 by S&P and Moody's, respectively. In all other situations, all insurance proceeds on account of such damage or destruction to the Facility, shall be paid to the Owner Lessor or, if the Lessor Notes are outstanding, the Lease Indenture Trustee and be applied and dealt with as provided in Section 11.7(b) below. (b) All such proceeds actually received on account of any such damage or destruction other than in connection with an Event of Loss shall, unless a Material Lease Default or a Lease Event of Default shall have occurred and continuing, be paid over to the Facility Lessee or as it may direct from time to time as restoration progresses, to pay (or reimburse the Facility Lessee for) the cost of restoration, if the amount of such proceeds received by the Lease Indenture Trustee or the Owner Lessor, together with such additional amounts, if any, theretofore expended by the Facility Lessee out of its own funds for such restoration, are sufficient to pay the estimated cost of completing such restoration, but only upon receipt by the Owner Lessor and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee of a written application of the Facility Lessee accompanied by an Officer's Certificate of the Facility Lessee setting forth in reasonable detail the nature of such restoration, the actual cash expenditures made to date for such restoration and the estimated cost to complete such restoration and stating that no Lease Event of Default has occurred and is continuing. 29 (c) All such proceeds received or payable on account of an Event of Loss shall, unless the Facility Lessee has elected to rebuild or restore the Facility pursuant to Section 10.2, be dealt with in accordance with Section 10.3. (d) Notwithstanding the foregoing provisions of this Section 11 or Section 10, so long as a Material Lease Default or a Lease Event of Default shall have occurred and be continuing, the proceeds of any insurance required to be maintained pursuant to this Section 11 that would otherwise be payable to or for the account of, or that would otherwise be retained by, the Facility Lessee pursuant to this Section 11 or Section 10.3 will be held as security for the obligations of the Facility Lessee under this Facility Lease by the Owner Lessor or, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and at such time thereafter as no Material Lease Default or a Lease Event of Default shall be continuing, such amount shall be paid promptly to the Facility Lessee. SECTION 12. INSPECTION During the Facility Lease Term, each of the Lease Financing Parties and their respective representatives shall have the right, during normal business hours, upon reasonable notice to the Facility Lessee and at no expense (except when a Material Lease Default or a Lease Event of Default has occurred and is continuing) or risk to the Facility Lessee, to inspect the Facility and the records with respect to the operations and maintenance thereof in the Facility Lessee's custody or to which the Facility Lessee has access; PROVIDED, HOWEVER, that any such inspection shall be conducted in accordance with the Operative Documents and so as not to interfere with the operation or maintenance of the Facility or the conduct by the Facility Lessee of its business and shall be in accordance with the Facility Lessee's safety and insurance programs. The Lease Financing Parties shall attempt to conduct their inspections at the same time and, except during the continuance of a Material Lease Default or a Lease Event of Default or during the last 24 months of the Facility Lease Term (unless the Facility Lessee shall have exercised its option to renew the Facility Lease), no more than one inspection a year shall be conducted by any Lease Financing Party. 30 SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS SECTION 13.1. TERMINATION FOR ILLEGALITY. If, as a result of change in Requirements of Law, it shall have become illegal for the Facility Lessee to continue this Facility Lease or for the Facility Lessee to make payments under this Facility Lease or any other Operative Document, and the transactions contemplated by the Operative Documents cannot be restructured to comply with such change in law in a manner reasonably acceptable to the Lease Financing Parties, the Facility Lessee shall have the right, at its option, by giving notice to the Owner Lessor no later than twelve months after the date the Facility Lessee receives notice or first has actual knowledge of such illegality, to terminate this Facility Lease on the Termination Date specified in such notice (which shall be a date occurring not more than 60 days after the date of such notice) and purchase the Undivided Interest by paying to the Owner Lessor the Termination Value determined as of such Termination Date and causing EME to pay to the Persons entitled thereto all other amounts required to be paid under Section 13.3; PROVIDED, that all amounts owed by EME to the Lease Financing Parties under the Operative Documents at such time, shall have been paid to such Persons. It shall be a condition to the termination of this Facility Lease pursuant to this Section 13.1 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to terminate any and all Other Facility Leases to which each such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. SECTION 13.2. TERMINATION FOR BURDENSOME INDEMNITY. If (i) one or more events outside the control of the Facility Lessee or its Affiliates shall have occurred which will, or could reasonably be expected to, give rise to an obligation by the Facility Lessee or EME to pay or incur an indemnity obligation under Section 12 of the Participation Agreement (except for tax indemnity obligations expected on the Closing Date to be incurred) or pursuant to the Tax Indemnity Agreement, (ii) such payment or indemnity obligation (and the underlying cost or tax) can be avoided in whole or in part if the Facility Lessee purchases the Undivided Interest and (iii) the amount of such avoided payments, together with the amount of any indemnity payments made during the Burdensome Buyout Period that could have been avoided if the Facility had been purchased by the Facility Lessee would exceed (on a present value basis, discounted at the Discount Rate, compounded on an annual basis to the 31 date of the termination) 2.5% of the Purchase Price (unless the Owner Participant has waived its right to indemnity payments in excess of 2.5% of the Purchase Price or arranged for its own account for the payment thereof), the Facility Lessee shall have the right, at its option, no later than 24 months after the date the Facility Lessee receives notice or actual knowledge of such event referred to in clause (i) above, to terminate this Facility Lease on the Termination Date specified in the notice provided pursuant to Section 13.1 (which shall be a date occurring not more than 60 days after the date of such notice), and purchase the Undivided Interest by paying to the Owner Lessor the Termination Value determined as of such Termination Date and causing EME to pay to the Persons entitled thereto all other amounts required to be paid under Section 13.3; PROVIDED, that all amounts owed by EME to the Lease Financing Parties under the Operative Documents at such time, shall have been paid to such Persons. It shall be a condition to the termination of this Facility Lease pursuant to this Section 13.2 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to terminate any and all Other Facility Leases to which each such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. SECTION 13.3. PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the Facility Lessee shall have exercised its option under Section 13.1 or 13.2 (each, a "BURDENSOME BUYOUT OPTION"), on the Termination Date specified in the Facility Lessee's notice of such exercise, the Facility Lessee shall pay the Termination Value to the Owner Lessor, and shall pay (or in the case of clause (b) below, cause EME to pay) the following amounts to the Owner Lessor or the Person entitled thereto, without duplication, (a) all amounts of Basic Lease Rent or Renewal Lease Rent, as the case may be, due and payable on or prior to such Termination Date PLUS (b) all reasonable documented out-of-pocket costs and expenses incurred by the Lease Financing Parties, other than Affiliates of the Facility Lessee, in connection with the exercise of the Burdensome Buyout Option due and payable on or prior to the Termination Date and any fees and expenses of the Lease Indenture Trustee and Pass Through Trustees due and unpaid on such Termination Date PLUS (c) any other Rent payments under the Facility Lease or under the Lease Indenture or under any other Operative Document. Concurrently with the payment of all sums specified in Section 13.1 or 13.2, as the case may be, and this Section 13.3, (1) Basic Lease Rent for the Undivided Interest shall cease to accrue, (2) the Facility Lessee shall cease to have any liability 32 to the Owner Lessor with respect to the Undivided Interest, except for Supplemental Lease Rent and other obligations surviving pursuant to the express terms of any Operative Document, (3) subject to EME having paid all amounts owed by EME to the Lease Financing Parties under the Operative Documents, the Owner Lessor will in connection with a sale of the Facility pursuant to Section 13.1 or 13.2 transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessee and prepared and recorded at the Facility Lessee's expense), the Undivided Interest to the Facility Lessee (or its designee) on an "as is" and "where is" basis, without representations or warranties other than a warranty as to the absence of Owner Lessor's Liens and Owner Participant's Liens, (4) this Facility Lease shall terminate and (5) the Owner Lessor shall deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepared, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. It shall be a condition of the termination of this Facility Lease pursuant to this Section 13 that the Facility Lessee shall pay all amounts it is obligated to pay under Section 13.1 or 13.2, as the case may be, and this Section 13.3 and all other amounts due by the Facility Lessee under this Facility Lease and the other Operative Documents and that EME shall pay all amounts owed by EME to the Lease Financing Parties under the Operative Documents. The Burdensome Buyout Option must be exercised within the 24 month period (the "BURDENSOME BUYOUT PERIOD") after actual knowledge by the Facility Lessee of the event or illegality, as the case may be, giving rise thereto, and if the Burdensome Buyout Option is not exercised within the Burdensome Buyout Period, the Facility Lessee shall be deemed to have irrevocably waived its right to exercise the Burdensome Buyout Option with respect to such event. If the Facility Lessee fails to consummate the Burdensome Buyout Option under this Section 13 after giving notice of its intention to do so (other than in consequence of a failure of the Owner Lessor or Owner Participant to fulfill their obligations, if any, under Section 13), (i) the Facility Lease shall continue, (ii) such failure to consummate shall not constitute a default under the Facility Lease, and (iii) the Facility Lessee will lose its right to terminate this Facility Lease pursuant to this Section 13.3 as a result of the event or condition giving rise to such Burdensome Buyout Option during the remainder of the Facility Lease Term. The Facility Lessee hereby acknowledges the Lien of the Lease Indenture and agrees for the benefit of the Lease Indenture Trustee that any transfer effected pursuant to this Section 13.3 will be subject to said Lien unless the same has been released or discharged in accordance with the terms of the Lease Indenture. 33 SECTION 13.4. ASSUMPTION OF THE LESSOR NOTES; SPECIAL LESSEE TRANSFERS. (a) Notwithstanding the foregoing provisions of Section 13.3 to the contrary, at the option of the Facility Lessee, if (i) the Facility Lessee shall have executed and delivered an assumption agreement to assume the Lessor Notes on a fully recourse basis, as permitted by and in accordance with Section 2.12 of the Lease Indenture, (ii) all other conditions contained in such Section 2.12 of the Lease Indenture shall have been satisfied, (iii) no Lease Event of Default shall have occurred and be continuing and shall not be cured by such assumption, (iv) the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and to make other payments under the Facility Lease in full and (v) the Facility Lessee shall purchase the Facility pursuant to Section 13.1 or 13.2, as the case may be, then, the obligation of the Facility Lessee to pay Termination Value shall be reduced by the outstanding principal amount of the Lessor Notes so assumed by the Facility Lessee; PROVIDED, HOWEVER, for so long as the Lessor Notes are outstanding, if the Facility Lessee shall have chosen to assume the Lessor Notes pursuant to this Section 13.4(a), the Facility Lessee (or its designee) shall acquire the Undivided Interest from the Owner Lessor subject to the Lien of the Lease Indenture; PROVIDED, FURTHER, that if the Facility Lessee assumes the Lessor Notes, then the EME Guarantee shall be re-executed in favor of the Lease Indenture Trustee or its successor, and for the benefit of the Pass Through Trustees. (b) Notwithstanding the foregoing provisions of Section 13.3 to the contrary, in the case of a Burdensome Buyout Event, the Facility Lessee (or its designee) so long as the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and all other payments hereunder in full, and in all respects in accordance with Section 17 of the Participation Agreement, may purchase the Owner Participant's Beneficial Interest or all of the outstanding membership interests in the Owner Participant, in lieu of purchasing the Undivided Interest pursuant to Sections 13.1 and 13.2, and keep the Facility Lease (and Lessor Notes) in place. SECTION 14. TERMINATION FOR OBSOLESCENCE SECTION 14.1. TERMINATION. Upon at least six months' prior written notice to the Owner Lessor, (which notice shall be accompanied by a certification by the board of directors of the Facility Lessee as to one or more of the matters described in clauses (a) and (b) below), the Facility Lessee shall have the option, so long as no 34 Material Lease Default or Lease Event of Default shall have occurred and be continuing on the date of such notice or the proposed Obsolescence Termination Date (as defined below), to terminate this Facility Lease on any Termination Date occurring on or after the seventh anniversary of the Closing Date and not less than 180 days after such notice (the date of termination selected by the Facility Lessee being the "OBSOLESCENCE TERMINATION DATE") which proposed Obsolescence Termination Date shall be set forth in the notice, on the terms and conditions set forth in this Section 14, if (a) the Facility is economically or technologically obsolete as a result of (i) a change in Requirements of Law, regulation or tariff of general application or imposition by the FERC or any other Governmental Authority having or claiming jurisdiction over the Facility Lessee or the Facility of any conditions or requirements (including, without limitation, requiring significant capital improvements to the Facility) relating to the availability, continued effectiveness or renewal of any license or permit required for the operation or ownership of the Facility, or (ii) as a result of any change in the markets for the wholesale purchase and/or sale of energy or any material abrogation of power purchase agreements; (b) an event has occurred that, in the Facility Lessee's good faith judgment, will cause the Facility to become obsolete; or (c) the Facility is surplus to the Facility Lessee's needs or is no longer useful in its trade or business. It shall be a condition to the termination of this Facility Lease pursuant to this Section 14.1 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to terminate any and all Other Facility Leases to which such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. SECTION 14.2. SOLICITATION OF OFFERS. If the Facility Lessee shall give the Owner Lessor notice pursuant to Section 14.1 and the Owner Lessor shall not have elected to retain the Undivided Interest pursuant to Section 14.3 hereof, the Facility Lessee shall (i) as non-exclusive agent for the Owner Lessor, use commercially reasonable efforts to obtain bids from third parties unaffiliated with the Facility Lessee and sell the Owner Lessor's Interest on the Obsolescence Termination Date and (ii) covenant that it will not sell the Owner Lessor's Interest to any third party with whom the Facility Lessee or an Affiliate thereof has an arrangement to use or operate the Facility to generate power for the benefit of the Facility Lessee or any Affiliate thereof after the termination of this Facility Lease. All of the proceeds of any such sale will be for the account of the Owner Lessor; PROVIDED that, so long as 35 the Lessor Notes are outstanding, the proceeds of such sale shall be paid directly to the Lease Indenture Trustee. SECTION 14.3. RIGHT OF OWNER LESSOR TO RETAIN THE UNDIVIDED INTEREST. The Owner Lessor may irrevocably elect to retain, rather than sell, the Undivided Interest by giving notice to the Facility Lessee at least 90 days prior to the Obsolescence Termination Date. If the Owner Lessor elects to retain the Undivided Interest pursuant to this Section 14.3, on the Obsolescence Termination Date the Facility Lessee shall pay (or, in the case of clauses (iii) and (iv) below, cause EME to pay) to the Owner Lessor (i) any Basic Rent or Renewal Lease Rent, as the case may be, payable on the Obsolescence Termination Date, PLUS (ii) the amount set forth under the column headed "Excess of the Cumulative Allocated 467 Fixed Rent and Interest on 467 Fixed Rent over Basic Lease Rent Paid" set forth in Schedule 2 for such Obsolescence Termination Dates (PROVIDED that the amount, if any, set forth in Schedule 2 under the column headed "Excess of Basic Lease Rent Paid over the Cumulative Allocated 467 Fixed Rent and Interest on 467 Fixed Rent" shall be credited against the amount payable under this Section 14.3 and any excess payable under this Section 14.3 after such crediting shall be payable by the Owner Lessor to the Facility Lessee), PLUS (iii) all reasonable documented out-of-pocket costs and expenses incurred in connection with exercise by the Facility Lessee of the termination option pursuant to this Section 14 by the other Lease Financing Parties (but excluding the fees and costs of any broker unless engaged by the Facility Lessee on behalf of the Owner Lessor), PLUS (iv) any other Rent payments under this Facility Lease due and unpaid on the Obsolescence Termination Date including the reimbursement of any fees or expenses of the Lease Indenture Trustee under the Lease Indenture, but not including the outstanding amount of the Lessor Notes on such date, under any other Operative Document. Concurrently with the payment of all sums required to be paid pursuant to this Section 14.3, (i) Basic Lease Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Lessee shall cease to have any liability hereunder or any other Operative Document with respect to the Undivided Interest, except for Supplemental Lease Rent and other obligations surviving pursuant to the express terms of any Operative Document, (iii) the Owner Lessor shall pay all outstanding principal and accrued interest on the Lessor Notes and all other amounts due under the Lease Indenture including the reimbursement of any fees or expenses of the Lease Indenture Trustee, (iv) the Facility Lessee will return the Undivided Interest to the Owner Lessor in accordance with Section 5.1, (v) this Facility Lease shall terminate and (vi) subject to EME having paid all amounts owed 36 by EME to the Lease Financing Parties under the Operative Documents, the Owner Lessor shall execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. It shall be a condition precedent to the termination of this Facility Lease pursuant to this Section 14.3, that the Owner Lessor and the Facility Lessee shall each pay all amounts that each is obligated to pay under this Section 14.3. SECTION 14.4. PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the Owner Lessor has not elected to retain the Undivided Interest in accordance with Section 14.3 hereof, on the Obsolescence Termination Date the Owner Lessor shall sell the Owner Lessor's Undivided Interest under this Section 14.4 and its interest in the Ground Interest under Section 6 of the Facility Site Lease and Section 6 of the Facility Site Sublease to the bidder or bidders (which shall not be the Facility Lessee, any Affiliate thereof or any third party with whom the Facility Lessee or an Affiliate thereof has an arrangement to use or operate the Facility to generate power for the benefit of the Facility Lessee or any Affiliate after the termination of this Facility Lease), that shall have submitted the highest cash bid or bids with respect to the Owner Lessor's Interest. On the Obsolescence Termination Date, the Facility Lessee shall pay (or in the case of clause (c) and (d) below, cause EME to pay to the appropriate Lease Financing Party (a) the excess, if any, of Termination Value plus, in the case of a termination of this Facility Lease pursuant to Section 14.1(a)(ii), (b) or (c) hereof, Make-Whole Premium, if any, in each case as determined as of such Obsolescence Termination Date over the proceeds of the sale of the Undivided Interest paid to or retained by the Owner Lessor in connection with such sale, PLUS (b) if such Obsolescence Termination Date shall be a Rent Payment Date, any Basic Lease Rent or Renewal Lease Rent due and payable on such Rent Payment Date, PLUS (c) all reasonable out-of-pocket costs and expenses of the Lease Financing Parties (excluding the fees and costs of any broker unless engaged by the Facility Lessee on the Owners Lessor's behalf) incurred in connection with the exercise of the termination option pursuant to this Section 14 due and payable on such Obsolescence Termination Date, PLUS (d) any other Rent payments under this Facility Lease due and unpaid on the Obsolescence Termination Date. If the proceeds from the sale of the Owner Lessor's Interest paid to or retained by the Owner Lessor exceeds the Termination Value PLUS, in the case of a termination of the Facility Lease pursuant to Section 14.1(a)(ii), (b) or (c) hereof, Make-Whole Premium, if any, in each case as determined as of the Obsolescence Termination Date, the Owner Lessor shall 37 reimburse the Facility Lessee for the amount of the Termination Value paid by the Facility Lessee, if any. Concurrently with the payment of all sums required to be paid pursuant to this Section 14.4, (i) Basic Lease Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Lessee shall cease to have any liability hereunder to the Owner Lessor with respect to the Undivided Interest, except for Supplemental Lease Rent and other obligations surviving pursuant to the express terms of any Operative Document, (iii) subject to EME having paid all amounts owed by EME to the Lease Financing Parties under the Operative Documents, the Owner Lessor will transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessor and prepared and recorded at the Facility Lessee's expense) the Owner Lessor's Interest under this Section 14.4, to the purchaser on an "as is" and "where is" basis, without representations or warranties other than a warranty as to the absence of Owner Lessor's Liens and Owner Participant's Liens, (iv) this Facility Lease shall terminate and (v) the Owner Lessor shall execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. The Facility Lessee may, at its election, revoke its notice of termination on at least 30 days' prior notice to the Owner Lessor, in which event this Facility Lease shall continue with respect to the Undivided Interest; PROVIDED, HOWEVER, that the Facility Lessee shall not be permitted to reissue a notice to terminate pursuant to Section 14.1 more than once in any five year period. The Owner Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Facility Lessee to obtain bids or otherwise take any action in arranging any such sale of the Owner Lessor's Interest other than, if the Owner Lessor has not elected to retain the Undivided Interest, to transfer the Owner Lessor's Interest in accordance with clause (iv) of the second preceding sentence. It shall be a condition of the Owner Lessor's obligation to consummate a sale of the Owner Lessor's Interest that the Facility Lessee shall pay all amounts it is obligated to pay under this Section 14.4 and that EME shall have paid all amounts owed by EME to the Lease Financing Parties under the Operative Documents. If no sale shall occur on the Obsolescence Termination Date, the notice of termination shall be deemed revoked and this Facility Lease shall continue as to the Undivided Interest in full force and effect in accordance with its terms (without prejudice to the Facility Lessee's right to exercise its rights under this Section 14). It shall be a condition to the termination of this Facility Lease pursuant to this Section 14.4 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to terminate any and all Other Facility Leases to 38 which each such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. The Facility Lessee hereby acknowledges the Lien of the Lease Indenture and agrees for the benefit of the Lease Indenture Trustee that any transfer effected pursuant to this Section 14.4 will be subject to said Lien unless the same has been released or discharged in accordance with the terms of the Lease Indenture. SECTION 15. LEASE RENEWAL SECTION 15.1. WINTERGREEN RENEWAL LEASE TERMS. (a) Not earlier than 42 months prior to, but not less than 18 months prior to, the expiration of the Basic Lease Term, so long as no Lease Event of Default shall have occurred and be continuing on the date any notice is given pursuant to this Section 15.1(a) and no Lease Event of Default or Material Lease Default shall have occurred and be continuing on the date the lease renewal proposed pursuant to this Section 15.1(a) is to commence, the Facility Lessee may deliver to the Owner Lessor a notice (which notice may be in addition to a notice of the Facility Lessee's interest in electing a FMV Renewal Lease Term under Section 15.2) of the Facility Lessee's interest in renewing this Facility Lease at the end of the Basic Lease Term for a term (the "FIRST WINTERGREEN RENEWAL LEASE TERM") selected by the Facility Lessee, which term shall satisfy the following criteria: (i) on the last date of such proposed First Wintergreen Renewal Lease Term, the estimated Fair Market Sales Value of the Facility shall be no less than 20% of the Purchase Price (without taking into account inflation or deflation subsequent to the Closing Date), (ii) the aggregate of the proposed First Wintergreen Renewal Lease Term and the Basic Lease Term shall be no greater than 80% of the estimated remaining useful life of the Facility, measured from the Closing Date and (iii) the First Wintergreen Renewal Lease Term will be for a period of not less than 3.25 years and items (i), (ii) and (iii) shall be determined not more than 36 months prior to the expiration of the Basic Lease Term by an Independent Appraiser selected by the Facility Lessee and reasonably acceptable to the Owner Lessor. The Facility Lessee may withdraw any notice given in accordance with this Section 15.1(a) by written notice of such withdrawal to the Owner Lessor, on or prior to the date which is 18 months before the commencement of the proposed First Wintergreen Renewal Lease Term and if 39 such notice is not so withdrawn, the Facility Lessee shall be deemed to have irrevocably elected to renew the Facility Lease for the First Wintergreen Renewal Term. (b) Not earlier than 42 months prior to, but not less than 18 months prior to, the expiration of the First Wintergreen Renewal Term, so long as no Lease Event of Default shall have occurred and be continuing on the date any notice is given pursuant to this Section 15.1(b) and no Lease Event of Default or Material Lease Default shall have occurred and be continuing on the date the lease renewal proposed pursuant to this Section 15.1(b) is to commence, the Facility Lessee may deliver to the Owner Lessor a notice (which notice may be in addition to a notice of the Facility Lessee's interest in electing a FMV Renewal Lease Term under Section 15.2) of the Facility Lessee's interest in renewing this Facility Lease at the end of the First Wintergreen Renewal Lease Term for a term (the "SECOND WINTERGREEN RENEWAL LEASE TERM") selected by the Facility Lessee, which term shall satisfy the following criteria: (i) on the last date of such proposed Second Wintergreen Renewal Lease Term, the estimated Fair Market Sales Value of the Facility shall be no less than 20% of the Purchase Price (without taking into account inflation or deflation subsequent to the Closing Date) and (ii) the aggregate of the proposed Second Wintergreen Renewal Lease Term, the First Wintergreen Renewal Lease Term and the Basic Lease Term shall be no greater than 80% of the estimated remaining useful life of the Facility, measured from the Closing Date and both (i) and (ii) determined not more than 36 months prior to the expiration of the First Wintergreen Renewal Lease Term by an Independent Appraiser selected by the Facility Lessee and reasonably acceptable to the Owner Lessor. The Facility Lessee may withdraw any notice given in accordance with this Section 15.1(b) by written notice of such withdrawal to the Owner Lessor on or prior to 18 months before commencement of the proposed Second Wintergreen Renewal Lease Term and if such notice is not so withdrawn, the Facility Lessee shall be deemed to have irrevocably elected to renew the Facility Lease for the Second Wintergreen Renewal Term. SECTION 15.2. FAIR MARKET VALUE RENEWAL LEASE TERMS. Not earlier than 42 months prior to, but not less than 18 months prior to, the expiration of the Basic Lease Term or any Renewal Lease Term, so long as no Lease Event of Default shall have occurred and be continuing on the date any notice is given pursuant to this Section 15.2 and no Lease Event of Default or Material Lease Default shall have occurred and be continuing on the date the lease renewal proposed pursuant to this Section 15.2 is to commence, the Facility Lessee may deliver to the Owner Lessor a 40 notice (which notice may be in addition to a notice of the Facility Lessee's interest in electing the First Wintergreen Renewal Lease Term or the Second Wintergreen Renewal Lease Term) of the Facility Lessee's interest in renewing this Facility Lease for a term (each such term, a "FMV RENEWAL LEASE TERM") commencing upon expiration of the Basic Lease Term or the Renewal Lease Term otherwise expiring and extending for no less than two years and no more than five years; PROVIDED that, unless such FMV Renewal Lease Term extends to the end of the useful life of the Facility, no Renewal Lease Term shall extend beyond the date that is 36 months prior to the end of the useful life of the Facility (as set forth in the most recent of the Closing Date Appraisal, the appraisal obtained by the Facility Lessee in connection with the determination of the First Wintergreen Renewal Lease Term and the appraisal obtained by the Facility Lessee in connection with the determination of the Second Wintergreen Renewal Lease Term). The Facility Lessee may withdraw any notice given in accordance with this Section 15.2 by written notice of such withdrawal to the Owner Lessor and if such notice is not so withdrawn, the Facility Lessee shall be deemed to have irrevocably elected to renew the Facility Lease for the FMV Renewal Term. SECTION 15.3. RENEWAL LEASE RENT AND TERMINATION VALUE FOR RENEWAL LEASE TERM. During each Renewal Lease Term, Renewal Lease Rent shall be paid on the Rent Payment Dates. The installment of Renewal Lease Rent payable on each such Rent Payment Date during the First Wintergreen Renewal Lease Term and the Second Wintergreen Renewal Lease Term shall be equal to the lesser of (i) the Fair Market Rental Value of the Undivided Interest determined not more than 36 months prior to the expiration of the Basic Lease Term, in the case of rent payable during the First Wintergreen Renewal Term, or the First Wintergreen Renewal Lease Term, in the case of rent payable during the Second Wintergreen Renewal Term, and (ii) 50% of the average Basic Lease Rent payable with respect to the Basic Lease Term. Renewal Lease Rent payable on each Rent Payment Date during any FMV Renewal Lease Term for the Undivided Interest shall be equal to 105% of the Fair Market Rental Value of the Undivided Interest determined not more than 36 months before the commencement of such FMV Renewal Lease Term. SECTION 15.4. DETERMINATION OF FAIR MARKET RENTAL VALUE. The Fair Market Rental Value of the Undivided Interest as of the commencement of any Renewal Lease Term shall be determined by agreement of the Owner Lessor and the Facility Lessee within six months after receipt by the Owner Lessor of the notice from the 41 Facility Lessee of its election to renew pursuant to Section 15.1 or 15.2 (but not more than 36 months before the commencement of such Renewal Lease Term) or, if they shall fail to agree within such six month period, shall be determined by an appraisal conducted by an Independent Appraiser according to the Appraisal Procedure. The Facility Lessee shall be responsible for such Independent Appraiser's fees and expenses. SECTION 16. EVENTS OF DEFAULT Each of the following events shall constitute a "LEASE EVENT OF DEFAULT" hereunder (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority): (a) the Facility Lessee shall fail to make any payment of Basic Lease Rent, Renewal Lease Rent, Termination Value, Make-Whole Premium or other prepayment premium or other costs (but in no event interest or principal), fees and expenses associated with the Lessor Notes (other than costs, fees and expenses in respect of the Lessor Notes incurred as a result of the Lease Indenture Event of Default which is not a Lease Event of Default) when due, and such failure shall continue unremedied for five (5) Business Days; or (b) the Facility Lessee shall fail to make or cause EME to make any other payment required to be made by the Facility Lessee under this Facility Lease, or under any other Operative Document (other than Excepted Payments, unless the Owner Participant shall have declared a default with respect thereto) when due, and such failure shall have continued unremedied for 30 days after receipt by the Facility Lessee of written notice of such failure; or (c) the Facility Lessee shall fail to maintain insurance in the amounts and on the terms set forth in the Operative Documents, including Section 11 hereof, and such failure shall continue unremedied for 10 Business Days after receipt by the Facility Lessee of written notice thereof; or (d) the Facility Lessee shall fail to perform or observe any other material covenant set forth in this Facility Lease or any other covenant set forth in 42 the Participation Agreement or in any other Operative Document and such failure shall continue unremedied for 30 days after receipt by the Facility Lessee of written notice thereof; PROVIDED, HOWEVER, that if such failure cannot be remedied within such 30-day period, then the period within which to remedy such failure shall be extended up to an additional 180 days, so long as the Facility Lessee diligently pursues such remedy, such failure is reasonably capable of being remedied within such additional 180-day period and the continuation of such failure during the period of such extension would not have a Material Adverse Effect on the Facility Lessee or the Guarantor; PROVIDED, FURTHER, that in the case of the Facility Lessee's obligation set forth in clause (b) of Section 7.1, to the extent and for so long as a test, challenge, appeal or proceeding to review with respect to such non-compliance shall be prosecuted in good faith by the Facility Lessee, the failure by the Facility Lessee to comply with the requirements thereof shall not constitute a Lease Event of Default if such test, challenge, appeal or proceeding shall not involve (i) a risk of foreclosure, sale, forfeiture or loss of, or imposition of a Lien on, the Facility or any part thereof or of impairment of the use, operation or maintenance of the Facility, or (ii) a risk of criminal liability being incurred by, or of a material adverse effect on the interests of, any other Lease Financing Party, including, without limitation, subjecting any such person to regulation as a public utility under Requirements of Law; and PROVIDED, FURTHER, also in the case of the Facility Lessee's obligation set forth in clause (b) of Section 7.1, if such noncompliance is not a type that can be immediately remedied, the failure to comply shall not be a Lease Event of Default if the Facility Lessee is taking all reasonable action to remedy such noncompliance and if, but only if, such noncompliance shall not involve any danger described in clause (i) or (ii) of the preceding proviso; and PROVIDED, FURTHER, such noncompliance, or such test, challenge, appeal or proceeding to review with respect to such noncompliance shall not extend beyond the date that is 36 months prior to the scheduled expiration of the Basic Lease Term or any Renewal Lease Term then in effect or already elected by the Facility Lessee; or (e) any representation or warranty of the Facility Lessee or the Guarantor set forth in the Operative Documents (other than a tax representation set forth in the Tax Indemnity Agreement) shall prove to have been incorrect in any material respect when made and the facts or circumstances upon which such breach of representation or warranty is based continue to be material and unremedied for a period of 30 days after receipt by the Facility Lessee of written notice thereof; PROVIDED, HOWEVER, that if such condition cannot be remedied within such 30-day 43 period, then the period within which to remedy such condition shall be extended up to an additional 60 days, so long as the Facility Lessee diligently pursues such remedy, such condition is reasonably capable of being remedied within such additional 60-day period and the continuation of such condition during the period of such extension would not have a Material Adverse Effect on the Facility Lessee or the Guarantor; or (f) the Facility Lessee or the Guarantor shall (i) commence a voluntary case or other proceeding seeking relief under Title 11 of the Bankruptcy Code or liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or apply for or consent to the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) consent to, or fail to controvert in a timely manner, any such relief or the appointment of or taking possession by any such official in any voluntary case or other proceeding commenced against it, or (iii) file an answer admitting the material allegations of a petition filed against it in any such proceeding, or (iv) make a general assignment for the benefit of creditors; or (g) an involuntary case or other proceeding shall be commenced against the Facility Lessee or the Guarantor, seeking (i) liquidation, reorganization or other relief with respect to it or its debts under Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other similar law now or hereafter in effect, or (ii) the appointment of a trustee, receiver, liquidator, custodian or other similar official with respect to it or any substantial part of its property or (iii) the winding-up or liquidation of the Facility Lessee or the Guarantor, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days; or (h) default under any bond, debenture, note or other evidence of Indebtedness (but excluding obligations arising under the Operative Documents and non-recourse Indebtedness) for money borrowed by the Facility Lessee or the Guarantor under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Facility Lessee or the Guarantor, whether such indebtedness now exists or shall hereafter be created, which Indebtedness is in an aggregate principal amount exceeding $20,000,000 at all other times and which default shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which 44 it would otherwise have become due and payable, without such Indebtedness having been discharged, or such acceleration having been rescinded or annulled; or (i) failure by the Facility Lessee to comply in all material respects with the restrictions on transfer imposed on it by Section 22.4 herein; or (j) any of the Operative Documents (including the Lease Indenture) to which the Facility Lessee or the Guarantor is a party are declared unenforceable, are terminated, cease to be in full force and effect or fail to constitute valid and perfected first priority security interests (in each case, other than in accordance with their terms) or either the Facility Lessee or the Guarantor fails to comply with its respective obligations under Sections 5.7, or 7.5 of the Participation Agreement; or (k) judgments or orders for the payment of money against either of the Facility Lessee or the Guarantor, which judgments or orders, as the case may be, are in excess of $20,000,000 in the aggregate (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without reservation) and which are not vacated, discharged or effectively stayed or bonded within 60 days from the entry thereof; or (l) the Guarantor fails to make any payment under the EME Guarantee, the EME OP Guarantee or any other Operative Document (other than payments pursuant to the Reimbursement Agreement and other than Excepted Payments, unless the Owner Participant shall have declared a default with respect to such Excepted Payments) when due, and such failure shall continue unremedied for five (5) Business Days after receipt by the Guarantor of written notice of such failure; (m) occurrence of a Regulatory Violation with respect to the Facility Lessee; or (n) (i) any Reportable Event shall occur; (ii) there shall be initiated any action by the Guarantor or any member of the Controlled Group to terminate a Plan; (iii) there shall be initiated proceedings by the PBGC under Section 4042 of ERISA to terminate a Plan or to appoint a trustee to administer a Plan; (iv) any Plan shall incur an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), unless waived; (v) the imposition upon the 45 Guarantor or any member of the Controlled Group or any Plan fiduciary of a material liability resulting from either the engagement by any such party in a transaction prohibited under Section 4975 of the Code or Section 406 of ERISA or any other violation of Title I of ERISA; (vi) the Guarantor or any member of the Controlled Group suffers a partial or complete withdrawal from a Multiemployer Plan, which, with respect to clauses (i) through (vi) above, results in a liability, individually or in the aggregate, of at least $20,000,000; (o) the Guarantor shall fail to perform or observe any other material covenant set forth in the Participation Agreement or in any other Operative Document (other than the EME OP Guarantee) and such failure shall continue unremedied for 30 days after receipt by the Guarantor of written notice thereof; PROVIDED, HOWEVER, that if such failure cannot be remedied within such 30-day period, then the period within which to remedy such failure shall be extended up to an additional 180 days, so long as the Guarantor diligently pursues such remedy, such failure is reasonably capable of being remedied within such additional 180-day period and the continuation of such failure during the period of such extension would not have a Material Adverse Effect on the Guarantor; or (p) the Guarantor shall fail to perform or observe any other material covenant set forth in the EME OP Guarantee, the Owner Participant shall have declared a default thereunder with respect to such failure and such failure shall continue unremedied for 30 days after such declaration; PROVIDED, HOWEVER, that if such failure cannot be remedied within such 30-day period, then the period within which to remedy such failure shall be extended up to an additional 180 days, so long as the Guarantor diligently pursues such remedy, such failure is reasonably capable of being remedied within such additional 180-day period and the continuation of such failure during the period of such extension would not have a Material Adverse Effect on the Guarantor. SECTION 17. REMEDIES SECTION 17.1. REMEDIES FOR LEASE EVENT OF DEFAULT. Upon the occurrence of any Lease Event of Default and at any time thereafter so long as the same shall be continuing, the Owner Lessor may, at its option, declare this Facility Lease to be in default by written notice to the Facility Lessee (PROVIDED, that this Facility Lease shall automatically be in default without such declaration or delivery of such notice 46 upon the occurrence of a Lease Event of Default in clause (f) or (g) of Section 16); and at any time thereafter, so long as the Facility Lessee shall not have remedied all outstanding Lease Events of Default, the Owner Lessor may do one or more of the following as the Owner Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with any mandatory Requirements of Law then in effect and subject to Section 17.2 below: (a) proceed by appropriate court action or actions, either at law or in equity, to enforce performance by the Facility Lessee of the applicable covenants and terms of this Facility Lease or to recover damages for breach thereof; (b) by notice in writing to the Facility Lessee, terminate this Facility Lease whereupon all right of the Facility Lessee to the possession and use of the Undivided Interest under this Facility Lease shall absolutely cease and terminate but the Facility Lessee shall remain liable as hereinafter provided; and thereupon, the Owner Lessor may demand that the Facility Lessee, and the Facility Lessee shall, upon written demand of the Owner Lessor, forthwith return possession of the Undivided Interest to the Owner Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of Section 5, except those provisions relating to periods of notice; and the Owner Lessor may thenceforth hold, possess and enjoy the same free from any right of the Facility Lessee, or its successor or assigns, to use the Undivided Interest for any purpose whatever; (c) sell the Owner Lessor's Interest at public or private sale, as the Owner Lessor may determine, free and clear of any rights of the Facility Lessee under this Facility Lease and without any duty to account to the Facility Lessee with respect to such sale or for the proceeds thereof (except to the extent required by paragraph (f) below if the Owner Lessor elects to exercise its rights under said paragraph and by Requirements of Law), in which event the Facility Lessee's obligation to pay Basic Lease Rent hereunder due for any periods subsequent to the date of such sale shall terminate (except to the extent that Basic Lease Rent is to be included in computations under paragraph (f) below if the Owner Lessor elects to exercise its rights under said paragraph); (d) hold, keep idle or lease to others the Owner Lessor's Interest as the Owner Lessor in its sole discretion may determine, free and clear of any rights of the Facility Lessee under this Facility Lease and without any duty to account to the 47 Facility Lessee with respect to such action or inaction or for any proceeds with respect thereto, except that the Facility Lessee's obligation to pay Basic Lease Rent with respect to the Undivided Interest due for any periods subsequent to the date upon which the Facility Lessee shall have been deprived of possession and use of the Undivided Interest pursuant to this Section 17 shall be reduced by the net proceeds, if any, received by the Owner Lessor from leasing the Undivided Interest to any Person other than the Facility Lessee; (e) whether or not the Owner Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights under paragraph (b) above with respect to the Undivided Interest, the Owner Lessor, by written notice to the Facility Lessee specifying a Termination Date that shall be not earlier than 10 days after the date of such notice, may demand that the Facility Lessee pay to the Owner Lessor, and the Facility Lessee shall pay to the Owner Lessor, on the Termination Date specified in such notice (or immediately upon the occurrence of a Lease Event of Default described in clause (f) or (g) of Section 16, in which case no such written notice or demand shall be required under this Section 17.1(e) for the amounts described in this Section 17.1(e) to become due and payable by the Facility Lessee), any unpaid Basic Lease Rent due before such Termination Date and, if such Termination Date shall be a Rent Payment Date, any Basic Lease Rent due and payable on such Rent Payment Date, any Supplemental Lease Rent due and unpaid as of the payment date specified in such notice, plus as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Lease Rent due after the Termination Date specified in such notice), (i) an amount equal to the excess, if any, of the Termination Value computed as of the Termination Date specified in such notice over the Fair Market Sales Value of the Owner Lessor's Interest as of the Termination Date specified in such notice; or (ii) an amount equal to the excess, if any, of Termination Value computed as of the Termination Date specified in such notice over the Fair Market Rental Value of the Owner Lessor's Interest until the end of the Basic Lease Term or the then current Renewal Lease Term, after discounting such Fair Market Rental Value quarterly to present value as of the Termination Date specified in such notice at a rate equal to the Discount Rate; or (iii) an amount equal to the Termination Value computed as of the Termination Date specified in such notice and, upon payment of such Termination Value by the Facility Lessee pursuant to this clause (iii) and all other Rent then due and unpaid by the Facility Lessee, the Owner Lessor will forthwith transfer to the Facility Lessee (or its designee) in accordance with this Section 17.1(e) and Section 6 of the Facility Site Lease on an 48 "as is," "where is" and "with all faults" basis, without representation or warranty other than a warranty as to the absence of Owner Lessor's Liens accompanied by a warranty of the Owner Participant as to the absence of the Owner Participant's Liens, all of its interest in the Owner Lessor's Interest and execute, acknowledge and deliver, and record and file (as appropriate), appropriate releases, including a release from the Lien of the Lease Indenture, and all other documents or instructions necessary or desirable to effect the foregoing all in form and substance reasonably satisfactory to the Owner Lessor and at the cost and expense of the Facility Lessee, and upon payment of such amounts under either clauses (i) and (ii) of this paragraph (e), this Facility Lease, and the Facility Lessee's obligation to pay Basic Lease Rent hereunder due for any periods subsequent to the date of such payment shall terminate; and (f) if the Owner Lessor shall have sold the Owner Lessor's Interest pursuant to paragraph (c) above, the Owner Lessor may, if it shall so elect, demand that the Facility Lessee pay to the Owner Lessor, and the Facility Lessee shall pay to the Owner Lessor, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Lease Rent due for any periods subsequent to the date of such sale), an amount equal to (A) any unpaid Basic Lease Rent due before the date of such sale PLUS (B) if that date is a Rent Payment Date, the Basic Lease Rent due on that date, PLUS (C) the amount, if any, by which the Termination Value computed as of the Termination Date next preceding the date of such sale or, if such sale occurs on a Rent Payment Date or a Termination Date then computed as of such date, exceeds the net proceeds of such sale, and, upon payment of such amount, this Facility Lease and the Facility Lessee's obligation to pay Basic Lease Rent for any periods subsequent to the date of such payment shall terminate. In addition, the Facility Lessee shall be liable, except as otherwise provided above, for (i) any and all unpaid Basic Lease Rent due hereunder before, or during the exercise of any of the foregoing remedies, and (ii) on an After-Tax Basis, for legal fees and other costs and expenses incurred by reason of the occurrence of any Lease Event of Default or the exercise of the Owner Lessor's remedies with respect thereto, including the repayment in full of any costs and expenses necessary to be expended in connection with the return of the Undivided Interest in accordance with Section 5.2 hereof, including, without limitation, any costs and expenses incurred by the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and other Lease Financing Parties in connection with retaking constructive possession of, or in 49 repairing, the Undivided Interest in order to cause it to be in compliance with all maintenance standards imposed by this Facility Lease. SECTION 17.2. LIMITATION ON RECOURSE. Notwithstanding anything herein to the contrary, at any time during the Basic Lease term only, if Rent (including Termination Value) and Other Midwest Liabilities due and unpaid at such time is greater than the aggregate Free Cashflow amount attributable to the Fiscal Quarters during which Rent and Other Midwest Liabilities became due and are undischarged, any claim against the Facility Lessee for the amount by which such Rent and Other Midwest Liabilities due and unpaid exceed the aggregate Free Cashflow amount attributable to the Fiscal Quarters during which Rent and Other Midwest Liabilities became due and are undischarged shall be subordinated to the claims of the holders of Specified Midwest Indebtedness on the terms and conditions set forth in the Subordination Agreement; PROVIDED that such subordination shall not impair or otherwise restrict any right or ability of the Owner Participant, the Owner Trustee, the Equity Investor, the Lease Indenture Trustee or either Pass Through Trustee to make a claim under the EME Guarantee or the EME OP Guarantee, as the case may be, in respect of such excess or to retain any amount paid by EME under the EME Guarantee or the EME OP Guarantee, as the case may be, in respect of such excess. Notwithstanding the foregoing, no provision of this Facility Lease (including this Section 17.2) or the Subordination Agreement shall limit or impair, or be deemed to limit or impair, in any way the right of the Owner Lessor to take (or cause to be taken) any of the following actions: (i) the giving of any notice necessary to cause a default, breach, failure or misrepresentation to become a Lease Event of Default, (ii) the declaration of this Facility Lease to be in default; (iii) the election or exercise of any remedy arising out of or in connection with a Lease Event of Default (including making any demand for payment of Termination Value, terminating this Facility Lease, exercising the rights of the Owner Lessor as owner of the Undivided Interest or any other remedy under Section 17 hereof); (iv) the making of demand for payment of any claim required to be subordinated pursuant this Section 17.2 and Section 18.19 of the Participation Agreement; and (v) the exercise of any other right or remedy in the Operative Documents or at law with respect to any claim not constituting a claim required to be subordinated pursuant this Section 17.2 and Section 18.19 of the Participation Agreement; PROVIDED, HOWEVER, that in no event shall the Owner Lessor be entitled to seek to collect or enforce payment of any 50 amount constituting a claim required to be subordinated pursuant to this Section 17.2 and Section 18.19 of the Participation Agreement. SECTION 17.3. CUMULATIVE REMEDIES. The remedies in this Facility Lease provided in favor of the Owner Lessor shall not be deemed exclusive, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law or in equity; and the exercise or beginning of exercise by the Owner Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Owner Lessor of any or all of such other remedies. To the extent permitted by Requirements of Law, the Facility Lessee hereby waives any rights now or hereafter conferred by statute or otherwise which may require the Owner Lessor to sell, lease or otherwise use the Undivided Interest or any Component thereof in mitigation of Owner Lessor's damages as set forth in this Section 17 or which may otherwise limit or modify any of Owner Lessor's rights and remedies in this Section 17. SECTION 17.4. NO DELAY OR OMISSION TO BE CONSTRUED AS WAIVER. No delay or omission to exercise any right, power or remedy accruing to the Owner Lessor upon any breach or default by the Facility Lessee under this Facility Lease shall impair any such right, power or remedy of the Owner Lessor, nor shall any such delay or omission be construed as a waiver of any breach or default, or of any similar breach or default hereafter occurring; nor shall any waiver of a single breach or default be deemed a waiver of any subsequent breach or default. SECTION 18. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS Any moneys received by the Owner Lessor or the Lease Indenture Trustee pursuant to Section 10.3, 10.5 or 11.7 shall, until paid to the Facility Lessee as provided in accordance with such Sections, be held by the Owner Lessor or the Lease Indenture Trustee, as the case may be, as security for the Facility Lessee's obligations under this Facility Lease and be invested in Permitted Investments by the Owner Lessor or the Lease Indenture Trustee, as the case may be, at the sole risk of the Facility Lessee, from time to time as directed in writing by the Facility Lessee if such investments are reasonably available for purchase. Any gain (including interest received) realized as the result of any such Permitted Investment (net of any fees, commissions, taxes and other expenses, if any, incurred in connection with such 51 Permitted Investment) shall be applied or remitted to the Facility Lessee in the same manner as the principal invested. SECTION 19. RIGHT TO SUBLEASE SECTION 19.1. SUBLEASE. Except as provided in this Section 19.1, the Facility Lessee shall not assign, transfer or sublease all or any portion of its rights in the Owner Lessor's Undivided Interest under this Facility Lease. Pursuant to the provisions of the Operative Documents, the Facility Lessee shall have the right to sublease the Undivided Interest without the consent of any other Lease Financing Party if: (a) the EME Guarantee, the Reimbursement Agreement and the EME OP Guarantee remain in full force and effect; (b) the sublessee (i) is a solvent corporation, partnership, business trust, limited liability company or other entity (but not individuals) not subject to bankruptcy proceedings, (ii) is not involved in material litigation with the Owner Participant, and (iii) is, or its operating, maintenance and use obligations under the sublease are guaranteed by, or such obligations are contracted to be performed by, an experienced, reputable operator of electric generating assets similar to the Facility; (c) the sublease does not extend beyond the scheduled expiration of the applicable Basic Lease Term or any Renewal Lease Term then in effect or already elected by the Facility Lessee (and may be terminated upon early termination of the Facility Lease) and is expressly subject and subordinate to the Facility Lease; (d) all terms and conditions of the Facility Lease and the other Operative Documents remain in effect and the Facility Lessee remains fully and primarily liable for its obligations thereunder but subject to Section 17.2 of this Facility Lease and Section 18.19 of the Participation Agreement; (e) no Lease Event of Default under the Facility Lease shall have occurred and be continuing; (f) the sublease prohibits further assignment or subletting; 52 (g) the sublease requires the sublessee to operate and maintain the Undivided Interest in a manner not less favorable than that required under the Facility Lease and the other Operative Documents; (h) the sublessee does not cause the Facility to become "tax-exempt use property" within the meaning of Section 168(h) of the Code (unless the Facility sublessee shall make a payment to the Owner Participant contemporaneously with the execution of the sublease that, in reasonable judgement of the Owner Participant, compensates such Owner Participant for the adverse tax consequences resulting from the classification of the Facility as "tax-exempt use property"); (i) the Owner Lessor (and so long as the Lessor Notes are outstanding, the Pass-Through Trustee and the Lease Indenture Trustee) shall have received an opinion of counsel, which opinion of counsel shall be reasonably acceptable to each such recipient, to the effect that all regulatory approvals required to enter into such sublease shall have been obtained; (j) the Facility sublessee shall pay all reasonable documented out-of-pocket expenses incurred by the other Lease Financing Parties in connection with such sublease; and (k) the Owner Participant shall have received an opinion reasonably satisfactory to it from Hunton & Williams or from a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee, to the effect that such sublease would not result in any material indemnified, or any unindemnified, incremental tax risk to the Owner Participant. As a condition precedent to such sublease, the Facility Lessee shall provide the Owner Lessor, the Owner Participant, and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and Pass Through Trustees with all documentation in respect of such sublease and an opinion of counsel to the effect that such sublease complies with the provisions of this Section 19.1 (such documentation, counsel and opinion to be reasonably satisfactory to such recipients). 53 SECTION 20. OWNER LESSOR'S RIGHT TO PERFORM If the Facility Lessee fails to make any payment required to be made by it hereunder or fails to perform or comply with any of its other agreements contained herein after notice to the Facility Lessee and failure of the Facility Lessee to so perform or comply within 10 days thereafter, the Owner Lessor or the Owner Participant may itself make such payment or perform or comply with such agreement in a reasonable manner, but shall not be obligated hereunder to do so, and the amount of such payment and of the reasonable expenses of the Owner Lessor or the Owner Participant incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, shall be deemed to be Supplemental Lease Rent, payable by the Facility Lessee to the Owner Lessor on demand. SECTION 21. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE LEASE INDENTURE TRUSTEE In order to secure the Lessor Notes, the Owner Lessor will assign and grant a Lien to the Lease Indenture Trustee of all of the Owner Lessor's right, title and interest in, to and under this Facility Lease, and the Undivided Interest (other than Excepted Payments and the rights to enforce and collect the same). The Facility Lessee hereby consents to such assignment and to the creation of such Lien and security interest and acknowledges receipt of copies of the Lease Indenture, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent of the Facility Lessee under any other circumstances. Unless and until the Facility Lessee shall have received written notice from the Lease Indenture Trustee that the Lien of the Lease Indenture has been fully terminated, the Lease Indenture Trustee shall have the right to exercise the rights of the Owner Lessor under this Facility Lease (other than the rights to enforce and collect the same) to the extent set forth in and subject in each case to the exceptions set forth in the Lease Indenture. TO THE EXTENT, IF ANY, THAT THIS FACILITY LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS FACILITY LEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RE- 54 CEIPT THEREFOR EXECUTED BY THE LEASE INDENTURE TRUSTEE ON THE SIGNATURE PAGE THEREOF. SECTION 22. MISCELLANEOUS SECTION 22.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition of this Facility Lease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. SECTION 22.2. NOTICES. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or shall be produced by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, PROVIDED such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to such party and any copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other party: If to the Owner Lessor: Joliet Trust I c/o Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Facsimile No.: (302) 651-8882 Attention: Corporate Trust Administration 55 with a copy to the Owner Participant: Joliet Generation I, LLC c/o PSEG Resources Inc. 80 Park Plaza, Suite T-22 Newark, NJ 07101 Telephone No.: (973) 456-3560 Facsimile No.: (973) 456-3569 Attention: President and to the Lease Indenture Trustee: United States Trust Company of New York, 114 West 47th Street, 25th floor New York, NY 10036 Facsimile No.: (212) 852-1625 Attention: Christopher J. Grell, Vice President If to the Facility Lessee: Midwest Generation, LLC One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Facsimile No. : (312) 583-6111 Attention: President with copy to: Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612 Facsimile No.: (949) 752-1420 Attention: General Counsel 56 SECTION 22.3. SURVIVAL. Except for the provisions of Sections 3.3, 3.5, 5, 9 and 17, which shall survive, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Facility Lease in accordance with its terms. SECTION 22.4. SUCCESSORS AND ASSIGNS. (a) This Facility Lease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided in Section 22.4(c), the Facility Lessee may not assign the Facility Lease or any other Operative Document, or any interest therein, without the prior written consent of the Owner Lessor and the Owner Participant. (c) The Facility Lessee may, upon satisfaction of the conditions set forth herein and in Section 22.4(d), without the consent of any other Lease Financing Party, so long as the Owner Lessor or Owner Participant does not become regulated as a "public utility" or "public utility holding company" as a result of such assignment, assign the Facility Lease and the other Operative Documents, or any interest therein. In addition to the conditions set forth in the preceding sentence, the Facility Lessee may assign the Facility Lease and the other Operative Documents, or any interest therein, under the following circumstances: (i) to any entity; PROVIDED that such entity's long term senior unsecured Indebtedness is rated equal to or greater than BBB+ from S&P and Baa1 from Moody's or, if higher, the rating by S & P and Moody's of EME's long term senior unsecured Indebtedness (but not to exceed A - by S & P or A3 by Moody's); or (ii) to any entity; PROVIDED that the Facility Lessee shall remain secondarily liable under the Facility Lease and all other Operative Documents, subject to Section 17.2 of this Facility Lease and Section 18.19 of the Participation Agreement such that the Facility Lessee would be directly obligated to pay or perform any obligation not paid or performed by the assignee when due, and the EME Guarantee, the Reimbursement Agreement and the EME OP Guarantee shall remain in full force and effect. 57 In the case of an assignment pursuant to clause (i) above, the Facility Lessee shall, upon the transferee's assumption of the Facility Lessee's obligations under the Facility Lease and the other Operative Documents in accordance with the terms of this Section 22.4(c) and Section 22.4(d), have no further liability or obligation thereunder, arising after such transfer and the obligations of the Facility Lessee and the Guarantor, as the case may be, under the other Operative Documents shall be assumed by the transferee, including, without limitation, the EME indemnity obligations set forth in Section 12 of the Participation Agreement and the parties shall execute and deliver amendments to the Operative Documents necessary to effect the release of EME from such obligations. Notwithstanding the foregoing, so long as the Lessor Notes are outstanding, no such assignment shall be permitted unless each of S&P and Moody's shall have confirmed that such assumption shall not result in a downgrade of the then existing credit rating of the Certificates. (d) Any assignment by the Facility Lessee pursuant to Section 22.4(c) shall be subject to satisfaction of the following additional conditions: (i) the Owner Lessor and the Owner Participant (and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and the Pass-Through Trustees) shall have received an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to each recipient thereof, to the effect that all regulatory approvals required in connection with such transfer or necessary to assume the Facility Lessee's obligations under the Operative Documents shall have been obtained; (ii) such transfer shall be pursuant to an assignment and assumption agreement in form and substance reasonably satisfactory to the Owner Participant (and the Lease Indenture Trustee and the Pass-Through Trustees, so long as the Lessor Notes are outstanding); (iii) the Owner Lessor and the Owner Participant (and the Lease Indenture Trustee and the Pass-Through Trustees, so long as the Lessor Notes are outstanding) shall have received an opinion of counsel, which opinion and counsel are reasonably satisfactory to each recipient thereof, as to the validity and enforceability of such assignment and assumption agreement required pursuant to (ii) above; 58 (iv) the Owner Participant shall have received an opinion reasonably satisfactory to it from Hunton & Williams, or from a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee, to the effect that such transfer would not result in any material indemnified incremental tax risk, or any unindemnified, incremental tax risk to the Owner Participant; (v) no Material Lease Default or no Lease Event of Default shall have occurred and be continuing; (vi) such transfer by the Facility Lessee shall not result in a Regulatory Event of Loss; (vii) the transferee shall not be involved in material litigation with the Owner Participant; (viii) the Facility Lessee shall pay all reasonable documented out-of-pocket expenses incurred by the other Lease Financing Parties in connection with such assignment; and (ix) the transferee, or the operator of the Facility retained by the transferee, shall be experienced in operating facilities such as the Facility. The Facility Lessee acknowledges that the Owner Participant is a third party beneficiary of this Section 22.4 and should be entitled to enforce its rights hereunder as if it were a party to this Facility Lease. SECTION 22.5. "TRUE LEASE." This Facility Lease shall constitute an agreement of lease and nothing herein shall be construed as conveying to the Facility Lessee any right, title or interest in or to the Undivided Interest except as lessee only. The parties hereto hereby agree that the Facility Lessee's obligation to make Excepted Payments is a separate and independent obligation from its obligation to make other Rent payments, and that the Lessee's obligation to make Excepted Payments may be assigned, pledged or otherwise transferred separately from the Lessee's 59 obligations to make other Rent payments. The obligation to make Excepted Payments has been included herein for the convenience of the parties. SECTION 22.6. GOVERNING LAW. This Facility Lease was negotiated in the State of New York which the Facility Lessee and the Owner Lessor agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and, in accordance with Section 5-1401 of the New York General Obligations Law, in all respects, including matters of construction, validity and performance, this Facility Lease shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America, EXCEPT that the provisions for the creation and enforcement of the leasehold interest created hereby shall be governed by and construed according to the law of the state in which the Facility is located, it being understood that, to the fullest extent permitted by the law of the state in which the Facility is located, the law of the State of New York shall govern the validity and the enforceability of the representations, warranties, covenants and obligations of the Facility Lessee and the Owner Lessor under this Facility Lease and all other Operative Documents and all of the indebtedness arising hereunder or thereunder. To the fullest extent permitted by law, the Facility Lessee and the Owner Lessor hereby unconditionally and irrevocably waive any claim to assert that the law of any other jurisdiction governs this Facility Lease, except as expressly otherwise provided above. SECTION 22.7. SEVERABILITY. Any provision of this Facility Lease that 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. SECTION 22.8. COUNTERPARTS. This Facility Lease may be executed by the parties hereto in separate counterparts, each of which, subject to Section 21, when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 22.9. HEADINGS AND TABLE OF CONTENTS. The headings of the sections of this Facility Lease and the Table of Contents are inserted for purposes of conve- 60 nience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. SECTION 22.10. FURTHER ASSURANCES. Each party hereto will promptly and duly execute and deliver such further documents and assurances for and take such further action reasonably requested by the other party, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Facility Lease. SECTION 22.11. EFFECTIVENESS. This Facility Lease has been dated as of the date first above written for convenience only. This Facility Lease shall be effective on the date of execution and delivery by the Facility Lessee and the Owner Lessor. SECTION 22.12. LIMITATION OF LIABILITY. It is expressly understood and agreed by the parties hereto that (a) this Facility Lease is executed and delivered by Wilmington Trust Company ("WILMINGTON"), not individually or personally but solely as trustee of the Owner Trust under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it pursuant thereto, (b) each of the representations, undertakings and agreements herein made on the part of the Owner Lessor is made and intended not as personal representations, undertakings and agreements by Wilmington but is made and intended for the purpose for binding only the Owner Lessor, (c) nothing herein contained shall be construed as creating any liability on Wilmington individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto or by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall Wilmington be personally liable for the payment of any indebtedness or expenses of the Owner Lessor or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Owner Lessor under this Facility Lease. SECTION 22.13. MEASURING LIFE. If and to the extent that any of the rights and privileges granted under this Facility Lease, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Facility Lease, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of 61 (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Facility Lease of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Facility Lease, whichever of (a) and (b) is shorter. 62 IN WITNESS WHEREOF, the Owner Lessor and the Facility Lessee have caused this Facility Lease to be duly executed and delivered under seal by their respective officers thereunto duly authorized. JOLIET TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ James P. Lawler ------------------------------- Name: James P. Lawler Title: Vice President Date: August 24, 2000 MIDWEST GENERATION, LLC By: /s/ John P. Finneran, Jr. ------------------------------- Name: John P. Finneran, Jr. Title: Vice President Date: August 24, 2000 EXHIBIT A TO FACILITY LEASE DESCRIPTION OF FACILITY SITE A-1 EXHIBIT B TO FACILITY LEASE DESCRIPTION OF FACILITY A-2 A-3 SCHEDULE 1-1 TO FACILITY LEASE BASIC LEASE RENT Schedule 1-1-1 SCHEDULE 1-2 TO FACILITY LEASE ALLOCATION OF BASIC LEASE RENT Schedule 1-2-1 SCHEDULE 1-3 TO FACILITY LEASE 467 RENT ALLOCATION
SUM OF 467 FIXED RENT RENTAL PERIOD 467 INTEREST ON AND 467 ENDING ON 467 FIXED RENT FIXED RENT INTEREST ON FIXED RENT - ---------------------------- ----------------------- ----------------------- -----------------------------
Schedule 1-3-1 SCHEDULE 2 TO FACILITY LEASE TERMINATION VALUES Schedule 1-3-1 EX-4.8-1 14 a2031364zex-4_81.txt EXHIBIT 4.8.1 Exhibit 4. 8.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 4.8 - ------------------------------------------------------------------------- Facility Lease Agreement (T2), dated as of August 17, 2000, by and between Joliet Trust II, as Owner Lessor, and Midwest Generation, LLC, as Facility Lessee. EX-4.9 15 a2031364zex-4_9.txt EXHIBIT 4.9 Exhibit 4.9 EXECUTION COPY - -------------------------------------------------------------------------------- GUARANTEE DATED AS OF AUGUST 17, 2000 IN FAVOR OF POWERTON TRUST I MADE BY EDISON MISSION ENERGY, AS GUARANTOR - -------------------------------------------------------------------------------- GUARANTEE, dated as of August 17, 2000, (this "GUARANTEE") made by EDISON MISSION ENERGY, a California corporation (the "GUARANTOR") in favor of POWERTON TRUST I, a Delaware business trust and lessor under the Facility Lease referred to below (the "OWNER LESSOR"). W I T N E S S E T H WHEREAS, the Owner Lessor and Midwest Generation, LLC, a Delaware limited liability company and lessee under the Facility Lease referred to below (the "FACILITY LESSEE") are party to the Facility Lease (as from time to time amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "FACILITY LEASE") dated as of August 17, 2000 providing for the lease by the Owner Lessor to the Facility Lessee of an undivided interest as tenant-in-common in the Facility. This Guarantee guarantees the obligations of the Facility Lessee to pay Rent, including Termination Value, owed to the Owner Lessor under the Facility Lease and the other Operative Documents; and WHEREAS, the Owner Lessor, Powerton Generation I, LLC, Wilmington Trust Company, as the Owner Trustee, the Facility Lessee, the Guaran tor, United States Trust Company of New York, as the Lease Indenture Trustee (as such term is defined therein), United States Trust Company of New York, as the Pass Through Trustees (as such term is defined therein) are party to the Participation Agreement (as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time, the "PARTICIPATION AGREEMENT") dated as of August 17, 2000 which establishes certain rights and obligations of the parties to the leveraged lease financing of the Powerton Station pursuant to the Facility Lease and the other Operative Documents; and WHEREAS, in connection with the Facility Lease, the Owner Lessor and the Lease Indenture Trustee have entered into the Indenture of Trust, Mortgage, and Security Agreement (as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time, the "LEASE INDENTURE"), dated as of August 17, 2000 providing for the issuance by the Owner Lessor of the notes (the "LESSOR NOTES"). WHEREAS, the Owner Lessor has granted to the Lease Indenture Trustee for the benefit of the holders of the Lessor Notes a security interest in the POWERTON EME GUARTANTEE (T1) Trust Estate (as defined in the Lease Indenture and including, without limitation, a collateral assignment of the Facility Lease and this Guarantee), other than Excepted Payments (as defined in the Participation Agreement), as security for the Lessor Notes and certain other obligations. NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby covenant and agree as follows: ARTICLE 1. DEFINITIONS. 1.01 DEFINED TERMS. Each capitalized term used herein (including in the preamble and recitals hereto) and not otherwise defined herein shall have the definition assigned to that term in Appendix A to the Participation Agreement. 1.02 INTERPRETATION. The rules of interpretation set forth in Appendix A to the Participation Agreement shall apply MUTATIS MUTANDIS to this Guarantee as if set forth in full in this SECTION 1.02. ARTICLE 2. GUARANTEE. 2.01 THE GUARANTEE. The Guarantor hereby unconditionally and irrevocably guarantees, as primary obligation and not merely as surety, to the Owner Lessor and its successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of Rent, including Termination Value, due to the Owner Lessor strictly in accordance with the terms of the Facility Lease and the other Operative Documents; PROVIDED, that the Guarantor's obligations hereunder shall not be subject to the limitation on claims set forth in SECTION 18.19 of the Participation Agreement, SECTION 17.2 of the Facility Lease or the provisions of the Subordination Agreement (such obligations being herein called the "GUARANTEED OBLIGATIONS"); PROVIDED, FURTHER, that the Guaranteed Obligations constituting Termination Value may be limited as set forth in Section 2.03 of this Guarantee. The Guarantor hereby further agrees that if the Facility Lessee shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any Guaranteed Obligation payable by it, the Guarantor will promptly pay the same without set-off or deduction and, without any demand or notice whatsoever, and that in the case of any 2 extension of time of payment or renewal of any Guaranteed Obligation, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. 2.02 OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantor under SECTION 2.01 are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Facility Lessee under the Facility Lease or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guarantee of or security for the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this SECTION 2.02 that the obligations of the Guarantor hereunder shall be absolute and unconditional, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantor hereunder, which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Guarantor, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of the Operative Documents or any other agreement or instrument referred to therein shall be done or omitted; or (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under the Operative Documents or any other agreement or instrument referred to therein shall be waived or any other guarantee of a Guaranteed Obligation or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with. Without limiting the generality of the foregoing, the Guarantor shall have no right to terminate this Guarantee, or to be released, relieved or discharged from its 3 obligations hereunder, and such obligations shall be neither affected nor diminished for any reason whatsoever, including: (i) any amendment or supplement to or modification of any of the Operative Documents, any extension or renewal of the Facility Lessee's obligations under any Operative Document, or any subletting, assignment or transfer of the Facility Lessee's or the Owner Lessor's interest in the Operative Documents; (ii) any bankruptcy, insolvency, readjustment, composition, liquidation or any other change in the legal status of the Facility Lessee or any rejection or modification of the Guaranteed Obligations as a result of any bankruptcy, reorganization, insolvency or similar proceeding; (iii) any furnishing or acceptance of additional security or any exchange, substitution, surrender or release of any security; (iv) any waiver, consent or other action or inaction or any exercise or nonexercise of any right, remedy or power with respect to the Guaranteed Obligations or any of the Operative Documents; (v) the unenforceability, lack of genuineness or invalidity of the Guaranteed Obligations or any part thereof or the unenforceability, lack of genuineness or invalidity of any agreement relating thereto; (vi) (A) any merger or consolidation of the Facility Lessee or the Guarantor into or with any other Person, (B) any change in the structure of the Facility Lessee, (C) any change in the ownership of the Facility Lessee or the Guarantor or (D) any sale, lease or transfer of any or all of the assets of the Facility Lessee or the Guarantor to any other Person; (vii) any default, misrepresentation, negligence, misconduct or other action or inaction of any kind by the Owner Lessor under or in connection with any Operative Document or any other agreement relating to this Guarantee, except to the extent that any such default, misrepresentation, negligence, misconduct or other action or inaction would limit the Guaranteed Obligations; 4 (viii) the subordination of any Guaranteed Obligation (or any portion thereof) pursuant to Subordination Agreement or the exercise of any right by any of the holders of any Senior Claims (as defined in the Subordination Agreement) including any release, discharge, compromise or settlement of any Guaranteed Obligation (or any portion thereof); or (ix) any other act, occurrence or circumstance whatsoever (except the complete payment and performance of the Guaranteed Obligations), including, without limitation, any act or omission of the Facility Lessee or the Owner Lessor which changes the scope of the Guarantor's risk. The Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Owner Lessor or any other Person exhaust any right, power or remedy or proceed against the Facility Lessee under the Facility Lease, the other Operative Documents or any other agreement or instrument referred to therein, or against any other Person under any other guarantee of, or security for, the Guaranteed Obligations. 2.03 GUARANTEED TV AMOUNT. If, during the period starting on the date hereof and until the sixteenth anniversary of the Closing Date, upon a Lease Event of Default, the Owner Lessor or the Lease Indenture Trustee, as the case may be, exercises the remedies set forth in Sections 17.1(b), (c) and (d) of the Facility Lease without first providing to the Facility Lessee and the Guarantor a written demand for payment contemplated by Section 17.1(e) of the Facility Lease (unless the Owner Lessor or the Lease Indenture Trustee, as the case may be, is stayed or otherwise prevented by operation of law from issuing such demand, in which event such written demand shall be deemed to have been issued), then the obligations of the Guarantor under this Guarantee with respect to payment of Termination Value shall be limited to the amount set forth on Schedule 1 hereto applicable at such time. 2.04 REINSTATEMENT. The obligations of the Guarantor under this Article 2 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Facility Lessee in respect of any of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of a Guaranteed Obligation, whether as a result of any proceedings in bankruptcy or reorganization or 5 otherwise, and the Guarantor agrees that it will indemnify the Owner Lessor on demand for all reasonable costs and expenses (including fees of counsel) incurred by the Owner Lessor in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 2.05 SUBROGATION. The Guarantor shall be subrogated to any and all rights of the holders of the Guaranteed Obligations against the Facility Lessee in respect of any amounts paid to the holders of the Guaranteed Obligations in respect of any amounts paid by the Guarantor under this Guarantee; PROVIDED, HOWEVER, that following the occurrence of a Specified Event under and as defined in the EME Powerton (T1) Pledge Agreement the Guarantor shall not be entitled to enforce or to exercise any rights that it may acquire (or has theretofore acquired) by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of performance by it of its guarantee in SECTION 2.01 until such time as the Secured Obligations as defined in the EME Powerton (T1) Pledge Agreement have been fully and indefeasibly paid in full. 2.06 REMEDIES. The Guarantor agrees that, as between the Guarantor, on the one hand and the Facility Lessee and the Owner Lessor, on the other hand, the obligations of the Facility Lessee under the Facility Lease may be declared to be forthwith due and payable as provided in SECTION 17 of the Facility Lease (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section) for purposes of SECTION 2.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Facility Lessee and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by Facility Lessee) shall forthwith become due and payable by the Guarantor for purposes of SECTION 2.01. 2.07 INSTRUMENT FOR THE PAYMENT OF MONEY. The Guarantor hereby acknowledges that the guarantee in this Article 2 constitutes an instrument for the payment of money, and consents and agrees that the Owner Lessor, at its sole option, in the event of a dispute by the Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. 6 2.08 CONTINUING GUARANTEE. This Guarantee is a continuing guarantee, and shall apply to all of the Guaranteed Obligations whenever arising. 2.09 PREPAYMENT UNDER INTERCOMPANY NOTE. The Guarantor covenants that it will not elect to prepay the principal amount of the EME Note, in whole or in part, prior to its stated maturity and it will not modify or amend or permit the modification or amendment of, the EME Note without the prior written consent of the Owner Lessor and the Owner Participant, which shall not be unreasonably withheld. ARTICLE 3. ASSIGNMENT, ETC. 3.01 PAYMENTS UNDER ASSIGNMENT. The Owner Lessor hereby irrevocably directs (it being understood and agreed that such direction shall be deemed to have been revoked after the Lien created under the Lease Indenture shall have been fully discharged in accordance with its terms) the Guarantor, and the Guarantor agrees, to make all payments pursuant to, and in the manner set forth in, SECTION 2.01 hereof to the Lease Indenture Trustee's Account or such other place as the Lease Indenture Trustee may notify the Guarantor in writing pursuant to the Participation Agreement. The Guarantor hereby acknowledges assignment of this Guarantee by the Owner Lessor to the Lease Indenture Trustee for the benefit of the holders of the Lessor Notes. The Guarantor agrees that the Lease Indenture Trustee (acting for the benefit of the holders of the Lessor Notes) and any assignee thereof shall have the full right and power to enforce directly against the Guarantor any and all obligations of the Guarantor under this Guarantee and otherwise exercise all remedies hereunder and to make any and all requests required or permitted to be made by the Owner Trustee under this Guarantee. ARTICLE 4. MISCELLANEOUS. 4.01 NO WAIVER. No failure on the part of the Owner Lessor or the Guarantor to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege hereunder shall operate as a waiver thereof, and no single or partial exercise by the Owner Lessor or the Guarantor of any right, power or privilege hereunder shall preclude any other or further exercise thereof or 7 the exercise of any other right, power or privilege. The remedies provided herein are cumulative and are not exclusive of any remedies provided by applicable law. 4.02 NOTICES. All notices, requests and other communications provided for herein (including, without limitation, any modifications of, or waivers under, this Guarantee) shall be given or made in writing (including, without limitation, by telecopy) delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof, or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Guarantee, all such communications shall be deemed to have been duly given (a) when received by certified mail or by an international courier, such as Federal Express, by such Person, at said address of such Person or (b) when transmitted by facsimile to the number specified below and the receipt confirmed telephonically by recipient, PROVIDED that such facsimile is promptly followed by a copy of such notice delivered to such Person by postage-prepaid certified mail, or by an international courier, such as Federal Express. 4.03 EXPENSES. The Guarantor agrees to pay to the Owner Lessor all reasonable out-of-pocket expenses (including reasonable expenses for legal services of every kind) of, or incident to, the enforcement of any of the provisions of this Guarantee, and for the defending or asserting of rights and claims of the Owner Lessor in respect thereof, by litigation or otherwise. 4.04 WAIVERS; ETC. The terms of this Guarantee may be waived, altered or amended only by an instrument in writing duly executed by the Owner Lessor and the Guarantor. Any such amendment or waiver shall be binding upon the Owner Lessor, the Facility Lessee and the Guarantor. 4.05 SUCCESSORS AND ASSIGNS. This Guarantee shall be binding upon and inure to the benefit of the respective successors and assigns of each of the Owner Lessor and the Guarantor. 4.06 COUNTERPARTS; INTEGRATION: EFFECTIVENESS. This Guarantee may be executed in any number of counterparts, all of which when taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Guarantee by signing any such counterpart. This Guarantee constitutes the entire agreement and understanding among the parties hereto and supersedes any and all 8 prior agreements and understandings, written or oral, relating to the subject matter hereof. 4.07 SEVERABILITY. If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by applicable law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the parties hereto as nearly as may be possible and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. 4.08 HEADINGS. Headings appearing herein are used solely for convenience of reference and are not intended to affect the interpretation of any provision of this Guarantee. 4.09 SPECIAL EXCULPATION. NO CLAIM MAY BE MADE BY ANY PARTY HERETO OR ANY OTHER PERSON AGAINST THE OTHER PARTY HERETO, THE OWNER LESSOR (OR ANY PERSON FOR WHOSE BENEFIT THE OWNER LESSOR ACTS) OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATING TO THIS GUARANTEE OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH AND EACH PARTY HERETO HEREBY WAIVES, RELEASES AND AGREES, FOR ITSELF AND THOSE WHO CLAIM THROUGH IT, NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. 4.10 WAIVER OF JURY TRIAL. EACH OF THE OWNER LESSOR (FOR ITSELF AND ON BEHALF OF EACH PERSON WHO CLAIMS THROUGH THE OWNER LESSOR) AND THE GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING 9 TO THIS GUARANTEE OR THE TRANSACTIONS CONTEMPLATED HEREBY. 4.11 NO THIRD PARTY BENEFICIARIES. THE AGREEMENTS OF THE PARTIES HERETO ARE SOLELY FOR THE BENEFIT OF THE OWNER LESSOR (AND EACH PERSON WHO CLAIMS THROUGH THE OWNER LESSOR), AND NO PERSON (OTHER THAN THE PARTIES HERETO AND THEIR SUCCESSORS AND ASSIGNS PERMITTED HEREUNDER) SHALL HAVE ANY RIGHTS HEREUNDER. 4.12 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Guarantee shall be governed by, and construed in accordance with, the law of the State of New York. The Guarantor hereby submits to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York and of the Supreme Court of the State of New York sitting in New York County (including its Appellate Division) and of any other appellate court in the State of New York for the purposes of all legal proceedings arising out of or relating to this Guarantee or the transactions contemplated hereby. The Guarantor hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 4.13 LIMITATIONS OF LIABILITY OF TRUSTEE. It is expressly understood and agreed by the parties hereto that this Guarantee is executed by Wilmington Trust Company, not individually or personally, but solely as Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Trustee, that each and all of the representations, undertakings and agreements herein made on the part of the Trustee or the Owner Lessor are intended not as personal representations, undertakings and agreements by Wilmington Trust Company, or for the purpose or with the intention of binding Wilmington Trust Company, personally, but are made and intended for the purpose of binding only the Trust Estate, that nothing herein contained shall be construed as creating any liability of Wilmington Trust Company, or any incorporator or any past, present or future subscriber to the capital stock of, or stockholder, officer or director of Wilmington Trust Company, to perform any covenant either express or implied contained herein or in the other Operative Documents to which the Trustee or the Owner Lessor is a party, and that so far as Wilmington Trust Company is concerned, any Person shall 10 look solely to the Trust Estate for the performance of any obligation hereunder or thereunder or under any of the instruments referred to herein or therein; PROVIDED, that nothing contained in this SECTION shall be construed to limit in scope or substance any general corporate liability of Wilmington Trust Company as expressly provided in the Trust Agreement or in the Participation Agreement. 11 IN WITNESS WHEREOF, the parties hereto have caused this Guarantee to be duly executed and delivered as of the day and year first above written. EDISON MISSION ENERGY, as Guarantor By: /s/ John P. Finneran, Jr. -------------------------------------- Name: John P. Finneran, Jr. Title: Vice President Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: Telecopier No.: POWERTON TRUST I, as Owner Lessor BY WILMINGTON TRUST COMPANY, not in its individual capacity but solely as trustee for Powerton Trust I By: /s/ James P. Lawler -------------------------------------- Name: James P. Lawler Title: Vice President Address for Notices: c/o Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Attention: Corporate Trust Administration Telecopier No.: (302) 651-8882 Schedule 1 to the Powerton EME Guarantee GUARANTEED TV AMOUNT EX-4.9-1 16 a2031364zex-4_91.txt EXHIBIT 4.9.1 Exhibit 4.9.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 4.9 - ------------------------------------------------------------------------- Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Powerton Trust II, as Owner Lessor. EX-4.10 17 a2031364zex-4_10.txt EXHIBIT 4.10 Exhibit 4.10 EXECUTION COPY - -------------------------------------------------------------------------------- GUARANTEE DATED AS OF AUGUST 17, 2000 IN FAVOR OF JOLIET TRUST I MADE BY EDISON MISSION ENERGY, AS GUARANTOR - -------------------------------------------------------------------------------- GUARANTEE, dated as of August 17, 2000, (this "GUARANTEE") made by EDISON MISSION ENERGY, a California corporation (the "GUARANTOR") in favor of JOLIET TRUST I, a Delaware business trust and lessor under the Facility Lease referred to below (the "OWNER LESSOR"). W I T N E S S E T H WHEREAS, the Owner Lessor and Midwest Generation, LLC, a Delaware limited liability company and lessee under the Facility Lease referred to below (the "FACILITY LESSEE") are party to the Facility Lease (as from time to time amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "FACILITY LEASE") dated as of August 17, 2000 providing for the lease by the Owner Lessor to the Facility Lessee of an undivided interest as tenant-in-common in the Facility. This Guarantee guarantees the obligations of the Facility Lessee to pay Rent, including Termination Value, owed to the Owner Lessor under the Facility Lease and the other Operative Documents; and WHEREAS, the Owner Lessor, Joliet Generation I, LLC, Wilmington Trust Company, as the Owner Trustee, the Facility Lessee, the Guarantor, United States Trust Company of New York, as the Lease Indenture Trustee (as such term is defined therein), United States Trust Company of New York, as the Pass Through Trustees (as such term is defined therein) are party to the Participation Agreement (T1) (as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time, the "PARTICIPATION AGREEMENT") dated as of August 17, 2000 which establishes certain rights and obligations of the parties to the leveraged lease financing of the Joliet Station pursuant to the Facility Lease and the other Operative Documents; and WHEREAS, in connection with the Facility Lease, the Owner Lessor and the Lease Indenture Trustee have entered into the Indenture of Trust, Mortgage, and Security Agreement (as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time, the "LEASE INDENTURE"), dated as of August 17, 2000 providing for the issuance by the Owner Lessor of the notes (the "LESSOR NOTES"). WHEREAS, the Owner Lessor has granted to the Lease Indenture Trustee for the benefit of the holders of the Lessor Notes a security interest in the JOLIET EME GUARANTEE (T1) Trust Estate (as defined in the Lease Indenture and including, without limitation, a collateral assignment of the Facility Lease and this Guarantee), other than Excepted Payments (as defined in the Participation Agreement), as security for the Lessor Notes and certain other obligations. NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby covenant and agree as follows: ARTICLE 1. DEFINITIONS. 1.01 DEFINED TERMS. Each capitalized term used herein (including in the preamble and recitals hereto) and not otherwise defined herein shall have the definition assigned to that term in Appendix A to the Participation Agreement. 1.02 INTERPRETATION. The rules of interpretation set forth in Appendix A to the Participation Agreement shall apply MUTATIS MUTANDIS to this Guarantee as if set forth in full in this SECTION 1.02. ARTICLE 2. GUARANTEE. 2.01 THE GUARANTEE. The Guarantor hereby unconditionally and irrevocably guarantees, as primary obligation and not merely as surety, to the Owner Lessor and its successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of Rent, including Termination Value, due to the Owner Lessor strictly in accordance with the terms of the Facility Lease and the other Operative Documents; PROVIDED, that the Guarantor's obligations hereunder shall not be subject to the limitation on claims set forth in SECTION 18.19 of the Participation Agreement, SECTION 17.2 of the Facility Lease or the provisions of the Subordination Agreement (such obligations being herein called the "GUARANTEED OBLIGATIONS"); PROVIDED, FURTHER, that the Guaranteed Obligations constituting Termination Value may be limited as set forth in Section 2.03 of this Guarantee. The Guarantor hereby further agrees that if the Facility Lessee shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any Guaranteed Obligation payable by it, the Guarantor will promptly pay the same without set-off or deduction and, without any demand or notice whatsoever, and that in the case of any 2 extension of time of payment or renewal of any Guaranteed Obligation, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. 2.02 OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantor under SECTION 2.01 are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Facility Lessee under the Facility Lease or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guarantee of or security for the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this SECTION 2.02 that the obligations of the Guarantor hereunder shall be absolute and unconditional, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantor hereunder, which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Guarantor, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of the Operative Documents or any other agreement or instrument referred to therein shall be done or omitted; or (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under the Operative Documents or any other agreement or instrument referred to therein shall be waived or any other guarantee of a Guaranteed Obligation or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with. Without limiting the generality of the foregoing, the Guarantor shall have no right to terminate this Guarantee, or to be released, relieved or discharged from its 3 obligations hereunder, and such obligations shall be neither affected nor diminished for any reason whatsoever, including: (i) any amendment or supplement to or modification of any of the Operative Documents, any extension or renewal of the Facility Lessee's obligations under any Operative Document, or any subletting, assignment or transfer of the Facility Lessee's or the Owner Lessor's interest in the Operative Documents; (ii) any bankruptcy, insolvency, readjustment, composition, liquidation or any other change in the legal status of the Facility Lessee or any rejection or modification of the Guaranteed Obligations as a result of any bankruptcy, reorganization, insolvency or similar proceeding; (iii) any furnishing or acceptance of additional security or any exchange, substitution, surrender or release of any security; (iv) any waiver, consent or other action or inaction or any exercise or nonexercise of any right, remedy or power with respect to the Guaranteed Obligations or any of the Operative Documents; (v) the unenforceability, lack of genuineness or invalidity of the Guaranteed Obligations or any part thereof or the unenforceability, lack of genuineness or invalidity of any agreement relating thereto; (vi) (A) any merger or consolidation of the Facility Lessee or the Guarantor into or with any other Person, (B) any change in the structure of the Facility Lessee, (C) any change in the ownership of the Facility Lessee or the Guarantor or (D) any sale, lease or transfer of any or all of the assets of the Facility Lessee or the Guarantor to any other Person; (vii) any default, misrepresentation, negligence, misconduct or other action or inaction of any kind by the Owner Lessor under or in connection with any Operative Document or any other agreement relating to this Guarantee, except to the extent that any such default, misrepresentation, negligence, misconduct or other action or inaction would limit the Guaranteed Obligations; 4 (viii) the subordination of any Guaranteed Obligation (or any portion thereof) pursuant to Subordination Agreement or the exercise of any right by any of the holders of any Senior Claims (as defined in the Subordination Agreement) including any release, discharge, compromise or settlement of any Guaranteed Obligation (or any portion thereof); or (ix) any other act, occurrence or circumstance whatsoever (except the complete payment and performance of the Guaranteed Obligations), including, without limitation, any act or omission of the Facility Lessee or the Owner Lessor which changes the scope of the Guarantor's risk. The Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Owner Lessor or any other Person exhaust any right, power or remedy or proceed against the Facility Lessee under the Facility Lease, the other Operative Documents or any other agreement or instrument referred to therein, or against any other Person under any other guarantee of, or security for, the Guaranteed Obligations. 2.03 GUARANTEED TV AMOUNT. If, during the period starting on the date hereof and until the sixteenth anniversary of the Closing Date, upon a Lease Event of Default, the Owner Lessor or the Lease Indenture Trustee, as the case may be, exercises the remedies set forth in Sections 17.1(b), (c) and (d) of the Facility Lease without first providing to the Facility Lessee and the Guarantor a written demand for payment contemplated by Section 17.1(e) of the Facility Lease (unless the Owner Lessor or the Lease Indenture Trustee, as the case may be, is stayed or otherwise prevented by operation of law from issuing such demand, in which event such written demand shall be deemed to have been issued), then the obligations of the Guarantor under this Guarantee with respect to payment of Termination Value shall be limited to the amount set forth on Schedule 1 hereto applicable at such time. 2.04 REINSTATEMENT. The obligations of the Guarantor under this Article 2 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Facility Lessee in respect of any of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of a Guaranteed Obligation, whether as a result of any proceedings in bankruptcy or reorganization or 5 otherwise, and the Guarantor agrees that it will indemnify the Owner Lessor on demand for all reasonable costs and expenses (including fees of counsel) incurred by the Owner Lessor in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 2.05 SUBROGATION. The Guarantor shall be subrogated to any and all rights of the holders of the Guaranteed Obligations against the Facility Lessee in respect of any amounts paid to the holders of the Guaranteed Obligations in respect of any amounts paid by the Guarantor under this Guarantee; PROVIDED, HOWEVER, that following the occurrence of a Specified Event under and as defined in the EME Joliet (TI) Pledge Agreement the Guarantor shall not be entitled to enforce or to exercise any rights that it may acquire (or has theretofore acquired) by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of performance by it of its guarantee in SECTION 2.01 until such time as the Secured Obligations as defined in the EME Joliet (T1) Pledge Agreement have been fully and indefeasibly paid in full. 2.06 REMEDIES. The Guarantor agrees that, as between the Guarantor, on the one hand and the Facility Lessee and the Owner Lessor, on the other hand, the obligations of the Facility Lessee under the Facility Lease may be declared to be forthwith due and payable as provided in SECTION 17 of the Facility Lease (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section) for purposes of SECTION 2.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Facility Lessee and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by Facility Lessee) shall forthwith become due and payable by the Guarantor for purposes of SECTION 2.01. 2.07 INSTRUMENT FOR THE PAYMENT OF MONEY. The Guarantor hereby acknowledges that the guarantee in this Article 2 constitutes an instrument for the payment of money, and consents and agrees that the Owner Lessor, at its sole option, in the event of a dispute by the Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. 6 2.08 CONTINUING GUARANTEE. This Guarantee is a continuing guarantee, and shall apply to all of the Guaranteed Obligations whenever arising. 2.09 PREPAYMENT UNDER INTERCOMPANY NOTE. The Guarantor covenants that it will not elect to prepay the principal amount of the EME Note, in whole or in part, prior to its stated maturity and it will not modify or amend or permit the modification or amendment of, the EME Note without the prior written consent of the Owner Lessor and the Owner Participant, which shall not be unreasonably withheld. ARTICLE 3. ASSIGNMENT, ETC. 3.01 PAYMENTS UNDER ASSIGNMENT. The Owner Lessor hereby irrevocably directs (it being understood and agreed that such direction shall be deemed to have been revoked after the Lien created under the Lease Indenture shall have been fully discharged in accordance with its terms) the Guarantor, and the Guarantor agrees, to make all payments pursuant to, and in the manner set forth in, SECTION 2.01 hereof to the Lease Indenture Trustee's Account or such other place as the Lease Indenture Trustee may notify the Guarantor in writing pursuant to the Participation Agreement. The Guarantor hereby acknowledges assignment of this Guarantee by the Owner Lessor to the Lease Indenture Trustee for the benefit of the holders of the Lessor Notes. The Guarantor agrees that the Lease Indenture Trustee (acting for the benefit of the holders of the Lessor Notes) and any assignee thereof shall have the full right and power to enforce directly against the Guarantor any and all obligations of the Guarantor under this Guarantee and otherwise exercise all remedies hereunder and to make any and all requests required or permitted to be made by the Owner Trustee under this Guarantee. ARTICLE 4. MISCELLANEOUS. 4.01 NO WAIVER. No failure on the part of the Owner Lessor or the Guarantor to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege hereunder shall operate as a waiver thereof, and no single or partial exercise by the Owner Lessor or the Guarantor of any right, power or privilege hereunder shall preclude any other or further exercise thereof or 7 the exercise of any other right, power or privilege. The remedies provided herein are cumulative and are not exclusive of any remedies provided by applicable law. 4.02 NOTICES. All notices, requests and other communications provided for herein (including, without limitation, any modifications of, or waivers under, this Guarantee) shall be given or made in writing (including, without limitation, by telecopy) delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof, or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Guarantee, all such communications shall be deemed to have been duly given (a) when received by certified mail or by an international courier, such as Federal Express, by such Person, at said address of such Person or (b) when transmitted by facsimile to the number specified below and the receipt confirmed telephonically by recipient, PROVIDED that such facsimile is promptly followed by a copy of such notice delivered to such Person by postage-prepaid certified mail, or by an international courier, such as Federal Express. 4.03 EXPENSES. The Guarantor agrees to pay to the Owner Lessor all reasonable out-of-pocket expenses (including reasonable expenses for legal services of every kind) of, or incident to, the enforcement of any of the provisions of this Guarantee, and for the defending or asserting of rights and claims of the Owner Lessor in respect thereof, by litigation or otherwise. 4.04 WAIVERS; ETC. The terms of this Guarantee may be waived, altered or amended only by an instrument in writing duly executed by the Owner Lessor and the Guarantor. Any such amendment or waiver shall be binding upon the Owner Lessor, the Facility Lessee and the Guarantor. 4.05 SUCCESSORS AND ASSIGNS. This Guarantee shall be binding upon and inure to the benefit of the respective successors and assigns of each of the Owner Lessor and the Guarantor. 4.06 COUNTERPARTS; INTEGRATION: EFFECTIVENESS. This Guarantee may be executed in any number of counterparts, all of which when taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Guarantee by signing any such counterpart. This Guarantee constitutes the entire agreement and understanding among the parties hereto and supersedes any and all 8 prior agreements and understandings, written or oral, relating to the subject matter hereof. 4.07 SEVERABILITY. If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by applicable law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the parties hereto as nearly as may be possible and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. 4.08 HEADINGS. Headings appearing herein are used solely for convenience of reference and are not intended to affect the interpretation of any provision of this Guarantee. 4.09 SPECIAL EXCULPATION. NO CLAIM MAY BE MADE BY ANY PARTY HERETO OR ANY OTHER PERSON AGAINST THE OTHER PARTY HERETO, THE OWNER LESSOR (OR ANY PERSON FOR WHOSE BENEFIT THE OWNER LESSOR ACTS) OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATING TO THIS GUARANTEE OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH AND EACH PARTY HERETO HEREBY WAIVES, RELEASES AND AGREES, FOR ITSELF AND THOSE WHO CLAIM THROUGH IT, NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. 4.10 WAIVER OF JURY TRIAL. EACH OF THE OWNER LESSOR (FOR ITSELF AND ON BEHALF OF EACH PERSON WHO CLAIMS THROUGH THE OWNER LESSOR) AND THE GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING 9 TO THIS GUARANTEE OR THE TRANSACTIONS CONTEMPLATED HEREBY. 4.11 NO THIRD PARTY BENEFICIARIES. THE AGREEMENTS OF THE PARTIES HERETO ARE SOLELY FOR THE BENEFIT OF THE OWNER LESSOR (AND EACH PERSON WHO CLAIMS THROUGH THE OWNER LESSOR), AND NO PERSON (OTHER THAN THE PARTIES HERETO AND THEIR SUCCESSORS AND ASSIGNS PERMITTED HEREUNDER) SHALL HAVE ANY RIGHTS HEREUNDER. 4.12 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Guarantee shall be governed by, and construed in accordance with, the law of the State of New York. The Guarantor hereby submits to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York and of the Supreme Court of the State of New York sitting in New York County (including its Appellate Division) and of any other appellate court in the State of New York for the purposes of all legal proceedings arising out of or relating to this Guarantee or the transactions contemplated hereby. The Guarantor hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 4.13 LIMITATIONS OF LIABILITY OF TRUSTEE. It is expressly understood and agreed by the parties hereto that this Guarantee is executed by Wilmington Trust Company, not individually or personally, but solely as Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Trustee, that each and all of the representations, undertakings and agreements herein made on the part of the Trustee or the Owner Lessor are intended not as personal representations, undertakings and agreements by Wilmington Trust Company, or for the purpose or with the intention of binding Wilmington Trust Company, personally, but are made and intended for the purpose of binding only the Trust Estate, that nothing herein contained shall be construed as creating any liability of Wilmington Trust Company, or any incorporator or any past, present or future subscriber to the capital stock of, or stockholder, officer or director of Wilmington Trust Company, to perform any covenant either express or implied contained herein or in the other Operative Documents to which the Trustee or the Owner Lessor is a party, and that so far as Wilmington Trust Company is concerned, any Person shall 10 look solely to the Trust Estate for the performance of any obligation hereunder or thereunder or under any of the instruments referred to herein or therein; PROVIDED, that nothing contained in this SECTION shall be construed to limit in scope or substance any general corporate liability of Wilmington Trust Company as expressly provided in the Trust Agreement or in the Participation Agreement. 11 IN WITNESS WHEREOF, the parties hereto have caused this Guarantee to be duly executed and delivered as of the day and year first above written. EDISON MISSION ENERGY, as Guarantor By: /s/ John P. Finneran, Jr. ---------------------------------- Name: John P. Finneran, Jr. Title: Vice President Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: Telecopier No.: JOLIET TRUST I, as Owner Lessor BY WILMINGTON TRUST COMPANY, not in its individual capacity but solely as trustee for Joliet Trust I By: /s/ James P. Lawler ---------------------------------- Name: James P. Lawler Title: Vice President Address for Notices: c/o Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Attention: Corporate Trust Administration Telecopier No.: (302) 651-8882 Schedule 1 to the Joliet EME Guarantee GUARANTEED TV AMOUNT EX-4.10-1 18 a2031364zex-4_101.txt EXHIBIT 4.10.1 Exhibit 4.10.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT TO EXHIBIT 4.10 - ----------------------------------------------------------------------- Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Joliet Trust II, as Owner Lessor. EX-4.11 19 a2031364zex-4_11.txt EXHIBIT 4.11 Exhibit 4.11 $1,147,000,000 MIDWEST GENERATION PASS THROUGH TRUSTS Pass Through Certificates, Series A and Series B REGISTRATION RIGHTS AGREEMENT August 17, 2000 CREDIT SUISSE FIRST BOSTON CORPORATION LEHMAN BROTHERS INC. as representatives of the several Purchasers c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 c/o Lehman Brothers Inc. Three World Financial Center New York, NY 10285 Dear Sirs: Edison Mission Energy, a California corporation ("EME"), and its wholly-owned subsidiary Midwest Generation, LLC, a Delaware limited liability company (the "COMPANY" and together with EME, the "REGISTRANTS"), propose, subject to the terms and conditions stated in a purchase agreement dated August 17, 2000 (the "PURCHASE AGREEMENT"), that United States Trust Company of New York, acting not in its individual capacity but solely as trustee (in its individual capacity as such trustee, the "PASS THROUGH TRUSTEE") under each of the Pass Through Trust Agreements (the "PASS THROUGH TRUST AGREEMENTS") dated as of August 17, 2000 among the Company and the Pass Through Trustee, will issue and sell to Credit Suisse First Boston Corporation ("CSFB"), Lehman Brothers Inc. ("LEHMAN"), Chase Securities Inc. ("CSI"), Salomon Smith Barney Inc. ("SSB") and SG Cowen Securities Corp. ("COWEN" and together with CSFB, Lehman, CSI and SSB, the several "PURCHASERS") Midwest Generation Pass Through Certificates, Series A in the aggregate amount of $333,500,000 and Midwest Generation Pass Through Certificates, Series B in the aggregate amount of $813,500,000 (such Pass Through Certificates are herein referred to as the "INITIAL SECURITIES"). Capitalized terms used herein but not defined herein shall have the respective meanings specified in the Purchase Agreement whether expressly set forth therein or by reference to another agreement. SECTION 1. DEFINITIONS. The definitions set forth in this Agreement shall equally apply to both the singular and plural forms of the terms defined. As used in this Agreement, the following terms shall have the following meanings: "ADVICE" shall have the meaning set forth in the last paragraph of Section 5 of this Agreement. "AFFILIATE", with respect to any Person, shall mean any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such first Person. The term "control" means the possession, directly or indirectly of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or by contract or otherwise. For purposes of Section 2, an "Affiliate" of the Company or EME shall mean and include, in addition, any Person deemed an affiliate thereof under the Securities Act or the Exchange Act in connection with the Exchange Offer. "CLOSING DATE" shall have the meaning set forth in the Purchase Agreement. "COMMISSION" shall mean the United States Securities and Exchange Commission. "COMPANY" shall have the meaning set forth in the first paragraph of this Agreement. "CURE DATE" shall have the meaning set forth in Section 4(a) of this Agreement. "EFFECTIVE DATE" shall mean the date which is 270 days after the Closing Date. "EFFECTIVE PERIOD" shall have the meaning set forth in Section 3(a) of this Agreement. "EME" shall have the meaning set forth in the first paragraph of this Agreement. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "EXCHANGE OFFER" shall have the meaning set forth in Section 2(a) of this Agreement. "EXCHANGE OFFER REGISTRATION STATEMENT" shall have the meaning set forth in Section 2(a) of this Agreement. "EXCHANGE PERIOD" shall have the meaning set forth in Section 2(a) of this Agreement. 2 "EXCHANGE SECURITIES" shall have the meaning set forth in Section 2(a) of this Agreement. A "HOLDER" of Registrable Securities shall mean the registered holder of such securities or any beneficial owner thereof. "HOLDER INDEMNIFIED PARTY" shall have the meaning set forth in Section 8(a) of this Agreement. "HOLDER INFORMATION" shall have the meaning set forth in Section 8(a) of this Agreement. "ILLIQUIDITY EVENT" with respect to the Initial Securities shall mean any of the following events: (a) as of the Effective Date, both (i) an Exchange Offer Registration Statement (which, if applicable pursuant to Section 2(a), covers resales of such Exchange Securities) has not become effective and (ii) the Registrable Securities are not the subject of an Initial Shelf Registration Statement which has become effective; or (b) the Exchange Securities offered in exchange for the Registrable Securities are the subject of an Exchange Offer Registration Statement which was effective (and which, if applicable pursuant to Section 2(a), covered resales of such Exchange Securities) but which ceased to be effective for any reason prior to the end of the Exchange Period; or (c) the Registrable Securities are the subject of an Initial Shelf Registration Statement or Subsequent Shelf Registration Statement which was effective but which has ceased to be effective for any reason prior to the end of the Effective Period. An Illiquidity Event shall be deemed to cease to exist on the date subsequent to the occurrence of such Illiquidity Event on which: (i) in the case of an Illiquidity Event described in clause (a) above, either (i) an Exchange Offer Registration Statement (which, if applicable pursuant to Section 2(a), covers resales of the Exchange Securities exchanged for such Registrable Securities) shall become effective and an Exchange Offer for such Registrable Securities shall have commenced or (ii) an Initial Shelf Registration Statement covering such Registrable Securities shall become effective; or (ii) in the case of an Illiquidity Event described in clause (b) above, either (i) an Exchange Offer Registration Statement (which, if applicable pursuant to Section 2(a) covers resales of the Exchange Securities offered in exchange for such Initial Securities) shall become effective and an Exchange Offer for such Registrable Securities shall have commenced pursuant to an Exchange Offer Registration Statement or 3 (ii) an Initial Shelf Registration Statement covering such Registrable Securities shall become effective; or (iii) in the case of an Illiquidity Event described in clause (c) above, a Subsequent Shelf Registration Statement covering such Registrable Securities shall become effective. "INITIAL SECURITIES" shall have the meaning set forth in the first paragraph of this Agreement. "INITIAL SHELF REGISTRATION STATEMENT" shall have the meaning set forth in Section 3(a) of this Agreement. "INSPECTORS" shall have the meaning set forth in Section 5(m) of this Agreement. "MANAGING UNDERWRITERS" shall mean the investment banker or investment bankers and manager or managers that shall administer an Underwritten Offering. "NASD" shall mean the National Association of Securities Dealers, Inc. "PASS THROUGH TRUST AGREEMENTS" shall have the meaning set forth in the first paragraph of this Agreement. "PASS THROUGH TRUSTEE" shall have the meaning set forth in the first paragraph of this Agreement, including its successors and any successor trustee under the Pass Through Trust Agreements. "PROSPECTUS" shall mean the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the prospectus included in any Registration Statement, including post-effective amendments and all material incorporated by reference into such prospectus. "PURCHASE AGREEMENT" shall have the meaning set forth in the first paragraph of this Agreement. "PURCHASERS" shall have the meaning set forth in the first paragraph of this Agreement. "RECORDS" shall have the meaning set forth in Section 5(m) of this Agreement. "REGISTRABLE SECURITIES" shall mean the Initial Securities upon original issuance thereof and at all times subsequent thereto until, in the case of any such Initial Security, (i) a Registration Statement covering such Initial Security, or the Exchange 4 Security to be exchanged for such Initial Security (and, in the case of any Resale Security, any resale thereof), has been declared effective and such Initial Security has been disposed of or exchanged (or, in any case where such Registration Statement covers the resale of Resale Securities, such Initial Security has been exchanged and the Resale Security received therefor has been resold), as the case may be, in accordance with such effective Registration Statement, (ii) such Initial Security is sold in compliance with Rule 144 or would be permitted to be sold pursuant to Rule 144(k), (iii) such Initial Security shall have been otherwise transferred and a new certificate therefor not bearing a legend restricting further transfer shall have been delivered by or on behalf of the Registrants and such Initial Security shall be tradeable by each holder thereof without restriction under the Securities Act or the Exchange Act and without material restriction under the applicable blue sky or state securities laws or (iv) such Initial Security ceases to be outstanding. "REGISTRANTS" shall have the meaning set forth in the first paragraph of this Agreement. "REGISTRATION STATEMENT" shall mean any registration statement (including any Shelf Registration Statement) of the Company or EME that covers any of the Registrable Securities or the Exchange Securities, as the case may be, pursuant to the provisions of this Agreement, including the Prospectus which is part of such Registration Statement, amendments (including post-effective amendments) and supplements to such Registration Statement and all exhibits and appendices to any of the foregoing. For purposes of the foregoing, unless the context requires otherwise, a Registration Statement for an Exchange Offer shall not be deemed to cover Registrable Securities held by a Restricted Person unless such Registration Statement covers the resale of Resale Securities to be received by such Restricted Person pursuant to such Exchange Offer and any such Initial Securities shall continue to be Registrable Securities. "RESALE PURCHASER" shall have the meaning set forth in Section 8(a) of this Agreement. "RESALE SECURITIES" shall mean any Exchange Security received by a Restricted Person pursuant to an Exchange Offer, and at all times subsequent thereto, until, subject to the time periods set forth herein, such Exchange Security has been resold by such Restricted Person. "RESTRICTED PERSON" shall mean (a) any Affiliate of the Company or EME, (b) any Purchaser or (c) any Affiliate or any Purchaser (other than Affiliates of such Purchaser that (i) is acquiring Exchange Securities in the ordinary course of business and do not have an arrangement with any Person to distribute Exchange Securities and (ii) may trade such Exchange Securities without restriction under the Securities Act). "RULE 144" shall mean Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. 5 "RULE 144A" shall mean Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "RULE 415" shall mean Rule 415 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "SHELF NOTICE" shall have the meaning set forth in Section 2(b) of this Agreement. "SHELF REGISTRATION STATEMENT" shall have the meaning set forth in Section 3(b) of this Agreement. "SPECIAL COUNSEL" shall mean Milbank, Tweed, Hadley & McCloy LLP, special counsel to the Purchasers, or any other firm acceptable to the Registrants, acting as special counsel to the holders of Registrable Securities or Exchange Securities. "SUBSEQUENT SHELF REGISTRATION STATEMENT" shall have the meaning set forth in Section 3(b) of this Agreement. "TIA" shall mean the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission promulgated thereunder. "UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall mean a registration in which securities are sold to an underwriter or group of underwriters for reoffering to the public. SECTION 2. EXCHANGE OFFER. (a) Unless the Registrants determine in good faith that the Exchange Offer shall not be permissible under applicable law or Commission policy, the Registrants shall prepare and cause to be filed with the Commission as soon as reasonably practicable after the Closing Date, subject to Sections 2(b) and 2(c) of this Agreement, a Registration Statement (an "EXCHANGE OFFER REGISTRATION STATEMENT") for an offer to exchange (an "EXCHANGE OFFER") the Registrable Securities (subject to Section 2(c)) for (x) an EME Guarantee which is registered under the Securities Act and (y) a like aggregate principal amount of pass-through certificates otherwise in all material respects substantially identical to the Initial Securities (the "EXCHANGE SECURITIES") (and which, in the case of the pass-through certificates, are entitled to the benefits of the Pass Through Trust Agreements, which shall be qualified under the TIA in connection with such registration, or agreements which are substantially identical in all material respects to the Pass Through Trust Agreements), other than (i) such changes to the Pass Through Trust Agreements or any substantially identical agreements as the Pass Through Trustee and the Registrants may deem necessary in connection with the Pass Through Trustee's 6 rights and duties or to comply with any requirements of the Commission to effect or maintain the qualification thereof under the TIA and (ii) such changes relating to restrictions on transfer set forth in the Pass Through Trust Agreements. The Exchange Offer shall be registered under the Securities Act on the appropriate form of Registration Statement and shall comply with all applicable tender offer rules and regulations under the Exchange Act and with all other applicable laws. Subject to the terms and limitations of Section 2(c), such Exchange Offer Registration Statement may also cover any resales of Exchange Securities by any Restricted Person, in the manner or manners designated by them which, in any event, is reasonably acceptable to the Registrants. The Registrants shall use their reasonable best efforts to (i) cause the Exchange Offer Registration Statement to become effective under the Securities Act on or prior to the Effective Date, (ii) keep the Exchange Offer open for a period of not less than the shorter of (A) the period ending when the last remaining Initial Security is tendered into the Exchange Offer and (B) 30 days from the date notice is mailed to the holders of the Initial Securities (PROVIDED that in no event shall such period be less than the period required under applicable Federal and state securities laws), and (iii) maintain such Exchange Offer Registration Statement continuously effective for a period (the "EXCHANGE PERIOD") of not less than the longer of (A) the period until the consummation of the Exchange Offer and (B) 120 days after effectiveness of the Exchange Offer Registration Statement; PROVIDED, HOWEVER, that in the event that all resales of Exchange Securities (including, subject to the time periods set forth herein, any Resale Securities and including, subject to the time periods set forth herein, any resales by broker-dealers that receive Exchange Securities for their own account pursuant to the Exchange Offer) covered by such Exchange Offer Registration Statement have been made, the Exchange Offer Registration Statement need not remain continuously effective for the period set forth in clause (B) above. Upon consummation of the Exchange Offer, the Registrants shall deliver to the Pass Through Trustee under the Pass Through Trust Agreements for cancellation all Initial Securities tendered by the holders thereof pursuant to the Exchange Offer and not withdrawn prior to the date of consummation of the Exchange Offer. Each Restricted Person shall notify the Registrants promptly after re-selling all Resale Securities held by such Restricted Person which are covered by any such Registration Statement. Each holder of Registrable Securities to be exchanged in the Exchange Offer (other than any Restricted Person) shall be required as a condition to participating in the Exchange Offer to represent that (i) it is not an Affiliate of the Company or EME, (ii) any Exchange Securities to be received by it shall be acquired in the ordinary course of its business and (iii) that at the time of the consummation of the Exchange Offer it shall have no arrangement with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities. Upon consummation of an Exchange Offer in accordance with this Section 2 and compliance with the other provisions of this Section 2, the Registrants shall, subject to Sections 2(b) and 2(c), have no further obligation to register Registrable Securities pursuant to Section 3(a) of this Agreement; PROVIDED that the other provisions of this Agreement shall continue to apply as set forth in such provisions. 7 (b) In the event that the Registrants reasonably determine in good faith that (i) the Exchange Securities would not, upon receipt in the Exchange Offer by any holder of Registrable Securities (other than any Restricted Person and other than any holder who is not acquiring such Exchange Securities in the ordinary course of business or who has an arrangement with any person to participate in the distribution of such Exchange Securities), be tradeable by each holder thereof without restriction under the Securities Act and the Exchange Act and without restriction under applicable blue sky or state securities laws, (ii) after conferring with counsel, the Commission is unlikely to permit the Exchange Offer Registration Statement to become effective prior to the Effective Date (except in the circumstances set forth in Section 2(c)) or (iii) the Exchange Offer may not be made in compliance with applicable laws, then the Registrants shall promptly deliver notice thereof (the "SHELF NOTICE") to the holders of the Registrable Securities and the Pass Through Trustee and shall thereafter file an Initial Shelf Registration Statement pursuant to, and otherwise comply with, the provisions of Section 3(a). Following the delivery of a Shelf Notice in accordance with this Section 2(b) and compliance with Section 3(a), the Registrants shall not have any further obligation under this Section 2. (c) In the event that the Registrants reasonably determine in good faith that (i) the Exchange Securities would not, upon consummation of any resale thereof by a Restricted Person to any Person other than another Restricted Person, be tradeable by each holder thereof without restriction under the Securities Act (other than applicable requirements) and the Exchange Act and without restriction under applicable blue sky or state securities laws or (ii) the Commission is unlikely to permit the Exchange Offer Registration Statement to become effective prior to the Effective Date solely because such Registration Statement covers resales of the Exchange Securities by Restricted Persons, then the Registrants shall promptly deliver a Shelf Notice to the Restricted Persons who are holders of Registrable Securities and to the Pass Through Trustee, and the Registrants shall thereafter file an Initial Shelf Registration Statement with respect to any such Registrable Securities pursuant to, and otherwise comply with, the provisions of Section 3(a); PROVIDED that such Initial Shelf Registration Statement shall only cover resales of Registrable Securities by Restricted Persons if a Shelf Notice is not then otherwise required to be delivered pursuant to Section 2(b); and, PROVIDED, FURTHER, that such Initial Shelf Registration Statement covering Registrable Securities held by Restricted Persons shall be kept effective for at least a period of 120 days and is not required to remain effective with respect to Registrable Securities held by Restricted Persons thereafter. Following the delivery of a Shelf Notice in accordance with this Section 2(c) and compliance with Section 3(a), the Registrants shall not have any further obligation under this Section 2 with respect to the filing of an offer to exchange the Registrable Securities held by the Restricted Persons (including, without limitation, any obligation to provide that an Exchange Offer Registration Statement filed pursuant to Section 2(a) cover resales of Exchange Securities by Restricted Persons); PROVIDED that the provisions of this Section 2 shall otherwise remain in full force and effect with respect to Registrable Securities held by any person other than a Restricted Person. SECTION 3. SHELF REGISTRATION; REGISTRABLE SECURITIES. With respect to the Registrable Securities, if a Shelf Notice is delivered in accordance with Section 2(b) 8 or 2(c) of this Agreement, then the Registrants shall comply with the following provisions of this Section 3: (a) INITIAL SHELF REGISTRATION. The Registrants shall prepare and cause to be filed with the Commission a Registration Statement for an offering to be made on a continuous basis other than pursuant to an Underwritten Offer pursuant to Rule 415 covering all of the Registrable Securities (or, if a Shelf Notice is delivered solely pursuant to Section 2(c), all of the Registrable Securities held by any Restricted Persons) (the "INITIAL SHELF REGISTRATION STATEMENT"); PROVIDED, HOWEVER, that no holder shall be entitled to have its Registrable Securities covered by such Initial Shelf Registration Statement unless such holder agrees in writing, within 10 Business Days after actual receipt of a request therefrom, to be bound by all the provisions of this Agreement applicable to such holder. No holder shall be entitled to the benefits of Section 4 of this Agreement unless and until such holder shall have provided all information reasonably requested by the Registrants (after conferring with counsel), and such holder shall not be entitled to such benefits with respect to any period during which such information was not provided. Each holder to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Registrants all information required to be disclosed in order to make the information previously furnished to the Registrants by such holder not materially misleading. The Initial Shelf Registration Statement shall be an appropriate form permitting registration of such Registrable Securities for such resale by the holders thereof in the manner or manners reasonably designated by them (but excluding any Underwritten Offerings). The Registrants shall use their reasonable best efforts to (A) cause the Initial Shelf Registration Statement to be declared effective under the Securities Act on or prior to the Effective Date and (B) keep the Initial Shelf Registration Statement continuously effective under the Securities Act for a period of two years after the Closing Date (subject to extension pursuant to the last paragraph of Section 5 and subject, with respect to Registrable Securities held by Restricted Persons, to the limitations set forth in Section 2(c)) (such two-year period, as it may be extended, being the "EFFECTIVE PERIOD"), or such shorter period ending when (1) all Registrable Securities covered by the Initial Shelf Registration Statement have been sold or (2) a Subsequent Shelf Registration Statement covering all of such Registrable Securities remaining unsold has been declared effective under the Securities Act or (3) all Registrable Securities may be sold pursuant to subsection (k) of Rule 144. Notwithstanding any other provision hereof, the Registrants may postpone or suspend the filing or the effectiveness of a Registration Statement (or any amendments or supplements thereto), if (1) such action is required by applicable law, or (2) such action is taken by the Registrants in good faith and for valid business reasons (not including avoidance of such party's obligations hereunder), including the acquisition or divestiture of assets, other pending corporate developments, public filings with the Commission or other similar events, so long as the Registrants promptly thereafter comply with the requirements of Section 5(b) hereof, if applicable. Notwithstanding the occurrence of any event referred to in the immediately preceding sentence (a "SUSPENSION"), such event shall not suspend, postpone or in any other manner affect the running of the time period after which an Illiquidity Event shall be deemed to occur and, if the filing or effectiveness of a Registration Statement is postponed or suspended 9 as a result of a Suspension, an Illiquidity Event shall nonetheless exist if all other requirements set forth for the occurrence of an Illiquidity Event shall be satisfied, and the provisions of Section 4 requiring the accrual payment of additional interest, as set forth in such Section, on the Registrable Securities, shall be applicable. (b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effective Period after the Effective Date, the Registrants may attempt to obtain the withdrawal of any order suspending the effectiveness thereof, and may amend such Initial Shelf Registration Statement or Subsequent Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement applicable to the Initial Securities pursuant to Rule 415 covering all of such Registrable Securities remaining unsold (a "SUBSEQUENT SHELF REGISTRATION Statement"). If a Subsequent Shelf Registration Statement is declared effective, the Registrants shall use their reasonable best efforts to keep such Shelf Registration Statement continuously effective for a period after the date of such effectiveness equal in length to the length of the Effective Period plus the aggregate number of days from the date of the order suspending the effectiveness of the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement. As used herein, the term "Shelf Registration Statement" means the Initial Shelf Registration Statement and any Subsequent Shelf Registration Statement. SECTION 4. ADDITIONAL INTEREST FOR ILLIQUIDITY. (a) The Registrants acknowledge and agree that the Purchasers (and any subsequent holders of the Initial Securities) have acquired the Initial Securities in reliance on the covenant of the Registrants to use their reasonable best efforts to (i) cause to become effective on or prior to the Effective Date (A) the Exchange Offer Registration Statement or (B) an Initial Shelf Registration Statement, and (ii) maintain the respective effectiveness of such Registration Statements as described herein. The Registrants further acknowledge and agree that the failure of the Registrants to fulfill such covenants will have an adverse effect on the holders of the Initial Securities. Therefore, the Registrants agree that from and after the date on which any Illiquidity Event occurs, additional interest (in addition to the interest otherwise payable with respect to the Registrable Securities) shall accrue with respect to the Initial Securities until but not including the date on which such Illiquidity Event shall cease to exist (and provided no other Illiquidity Event with respect to any Initial Securities shall then be continuing), at the rate of one half of one percent (0.50%) per annum, which additional interest shall be payable to the holders of all Initial Securities at the times, in the manner and subject to the same terms and conditions set forth in the Pass Through Trust Agreements, as nearly as may be, as though the interest rates provided in such Initial Securities had been increased by one half of one percent (0.50%) per annum. Subject to the provisions of this Section 4, the Registrants agree that the holders of all Initial Securities shall be entitled to the payment of any and all additional interest on the Initial Securities that shall accrue pursuant to this Section 4. 10 Any such additional interest accrued on any such Initial Securities but unpaid on the date on which such interest ceases to accrue (the "CURE DATE") shall be due and payable on the first interest payment date following the next record date following such Cure Date (or the record date occurring on such Cure Day, if such Cure Date is a record date) to the holders of record of such Initial Securities on such record date. (b) The Registrants shall promptly notify the holders of the Initial Securities and the Pass Through Trustee of the occurrence of any Illiquidity Event of which they have knowledge. Notwithstanding the foregoing, no holder shall be entitled to receive the additional interest described in clause (a) of this Section 4 with respect to the Registrable Securities held by such holder if the applicable Illiquidity Event arises by reason of the failure of such holder to provide such information as (i) the Registrants may reasonably request, with reasonable prior written notice, for use in the Shelf Registration Statement or any Prospectus included therein to the extent the Registrants reasonably determine that such information is required to be included therein by applicable law, (ii) the NASD or the Commission may request in connection with such Shelf Registration Statement, or (iii) is required to comply with the agreements of such holder contained in clause (a) of Section 3 to the extent compliance thereof is necessary for the Shelf Registration Statement to be declared effective. SECTION 5. REGISTRATION PROCEDURES. In connection with the registration of any Registrable Securities or Exchange Securities pursuant to Sections 2 and 3 hereof, the Registrants shall use their reasonable best efforts to effect such registration to permit the sale of such Registrable Securities or Exchange Securities in accordance with any permitted intended method or methods of disposition thereof, and pursuant thereto the Registrants shall: (a) prepare and cause to be filed with the Commission a Registration Statement or Registration Statements as prescribed by Sections 2 and 3 of this Agreement, and use their reasonable best efforts to cause each such Registration Statement to become effective and remain effective for the applicable period as provided herein; PROVIDED, HOWEVER, that (i) during the period in which the Initial Registration Statement is open for the Restricted Persons, the Registrants shall afford any Restricted Person which is a holder of Registrable Securities or Exchange Securities and the Special Counsel, upon such holder's written request to the Registrants, an opportunity to review copies of all such documents proposed to be filed, and (ii) if such filing is pursuant to Section 3, before filing any Registration Statement or Prospectus or any amendments or supplements thereto (including documents that would be incorporated therein by reference after the initial filing of the Registration Statement), the Registrants shall afford the Special Counsel for all holders of the Registrable Securities covered by such Registration Statement an opportunity to review copies of all such documents proposed to be filed; (b) prepare and cause to be filed with the Commission such amendments and post-effective amendments to each Shelf Registration Statement as may 11 be necessary to keep such Registration Statement continuously effective for the applicable period as provided herein; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations of the Commission promulgated thereunder with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented in accordance with the intended methods of disposition by the sellers of Registrable Securities covered thereby set forth therein; (c) if a Shelf Registration Statement is filed pursuant to Section 3 hereof, notify the selling holders of Registrable Securities promptly after the Registrants become aware thereof, and confirm such notice in writing, (i) where a Prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or Prospectus or the initiation of any proceedings for that purpose, (iv) of the receipt by the Registrants of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Securities for offer or sale in any jurisdiction, or the initiation of any proceeding for such purpose, (v) of the existence of any fact known to the Registrants which results in such Registration Statement or related Prospectus or any document incorporated therein by reference containing any untrue statement of a material fact or omitting to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (which notice may be accompanied by an instruction that such notice constitutes material non-public information and to suspend the use of the prospectus until the requisite changes have been made, and which instruction shall require that such holders shall not communicate such material non-public information to any third party and shall not sell or purchase, or offer to sell or purchase, any securities of the Registrants after receipt of such notice) and (vi) if the Registrants reasonably determine that the filing of a post-effective amendment to such Registration Statement would be appropriate; (d) if a Shelf Registration Statement is filed pursuant to Section 3, use their reasonable efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment; (e) if a Shelf Registration Statement is filed pursuant to Section 3, furnish to each selling holder of Registrable Securities who so requests (at such holder's address set forth in the Securities Register) without charge, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment 12 thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (f) if a Shelf Registration Statement is filed pursuant to Section 3, deliver to each selling holder of Registrable Securities without charge, as many copies of the Prospectus (including each preliminary prospectus) and each amendment or supplement thereto as such persons may reasonably request, and subject to the last paragraph of this Section 5, the Registrants hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of Registrable Securities covered by such Prospectus and any amendment or supplement thereto; (g) prior to any public offering of Registrable Securities, register or qualify, or cooperate with the selling holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions within the United States as the selling holders reasonably request in writing (PROVIDED that if Registrable Securities are offered other than through an Underwritten Offering, the Registrants agree to cause their counsel to perform blue sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(g)); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective; and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdiction of the Registrable Securities covered by the applicable Registration Statement; PROVIDED, HOWEVER, that neither Registrant will be required to qualify as a foreign corporation or limited liability company, or to do business, to file a general consent or take any action which would subject it to service of process in any jurisdiction or take any action which would subject itself to taxation in any such jurisdiction; (h) if a Shelf Registration Statement is filed pursuant to Section 3, cooperate with the Pass Through Trustee and the selling holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company, and enable such Registrable Securities to be in such authorized denominations and Registered in such names as the holders may reasonably request at least three Business Days prior to any such sale; (i) if a Shelf Registration Statement is filed pursuant to Section 3, upon the occurrence of any event contemplated by Section 5(c), prepare a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under 13 which they were made, not misleading. If the Registrants so notify the holders to suspend the use of the Prospectus after the occurrence of such an event, the holders shall suspend use of the Prospectus, and not communicate such material non-public information to any third party, and not sell or purchase, or offer to sell or purchase, any securities of the Registrants, until the Registrants have amended or supplemented the Prospectus to correct such misstatement or omission; (j) use their reasonable best efforts to cause the Registrable Securities covered by the Registration Statement to continue to be rated by the rating agencies that initially rated the Initial Securities during the period that the Registration Statement is required hereunder to remain effective (it being acknowledged, however, that the foregoing shall not be deemed to require the Registrants to maintain the rating of such Registrable Securities at the rating given the Initial Securities); (k) prior to the effective date of the first Registration Statement relating to the Registrable Securities or the Exchange Securities, as the case may be, (i) provide the Pass Through Trustee with printed certificates for such securities in definitive form or in a global form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for such Registrable Securities or Exchange Securities represented by such certificates; (l) if a Shelf Registration Statement is filed pursuant to Section 3, enter into such reasonably required agreements and take all other appropriate actions in order to expedite or facilitate the registration or the disposition of such Registrable Securities; (m) in the event of any Underwritten Offering (which shall only be undertaken at the option of the Registrants), if a Shelf Registration Statement is filed pursuant to Section 3, make available prior to the filing thereof for inspection by a representative of the holders of a majority in aggregate principal amount of the Registrable Securities being sold, and the Special Counsel, on the one hand, or underwriter on the other hand (collectively, the "INSPECTORS"), during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Registrants (collectively, the "RECORDS"), and cause the officers, directors and employees of the Registrants to supply all relevant information as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities; PROVIDED, HOWEVER, that as a condition to supplying such information, the Registrants shall receive an agreement in writing from the Special Counsel agreeing that any information that is designated in writing by the Registrants, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such inspector (other than as to holders of Registrable Securities) and by any holders of Registrable Securities receiving such information, unless (i) disclosure of such information is required pursuant to applicable law or by court or administrative order, (ii) disclosure of such information is, in the reasonable opinion of counsel to the Registrants, necessary to avoid or correct a misstatement or omission of a material fact in the Registration Statement, Prospectus or any supplement or post-effective amendment thereto or disclosure is otherwise required by law, (iii) such information becomes generally available to the public other than as a 14 result of a disclosure by any inspector or any such holder of Registrable Securities in violation of this Section 5(m) or (iv) such information is approved for release by the Registrants, in writing; (n) use their best efforts to cause the Pass Through Trust Agreements or the trust indenture provided for in Section 2, as the case may be, to be qualified under the TIA not later than the effective date of such Registration Statement; and, in connection therewith, cooperate with the Pass Through Trustee under the Pass Through Trust Agreements and the holders of the Registrable Securities to effect such changes to the Pass Through Trust Agreements as may be required for the Pass Through Trust Agreements to be so qualified in accordance with the terms of the TIA and execute, and use their best efforts to cause such Pass Through Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable the Pass Through Trust Agreements or the trust indenture provided for in Section 2 to be so qualified in a timely manner; (o) otherwise use their reasonable best efforts to comply with all applicable rules and regulations of the Commission. For purposes of the covenants set forth in this Section 5, references to a Shelf Registration Statement, including a Shelf Registration Statement filed pursuant to Section 3, shall be deemed to include any Registration Statement, filed pursuant to Section 2, which covers, for the period set forth therein, resales of Exchange Securities held by Restricted Persons as provided in Section 2, and, in connection with such Restricted Persons shall be entitled to exercise all rights, receive all notices and copies of documents, and otherwise receive all benefits afforded to sellers or holders of Registrable Securities under this Section 5 in connection with a Shelf Registration Statement. Without limiting the generality of the foregoing, the Registrants agree to fulfill their obligations set forth in Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (l) and (m) with respect to any such Registration Statement filed pursuant to Section 2 insofar as it covers such resales. The Registrants may require each seller of Registrable Securities as to which any registration is being effected, as a condition thereto, to furnish to the Registrants such information regarding the holder and the distribution of such Registrable Securities as the Registrants may, from time to time, request in writing, including without limitation stating that (i) it is not an Affiliate of either Registrant, (ii) the amount of Registrable Securities held by such holder prior to the Exchange Officer, (iii) the amount of Registrable Securities owned by such holder to be exchanged in the Exchange Offer and representing that such holder is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Exchange Securities to be issued, and (iv) it is acquiring the Exchange Securities in its ordinary course of business and to covenant and agree to promptly notify the Registrants if any such information so provided by such seller ceases to be true and correct and will promptly thereafter furnish the Registrants with corrected information. The Registrants may exclude from such registration the Registrable Securities of any 15 Person who fails to furnish such information within a reasonable time after receiving such request. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Registrants of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(v) or 5(c)(vi) hereof, such holder shall forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such holder is advised in writing (the "ADVICE") by the Registrants that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto and, if so directed by the Registrants, such holder will deliver to the Registrants (at such holder's expense) all copies in its possession, other than permanent file copies then in such holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice, or certify in writing as to the destruction thereof. In the event the Registrants shall give any such notice, the length of the Effective Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(i) or (y) the Advice. SECTION 6. DELIVERY OF PROSPECTUS; NOTIFICATION UPON RESALE. The Purchasers acknowledge that it is the position of the staff of the Commission that any broker-dealer that receives Exchange Securities for its own account in exchange for Registrable Securities pursuant to the Exchange Offer must deliver a prospectus in connection with any resale of such Resale Securities. By so acknowledging, such Purchasers shall not be deemed to admit that, by delivering a prospectus, it is an underwriter within the meaning of the Securities Act. Each Purchaser shall notify the Registrants promptly upon the completion of the resale of the Resale Securities received by such Purchaser pursuant to the Exchange Offer. SECTION 7. REGISTRATION EXPENSES. EME shall bear all expenses incurred in connection with the performance of the Registrants' obligations under Sections 2, 3 and 4; PROVIDED, HOWEVER, that EME shall bear or reimburse the holders for the reasonable fees and disbursements of only one counsel, the Special Counsel, in accordance with the terms of the Purchase Agreement; PROVIDED FURTHER, HOWEVER, that if the Registrants opt for an Underwritten Offering, the Registrants shall not be responsible for any fees and expenses of any Underwritten Offering, the Registrants shall not be responsible for any fees and expenses of any underwriter, including any underwriting discounts and commissions or any legal fees and expenses of counsel to the underwriters (except for the reasonable fees and disbursements of counsel in connection with state securities or blue sky qualification of any of the Registrable Securities or the Exchange Securities). 16 SECTION 8. INDEMNIFICATION AND CONTRIBUTION. (a) EME agrees to (A) indemnify and hold harmless each holder of Registrable Securities (including any Purchaser which holds Registrable Securities, including Resale Securities, for its own account (each, a "RESALE PURCHASER")) and each Person, if any, who controls any such Person within the meaning of either the Securities Act or the Exchange Act and each director, officer, employee or agent of each such Person (each, a "HOLDER INDEMNIFIED PARTY") against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them are subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement covering Registrable Securities held by such person or any Prospectus relating to any such Registration Statement, or any amendment thereof or supplement thereto and all documents incorporated by reference therein, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, and (B) reimburse each such Holder Indemnified Party for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; PROVIDED, HOWEVER, that EME will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement or Prospectus, or in any amendment thereof or supplement thereto, in reliance upon and in conformity with written information relating to such holder provided by such holder to the Registrants specifically for use therein (collectively, the "HOLDER INFORMATION"); PROVIDED FURTHER, HOWEVER, that the indemnity obligations arising out of this Section 8 with respect to any untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary Prospectus shall not inure to the benefit of any holder or any controlling Person of such holder, to the extent that a prospectus relating to such Registrable Securities or the Exchange Securities, as the case may be, was required to be delivered by such holder under the Securities Act in connection with such sale and any such loss, claim, damage or liability of such holder results from the fact that such holder failed to send or deliver to the Person asserting any such losses a copy of the final Prospectus with or prior to the delivery of the written confirmation of the sale of the Registrable Securities or the Exchange Securities, as the case may be, and such final Prospectus would have cured the untrue statement or omission giving rise to such losses if the Registrants had previously furnished copies thereof to such holder. This indemnity agreement will be in addition to any liability which the Registrants may otherwise have. (b) As a condition to the inclusion of a holder's Registrable Securities in a Registration Statement, such holder shall agree to (i) indemnify and hold harmless the Registrants and each person who controls either Registrant within the meaning of either the Securities Act or the Exchange Act, and each director, officer, employee or agent of each such person, against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them are subject under the Securities Act, the 17 Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a Registration Statement covering Registrable Securities held by such holder or any Prospectus relating to any such Registration Statement or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading and (ii) reimburse each such indemnified party for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; in each and every case under clause (i) and (ii) above to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement or Prospectus or in any amendment thereof or supplement thereto, in reliance upon and in conformity with the Holder Information. This indemnity agreement will be in addition to any liability which any such holder may otherwise have. In no event shall the liability of any selling holder of Registrable Securities hereunder be greater in amount than the dollar amount of the proceeds (net of payment of all expenses) received by such holder upon the sale (or, in the case of Resale Securities, the resale) of the Registrable Securities giving rise to such indemnification obligation. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof (enclosing a copy of all papers served); but the omission to so notify the indemnifying party (i) shall not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such omission results in the forfeiture by the indemnifying party or material impairment of substantial rights and defenses and (ii) shall not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligations provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party. After notice from the indemnifying party to such indemnified party of its election to so assume the defense of such claim or action, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than costs of investigation; provided that if (i) the defendants in any such action include both the indemnified party and the indemnifying party, and the indemnified party shall have received an opinion of counsel reasonably acceptable to the indemnifying party that representation of both parties by the same counsel would be inappropriate due to actual or likely conflicts of interest between them, or (ii) the indemnifying party shall not have employed counsel for the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action, then the indemnified party or parties shall have the right to 18 select one firm of separate counsel (in addition to the fees and expenses of local counsel) to assert any separate legal defenses and to otherwise defend such action on behalf of such indemnified party or parties. No indemnifying party shall be liable for any settlement of any action or claim for monetary damages which an indemnified party may effect without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification provided for in Section 8(a) or (b) hereof is for any reason, other than as specified in such provisions, unavailable to or insufficient to hold harmless an indemnified party, then such indemnifying party shall contribute to the aggregate losses, claims, damages or liabilities (or actions in respect thereof) referred to in Section 8(a) or (b) hereof in such proportion as is appropriate to reflect the relative fault and benefits to the Registrants on the one hand and such holders on the other hand in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the Registrants and such holders shall be determined by reference to, among other things, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent any untrue statement or omission. The obligations of the holders in this Section 8(d) are several in proportion to their respective obligations hereunder and not joint. Notwithstanding the provisions of this Section 8(d), in no event shall any holder of Registrable Securities be required to contribute any amount which is in excess of (i) the aggregate principal amount of Initial Securities sold or exchanged by such holder less (ii) the amount of any damages that such person has otherwise been required to pay be reason of such alleged untrue statement or omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each Holder Indemnified Party shall have the same rights to contribution as a holder, and each person who controls either Registrant within the meaning of either the Securities Act or the Exchange Act and each officer, director, employee and agent of such person, shall have the same rights to contribution as the Registrants, subject in each case to the applicable terms and conditions of this Section 8(d). Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 8(d), notify such party or parties from whom contribution may be sought; but the omission to so notify such party or parties (x) shall not relieve the party or parties from whom contribution may be sought from any liability under this paragraph (d) unless and to the extent it did not otherwise learn of such action and such omission results in the forfeiture by the party or parties from whom contribution may be sought or material impairment of substantial rights and defenses and (y) shall not, in any event, relieve such party or parties from any obligations other than under this Section 8(d). (e) The provisions of this Section 8 will remain in full force and effect, regardless of any investigation made by or on behalf of any holder of Registrable Securities, the Purchasers, the Registrants or any of the officers, directors or controlling 19 persons referred to in this Section 8 and will survive the sale (or, in the case of Resale Securities, the resale) by a holder of Registrable Securities of such Registrable Securities. SECTION 9. UNDERWRITTEN REGISTRATIONS (IF ANY). No holder may participate in any Underwritten Registration, which Underwritten Registration shall only be undertaken at the option of the Registrants, unless such holder (a) agrees to sell such holder's Initial Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. SECTION 10. TERMINATION. In the event that no Initial Securities are sold to the Purchasers pursuant to the Purchase Agreement, this Agreement shall automatically terminate, without liability on the part of any party. Upon the fulfillment of all obligations on the part of the Registrants to register the Initial Securities as set forth herein (including maintaining the effectiveness of any applicable Registration Statements), this Agreement shall terminate; PROVIDED that the provisions of Sections 7 and 8 hereof shall survive any termination and remain in full force and effect. SECTION 11. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. The Registrants neither have, as of the date hereof, entered into, nor shall, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the holders of Registrable Securities herein or otherwise conflicts with the provisions hereof. (b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Registrants have obtained the written consent of holders of at least a majority of the then outstanding aggregate principal amount of the Registrable Securities (or, after the consummation of any Exchange Offer in accordance with Section 2, of Exchange Securities); PROVIDED that with respect to any matter that directly or indirectly affects the rights of any Restricted Person hereunder occurring within the period in which the Initial Registration Statement is open for the Restricted Persons, the Registrants shall obtain the written consent of each such Restricted Person against which such amendment, modification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except for the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of holders of Registrable Securities whose securities are being sold or exchanged pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by holders of at least a majority in aggregate principal amount of the Registrable Securities being sold or exchanged by such holders pursuant to such Registration Statement; PROVIDED, HOWEVER, that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. Notwithstanding the 20 foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Resale Purchasers and that does not directly or indirectly affect the rights of holders of Registrable Securities or Exchange Securities may be given by each of the Resale Purchasers affected thereby. (c) NOTICES. All notices and other communications (including, without limitation, any notices or other communications to the Pass Through Trustee) provided for or permitted hereunder shall be made in writing and delivered by hand delivery, registered first-class mail, next-day air courier or telecopier: (i) if to a holder of Registrable Securities, at the most current address given by such holder to the Registrants in accordance with the provisions of this Section 11(c), which address initially is, with respect to the Purchasers, at the address set forth in the Purchase Agreement and thereafter at the address for such holders of Registrable Securities set forth in the Security Register applicable to such Registrable Securities; and (ii) if to the Registrants, initially at their respective addresses set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 11(c). All such notices and communications shall be deemed to have been duly given when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; one Business Day after being timely delivered to a next-day air courier; and when received, if telecopied. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Pass Through Trustee at the address specified in the Pass Through Trust Agreements. (d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including, without limitation and without the need for an express assignment or any consent by the Registrants thereto, subsequent holders of Registrable Securities. (e) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) GOVERNING LAW. This Agreement and the rights and duties of the parties hereunder shall be governed by, and construed in accordance with, the laws of the State of New York. Each of the parties hereto hereby submits to the non-exclusive jurisdiction of the Federal and State Courts of the Borough of Manhattan in the City of 21 New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. (h) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (i) ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement, is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, together with the Purchase Agreement, supersedes all prior agreements and understandings between the parties with respect to such subject matter. (j) SECURITIES HELD BY THE REGISTRANTS, ETC. Whenever the consent or approval of holders of a specified percentage of principal amount of Registrable Securities is required hereunder, Registrable Securities held by the Registrants or any of their Affiliates (other than subsequent holders of Registrable Securities if such subsequent holders are deemed to be Affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the holders of such required percentage. 22 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Registrants a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Purchasers and the Registrants in accordance with its terms. Very truly yours, EDISON MISSION ENERGY By: /s/ Sam Henry ------------------------------- Name: Sam Henry Title: Vice President MIDWEST GENERATION, LLC By: /s/ Debbie L. Keller ------------------------------- Name: Debbie L. Keller Title: Vice President The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION LEHMAN BROTHERS INC. acting on behalf of themselves and as representatives of the several Purchasers By: CREDIT SUISSE FIRST BOSTON CORPORATION By: /s/ Jennifer L. Powers -------------------------------------- Name: Jennifer L. Powers Title: Director By: LEHMAN BROTHERS INC. By: /s/ Joseph Sauvage -------------------------------------- Name: Joseph Sauvage Title: Managing Director 23 EX-4.12 20 a2031364zex-4_12.txt EXHIBIT 4.12 Exhibit 4.12 - -------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (T1) Dated as of August 17, 2000 among MIDWEST GENERATION, LLC POWERTON TRUST I, WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee, POWERTON GENERATION I, LLC, EDISON MISSION ENERGY, UNITED STATES TRUST COMPANY OF NEW YORK, not in its individual capacity, except as expressly provided herein, but solely as Lease Indenture Trustee, and UNITED STATES TRUST COMPANY OF NEW YORK, not in its individual capacity, except as expressly provided herein, but solely as Pass Through Trustees, POWERTON STATION FOSSIL COAL-FIRED ELECTRIC GENERATING FACILITY - --------------------------------------------------------------------------------
TABLE OF CONTENTS Page ---- SECTION I DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT.......................................................3 SECTION II PARTICIPATION; CLOSING DATE; TRANSACTION COSTS.........................................................................3 Section 2.1 Agreements to Participate.....................................................3 Section 2.2 Closing Date; Procedure for Participation.....................................5 Section 2.3 Transaction Costs.............................................................7 SECTION III REPRESENTATIONS AND WARRANTIES................................................7 Section 3.1 Representations and Warranties of Midwest.....................................7 Section 3.2 Representations and Warranties of EME........................................14 Section 3.3 Representations and Warranties of the Owner Lessor...........................18 Section 3.4 Representations and Warranties of the Owner Trustee and the Trust Company............................................................20 Section 3.5 Representations and Warranties of the Owner Participant......................22 Section 3.6 Representations and Warranties of Lease Indenture Trustee and the Lease Indenture Company..............................................24 Section 3.7 Representations and Warranties of Pass Through Trustees and the Pass Through Company.................................................26 SECTION IV CLOSING CONDITIONS...........................................................28 Section 4.1 Operative Documents..........................................................28 Section 4.2 Certificates and the Lessor Notes............................................29 Section 4.3 Purchase Agreement...........................................................29 Section 4.4 Other Documents..............................................................29 Section 4.5 Representations and Warranties...............................................29 Section 4.6 Defaults, Events of Default, Events of Loss..................................29 Section 4.7 Consents.....................................................................29 Section 4.8 Governmental Actions.........................................................30 Section 4.9 Insurance....................................................................30 Section 4.10 Engineering Report...........................................................30 Section 4.11 Appraisal; Condition of the Facility.........................................30 Section 4.12 Opinion with Respect to Certain Tax Aspects..................................30 Page ---- Section 4.13 Opinions of Counsel..........................................................31 Section 4.14 Recordings and Filings.......................................................31 Section 4.15 Taxes........................................................................31 Section 4.16 No Changes in Requirements of Law............................................31 Section 4.17 Registered Agent for Midwest and EME.........................................32 Section 4.18 FAS 13.......................................................................32 Section 4.19 Rent Adjustments.............................................................32 Section 4.20 Parent Guaranty..............................................................32 Section 4.21 Title Insurance..............................................................32 Section 4.22 EME Guarantees...............................................................32 Section 4.23 Non-consolidation Opinion....................................................32 Section 4.24 Rating of Certificates.......................................................32 Section 4.25 EME Note.....................................................................33 Section 4.26 No Material Adverse Change...................................................33 Section 4.27 Subordination Agreement and Reimbursement Agreement..........................33 Section 4.28 Survey.......................................................................33 SECTION V AFFIRMATIVE COVENANTS OF MIDWEST.............................................33 Section 5.1 Delivery of Certain Information..............................................33 Section 5.2 Financial Information........................................................34 Section 5.3 Information Concerning the Facility..........................................36 Section 5.4 Maintenance of Existence; Conduct of Business................................36 Section 5.5 Compliance with Requirements of Law and Contractual Obligations................................................................36 Section 5.6 Environmental Covenant with Respect to the Facility and the Facility Site............................................................36 Section 5.7 Further Assurances...........................................................37 Section 5.8 Access.......................................................................37 SECTION VI NEGATIVE COVENANTS OF MIDWEST................................................38 Section 6.1 Merger and Consolidation.....................................................38 Section 6.2 Changes in Legal Form or Business............................................39 SECTION VII AFFIRMATIVE COVENANTS OF EME.................................................39 Section 7.1 Financial Information, Reports, Notices......................................39 Page ---- Section 7.2 Maintenance of Corporate Existence...........................................41 Section 7.3 Further Assurances...........................................................41 Section 7.4 Taxes........................................................................41 SECTION VIII NEGATIVE COVENANTS OF EME....................................................41 Section 8.1 Liens........................................................................41 Section 8.2 Consolidation, Merger; Asset Disposition.....................................42 Section 8.3 Amendment, Waiver or Assignment of Certain Documents.........................43 SECTION IX COVENANTS OF THE TRUST COMPANY, THE OWNER TRUSTEE AND THE OWNER LESSOR...........................................43 Section 9.1 Compliance with the Trust Agreement..........................................43 Section 9.2 Owner Lessor's Liens.........................................................43 Section 9.3 Amendments to Operative Documents............................................44 Section 9.4 Transfer of the Owner Lessor's Interest......................................44 Section 9.5 Owner Lessor; Trust Estate...................................................44 Section 9.6 Limitation on Indebtedness and Actions.......................................44 Section 9.7 Change of Location...........................................................44 Section 9.8 Bankruptcy of Trust..........................................................45 Section 9.9 ComEd Consent................................................................45 SECTION X COVENANTS OF THE OWNER PARTICIPANT...........................................45 Section 10.1 Restrictions on Transfer of Beneficial Interest..............................45 Section 10.2 Owner Participant's Liens....................................................48 Section 10.3 Amendments or Revocation of Trust Agreement..................................48 Section 10.4 Prohibition on Fundamental Changes...........................................48 Section 10.5 Bankruptcy Filings...........................................................48 Section 10.6 Instructions.................................................................48 Section 10.7 Appointment of Successor Owner Trustee.......................................48 Section 10.8 Cooperation..................................................................49 SECTION XI COVENANTS OF THE LEASE INDENTURE TRUSTEE......................................................................49 Section 11.1 The Indenture Trustee's Liens................................................49 Page ---- SECTION XII EME'S INDEMNIFICATIONS.......................................................49 Section 12.1 General Indemnity............................................................49 Section 12.2 General Tax Indemnity........................................................56 SECTION XIII MIDWEST'S RIGHT OF QUIET ENJOYMENT...........................................67 SECTION XIV SUPPLEMENTAL FINANCING OF IMPROVEMENTS; OPTIONAL REFINANCINGS........................................................67 Section 14.1 Financing Improvements.......................................................67 Section 14.2 Optional Refinancing of Lessor Notes.........................................70 Section 14.3 Cooperation..................................................................73 SECTION XV PRE-CLOSING ADJUSTMENTS TO BASIC LEASE RENT AND TERMINATION VALUE...................................................73 SECTION XVI RIGHT OF FIRST REFUSAL; RIGHT OF FIRST OFFER........................................................................74 Section 16.1 Right of First Offer.........................................................74 Section 16.2 Right of First Refusal.......................................................75 SECTION XVII SPECIAL LESSEE TRANSFER......................................................76 SECTION XVIII MISCELLANEOUS................................................................77 Section 18.1 Consents.....................................................................77 Section 18.2 Successor Owner Lessor.......................................................77 Section 18.3 Bankruptcy of Trust Estate...................................................77 Section 18.4 Amendments and Waivers.......................................................78 Section 18.5 Notices......................................................................78 Section 18.6 Survival.....................................................................80 Section 18.7 Successors and Assigns.......................................................80 Section 18.8 Governing Law................................................................80 Section 18.9 Severability.................................................................80 Section 18.10 Counterparts.................................................................80 Section 18.11 Headings and Table of Contents...............................................81 Section 18.12 Limitation of Liability......................................................81 Page ---- Section 18.13 Consent to Jurisdiction; Waiver of Trial by Jury, Process Agent........................................................................82 Section 18.14 Further Assurances...........................................................83 Section 18.15 Effectiveness................................................................83 Section 18.16 Measuring Life...............................................................83 Section 18.17 No Partnership, Etc..........................................................84 Section 18.18 Restrictions on Transfer of Membership Interest..............................84 Section 18.19 Limitation on Claims Against Midwest; Subordination of Claims Against Midwest.......................................................86 Section 18.20 Guaranteed TV Amount.........................................................87
APPENDICES: Appendix A Definitions EXHIBITS: Exhibit A Form of Bill of Sale Exhibit B Form of Facility Deed Exhibit C Form of Facility Lease Exhibit A: Description of Facility Site Exhibit B: Description of Facility Schedule 1-1: Basic Lease Rent Schedule 1-2: Allocation of Basic Lease Rent Schedule 1-3: 467 Rent Allocation Schedule 2: Termination Values Exhibit D Form of Memorandum of the Facility Lease Exhibit A: Description of Facility Exhibit B: Description of Site Exhibit C: Form of Facility Site Lease Exhibit E Form of Facility Site Lease Exhibit F Form of Facility Site Sublease Exhibit G Form of Memorandum of the Facility Site Lease Exhibit H Form of Memorandum of the Facility Site Sublease Exhibit I Form of Lease Indenture Exhibit J Form of Lessor Notes (A&B) Exhibit K Form of Pass Through Trust Agreements (A&B) Exhibit L Form of Pass Through Certificates (A&B) Exhibit M Form of Certificate Purchase Agreement Exhibit N Form of (Amended and Restated) Trust Agreement Exhibit O Form of OP LLC Agreement Exhibit P Form of Tax Indemnity Agreement Exhibit Q Form of Purchase Agreement Exhibit R Form of EME Guarantee Exhibit S Form of EME OP Guarantee Exhibit T Form of EME Note Exhibit U Form of ComEd Consent Exhibit V [Intentionally Omitted] Exhibit W Form of Registration Rights Agreement Exhibit X Form of Operation Agreement Exhibit Y Form of Owner Participant Guaranty Exhibit Z Form of Reimbursement Agreement Exhibit AA Form of Subordination Agreement Exhibit BB [Intentionally Omitted] Exhibit CC Form of Opinion of SASM&F, special counsel to Midwest and EME Exhibit DD Form of Opinion of Sonnenschein, Nath and Rosenthal, special Illinois counsel to Midwest and EME Exhibit EE Form of Opinion of Hunton & Williams, special New York counsel to the Owner Participant and the Equity Investor Exhibit FF Form of Opinion of In-House Counsel to Midwest, EME and the Owner Participant Exhibit GG Form of Opinion of Richards, Layton & Finger, P.A., counsel to the Owner Lessor, the Trust Company, and the Owner Trustee, Exhibit HH Form of Opinion of Stadtmauer Bailkin LLP, special counsel to the Lease Indenture Trustee and the Lease Indenture Company and counsel to the Pass Through Trustees and the Pass Through Company Exhibit II [Intentionally Omitted] Exhibit JJ Form of Opinion of Van Ness Feldman, special federal regulatory to Midwest and EME Exhibit KK Form of Opinion of In-house counsel to the Owner Participant and Equity Investor Exhibit LL Form of Assignment and Assumption Agreement Exhibit MM List of Competitors SCHEDULES: Schedule 3.1(c) Midwest Governmental Approvals Part B - Non-final Approvals Part C - Threatened Approvals Schedule 3.1(y) Midwest Projections and other "forward looking" information Schedule 3.2(c) EME Governmental Approvals Part B - Non-final Approvals Part C - Threatened Approvals Schedule 3.2(o) EME Projections and other "forward looking" information Schedule 4.14 Recordings and Filings Schedule 10.1(c) Pricing Assumptions
PARTICIPATION AGREEMENT (T1) This PARTICIPATION AGREEMENT (T1), dated as of August 17, 2000 (as amended, supplemented or otherwise modified from time to time, in accordance with the provisions hereof, this "PARTICIPATION AGREEMENT" or this "AGREEMENT"), among, (i) MIDWEST GENERATION, LLC, a Delaware limited liability company as the Facility Lessee and as the Ground Lessor (herein, together with its successors and permitted assigns, called "MIDWEST"), (ii) POWERTON TRUST I, a Delaware business trust created for the benefit of Powerton Generation I, LLC, as the Facility Lessor and as the Ground Lessee (herein, together with its successors and permitted assigns, called the "OWNER LESSOR"), (iii) WILMINGTON TRUST COMPANY, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, except as expressly provided herein, but solely as trustee under the Trust Agreement (herein in its capacity as a trustee under the Trust Agreement, together with its successors and permitted assigns, called the "OWNER TRUSTEE," and herein in its individual capacity, together with its successors and permitted assigns, called the "TRUST COMPANY"), (iv) POWERTON GENERATION I, LLC, a Delaware limited liability company (herein, together with its successors and permitted assigns, called the "OWNER PARTICIPANT"), (v) EDISON MISSION ENERGY, a corporation organized under the laws of the State of California (herein, together with its successors and permitted assigns, called "EME"), (vi) UNITED STATES TRUST COMPANY OF NEW YORK, not in its individual capacity, except as expressly provided herein, but solely as trustee under the Lease Indenture (herein in its capacity as trustee under the Lease Indenture, together with its successors and permitted assigns, the "LEASE INDENTURE TRUSTEE," and herein in its individual capacity, together with its successors and permitted assigns, the "LEASE INDENTURE COMPANY"), and (vii) UNITED STATES TRUST COMPANY OF NEW YORK, not in its individual capacity, except as expressly provided herein, but solely as trustee under each of the Pass Through Trust Agreements (herein in its capacity solely as trustee under the Pass Through Trust Agreements, together with its successors and permitted assigns, the "PASS THROUGH TRUSTEES," and herein in POWERTON PARTICIPATION AGREEMENT (T1) its individual capacity, together with its successors and permitted assigns, called the "PASS THROUGH COMPANY"). WITNESSETH: WHEREAS, Midwest owns certain electric generation and related assets located in the State of Illinois, including the coal-fired electric generating facility known as Powerton Station with an aggregate capacity of approximately 1,538 MW, located in Tazewell County, Illinois; WHEREAS, Midwest desires to (i) sell to the Owner Lessor the Undivided Interest (which as described in Appendix A is an undivided ownership interest in such facility) pursuant to the Bill of Sale and the Deed, (ii) lease to the Owner Lessor the Ground Interest (which is a corresponding undivided leasehold interest in the land upon which such facility is located) and grant certain non-exclusive easements to the Owner Lessor pursuant to the Facility Site Lease, (iii) lease the Undivided Interest from the Owner Lessor pursuant to the Facility Lease and (iv) sublease the Ground Interest from the Owner Lessor pursuant to the Facility Site Sublease; WHEREAS, concurrently with the execution and delivery of this Agreement, the Equity Investor and Midwest have entered into the Purchase Agreement pursuant to which the Equity Investor will acquire from Midwest its membership interest in the Owner Participant; WHEREAS, Midwest will make an intercompany loan to EME in the aggregate amount equal to the Purchase Price (the "INTERCOMPANY LOAN") and EME will issue a note to evidence such intercompany loan (the "EME NOTE"); WHEREAS, in consideration of the Intercompany Loan, and concurrently with the execution and delivery of this Agreement, EME will issue (i) the EME Guarantee in favor of the Owner Trust that, among other things, guarantees the payment by Midwest of all Rent and (ii) the EME OP Guarantee in favor of the Owner Participant, the Equity Investor and their respective affiliates, successors, assigns, agents, members, partners, directors, officers or employees, but excluding in 2 all cases the Owner Lessor, that guarantees the payment by Midwest of all amounts owed by Midwest to the beneficiaries of the EME OP Guarantee; WHEREAS, the Owner Participant has entered into the Trust Agreement, pursuant to which the Owner Participant has authorized the Owner Lessor to, among other things and subject to the terms and conditions hereof and thereof, (i) issue the Lessor Notes and sell such Lessor Notes to the Pass Through Trusts, (ii) lease the Ground Interest from Midwest pursuant to the Facility Site Lease, (iii) lease the Undivided Interest to the Facility Lessee pursuant to the Facility Lease, (iv) sublease the Ground Interest to the Facility Lessee pursuant to the Facility Site Sublease and (v) grant to the Lease Indenture Trustee for the benefit of the Holders liens and security interests in the Indenture Estate to secure the Owner Lessor's obligations with respect to the Lessor Notes; WHEREAS, in order to provide a portion of the Purchase Price payable by the Owner Lessor in respect of its acquisition of the Undivided Interest pursuant to the Bill of Sale and Facility Deed, the Owner Participant is willing to make an investment in the Owner Trust in an amount equal to the Equity Investment, all in the manner and subject to the conditions set forth herein; WHEREAS, in order to provide the Owner Trust with the balance of the Purchase Price, the Pass Through Trusts are willing to acquire the Initial Lessor Notes for the amounts, in the manner and subject to the conditions set forth herein and in the Lease Indenture; WHEREAS, in order to provide funding to the Pass Through Trusts, the Initial Purchasers are willing to acquire the Certificates for the amounts, in the manner and subject to the conditions set forth in the Pass Through Trust Agreements; WHEREAS, the OP Guarantor will guarantee the payment and performance obligations of the Owner Participant under the Operative Documents pursuant to the Owner Participant Guaranty; and WHEREAS, the parties hereto desire to consummate the transactions contemplated hereby. 3 NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION I DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT The capitalized terms used in this Agreement, including the foregoing recitals, and not otherwise defined herein shall have the respective meanings specified in Appendix A hereto. The general provisions of Appendix A shall apply to terms used in this Agreement and specifically defined herein. SECTION II PARTICIPATION; CLOSING DATE; TRANSACTION COSTS SECTION 2.1 AGREEMENTS TO PARTICIPATE. Subject to the terms and conditions of this Agreement, and in reliance on the agreements, representations and warranties made herein, the parties agree to participate in the transactions described in this SECTION 2.1 on the Closing Date as follows: (a) The Owner Participant will provide funds in an amount sufficient to (i) fund the Equity Investment and (ii) pay the Transaction Costs which the Owner Lessor is responsible to pay pursuant to SECTION 2.3(a) hereof (collectively, the "OWNER PARTICIPANT'S COMMITMENT"); (b) The Owner Lessor will (i) issue the Initial Lessor Notes, (ii) sell the Initial Lessor Notes to the relevant Pass Through Trustee and (iii) grant to the Lease Indenture Trustee, for the benefit of the Pass Through Trustees, certain liens and security interests in the Indenture Estate to secure its obligations with respect to the Lessor Notes; (c) The Pass Through Trusts will use the Proceeds to purchase the Initial Lessor Notes from the Owner Lessor; 4 (d) The Owner Lessor will use the proceeds of the (i) Owner Participant's Commitment and (ii) sale of the Initial Lessor Notes to pay (x) the Purchase Price for the Undivided Interest to Midwest and (y) the Transaction Costs which the Owner Lessor is responsible to pay pursuant to SECTION 2.3(a) hereof; (e) Midwest will transfer the Undivided Interest to the Owner Lessor by issuing the Facility Deed and a Bill of Sale to the Owner Lessor; (f) The Owner Lessor and Midwest will enter into the Facility Lease, pursuant to which the Owner Lessor will lease the Undivided Interest to Midwest and Midwest will lease the Undivided Interest from the Owner Lessor; (g) Midwest will enter into the Facility Site Lease with the Owner Lessor, pursuant to which Midwest will lease the Ground Interest to the Owner Lessor and grant to the Owner Lessor certain non-exclusive easements and the Owner Lessor will lease the Ground Interest from Midwest; (h) The Owner Lessor and Midwest will enter into the Facility Site Sublease, pursuant to which the Owner Lessor will sublease the Ground Interest to Midwest and Midwest will sublease the Ground Interest from the Owner Lessor; (i) Midwest and the Equity Investor will enter into the Purchase Agreement, pursuant to which Midwest will sell its membership interest in the Owner Participant to the Equity Investor and the Equity Investor will purchase Midwest's membership interest in the Owner Participant from Midwest; (j) The OP Guarantor will guarantee the performance and payment obligations of the Owner Participant under the Operative Documents pursuant to the Owner Participant Guaranty; (k) The Owner Participant and EME will enter into the Tax Indemnity Agreement; (l) EME will issue (i) the EME Guarantee, (ii) the EME OP Guarantee and the Reimbursement Agreement; 5 (m) The Owner Lessor will pay all Transaction Costs which the Owner Lessor is responsible to pay pursuant to SECTION 2.3 hereof; and (n) the parties will enter into the agreements referred to above and the other Operative Documents, in each case, in substantially the form attached hereto. SECTION 2.2 CLOSING DATE; PROCEDURE FOR PARTICIPATION. (a) CLOSING DATE. The closing of the transactions contemplated hereby (the "CLOSING") shall take place after 10:00 a.m., New York City time, on the Scheduled Closing Date or such other date as the parties hereto shall mutually agree (the "CLOSING DATE"), at the offices of SASM&F, Four Times Square, New York, New York 10036. (b) PROCEDURES FOR FUNDING. Unless the Closing Date shall have been postponed pursuant to SECTION 2.2(c), subject to the terms and conditions of this Agreement, the Owner Participant shall make the Owner Participant's Commitment available not later than 10:00 a.m., New York City time, on the Scheduled Closing Date, by transferring or delivering such amount, in funds immediately available on the Scheduled Closing Date to the Trust Company. (c) POSTPONEMENT OF THE CLOSING. The Scheduled Closing Date may be postponed from time to time for any reason if EME gives the Equity Investor, the Owner Participant, the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee and the Pass Through Trustees a telex, telegraphic, facsimile or telephonic (confirmed in writing) notice of such postponement and notice of the date to which the Closing has been postponed, such notice of postponement to be received by each party no later than 10:00 a.m., New York City time, on the Business Day immediately preceding the Scheduled Closing Date. If, prior to receipt of a postponement notice under this SECTION 2.2(c), the Owner Participant shall have provided funds in accordance with SECTION 2.2(b), such funds shall be returned to the Owner Participant as soon as reasonably practicable, but in no event later than the Business Day following the Scheduled Closing Date, unless the Owner Participant shall have otherwise directed. All funds made available pursuant to SECTION 2.2(b) will be held by the Trust Company in trust for the Owner Participant and shall not be part of the 6 Indenture Estate or the Trust Estate, shall be invested by the Trust Company in accordance with clause (d) below and such funds shall remain the sole property of the Owner Participant unless and until released by the Owner Participant and made available to the Owner Trustee and applied to pay the Purchase Price or Transaction Costs or returned to the Owner Participant, as provided in this Agreement. (d) INVESTMENT OF FUNDS. If, on the Scheduled Closing Date, the Owner Participant has made the Owner Participant's Commitment available to the Trust Company in accordance with SECTION 2.2(b), the Closing does not occur on such date and the Trust Company is unable to return such funds to the Owner Participant, the Trust Company shall, subject to SECTION 2.2(c) above, use reasonable efforts to invest such funds from time to time at the written direction of EME, and at EME's sole expense and risk, in Permitted Investments until such funds can be returned to the Owner Participant. If, on the Scheduled Closing Date, the Owner Participant has made the Owner Participant's Commitment available to the Trust Company in accordance with SECTION 2.2(b), the Closing does not occur on such date and the Trust Company has not returned such funds to the Owner Participant on or before 1:00 p.m., New York City time, on such date, then EME shall reimburse the Owner Participant for loss of the use of such funds at the Applicable Rate for each day, from and including the day that such funds were made available to the Trust Company by the Owner Participant to, but excluding the earlier of (i) the day that such funds have been returned to the Owner Participant pursuant to SECTION 2.2(c) (funds received by the Owner Participant after 1:00 p.m., New York City time, of any day shall be deemed to be returned on the next succeeding Business Day) and (ii) the Closing Date. Subject to payment for the account of the Owner Participant of any reimbursement for loss of use of funds due to it at the Applicable Rate, any net gain realized on the investment of such funds (including interest) shall be paid to EME by the Trust Company on the earlier of (i) the date such funds are returned to the Owner Participant pursuant to SECTION 2.2(c) and (ii) the Closing Date. The Trust Company shall not be liable for any interest on or loss resulting from such investments and, if such funds are made available to the Owner Lessor and utilized to pay the Purchase Price or Transaction Costs on the Closing Date, EME shall reimburse the Trust Company for any net loss realized on the investment of such funds. If such funds are not so utilized, EME shall, in addition to its obligation to reimburse the Owner Participant for loss of use as provided above, reimburse the Owner Participant on the date such funds are returned to the Owner Participant for any net loss realized on the investment of such funds. In order to obtain funds for payment of the Purchase 7 Price or Transaction Costs or to return funds made available to the Owner Lessor by the Owner Participant, the Trust Company is authorized to sell any investments or obligations purchased as aforesaid. (e) EXPIRATION OF COMMITMENTS. The obligations of the parties hereto shall expire at 11:59 p.m., New York City time, on September 30, 2000. If the Closing Date has not occurred on or before September 30, 2000, the parties hereto shall have no obligation to consummate the transactions contemplated under this Agreement and, except as provided in SECTIONS 2.3, 14.1 and 14.2, all obligations of the Lease Financing Parties shall cease and terminate. SECTION 2.3 TRANSACTION COSTS AND OVERDUE RATE. (a) If the transactions contemplated by this Agreement are consummated, all Transaction Costs not to exceed the Maximum Transaction Costs, which shall be substantiated by an appropriate invoice or otherwise supported in reasonable detail, shall be paid by the Owner Lessor with the funds provided by the Owner Participant pursuant to SECTION 2.2(b) above. EME shall be responsible for Transaction Costs in excess of the Maximum Transaction Costs. All other fees, costs and expenses incurred by the parties hereto shall be for their respective accounts. (b) If the transactions contemplated by this Agreement are not consummated due to the failure of the Equity Investor to negotiate in good faith or consummate the transactions on the basis of the Equity Terms and Conditions and Equity Commitment Letter, each dated July 24, 2000, then the Equity Investor and Owner Participant shall pay their own out-of-pocket expenses and the fees and expenses of their legal counsels and advisors. (c) Subject to Section 2.3(b), if the transactions contemplated by this Agreement are not consummated for any reason, EME shall pay all Transaction Costs and reimburse each of the other parties hereto for Transaction Costs of such parties, which shall be substantiated by a reasonably detailed invoice. (d) Following the Closing Date, EME will be responsible for, and will pay at no after-tax cost to the Owner Lessor (i) the annual administration fees, if any, of the Owner Lessor (ii) fees and expenses of the Owner Trustee and (iii) other fees and costs (but in no event (but without derogation of EME's obliga- 8 tions under the EME Guarantee) interest, Make-Whole Premium, if any, or principal) payable with respect to the Lessor Notes or Certificates, (other than costs, fees and expenses associated with or resulting from a Lease Indenture Event of Default which is not a Lease Event of Default). EME agrees to pay, from and after the Closing Date, as and when due, to the Persons entitled thereto, all amounts indicated in the Facility Lease to be paid by EME. (e) EME agrees to reimburse Midwest for all Transaction Costs paid by the Owner Lessor pursuant to SECTION 2.3(a) above. (f) EME shall pay, from and after the Closing Date, interest, at the Overdue Rate, on any amounts that it has agreed or is obligated to pay under the Operative Documents but that are not paid as and when due. SECTION III REPRESENTATIONS AND WARRANTIES SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF MIDWEST. Midwest represents and warrants that, as of the date of execution and delivery hereof and as of the Closing Date: (a) ORGANIZATION; POWER. Midwest (i) is a Delaware limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) is duly qualified to do business and in good standing in each jurisdiction where the nature of its business requires such qualification, and (iii) has all requisite power and authority and holds all material requisite Governmental Approvals to enter into and perform its obligations under this Agreement and each of the other Operative Documents to which it is or will be a party and to conduct the business of owning and operating the Facility and the sale and marketing of wholesale electric power and other products and service related thereto, except, with respect to clauses (ii) and (iii) above, where 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, result in a Material Adverse Effect on Midwest. Midwest is a direct, wholly owned subsidiary of Holdings, which is, in turn, an indirect wholly owned subsidiary of EME. (b) DUE AUTHORIZATION; NON-CONTRAVENTION. The execution, delivery and performance of this Agreement and each of the other Operative 9 Documents to which it is or will be a party have been or when executed and delivered will be duly authorized by all necessary company action and do not and will not: (i) contravene the Organic Documents of Midwest; (ii) contravene any Requirement of Law or Contractual Obligation, binding on or affecting Midwest; or (iii) result in, or require the creation or imposition of, any Lien (other than pursuant to the Operative Docu- ments) on any of the properties of Midwest; except, in case of clauses (ii) and (iii) where such contravention, creation or imposition would not result in a Material Adverse Effect on Midwest. (c) GOVERNMENT APPROVALS. (i) All Governmental Approvals required in connection with the execution and delivery of, or performance of the transactions contemplated by, this Agreement and the other Operative Documents to which Midwest is or will be a party and the conduct of the business by Midwest are listed on SCHEDULE 3.1(c) and have been duly obtained or made and are in full force and effect, in each case, other than (A) as may be required under existing Requirements of Law to be obtained, given, accomplished or renewed at any time after the date of execution and delivery hereof or from time to time after the Closing Date in connection with the maintenance or operation of the Facility, (B) which are routine in nature and which cannot be obtained and such failure to obtain would not result in a Material Adverse Effect on Midwest, or are not normally applied for, prior to the time they are required, and which Midwest has no reason to believe will not be timely obtained, (C) as may be required in connection with any refinancing of the Lessor Notes or the issuance of Additional Lessor Notes, (D) as may be required in consequence of any transfer of the Beneficial Interest or any transfer of ownership of the Undivided Interest or the Trust Estate by the Owner Lessor or any relinquishment of the use or operation of the Undivided Interest by Midwest and (E) filing and recording to perfect the Lien of the Lease Indenture Trustee and the ownership and leasehold interests conveyed pursuant to this Agreement to the extent arrangements have been made satisfactory to the Owner Participant, the Owner Lessor and the Lease Indenture Trustee. Except as noted in Part B of SCHEDULE 3.1(c), all Govern- 10 mental Approvals that have been obtained pursuant to the first sentence of this SECTION 3.1(c) 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. No such Governmental Approval is the subject of any pending or, except as indicated in PART C of SCHEDULE 3.1(c), threatened judicial or administrative proceeding. (ii) All consents and approvals required to be obtained from Persons other than Governmental Authorities in connections with the transactions contemplated by the Operative Documents 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, result in a Material Adverse Effect on Midwest. (d) DISCLOSURE; NO MATERIAL OMISSION. The Offering Circular does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading; PROVIDED, HOWEVER, that no representation is given or made with regard to (i) any forecasts or projections included therein or omitted therefrom, or (ii) the descriptions of the Operative Documents or the tax consequences to beneficial owners of Certificates. (e) SECURITIES ACT. Neither Midwest nor anyone authorized by it has directly or indirectly offered or sold any interest in the Beneficial Interest, the Lessor Notes or the Certificates or any part thereof, or, except as disclosed in the Offering Circular in any similar security or lease, or in any security or lease the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Lessor Notes or the Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (f) VALIDITY. Each of the Operative Documents to which Midwest is or will be a party constitutes, or, upon the due execution and delivery thereof by Midwest, will constitute, the legal, valid and binding obligation of Midwest enforceable in accordance with its terms (except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' 11 rights generally and general principles of equity and except as indicated in the legal opinion of SASM&F delivered pursuant to SECTION 4.13 hereof). (g) COMPLIANCE WITH REQUIREMENTS OF LAW. Midwest is in compliance with all Requirements of Law (including ERISA and regulations of the Federal Reserve System) and Contractual Obligations applicable to it, except to the extent that failure to so comply would not result or has not resulted in a Material Adverse Effect on Midwest. (h) MARGIN REGULATION. Midwest is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Lessor Notes and the Equity Investment as contemplated by this Agreement and the other Operative Documents will be used for a purpose which violates, or would be inconsistent with, the Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in the Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this SECTION 3.1 with such meanings. (i) LITIGATION. There is no pending or, to the knowledge of Midwest, threatened, action, suit, investigation or proceeding or labor controversy against Midwest or any of its properties, business, assets or revenues or affecting any Governmental Approval before any Governmental Authority which, if determined adversely to Midwest (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without any reservations), would result in a Material Adverse Effect on Midwest or the Facility Site. (j) TITLE; LIENS. (i) Midwest has good, clear, marketable record fee title to the Facility, free and clear of all Liens, encumbrances or title defects other than Permitted Encumbrances and Lease Permitted Liens. (ii) Midwest has good, clear, marketable record fee title in the Facility Site, free and clear of all Liens, encumbrances or title defects other than Permitted Encumbrances and Lease Permitted Liens. (iii) Upon execution and delivery of the Operative Documents and recording of the instruments referred to in 12 SCHEDULE 4.14, good, clear, record and valid leasehold interest in the Ground Interest will be duly, validly and effectively conveyed to the Owner Lessor upon the terms and conditions in the Facility Site Lease, free and clear of all Liens, encumbrances or title defects other than Permitted Encumbrances and Lease Permitted Liens. (iv) Upon execution and delivery of the Operative Documents, good, clear, record and marketable fee simple title to the Undivided Interest will be duly, validly and effectively conveyed to the Owner Lessor, free and clear of all Liens, encum- brances or title defects other than Permitted Encumbrances and Lease Permitted Liens. (v) None of the Permitted Encumbrances and Lease Permitted Liens will, on and after the date of execution and delivery hereof and the Closing, materially interfere with the use, operation or possession of the Facility (as contemplated by the Opera- tive Documents) or the use of or the exercise by the Owner Lessor of its rights under the Facility Site Lease with respect to the Facility. (k) TAX RETURNS. Midwest has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by Midwest and with respect to which adequate reserves have to the extent required by GAAP been set aside on its books). (l) INVESTMENT COMPANY ACT. Midwest is not subject to any regulation as an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (m) HOLDING COMPANY ACT. (i) Midwest is an "exempt wholesale generator" under PUHCA, is interconnected with the high voltage network and has access to transmission services and ancillary services to sell wholesale electric power, and has the authority to sell wholesale electric power at market-based rates. 13 (ii) Midwest is not subject to (i) regulation as a "holding company," a "public utility company" or a "subsidiary company" or an "affiliate" of a "holding company" required to register under PUHCA or (ii) public utility regulation or regulation as an alternative retail electric supplier under the laws of the State of Illinois. (n) ENVIRONMENTAL WARRANTIES. Except as has not or would not, individually or in the aggregate, result in a Material Adverse Effect on Midwest: (i) (A) To the knowledge of Midwest, the Facility and the Facility Site have been, and continue to be, owned, leased and operated in compliance with all applicable Environmental Laws and (B) Midwest is and has been in compliance with all applicable Environmental Laws. (ii) There are no pending or, to the knowledge of Midwest, threatened Environmental Claims involving or against Midwest, the Facility or Facility Site. (iii) Midwest has obtained and is in compliance with all Governmental Approvals required under any applicable Environmental Law necessary for its business and, with respect to the Governmental Approvals not obtained by the date of execution and delivery hereof, (a) Midwest has no reason to believe that such approvals will not be timely obtained and (b) the failure to have obtained such Governmental Approvals by the date of execution and delivery hereof will not result in a Material Adverse Effect on Mid- west. (iv) Neither the Facility nor the Facility Site is listed or, to the knowledge of Midwest, 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. 14 (v) To the knowledge of Midwest, no Environmental Conditions exist at, on, under or about the Facility or the Facility Site which, with the passage of time, or the giving of notice or both, would give rise to any Environmental Claim. (vi) Other than as provided in the ASA, Midwest has not 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. (o) 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, 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 Midwest 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 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 Midwest or any member of the Controlled Group: (i) a Reportable Event; (ii) a complete or partial withdrawal from any Multiemployer Plan by Midwest or any member of the Controlled Group; (iii) any liability of Midwest or any member of the Controlled Group under ERISA if Midwest 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 Midwest 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 on Midwest, other than liability for continuation coverage described in Part 6 of Title I of ERISA. (p) LOCATION OF CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS, ETC. The chief executive office and principal place of business of Midwest and the office where Midwest keeps its corporate records concerning the 15 Facility, the Facility Site and the other Operative Documents is located at One Finance Place, 440 South LaSalle Street, Suite 3500, Chicago, Illinois 60605. (q) ACCESS; EGRESS. Midwest has sufficient access to public roads, easements of ingress and egress and other rights of access to permit use and operation of the Facility and the Facility Site as contemplated by the Operative Documents. (r) ABILITY TO DELIVER POWER. Midwest has rights necessary to deliver power to the point of interconnection to the electricity grid. (s) POWER SALES AGREEMENTS AND OTHER CONTRACTS. There are no contracts or agreements providing for sales of power and ancillary services produced by the Facility or for the use and operation of the Facility that have a term which extends beyond the expiration of the Basic Lease Term other than the Interconnection Agreement. (t) UTILITY SERVICES. The Facility and the Facility Site have available all necessary public utility services for the use and operation of the Facility as currently being used and as contemplated by the Operative Documents. (u) SUBDIVISION. No subdivision is necessary in connection with the transaction contemplated by Operative Documents. (v) ADEQUATE RIGHTS. Based upon Requirements of Law in effect on the Closing Date, the rights and interests made, or to be made available to the Owner Lessor or its permitted transferees pursuant to the Operative Documents, together with the rights of the Owner Lessor as owner of the Undivided Interest, are sufficient to permit the following actions by the Owner Lessor or any such permitted transferee following the expiration or termination of the Facility Lease: (i) the occupation, interconnection, maintenance and repair of the Facility, (ii) the use, operation and possession of the Facility, (iii) the construction, use, operation, possession, maintenance and renewal of all modifications, additions, improvements, replacements and substitutions thereof and thereto, (iv) appropriate ingress to and egress from the Facility for any reasonable purpose in connection with the exercise of rights under the Operation Agreement and such Person's interest in the Facility, (v) access to the off-site unloading dock, transportation and storage areas for fuel 16 handling, storage and transportation and access to the off-site lake for water-cooling, (vi) transmission of the electric energy and ancillary services provided by the Facility to the nearest point of interconnection to the relevant electricity grid and (vii) the disposal of by-products and waste from the Facility. (w) RETURN ACCEPTANCE TESTS. Midwest has no reason to believe that the Facility will not be able to satisfy the return conditions set forth in SECTION 5 of the Facility Lease as of the expiration of the Facility Lease Term if the Facility is maintained in accordance with SECTION 7 of the Facility Lease. (x) NO DEFAULTS. NO EVENT OF LOSS. No Lease Event of Default, Material Lease Default or event that with the passage of time or notice or both would constitute a Lease Event of Default has occurred or will occur upon execution and delivery of the Operative Documents. No Event of Loss has occurred or will occur upon the execution and delivery of the Operative Documents. (y) ACCURACY OF INFORMATION. (A) All factual information provided in writing by Midwest or its Affiliates to (i) the Engineering Consultant, in connection with the preparation of the Engineering Report and (ii) the Appraiser, in connection with the preparation of the Closing Date Appraisal (other than projections and "forward-looking" information) is true and materially accurate in every material respect on the date as of which such information is dated or certified, and to the knowledge of Midwest, such information is not incomplete by omitting to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. (B) All projections and other "forward looking" information contained in the items specified on SCHEDULE 3.1(y) were prepared in good faith and are based upon reasonable assumptions. SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF EME. EME represents and warrants that, as of the date of execution and delivery hereof and as of the Closing Date: (a) ORGANIZATION; POWER. EME (i) is a California corporation, duly organized, validly existing and in good standing under the laws of the State 17 of California, (ii) is duly qualified to do business and in good standing in each jurisdiction where the nature of its business requires such qualification, and (iii) has all requisite power and authority and holds all material requisite Governmental Approvals to enter into and perform its obligations under this Agreement and each of the other Operative Documents to which it is or will be a party and to conduct its business as currently conducted and currently expected to be conducted, except, with respect to clauses (ii) and (iii) above, where failure to be so qualified or be in good standing or the failure to obtain such Governmental Approvals could not, individually or in the aggregate, reasonably be expected to cause a Material Adverse Effect on EME. (b) DUE AUTHORIZATION; NON-CONTRAVENTION. The execution, delivery and performance of this Agreement and each of the Operative Documents to which it is or will be a party have been or when executed and delivered will be duly authorized by all necessary company action and do not and will not: (i) contravene the Organic Documents of EME; (ii) contravene any Requirement of Law or Contractual Obligation, binding on or affecting EME; or (iii) result in, or require the creation or imposition of, any Lien (other than pursuant to the Operative Documents) on any of the properties of EME; except, in case of clauses (ii) and (iii) where such contravention, creation or imposition would not result in a Material Adverse Effect on EME. (c) GOVERNMENT APPROVALS. (i) All Governmental Approvals required in connection with the execution and delivery of, or performance of the transactions contemplated by, this Agreement and the other Operative Documents to which EME is or will be a party and the conduct of the business by EME are listed on SCHEDULE 3.2(c) and have been duly obtained or made and are in full force and effect, in each case, other than (A) as may be required under existing Requirements of Law to be obtained, given, accomplished or renewed at any time after the date of execution and delivery hereof or from time to time after the Closing Date in connection with the transactions contemplated by the Operative Documents 18 and (B) which are routine in nature and which cannot be obtained and such failure to obtain would not result in a Material Adverse Effect on EME, or are not normally applied for, prior to the time they are required, and which EME has no reason to believe will not be timely obtained. Except as noted in Part B of SCHEDULE 3.2(c), all Governmental Approvals that have been obtained pursuant to the first sentence of this SECTION 3.2(c) 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. No such Governmental Approval is the subject of any pending or, except as indicated in PART C of SCHEDULE 3.2(c), threatened judicial or administrative proceeding. (ii) All consents and approvals required to be obtained from Persons other than Governmental Authorities in connection with the transactions contemplated by the Operative Documents 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, result in a Material Adverse Effect on EME. (d) DISCLOSURE; NO MATERIAL OMISSION. The Offering Circular does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading; PROVIDED, HOWEVER, that no representation is given or made with regard to (i) any forecasts or projections included therein or omitted therefrom or (ii) the descriptions of the Operative Documents or the tax consequences to beneficial owners of Certificates. (e) VALIDITY. Each of the Operative Documents to which EME is a party constitutes, or, upon the due execution and delivery thereof by EME, will constitute, the legal, valid and binding obligation of EME 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 and except as indicated in the legal opinion of SASM&F delivered pursuant to SECTION 4.13 hereof). (f) COMPLIANCE WITH REQUIREMENTS OF LAW. EME is in compliance with all Requirements of Law (including ERISA and regulations of the Federal Reserve System) and Contractual Obligations applicable to it, except to the 19 extent that failure to so comply would not result or has not resulted in a Material Adverse Effect on EME. (g) MARGIN REGULATION. EME is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Lessor Notes and the Equity Investment as contemplated by this Agreement and other Operative Documents will be used for a purpose which violates, or would be inconsistent with, the Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in the Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this SECTION 3.2 with such meanings. (h) LITIGATION. There is no pending or, to the knowledge of EME, threatened, action, suit, Environmental Claim, investigation, proceeding or labor controversy against EME or any of its properties, business, assets or revenues or affecting any Governmental Approval before any Governmental Authority hereto which, if determined adversely to EME (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without any reservations), would result in a Material Adverse Effect on EME. (i) TAX RETURNS. EME has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by Holdings by appropriate proceedings and with respect to which adequate reserves have to the extent required by GAAP been set aside on its books). (j) INVESTMENT COMPANY ACT. EME is not subject to regulation as an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (k) HOLDING COMPANY ACT. EME is not subject to (i) regulation as a "holding company," a "public utility company," or a "subsidiary company" or an "affiliate" of a "holding company" required to register under PUHCA except that it 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. 20 (l) 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, 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 EME 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 which could reasonably be expected to have a Material Adverse Effect with respect to it. Neither EME 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 on EME, other than liability for continuation coverage described in Part 6 of Title I of ERISA. (m) LOCATION OF CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS, ETC. The chief executive office and principal place of business of EME and the office where EME keeps its corporate records is located at 18101 Von Karman Avenue, Suite 1700, Irvine, California 92612. (n) RANKING OF GUARANTEES. The obligations of EME under each of the EME Guarantees are senior, unsecured Indebtedness of EME ranking at least pari passu with all other senior unsecured Indebtedness of EME. (o) ACCURACY OF INFORMATION. (A) All factual information provided in writing by EME or its Affiliates to (i) the Engineering Consultant, in connection with the preparation of the Engineering Report and (ii) the Appraiser, in connection with the preparation of the Closing Date Appraisal (other than projections and "forward-looking" information) is true and materially accurate in every material respect on the date as of which such information is dated or certified, and to the knowledge of EME, such information is not incomplete by omitting to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. 21 (B) All projections and "forward looking" information contained in items specified on SCHEDULE 3.2(o) were prepared in good faith and are based on reasonable assumptions. SECTION 3.3 REPRESENTATIONS AND WARRANTIES OF THE OWNER LESSOR. The Owner Lessor represents and warrants that as of the date of execution and delivery hereof and as of the Closing Date: (a) DUE ORGANIZATION. The Owner Lessor is a duly organized and validly existing "business trust" as such term is defined in 12 Del. C. Section 3801 (a) under the laws of the State of Delaware of which the Owner Participant is the beneficial owner, and has the power and authority to enter into and perform its obligations under this Agreement and each of the other Operative Documents to which it is or will be a party. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. (i) This Agreement and each of the other Operative Documents (other than the Lessor Notes) to which the Owner Lessor is or will be a party has been or when executed and delivered will be duly authorized, executed and delivered by the Owner Lessor, and assuming the due authorization, execution and delivery of this Agreement by each party hereto other than the Owner Lessor, this Agreement constitutes, and when executed and delivered each of the other Operative Documents (other than the Lessor Notes) to which it is or will be a party, will be the legal, valid and binding obligations of the Owner Lessor, enforceable against the Owner Lessor in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (ii) Upon the execution of the Lessor Notes by the Owner Lessor, authentication of the Lessor Notes by the Lease Indenture Trustee and delivery of such Lessor Notes against payment therefor, the Lessor Notes will constitute legal, valid and binding obligations of the Owner Lessor, enforceable against the Owner Lessor in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorgani- zation, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. 22 (c) NON-CONTRAVENTION. The execution and delivery by the Owner Lessor of this Agreement and the other Operative Documents to which it is or will be a party, the consummation by the Owner Lessor of the transactions contemplated hereby and thereby, and the compliance by the Owner Lessor with the terms and provisions hereof and thereof, do not and will not contravene (except where such contravention would not result in a Material Adverse Effect on the Owner Lessor) (i) the Trust Agreement or any of the Organic Documents of the Owner Lessor or (ii) any Requirement of Law or the provisions of, or constitute a default by the Owner Lessor under any indenture, mortgage, deed of trust or other material contract, agreement or instrument to which the Owner Lessor is a party or by which the Owner Lessor or its property is bound, or in the creation of any Owner Lessor's Lien upon the Trust Estate; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Owner Lessor to act as operator of the Facility following a Lease Event of Default or the expiration or termination of the Facility Lease. (d) GOVERNMENTAL ACTIONS. Assuming the representation and warranties of Midwest contained in paragraphs (c), (g), (l), (m) and (n) of SECTION 3.1 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority is required for the due execution, delivery or performance by the Owner Lessor, as the case may be, of the Trust Agreement, the Lessor Notes, this Agreement or the other Operative Documents to which the Owner Lessor is or will be a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Owner Lessor to act as operator of the Facility following a Lease Event of Default or the expiration or termination of the Facility Lease. (e) LITIGATION. There is no pending or, to the knowledge of the Owner Lessor, threatened, action, suit, investigation or proceeding against the Owner Lessor before any Governmental Authority which, if determined adversely to it, would materially adversely affect the ability of the Owner Lessor to perform its obligations under the Trust Agreement, the Lessor Notes, this Agreement or the other Operative Documents to which it is or will be a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the Lien of the Lease Indenture Trustee on the Trust Estate or which questions the validity or 23 enforceability of any Operative Document to which the Owner Lessor is or will be a party. (f) LIENS. The Owner Lessor's right, title and interest in and to the Trust Estate is free of any Owner Lessor's Liens. (g) COMPLIANCE WITH REQUIREMENTS OF LAW. The Owner Lessor is in compliance with all Requirements of Law, rules, regulations, orders, judgments, writs and decrees (including ERISA and regulations of the Federal Reserve System), except where failure to so comply, individually or in the aggregate, would not result or has not resulted in a Material Adverse Effect on the Owner Lessor. (h) INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. The Owner Lessor is not (i) an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, (ii) a "holding company," a "public utility company" or a "subsidiary company" of a "holding company" within the meaning of PUHCA, or (iii) subject to any other Requirement of Law which purports to restrict or regulate its ability to borrow money. (i) SECURITIES ACT. Neither the Owner Lessor nor anyone authorized by it has directly or indirectly offered or sold any interest in the Lessor Notes or any part thereof, or, except as disclosed in the Offering Circular, in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Lessor Notes or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (j) LOCATION OF CHIEF EXECUTIVE OFFICE; PRINCIPAL PLACE OF BUSINESS; SITUS. The chief executive office and principal place of business of the Owner Lessor where the Owner Lessor will keep its corporate records concerning the Facility, the Facility Site and the Operative Documents is located in Wilmington, Delaware. The situs of the Owner Lessor is in Delaware. (k) PAYMENT OF TAXES. The Owner Lessor has filed all federal, state and local tax returns and reports required by law to have been filed by it 24 and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by the Owner Lessor and with respect to which adequate reserve have, to the extent required by GAAP, been set aside on its books). SECTION 3.4 REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE AND THE TRUST COMPANY. The Trust Company (only with respect to representations and warranties relating to the Trust Company) and the Owner Trustee hereby severally represent and warrant that, as of the date of execution and delivery hereof and as of the Closing Date: (a) DUE INCORPORATION; ETC. The Trust Company is a banking corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority, as the Owner Trustee and/or in its individual capacity to the extent expressly provided herein or in the Trust Agreement, to enter into and perform its obligations under the Trust Agreement, this Agreement and each of the other Operative Documents to which it is or will be a party. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. (w) The Trust Agreement has been duly authorized, executed and delivered by the Trust Company, and (x) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, the Trust Agreement constitutes the legal, valid and binding obligation of the Trust Company, enforceable against it in its individual capacity or as Owner Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (i) (y) This Agreement has been duly authorized, executed and delivered by the Owner Trustee and the Trust Company, and (z) assuming the due authorization, execution and delivery of this Agreement by each party hereto other than the Owner Trustee and the Trust Company, this Agreement constitutes a legal, valid and binding obligation of the Owner Trustee and the Trust Company, enforceable against the Trust Company or the Owner Trustee, as the case may be, in accordance with its terms, except as 25 the same may be limited by bankruptcy, insolvency, fraudulent con- veyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (ii) (x) Each of the other Operative Documents to which the Trust Company or the Owner Trustee is or will be a party has been or when executed and delivered will be duly author- ized, executed and delivered by the Trust Company or the Owner Trustee and (y) assuming the due authorization, execution and deliv- ery of each of the other Operative Documents by each party thereto other than the Trust Company or the Owner Trustee, each of the other Operative Documents to which the Trust Company or the Owner Trustee is or will be a party constitutes or when executed and delivered will constitute a legal, valid and binding obligation of the Trust Company or the Owner Trustee, as the case may be, enforceable against the Trust Company or the Owner Trustee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) NON-CONTRAVENTION. The execution and delivery by the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, of the Trust Agreement, this Agreement and the other Operative Documents to which it is or will be a party, the consummation by the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, of the transactions contemplated hereby and thereby, and the compliance by the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, with the terms and provisions hereof and thereof, do not and will not (i) contravene any Requirement of Law of the State of Delaware or the United States governing the banking or trust powers of the Trust Company, the Trust Agreement, or its Organic Documents, or (ii) contravene the provisions of, or constitute a default by the Trust Company under, or result in the creation of any Owner Lessor's Lien attributable to it in its individual capacity and unrelated to the transactions contemplated by the Operative Documents upon the Trust Estate under any indenture, mortgage or other material contract, agreement or instrument to which the Trust Company is a party or by which the Trust Company or 26 its property is bound; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Trust Company or the Owner Trustee to act as operator of the Facility following a Lease Event of Default. (d) GOVERNMENTAL ACTIONS. Assuming the representations and warranties of Midwest contained in paragraphs (c), (g), (l), (m) and (n) of SECTION 3.1 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority of the State of Delaware or the United States governing the banking or trust powers of the Trust Company is required for the due execution, delivery or performance by the Trust Company or the Owner Trustee, as the case may be, of the Trust Agreement, this Agreement or the other Operative Documents to which the Trust Company or the Owner Trustee is or will be a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given. (e) LITIGATION. There is no pending or, to the actual knowledge of the Trust Company, threatened action, suit, investigation or proceeding against the Trust Company either in its individual capacity or as the Owner Trustee, as the case may be, before any Governmental Authority of the State of Delaware or the United States governing its banking and trust powers which, if determined adversely to it, would materially adversely affect the ability of the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, to perform its obligations under the Trust Agreement, this Agreement or the other Operative Documents to which it is or will be a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the security interest of the Lease Indenture Trustee in the Trust Estate or which question the validity or enforceability of any Operative Document to which the Trust Company, in its individual capacity or as the Owner Trustee, is or will be a party. (f) LIENS. The Trust Estate is free of any Owner Lessor's Liens attributable to the Trust Company or the Owner Trustee. SECTION 3.5 REPRESENTATIONS AND WARRANTIES OF THE OWNER PARTICIPANT. The Owner Participant represents and warrants that, as of the Closing Date and giving effect to the transactions contemplated by the Purchase Agreement: 27 (a) DUE ORGANIZATION. The Owner Participant is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the necessary power and authority to enter into and perform its obligations under this Agreement, the Trust Agreement, the OP LLC Agreement and the Tax Indemnity Agreement. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. This Agreement, the Trust Agreement, the Tax Indemnity Agreement and the other Operative Documents to which it is or will be a party have been or when executed and delivered will be duly authorized, executed and delivered by the Owner Participant and assuming the due authorization, execution and delivery by each other party thereto, this Agreement, the Trust Agreement, the Tax Indemnity Agreement and the other Operative Documents to which it is or will be a party constitute or when executed and delivered will constitute the legal, valid and binding obligations of the Owner Participant, enforceable against the Owner Participant in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) NON-CONTRAVENTION. The execution and delivery by the Owner Participant of this Agreement, the Trust Agreement, the OP LLC Agreement and the Tax Indemnity Agreement, the consummation by the Owner Participant of the transactions contemplated hereby and thereby, and the compliance by the Owner Participant with the terms and provisions hereof and thereof, do not and will not contravene any Requirement of Law binding on the Owner Participant (except where such contravention would not result in a Material Adverse Effect on the Owner Participant), or its Organic Documents, or contravene the provisions of, or constitute a default under, or result in the creation of any Owner Participant's Lien (other than any Lien created under any Operative Document) upon the Trust Estate under any indenture, mortgage or other material contract, agreement or instrument to which the Owner Participant is a party or by which the Owner Participant or its property is bound (it being understood that no representation or warranty is being made as to any Requirement of Law relating to the Facility or the Facility Site other than its representations set forth in SECTION 3.3(g) hereof or Section 4975 of the Code). 28 (d) GOVERNMENTAL ACTION. Assuming the representations and warranties of EME contained in paragraphs (c), (f), (j) and (k) of SECTION 3.2 and the representation and warranties of Midwest contained in paragraphs (c), (g), (l), (m) and (n) of SECTION 3.1 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority is required for the due execution, delivery or performance by the Owner Participant of this Agreement, the Trust Agreement, the OP LLC Agreement or the Tax Indemnity Agreement, other than any authorization or approval or other action or notice or filing as has been duly obtained, taken or given (it being understood that no representation or warranty is being made as to any Requirements of Law relating to the ownership or operation of the Facility or the Facility Site). (e) LITIGATION. There is no pending or, to the knowledge of the Owner Participant, threatened action, suit, investigation or proceeding against the Owner Participant before any Governmental Authority which, if determined adversely to it, would materially adversely affect the Owner Participant's ability to perform its obligations under this Agreement, the Trust Agreement, the OP LLC Agreement or the Tax Indemnity Agreement or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the Lien of the Lease Indenture Trustee in the Trust Estate or which questions the validity or enforceability of any Operative Document to which the Owner Participant is or will be a party. (f) LIENS. The Trust Estate is free of any Owner Participant's Liens. (g) ERISA. No part of the funds to be used by the Owner Participant to make its investment pursuant to this Agreement, directly or indirectly, constitutes or is deemed to constitute assets (within the meaning of ERISA and any applicable rules, regulations and court decisions thereunder) of any Plan. (h) REGULATORY EVENT OF LOSS. The Owner Participant is not aware of any fact or circumstance that would constitute or cause a Regulatory Event of Loss. (i) SECURITIES ACT. Neither the Owner Participant nor anyone authorized by it has directly or indirectly offered or sold any interest in the 29 Beneficial Interest, the Lessor Notes or any part thereof, or, except as disclosed in the Offering Circular, in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Lessor Notes or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (j) HOLDING COMPANY ACT AND FEDERAL POWER ACT. Immediately prior to executing this Agreement, the Owner Participant is not (i) an "electric utility," "electric utility company," "public utility," "public-utility company," "holding company" under the Federal Power Act or PUHCA or (ii) a "subsidiary" or "affiliate" of a "holding company" required to register under PUHCA. (k) PAYMENT OF TAXES. The Owner Participant has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by the Owner Participant and with respect to which adequate reserves have, to the extent required by GAAP, been set aside on its books). SECTION 3.6 REPRESENTATIONS AND WARRANTIES OF LEASE INDENTURE TRUSTEE AND THE LEASE INDENTURE COMPANY. The Lease Indenture Company and the Lease Indenture Trustee hereby severally represents and warrants that, as of the date of execution hereof and as of the Closing Date: (a) DUE ORGANIZATION. The Lease Indenture Company is a banking corporation duly organized, validly existing and in good standing under the laws of the State of New York, has the corporate power and authority, as Lease Indenture Trustee and/or in its individual capacity to the extent expressly provided herein or in the Lease Indenture, to enter into and perform its obligations under the Lease Indenture, this Agreement and each of the other Operative Documents to which it is or will be a party. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. (i) (A) This Agreement has been duly authorized, executed and delivered by the Lease Indenture Trustee and the Lease Indenture Company, and (B) assuming the due authorization, execution and delivery of this Agreement by each party hereto other than the Lease 30 Indenture Trustee and the Lease Indenture Company, this Agreement constitutes a legal, valid and binding obligation of the Lease Indenture Company and the Lease Indenture Trustee, enforceable against the Lease Indenture Company or the Lease Indenture Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (ii) (A) Each of the other Operative Documents to which the Lease Indenture Trustee is or will be a party has been or when executed and delivered will be duly authorized, executed and delivered by the Lease Indenture Trustee, and (B) assuming the due authorization, execution and delivery of each of the other Operative Documents by each party thereto other than the Lease Indenture Trustee, each of the other Operative Documents to which the Lease Indenture Trustee is or will be a party constitutes or when executed and delivered will be a legal, valid and binding obligation of the Lease Indenture Trustee, enforceable against the Lease Indenture Trustee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) NON-CONTRAVENTION. The execution and delivery by the Lease Indenture Company, in its individual capacity or as Lease Indenture Trustee, as the case may be, of this Agreement and the other Operative Documents to which it is or will be a party, the consummation by the Lease Indenture Company, in its individual capacity or as Lease Indenture Trustee, as the case may be, of the transactions contemplated hereby and thereby, and the compliance by the Lease Indenture Company, in its individual capacity or as Lease Indenture Trustee, as the case may be, with the terms and provisions hereof and thereof, do not and will not contravene any Requirement of Law of the United States of America governing the Lease Indenture Company or the banking or trust powers of the Lease Indenture Company, or its organizational documents or by-laws, or contravene the provisions of, or constitute a default by the Lease Indenture Company under, or result in the creation of any Lien attributable to the Lease Indenture Company upon the Indenture Estate or any indenture, mortgage or other material contract, agreement or instrument to which the Lease Indenture Company is a party or by which the Lease Indenture 31 Company or its property is bound which would materially adversely affect the ability of the Lease Indenture Company, in its individual capacity or as Lease Indenture Trustee, as the case may be, to perform its obligations under this Agreement or the other Operative Documents to which it is or will be a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the security interest of the Lease Indenture Trustee in the Indenture Estate; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Lease Indenture Company or the Lease Indenture Trustee to act as operator of the Facility following a Lease Event of Default. (d) GOVERNMENTAL ACTION. Assuming the representations and warranties of Midwest contained in paragraphs (c), (g), (l), (m) and (n) of SECTION 3.1 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority governing its banking or trust powers is required for the due execution, delivery or performance by the Lease Indenture Company or the Lease Indenture Trustee, as the case may be, of this Agreement or the other Operative Documents to which the Lease Indenture Trustee is or will be a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given. (e) LITIGATION. There is no pending or, to the knowledge of the Lease Indenture Company, threatened action, suit, investigation or proceeding against the Lease Indenture Company either in its individual capacity or as Lease Indenture Trustee, before any Governmental Authority which, if determined adversely to it, would materially adversely affect the ability of the Lease Indenture Company, in its individual capacity or as Lease Indenture Trustee, as the case may be, to perform its obligations under this Agreement or the other Operative Documents to which it is or will be a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the security interest of the Lease Indenture Trustee in the Indenture Estate. SECTION 3.7 REPRESENTATIONS AND WARRANTIES OF PASS THROUGH TRUSTEES AND THE PASS THROUGH COMPANY. The Pass Through Company and each Pass Through Trustee hereby severally represents and warrants that, as of the date of execution hereof and as of the Closing Date: 32 (a) DUE ORGANIZATION. The Pass Through Company is a banking corporation duly organized, validly existing and in good standing under the laws of the State of New York, has the corporate power and authority, as Pass Through Trustee and/or in its individual capacity to the extent expressly provided herein or in the Pass Through Trust Agreements, to enter into and perform its obligations under the Pass Through Trust Agreement, this Agreement and each of the other Operative Documents to which it is or will be a party. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. (i) (A) This Agreement has been duly authorized, executed and delivered by the Pass Through Trustees and the Pass Through Company and (B) assuming the due authorization, execution and delivery of this Agreement by each party hereto other than each Pass Through Trustee and the Pass Through Company, as the case may be, this Agreement constitutes a legal, valid and binding obligation of the Pass Through Company and each Pass Through Trustee, enforceable against the Pass Through Company or each Pass Through Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (ii) (A) Each of the other Operative Documents to which the Pass Through Company or such Pass Through Trustee is or will be a party has been or when executed and delivered will be duly authorized, executed and delivered by the Pass Through Company or such Pass Through Trustee, as the case may be, and (B) assuming the due authorization, execution and delivery of each of the other Operative Documents by each party thereto other than the Pass Through Company or such Pass Through Trustee, as the case may be, each of the other Operative Documents to which the Pass Through Company or such Pass Through Trustee is or will be a party constitutes or when executed and delivered will constitute a legal, valid and binding obligation of the Pass Through Company or such Pass Through Trustee, enforceable against the Pass Through Company or such Pass Through Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. 33 (c) NON-CONTRAVENTION. The execution and delivery by the Pass Through Company, in its individual capacity or as Pass Through Trustee, as the case may be, of this Agreement and the other Operative Documents to which it is or will be a party, the consummation by the Pass Through Company, in its individual capacity or as Pass Through Trustee, as the case may be, of the transactions contemplated hereby and thereby, and the compliance by the Pass Through Company, in its individual capacity or as Pass Through Trustee, as the case may be, with the terms and provisions hereof and thereof, do not and will not contravene any Requirement of Law of the United States of America or the State of New York governing the Pass Through Company or the banking or trust powers of the Pass Through Company, or its organizational documents or by-laws, or contravene the provisions of, or consti- tute a default by the Pass Through Company under, or result in the creation of any Lien attributable to the Pass Through Company upon the Certificates or any indenture, mortgage or other material contract, agreement or instrument to which the Pass Through Company is a party or by which the Pass Through Company or its property is bound which would materially adversely affect the ability of the Pass Through Company, in its individual capacity or as Pass Through Trustee, as the case may be, to perform its obligations under this Agreement or the other Operative Documents to which it is a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the security interest of any Pass Through Trustee in the Indenture Estate; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Pass Through Company or any Pass Through Trustee to act as operator of the Facility following a Lease Event of Default. (d) GOVERNMENTAL ACTION. Assuming the representation and warranties of Midwest contained in paragraphs (c), (g), (1), (m) and (n) of SECTION 3.1 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority governing its banking or trust powers is required for the due execution, delivery or performance by the Pass Through Company or any Pass Through Trustee, as the case may be, of this Agreement or the other Operative Documents to which such Pass Through Trustee is or will be a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given. (e) LITIGATION. There is no pending or, to the knowledge of the Pass Through Company, threatened action, suit, investigation or proceeding 34 against the Pass Through Company either in its individual capacity or as Pass Through Trustee, before any Governmental Authority which, if determined adversely to it, would materially adversely affect the ability of the Pass Through Company, in its individual capacity or as Pass Through Trustee, as the case may be, to perform its obligations under this Agreement or the other Operative Documents to which it is a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the security interest of any Pass Through Trustee in the Indenture Estate. SECTION IV CLOSING CONDITIONS The obligations of the Owner Participant, the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee, the Pass Through Trustees, Midwest and EME to consummate the transactions contemplated hereby on the Closing Date shall be subject to prior or concurrent satisfaction or waiver of the following conditions, except that the obligations of any Person shall not be subject to such Person's own performance or compliance. SECTION 4.1 OPERATIVE DOCUMENTS. On or before the Closing Date, each of the Operative Documents to be delivered at the Closing shall have been duly authorized, executed and delivered by the parties thereto in substantially the form attached as an Exhibit hereto, shall each be in full force and effect, and executed counterparts of each shall have been delivered to each of the parties hereto. SECTION 4.2 CERTIFICATES AND THE LESSOR NOTES. Each of the conditions precedent contained in the Certificate Purchase Agreement shall have been satisfied or waived by the Initial Purchasers and such Initial Purchasers shall have purchased the Certificates pursuant to, and in accordance with, the terms of the Certificate Purchase Agreement and the Proceeds shall have been provided to the Owner Lessor through the purchase by the Pass Through Trustees of the applicable Initial Lessor Notes; SECTION 4.3 PURCHASE AGREEMENT. The Equity Investor shall have purchased Midwest's membership interest in the Owner Participant pursuant to the Purchase Agreement. 35 SECTION 4.4 OTHER DOCUMENTS. Each of the Lease Financing Parties shall have received certified copies of the Organic Documents of each of the other parties hereto (except for the Lease Indenture Trustee and the Pass Through Trustees, who shall not be required to provide such documents) and resolutions of the board of directors or managers (or managing members), as the case may be, of each such other Lease Financing Party duly authorizing the Overall Transaction and such documents and such evidence as each party may reasonably request in order to establish the authority of each such other party to consummate the transactions contemplated by this Agreement, the taking of all corporate and other proceedings in connection therewith and compliance with the conditions herein or therein set forth and the incumbency of all officers signing any of the Operative Documents. Each of the foregoing documents shall be reasonably satisfactory to the recipient. SECTION 4.5 REPRESENTATIONS AND WARRANTIES. The representation and warranties set forth in SECTION 3 hereof shall be true and correct on and as of the Closing Date with the same effect as though made on and as of the Closing Date and each of the Lease Financing Parties shall have received a certificate of each of the parties hereto to such effect. SECTION 4.6 DEFAULTS, EVENTS OF DEFAULT, EVENTS OF LOSS. No Lease Event of Default, Lease Indenture Event of Default or Event of Loss or event that, with the passage of time or giving of notice or both, would constitute a Lease Event of Default, Lease Indenture Event of Default or an Event of Loss shall have occurred and be continuing. SECTION 4.7 CONSENTS. All material permits, licenses, approvals and consents necessary to consummate the Overall Transaction (including any consent required from ComEd or any lenders to EME, Holdings, Midwest or their Affiliates) shall have been duly obtained and shall be in full force and effect and in form and substance satisfactory to each of the Lease Financing Parties. SECTION 4.8 GOVERNMENTAL ACTIONS. All actions, if any, required to have been taken by any Governmental Authority on or prior to the Closing Date in connection with the transactions contemplated by any Operative Documents on the Closing Date, including, without limitation, the FERC Orders, shall have been taken and all orders, permits, waivers, exemptions, authorizations and approvals of and registrations with such Governmental Authorities required to be in effect on the 36 Closing Date in connection with the transactions contemplated by the Operative Documents on the Closing Date shall have been issued; and all such orders, permits, waivers, exemptions, authorizations and approvals shall be in full force and effect on the Closing Date. SECTION 4.9 INSURANCE. Insurance (including all related endorsements) complying with the requirements of SECTION 11 of the Facility Lease shall be in full force and effect and all premiums thereon shall be current. The Owner Participant, the Equity Investor, the Owner Trustee, the Owner Lessor, the Lease Indenture Trustee and the Pass Through Trustees shall have received a certificate or certificates dated the Closing Date of an independent insurance broker or carrier reasonably satisfactory to such Persons stating that such insurance is in full force and effect. The Equity Investor and the Owner Participant shall have received a report from their insurance consultant in form and substance satisfactory to them. SECTION 4.10 ENGINEERING REPORT. The Owner Participant, the Equity Investor, the Lease Indenture Trustee and the Pass Through Trustees shall have received, on or before the Closing Date, a copy of the Engineering Report and the Owner Participant and the Equity Investor shall have received a report of R. W. Beck, each such document in form and substance reasonably satisfactory to the recipients. SECTION 4.11 APPRAISAL; CONDITION OF THE FACILITY. The Owner Participant and the Equity Investor shall have received the Closing Date Appraisal prepared by the Appraiser addressed and delivered only to the Equity Investor and the Owner Participant and satisfactory in form and substance to the recipients. The Owner Participant shall be satisfied that the Facility shall be in the condition described in the Closing Date Appraisal. The Lease Indenture Trustee, the Pass Through Trustees and the Initial Purchasers shall have received a copy of the verification of value, useful life and estimated residual value prepared by the Appraiser in connection with the appraisal of assets subject to the Facility Lease, each of which will be reasonably satisfactory to the recipient. SECTION 4.12 OPINION WITH RESPECT TO CERTAIN TAX ASPECTS. The Owner Participant and the Equity Investor shall have received a satisfactory tax opinion, dated the Closing Date, of Hunton & Williams addressed and delivered only to the Owner Participant and the OP Guarantor. 37 SECTION 4.13 OPINIONS OF COUNSEL. Each of the relevant Lease Financing Parties shall have received an opinion or opinions, dated the Closing Date, of (a) SASM&F, special counsel to Midwest and EME, substantially in the form of Exhibit CC, (b) Sonnenschein, Nath and Rosenthal, special Illinois counsel to Midwest and EME, substantially in the form of Exhibit DD, (c) Hunton & Williams, special New York counsel to the Owner Participant and the Equity Investor, substantially in the form of Exhibit EE, (d) in-house counsel to Midwest, EME and the Owner Participant, substantially in the form of Exhibit FF, (e) Richards, Layton & Finger, P.A., counsel to the Owner Lessor, the Trust Company, and the Owner Trustee, substantially in the form of Exhibit GG, (f) Stadtmauer Bailkin LLP, special counsel to the Lease Indenture Trustee and the Lease Indenture Company, substantially in the form of Exhibit HH addressed to such Person, (g) Stadtmauer Bailkin LLP, counsel to the Pass Through Trustees and the Pass Through Company, substantially in the form of Exhibit II, (h) Van Ness Feldman, special federal regulatory counsel to Midwest and EME, substantially in the form of Exhibit JJ, and (i) in-house counsel to the Owner Participant and the Equity Investor, substantially in the form of Exhibit KK. Each such Person expressly consents to the rendering by its counsel of the opinion referred to in this SECTION 4.13 and acknowledges that such opinion shall be deemed to be rendered at the request and upon the instructions of such Person, each of whom has consulted with and has been advised by its counsel as to the consequences of such request, instructions and consent. Furthermore, each such counsel shall, to the extent requested, permit the Rating Agencies and the Initial Purchasers to rely on their opinion as if such opinion were addressed to such parties. SECTION 4.14 RECORDINGS AND FILINGS. All filings and recordings listed on Schedule 4.14 hereto shall have been duly made and all filing, recordation, transfer and other fees payable in connection therewith shall have been paid; and the filing of all precautionary financing statements under the Uniform Commercial Code of Illinois and any other mortgages, security agreements or other documents as may be reasonably requested by counsel to the Owner Participants, the Lease Indenture Trustee or the Pass Through Trustees to perfect the right, title and interest of the Owner Lessor in the Owner Lessor's Interest, or any part thereof or interest therein and the Lien of the Lease Indenture Trustee in the Indenture Estate, shall have been made. 38 SECTION 4.15 TAXES. All Taxes, if any, due and payable on or before the Closing Date in connection with the execution, delivery, recording and filing of this Agreement or any other Operative Document, or any document or instrument contemplated thereby shall have been duly paid in full. SECTION 4.16 NO CHANGES IN REQUIREMENTS OF LAW. No change shall have occurred in Requirements of Law or the interpretation thereof by any competent court or other Governmental Authority that would make it illegal for the Equity Investor, the Owner Participant, the Owner Lessor, the Owner Trustee or Midwest to participate in any of the transactions contemplated by the Operative Documents or would materially adversely affect the Facility, the Undivided Interest or the Ground Interest. No change in the Tax law shall have occurred with respect to which no adjustment has been made pursuant to SECTION 15 hereof. SECTION 4.17 REGISTERED AGENT FOR MIDWEST AND EME. CT Corporation System shall have been appointed by Midwest and EME as registered agent for service of process in the State of New York as provided in the Operative Documents and CT Corporation System shall have accepted such appointment. SECTION 4.18 FAS 13. The present value of Basic Lease Rent payable during the Basic Lease Term under the Facility Lease (taking into account any rent adjustment through or contemplated on the Closing Date), together with all rent payable under the Facility Site Sublease and all Transaction Costs financed through the Facility Lease, discounted at the Discount Rate, shall satisfy the 90 percent test for operating lease treatment under FAS 13. SECTION 4.19 RENT ADJUSTMENTS. No rent adjustment made or contemplated on the Closing Date (other than adjustments to reflect a change in Transaction Costs or the actual interest rate on the Initial Lessor Notes) shall cause either (i) the after-tax present value of Basic Lease Rent discounted at 6% per annum, compounded annually to increase by more than 100 basis points or (ii) the total Basic Lease Rent to increase by more than 2.0%. SECTION 4.20 PARENT GUARANTY. The OP Guarantor shall have executed and delivered to the other Lease Financing Parties an Owner Participant Guaranty substantially in the form of Exhibit Y hereto. 39 SECTION 4.21 TITLE INSURANCE. Each of the Title Policies shall have been delivered to the Owner Participant, the Equity Investor, the Lease Indenture Trustee and Pass Through Trustees. SECTION 4.22 EME GUARANTEES. EME shall have executed and delivered (i) to the Owner Lessor the EME Guarantee substantially in the form of Exhibit R hereto and (ii) the EME OP Guarantee to the beneficiaries thereof substantially in the form of Exhibit S hereto. SECTION 4.23 NON-CONSOLIDATION OPINION. Hunton & Williams, Special New York counsel to the Owner Participant shall have delivered to the Rating Agencies a non-consolidation opinion, if requested by any Rating Agency, with respect to non-consolidation of the Owner Participant into its immediate parent. SECTION 4.24 RATING OF CERTIFICATES. The Certificates shall be rated at least Baa1 by Moody's and A- by S&P. SECTION 4.25 EME NOTE. EME shall have issued to Midwest the EME Note substantially in the form of Exhibit T attached hereto. SECTION 4.26 NO MATERIAL ADVERSE CHANGE. No material adverse change has occurred with respect to Midwest, the Facility or the Facility Site since March 31, 2000. SECTION 4.27 SUBORDINATION AGREEMENT AND REIMBURSEMENT AGREEMENT. On or before the Closing Date, each of the Subordination Agreement and the Reimbursement Agreement shall have been duly authorized, executed and delivered by the parties thereto in substantially the form attached as Exhibits AA and Z respectively, and shall each be in full force and effect, and executed counterparts of each shall have been delivered to each of the parties hereto and thereto. SECTION 4.28 SURVEY. The Owner Participant, the Equity Investor, the Lease Indenture Trustee and Pass Through Trustees shall have received a copy of the Survey in form and substance reasonably satisfactory to the recipients. 40 SECTION V AFFIRMATIVE COVENANTS OF MIDWEST Midwest covenants and agrees that it will perform the obligations set forth in this SECTION 5. SECTION 5.1 DELIVERY OF CERTAIN INFORMATION. Midwest shall furnish prompt written notice to the Owner Trustee, the Owner Lessor, the Owner Participant and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees: (a) as soon as possible and in any event within five Business Days after any Authorized Officer of Midwest obtains knowledge of the occurrence of any default under any material agreement to which Midwest is a party or any termination thereof, in each case, together with a statement of an Authorized Officer of Midwest setting forth details of such event of default, default or termination and the action Midwest has taken and proposes to take with respect thereto; (b) as soon as possible and in any event within five Business Days after 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 3.1(i), notice thereof; (c) immediately upon becoming aware of the institution of any steps by Midwest 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 Midwest 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 Midwest 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 Midwest with respect to any post-retire- ment 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 Midwest or any member of the Controlled 41 Group from a Multiemployer Plan, notice thereof and copies of all documentation relating thereto; (d) as soon as possible and in any event within five Business Days after any Authorized Officer of Midwest obtains knowledge of the occurrence thereof, notice that any Governmental Authority may revoke, or refuse to grant or renew, or materially modify, any material Governmental Approval described in SECTION 3.1(c); (e) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Midwest, or compliance with the terms of this Agreement or the other Operative Documents, as the Owner Trustee, the Owner Lessor, the Owner Participant and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees may reasonably request; (f) immediately upon becoming aware of any change in operations of Midwest that would cause Midwest to fail to qualify for EWG status or to lose exemption from regulation under PUHCA; and (g) concurrently with the delivery of any notice, report, request, demand, certificate, financial statement or other instrument to the Owner Lessor pursuant to the Facility Lease (but without duplication of deliveries required under SECTION 5.1(a)), for so long as the Lien of the Lease Indenture has not been terminated or discharged, Midwest shall furnish a copy of the same to the Lease Indenture Trustee and the Pass Through Trustees. SECTION 5.2 FINANCIAL INFORMATION. Midwest shall caused to be delivered to the Owner Trustee, the Owner Lessor, the Owner Participant, and for as long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees: (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 Midwest, consolidated balance sheets of Midwest (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 Midwest (which will include results for its Consolidated 42 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; (b) as soon as available and in any event within 120 days after the end of each Fiscal Year of Holdings, commencing with the 1999 Fiscal Year, a copy of the annual audited report for such Fiscal Year for Holdings (which will include results for its Consolidated Subsidiaries), including therein consolidated balance sheets of Holdings (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 Holdings (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 Holdings, 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, PROVIDED HOWEVER, that in the event annual audited report of Midwest becomes and for as long as it continues to be available, information delivery requirements of this Section 5.2(b) shall be deemed to refer to such annual audited report of Midwest and not Holdings; (c) concurrently with the delivery of the financial statements referred to in Section 5.2(b) hereof, Midwest shall deliver an Officer's Certificate of Midwest stating that (i) the signer has made, or caused to be made under its supervision, a review of this Agreement and the other Operative Documents; and (ii) such review has not disclosed the existence during such fiscal year (and the signer does not have knowledge of the existence as of the date of such certificate) of any condition or event constituting a Lease Event of Default or an Event of Loss or, if any such condition or event existed or exists, specifying the nature thereof, the period of existence thereof and what action Midwest has taken or proposes to take with respect thereto; (d) as soon as available, one copy of any documents filed by Midwest with the Securities and Exchange Commission or any successor agency pursuant to Section 13(a), 13(c), 14 or 15(d) (or any successor sections) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"); (e) within ten Business Days after each anniversary of the Closing Date, a certificate from Midwest's insurers or insurance agents evidencing 43 that the insurance policies in place satisfy the requirements of the Operative Documents; (f) as soon as possible and in any event within five Business Days after any Authorized Officer of Midwest obtains (i) knowledge of the occurrence thereof, notice of any casualty, damage or loss to the Facility, whether or not insured, through fire, theft, other hazard or casualty, involving a probable loss of $5,000,000 or more or (ii) knowledge of (A) the occurrence, notice of any cancellation, notice of threatened or potential cancellation or (B) any material change in the terms, coverage or amounts of any policy of insurance which would result in such policy deviating from Prudent Industry Practice. SECTION 5.3 INFORMATION CONCERNING THE FACILITY. Concurrently with the delivery of the financial statements referred to in SECTION 5.2(b), Midwest shall furnish the Owner Trustee, the Owner Lessor, the Owner Participant and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees and their respective authorized representatives either: (i) the annual report provided to senior management and shareholders of Midwest or its Affiliates, and (ii) a report for the preceding calendar year with respect to the Facility, in each case, 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 Midwest or the Guarantor or any of its Subsidiaries; (D) significant plant activities, such as major plant overhauls, Alterations, modifications and other capital expenditures, significant changes in plant operations and major operating incidents; and (E) markets activities, including quantities and average price of energy and capacity delivered. SECTION 5.4 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. Midwest shall continue to engage in the business of owning and operating the Facility 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 limited liability company 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 SECTIONS 6.1 OR 6.2. 44 SECTION 5.5 COMPLIANCE WITH REQUIREMENTS OF LAW AND CONTRACTUAL OBLIGATIONS. Midwest shall 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 such non-compliance would not result in a Material Adverse Effect on Midwest. SECTION 5.6 ENVIRONMENTAL COVENANT WITH RESPECT TO THE FACILITY AND THE FACILITY SITE. Midwest shall: (a) comply, and make all reasonable efforts to cause other Persons to comply, with all applicable Environmental Laws and obtain, comply with and maintain all necessary Governmental Approvals required under any applicable Environmental Law in connection with the use, operation and maintenance of the Facility and the Facility Site, in each case, except where such noncompliance or failure, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect on Midwest; (b) promptly upon the request of the Owner Trustee, the Owner Lessor, the Owner Participant or, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee or the Pass Through Trustees, if there has been a Lease Event of Default which has not been fully and timely cured, arrange for, and EME shall be responsible for all costs and expenses incurred in connection with, the environmental surveys in accordance with the terms of SECTION 5.2(f) of the Facility Lease. (c) provide copies of such information to evidence compliance with this SECTION 5.6 as the Owner Trustee, the Owner Lessor, the Owner Participant or, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees, may reasonably request from time to time. SECTION 5.7 FURTHER ASSURANCES. Upon written request of the Owner Trustee, the Owner Lessor, the Owner Participant, or, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee or the Pass Through Trustees, Midwest shall promptly perform or cause to be performed any and all acts and execute or cause to be executed any and all docu- 45 ments (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 preserve, protect and perfect the ownership of the Undivided Interest and the interest of the Owner Lessor in the Facility Site Lease and to maintain the first priority Lien intended to be created by the Lease Indenture therein. SECTION 5.8 ACCESS. A portion of the access to the Facility Site and the Facility is made available pursuant to that certain Easement dated December 16, 1999 between ComEd, as grantor, and Midwest, as grantee, which Easement was recorded December 22, 1999 in Tazewell County, Illinois as Document No. 9931148 (the "ACCESS EASEMENT"). The Access Easement is subject to the lien of the Mortgage dated July 1, 1923 made by ComEd, as mortgagor, to predecessor Trustees of Harris Trust and Savings Bank and D.G. Donovan Trustees, as mortgagee, which Mortgage was supplemented from time to time, the most recent of which was recorded June 11, 1974 in Tazewell County, Illinois as Document No. 1033-124 (the "ComEd Mortgage"). In the event that access to the Facility Site and the Facility shall be denied as a result of the foreclosure of the ComEd Mortgage, Midwest shall do or cause to be done whatever is necessary to provide sufficient access to the Facility Site and the Facility. SECTION VI NEGATIVE COVENANTS OF MIDWEST Midwest covenants and agrees that it will perform the obligations set forth in this SECTION 6. SECTION 6.1 MERGER AND CONSOLIDATION. Midwest shall not consolidate or merge with any other Person (unless it is the surviving entity) or sell, transfer or otherwise dispose of all or substantially all of its assets in one or a series of transactions, unless (i) no Lease Event of Default shall have occurred and be continuing prior to and after giving effect to such merger, consolidation or sale, (ii) the entity resulting from such consolidation, surviving such merger or to whom such assets are transferred shall (a) be a corporate entity (including a limited liability company) organized under the laws of the United States of America, any state thereof or the District of Columbia, and (b) expressly assume, pursuant to an agreement reasonably acceptable to the other Lease Financing Parties, each obligation of Midwest under the Operative Documents, (iii) the Owner Participant shall have received an opinion 46 reasonably satisfactory to it from Hunton & Williams, or from a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to Midwest to the effect that such consolidation, merger or sale of assets would not result in any material indemnified, or any unindemnified, incremental tax risk to the Owner Participant, (iv) the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and Pass Through Trustees, shall have received an opinion of counsel reasonably satisfactory to each such Person (y) with respect to the agreement referred to in the immediately preceding clause (ii) (b) and (z) addressing other customary matters, (v) after giving effect to such transaction (A) while the Certificates are outstanding, the ratings of the Certificates shall be equal to or greater than the ratings of the Certificates immediately prior to consummating such transaction and (B) if the Certificates are no longer outstanding, the credit rating of the long-term senior unsecured indebtedness of Midwest or any successor or surviving entity shall be equal to or greater than the credit rating of the long-term senior unsecured indebtedness of Midwest immediately prior to consummating such transaction and, (vi) for as long as the EME Guarantees are in effect, EME shall have delivered written affirmations of its obligations under the EME Guarantees to the beneficiaries of the EME Guarantees. Midwest shall not sell more than 50% of its assets without the prior written consent of the Owner Lessor and, for as long as the Lessor Notes are outstanding, the Lease Indenture Trustee and the Pass Through Trustees which consent shall not be unreasonably withheld, PROVIDED, HOWEVER, that such consent shall not be required in connection with such sale or disposition if (x) the Certificates are rated at least Baa3 by Moody's and BBB- by S&P taking into account such sale of assets or (y) if the Certificates are no longer outstanding, the long-term senior unsecured indebtedness of Midwest is rated at least Baa3 by Moody's and BBB- by S&P taking into account such sale of assets. SECTION 6.2 CHANGES IN LEGAL FORM OR BUSINESS. Midwest shall not change its legal form or Organic Documents except as permitted by SECTION 6.1, change its Fiscal Year or engage in any business other than the construction, ownership, maintenance and operation of the Generating Assets, the sale of wholesale electric power therefrom and related products and services and such other business as may be reasonably incidental thereto. 47 SECTION VII AFFIRMATIVE COVENANTS OF EME EME covenants and agrees that it will perform the obligations set forth in this SECTION 7. SECTION 7.1 FINANCIAL INFORMATION, REPORTS, NOTICES. EME shall furnish to the Owner Trustee, the Owner Lessor, the Owner Participant and, for as long as the Lien of the Lease Indenture Trustee has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees: (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 EME, consolidated balance sheets of EME (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 EME (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 Officer of EME 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 EME, a copy of the annual audited report for such Fiscal Year for EME (which will include results for its Consolidated Subsidiaries), including therein consolidated balance sheets of EME (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 EME (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 EME, 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) for so long as any Certificates remain outstanding, unless EME is at the time subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, to holders of Certificates, Certificate Owners (as defined in the Pass Through Trust Agreements) and prospective investors, upon their request, 48 the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act; (d) following the effectiveness of any registration statement pursuant to the Registration Rights Agreement, whether or not required by the rules and regulations of the Securities and Exchange Commission (the "SEC"), EME shall maintain its status as a reporting company under the Exchange Act and file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to the Lease Financing Parties upon request, unless otherwise provided in the Operative Documents and so long as the requirements of SECTION 3.4 of the Facility Lease are complied with; (e) concurrently with the delivery of the financial statements referred to in SECTION 7.1(a), a certificate, executed by an Authorized Officer of EME with responsibility for financial matters, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Owner Lessor and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees) compliance with the financial covenant set forth in SECTION 4.09 of the EME OP Guarantee; (f) as soon as possible and in any event within five Business Days after any Authorized Officer of EME obtains knowledge of the occurrence of (i) each Lease Event of Default or (ii) any default under any other material agreement to which EME or any of its subsidiaries is a party or any termination thereof, if such event could reasonably be expected to result in a Material Adverse Effect on EME, in each case, together with a statement of such Authorized Officer setting forth details of such Default, default or termination and the action which EME or such subsidiary of EME 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 occurrence of any material adverse development with respect to any litigation, action, proceeding, or labor controversy of the type described in SECTION 3.2(h) or (ii) the commencement of any labor controversy, litigation, action, proceeding of the type described in SECTION 3.2(h) hereof, notice 49 thereof and, upon request of the Owner Lessor and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees, copies of all non-privileged documentation relating thereto; (h) immediately upon becoming aware of the institution of any steps by EME 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 EME 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 EME 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 EME with respect to any post-retirement Welfare Plan benefit, which has a Material Adverse Effect on EME notice thereof and copies of all documentation relating thereto; (i) as soon as known, any changes in EME's Debt Rating by Moody's or S&P or any other rating agency which maintains a Debt Rating on EME; (j) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of EME, or compliance with the terms of this Agreement or the other Operative Documents, as Owner Lessor, the Owner Participant, the Lease Indenture Trustee or the Pass Through Trustees may reasonably request. SECTION 7.2 MAINTENANCE OF CORPORATE EXISTENCE. Subject to the provisions of SECTION 8.2 hereof, EME shall at all times preserve and maintain in full force and effect (i) its corporate existence and good standing under the laws of the State of California and (ii) its qualification to do business in each other jurisdiction in which the character of its properties or the nature of its activities make such qualification necessary, except where the failure to be so qualified would not reasonably be expected to result in a Material Adverse Effect with respect to EME. 50 SECTION 7.3 FURTHER ASSURANCES. Upon written request of the Owner Lessor, the Owner Participant, and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees, EME shall 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 preserve, protect and perfect the ownership of the Undivided Interest and the interest of the Owner Lessor in the Ground Lease and to maintain the first priority Lien intended to be created by the Lease Indenture therein. SECTION 7.4 TAXES. EME shall, prior to the time penalties attach thereto, (i) file, or cause to be filed, all tax and information returns that are required to be, or are required to have been, filed by it in any jurisdiction, and (ii) pay or cause to be paid all taxes shown to be, or to have been, due and payable on such returns and all other taxes lawfully imposed and payable by it, except to the extent there is a Good Faith Contest thereof by EME. SECTION VIII NEGATIVE COVENANTS OF EME SECTION 8.1 LIENS. EME shall not pledge, mortgage or hypothecate, or permit to exist, any mortgage, pledge or other lien upon any property at any time directly owned by EME to secure any EME Indebtedness, without making effective provisions whereby the EME Guarantees shall be equally and ratably secured with any and all such EME Indebtedness and with any other EME Indebtedness similarly entitled to be equally and ratably secured; provided, however, that this restriction shall not apply to or prevent the creation or existence of (i) liens existing on the Closing Date, (ii) purchase money liens not to exceed the cost or value of the purchased property, (iii) other liens not to exceed 10 percent of EME's Consolidated Tangible Net Assets, and (iv) liens granted in connection with extending, renewing, replacing or refinancing, in whole or in part, EME Indebtedness (including, without limitation, increasing the principal amount of such EME Indebtedness) secured by liens described in the foregoing clauses (i) through (iii). In the event that EME proposes to pledge, mortgage or hypothecate any property at any time directly owned by it to secure any EME Indebtedness, other than as permitted by clauses (i) through (iv) of the previous paragraph, EME shall give prior written notice thereof to the Owner Trust, the Lease Indenture Trustee and the Pass Through Trustees, and EME 51 shall, prior to or simultaneously with such pledge, mortgage or hypothecation, effectively secure all the EME Guarantees equally and ratably with such EME Indebtedness. SECTION 8.2 CONSOLIDATION, MERGER; ASSET DISPOSITION. (a) EME shall not merge or consolidate with or into any other person and EME shall not sell, lease or convey all or substantially all of its assets to any person, unless (1) EME is the continuing corporation, or the successor corporation or the person that acquires all or substantially all of EME's assets is a corporation organized and existing under the laws of the United States or a State thereof or the District of Columbia and expressly assumes all EME's obligations under the EME Guarantees, the Participation Agreement and the other Operative Documents to which EME is a party, (2) immediately after such merger, consolidation, sale, lease or conveyance, there is no default or Lease Event of Default under the Lease Financing Documents, (3) if, as a result of the merger, consolidation, sale, lease or conveyance, any or all of EME's property would become the subject of a lien that would not be permitted by this Agreement, EME secures the EME Guarantees equally and ratably with the obligations secured by that lien and (4) EME delivers or causes to be delivered to the Owner Trust, the Owner Participant and as long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees an Officers' Certificate and an opinion of legal counsel, each stating that the merger, consolidation, sale, lease or conveyance comply with this Agreement and each in a form reasonably acceptable to the Owner Trust and Lease Indenture Trustee. (b) Except for the sale of the properties and assets of EME substantially as an entirety pursuant to subsection (a) above, and other than assets required to be sold to conform with governmental regulations, EME shall not sell or otherwise dispose of any assets (other than short-term, readily marketable investments purchased for cash management purposes with funds not representing the proceeds of other assets sales) if, on a pro forma basis, the aggregate net book value of all such sales during the most recent 12-month period would exceed 10 percent of EME's Consolidated Net Tangible Assets computed as of the end of the most recent fiscal quarter preceding such sale; provided, however, that any such sales shall be disregarded for purposes of this 10 percent limitation if the proceeds are invested in assets in similar or related lines of business of EME and, provided further, that EME 52 may sell or otherwise dispose of assets in excess of such 10 percent limitation if the proceeds from such sales or dispositions, which are not reinvested as provided above, are retained by EME as cash or cash equivalents or are used by EME to reduce or retire EME Indebtedness ranking pari passu in right of payment to the EME Guarantees or indebtedness of EME's Subsidiaries. SECTION 8.3 AMENDMENT, WAIVER OR ASSIGNMENT OF CERTAIN DOCUMENTS. EME shall not, and shall not permit any of its Subsidiaries to terminate, amend, supplement or otherwise modify any ComEd Agreement (i) in any materially adverse manner with respect to its term, offtake requirement or payment provision (ii) in a manner which would result in renewal or extension of the ComEd Agreements or which would otherwise limit in any way the Owner Lessor's or, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee's rights in respect of the Undivided Interest or (iii) otherwise in a manner which would result in a Material Adverse Effect on Midwest or the Owner Lessor or the Lease Indenture Trustee, as the case may be, without the prior written consent of the Owner Lessor or the Lease Indenture Trustee, as the case may be, which consent shall not be unreasonably withheld or delayed. SECTION IX COVENANTS OF THE TRUST COMPANY, THE OWNER TRUSTEE AND THE OWNER LESSOR SECTION 9.1 COMPLIANCE WITH THE TRUST AGREEMENT. Each of the Owner Lessor, the Trust Company and the Owner Trustee hereby severally covenants and agrees severally and as to itself only that it will: (a) comply with all of the terms of the Trust Agreement applicable to it; and (b) not amend, supplement, or otherwise modify SECTION 9.01, SECTION 10.01 or SECTION 10.02 of the Trust Agreement without the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default has occurred and is continuing or the Lease Indenture Trustee so long as the Lessor Notes are outstanding. 53 SECTION 9.2 OWNER LESSOR'S LIENS. The Trust Company, the Owner Trustee and the Owner Lessor each covenants severally and as to itself only that it will not directly or indirectly create, incur, assume or suffer to exist any Owner Lessor's Lien attributable to it and unrelated to the transactions contemplated hereby and will promptly notify in writing Midwest, EME, the Owner Participant and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees of the imposition of any such Lien of which it has actual knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Owner Lessor's Lien attributable to it. SECTION 9.3 AMENDMENTS TO OPERATIVE DOCUMENTS. The Owner Trustee and the Trust Company each covenants severally and as to itself only that it will not unless such action is expressly contemplated by the Operative Documents, or with respect to the Owner Trustee and the Owner Lessor, unless it is expressly directed by the Owner Participant in writing, (a) through its own action terminate any Operative Document to which it is a party, (b) amend, supplement, waive or modify (or consent to any such amendment, supplement, waiver or modification) any Operative Document (other than the Trust Agreement, amendments to and modifications of which are governed by SECTION 9.1 hereof) in any manner other than with respect to administrative or ministerial matters or (c) except as provided in SECTION 14.2 hereof, take any action to prepay or refund the Lessor Notes or amend any of the payment terms of the Lessor Notes without, in each case, the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing and, in the case of clause (a) or (b), the Lease Indenture Trustee and the Pass Through Trustees as long as the Lien of the Lease Indenture has not been terminated or discharged. SECTION 9.4 TRANSFER OF THE OWNER LESSOR'S INTEREST. Other than as contemplated by the Operative Documents, each of the Owner Lessor and the Owner Trustee covenants severally and as to itself only that it will not assign, pledge, sell, lease, convey or otherwise transfer any of its then existing right, title or interest in and to the Owner Lessor's Interest, the Trust Estate or the other Operative Documents without the consent of Midwest and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee, which consent may not be unreasonably withheld. Nothing in this SECTION 9.4 shall limit the ability of the Owner Trustee or the Owner 54 Participant to appoint a successor Owner Trustee pursuant to SECTION 9 of the Trust Agreement. SECTION 9.5 OWNER LESSOR; TRUST ESTATE. Each of the Owner Trustee and the Owner Lessor covenants severally and as to itself only that it will not voluntarily take any action to subject the Owner Lessor or the Trust Estate to the provisions of any applicable bankruptcy or insolvency law (as now or hereafter in effect). SECTION 9.6 LIMITATION ON INDEBTEDNESS AND ACTIONS. Each of the Owner Trustee and the Owner Lessor covenants severally and as to itself only that it will not incur any indebtedness nor enter into any business or activity except as required or expressly permitted or contemplated by any Operative Document. SECTION 9.7 CHANGE OF LOCATION. The Owner Trustee shall use all reasonable efforts to give the Owner Participant, the Lease Indenture Trustee, the Pass Through Trustees, Midwest and EME 30 days' written notice of any relocation of the Owner Trustee's chief executive office or the place where documents and records relating to the Owner Trustee or the Trust Estate are kept from the location set forth in SECTION 3.3(j) and of any change in its name, but in any event the Owner Trustee and the Owner Lessor shall give such notice within 30 days after such relocation or name change. SECTION 9.8 BANKRUPTCY OF TRUST. Each of the Trust Company, the Owner Trustee and the Owner Lessor hereby agrees severally and as to itself only that it shall not voluntarily take any action that shall, or cause any action to be taken that is intended to, submit the Owner Lessor, as debtor, to any proceeding under any Requirement of Law involving bankruptcy, insolvency, reorganization or other laws affecting the rights of creditors generally unless a Lease Event of Default or a Material Lease Default shall have occurred and be continuing (in which case, if the Lien of the Lease Indenture shall not have been discharged, the Trust Company or the Owner Lessor shall not take such action unless the Lease Indenture Trustee shall have given its prior written consent to such action in its sole discretion). SECTION 9.9 COMED CONSENT. The Owner Lessor and its successors and assigns, as the case may be, agree not to invoice ComEd pursuant to the ComEd Consent prior to exercise of remedies by the Owner Lessor or its successors and assigns under the Facility Lease. Following such exercise of remedies by the Owner 55 Lessor or its successors and assigns, as the case may be, the Owner Lessor and its successors and assigns hereby agree to cooperate with Midwest in preparing invoices under the Power Purchase Agreement with respect to electrical output of the Facility equal to the Undivided Interest Percentage. SECTION X COVENANTS OF THE OWNER PARTICIPANT SECTION 10.1 RESTRICTIONS ON TRANSFER OF BENEFICIAL INTEREST. (a) The Owner Participant covenants and agrees that it shall not during the Facility Lease Term assign, convey or transfer any of its right, title or interest in the Beneficial Interest without the prior written consent of Midwest and, so long as the Lien of the Lease Indenture has not been terminated or discharged, without the prior written consent of the Lease Indenture Trustee and the Pass Through Trustees; PROVIDED, HOWEVER, that the Owner Participant may assign, convey or transfer all or any part of its interest in the Beneficial Interest without such consent to a Person (the "TRANSFEREE") which shall assume the duties and obligations of the Owner Participant under the Operative Documents with respect to the interest being transferred pursuant to an Assignment and Assumption Agreement substantially in the form of Exhibit LL hereto, if each of the following conditions shall have been satisfied: (i) Midwest, EME, the Owner Trustee and, so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees shall have received an opinion of counsel, which opinion and counsel are reasonably satisfactory to each recipient thereof, to the effect that such Assignment and Assumption Agreement is a legal, valid and binding obligation of, and is enforceable against, each party thereto, that all regulatory approvals required in connection with such transfer or necessary to assume the Owner Participant's obligations under the Operative Documents shall have been obtained and that the proposed transfer of the Beneficial Interest will not require registration the Securities Act; (ii) the Transferee shall be a "United States person" within the meaning of Section 7701(a)(30) of the Code; 56 (iii) the Transferee or a guarantor of such Transferee meets the following criteria: (1) the Consolidated Tangible Net Assets of at least equal to $75 million calculated in accordance with GAAP, (2) agrees to be bound by the terms of the Operative Documents pursuant to an Assumption and Assignment Agreement substantially in the form of Exhibit LL hereto, and (3) so long as no Lease Event of Default shall have occurred and be continuing, such Transferee is not a Competitor of, or in material litigation with, Midwest or any Affiliate of Midwest, unless waived by Midwest; (iv) the transferring Owner Participant shall pay, without any right of indemnification from Midwest or any other Person, all reasonable documented out-of-pocket costs, fees and expenses incurred in connection with any such transfer by (x) the other Lease Financing Parties, except Midwest and EME, and (y) Midwest and EME, so long as no Lease Event of Default shall have occurred and be continuing; and (v) following such transfer, there shall be not more than two Owner Participants with interests (Undivided Interests or beneficial trust interests) in the Facility. (b) For purposes of the preceding clause (a), a "COMPETITOR" of Midwest shall be an entity (other than an entity which on the Closing Date is Other Owner Participant or an Affiliate thereof) which, or an Affiliate of which, is significantly involved as a seller or trader of capacity or energy in the electricity market; PROVIDED that, the foregoing restriction shall not apply in the case of a Transferee that is an Affiliate of such a seller or trader so long as (i) such Transferee is an entity involved in making passive investments such as the Owner Participant's contemplated investment in this transaction, (ii) such Transferee has in place procedures which shall be reasonably acceptable to Midwest to prevent such Affiliate that is a seller or trader of capacity from acquiring confidential information relating to such passive investments and agrees in writing with Midwest to maintain and abide by such procedures, and (iii) neither such Transferee nor any Affiliate thereof is an entity that is (x) actively involved in the generation of electricity in Mid-American Interconnected Network and/or the East Central Reliability Council or any 57 successor thereto, or (y) on the List of Competitors, attached hereto as Exhibit MM, which may, from time to time, but no more often than once per year, be modified by Midwest, and shall contain a list of up to six entities (including Affiliates) which Midwest reasonably believes in its good faith judgment are Competitors of Midwest. Notwithstanding the foregoing, the restrictions set forth in clause (i) or (iii)(1) and (iii)(3) of SECTION 10.1(a) above shall not inure to the benefit of Midwest if such transfer is in connection with the exercise of remedies during a Lease Event of Default. (c) Neither Midwest nor EME shall be responsible for any adverse tax consequence to the Owner Lessor or the Owner Participant resulting from any transfer pursuant to this SECTION 10.1 and the Pricing Assumptions (as set forth on SCHEDULE 10.1(c) hereto) shall not be changed as a result of any such transfer except if such transfer is in connection with the exercise of remedies during a Lease Event of Default. (d) The Owner Participant shall give the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee, the Pass Through Trustees, EME and Midwest 30 days' prior written notice of such transfer, or 10 days in the case of a transfer to an Affiliate of the Owner Participant, specifying the name and address of any proposed Transferee and such additional information as shall be necessary to determine whether the proposed transfer satisfies the requirements of this SECTION 10.1. If requested by the Owner Participant, the Lease Indenture Trustee or any Pass Through Trustee, Midwest shall acknowledge qualifying transfers. (e) Upon any such transfer in compliance with this SECTION 10.1, (i) such Transferee shall, to the extent of the Beneficial Interest conveyed to the Transferee, (x) be deemed the "Owner Participant" for all purposes, and (y) enjoy the rights and privileges and perform the obligations of the Owner Participant hereunder and under the Assignment and Assumption Agreement, the Owner Participant Guaranty and each other Operative Document to which such Owner Participant is a party, and each reference in this Agreement, the Assignment and Assumption Agreement, the Owner Participant Guaranty and each other Operative Document to the "Owner Participant" shall thereafter be deemed to include such Transferee, to the extent of the Beneficial Interest conveyed to the Transferee, for all purposes and (ii) the transferor Owner Participant and the Guarantor, if any, of such transferor Owner Participant's obligations shall be released from all obligations hereunder and under 58 each other Operative Document to which such transferor or Guarantor is a party or by which such transferor Owner Participant or Guarantor is bound to the extent such obligations are expressly assumed by a Transferee; PROVIDED, HOWEVER, that in no event shall any such transfer waive or release the transferor or its Guarantor from any liability existing immediately prior to or occurring simultaneously with such transfer. SECTION 10.2 OWNER PARTICIPANT'S LIENS. The Owner Participant covenants that it will not directly or indirectly create, incur, assume or suffer to exist any Owner Participant's Lien and the Owner Participant shall promptly notify Midwest, EME, the Lease Indenture Trustee and the Pass Through Trustees, in writing of the imposition of any such Lien of which the Owner Participant has actual knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Owner Participant's Lien. SECTION 10.3 AMENDMENTS OR REVOCATION OF TRUST AGREEMENT. The Owner Participant covenants that it will not (a) amend, supplement, or otherwise modify SECTION 9.01, SECTION 10.01 or SECTION 10.02 of the Trust Agreement except for amendments required by the Operative Documents or by Requirement of Law or which are administrative or ministerial in nature without the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default has occurred and is continuing, and without the prior written consent of the Lease Indenture Trustee and the Pass Through Trustees, so long as the Lien of the Lease Indenture has not been terminated or discharged, or (b) revoke, or otherwise waive compliance with or terminate the Trust Agreement without the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default has occurred and is continuing, and the Lease Indenture Trustee so long as the Lien of the Lease Indenture has not been terminated or discharged. SECTION 10.4 PROHIBITION ON FUNDAMENTAL CHANGES. The Owner Participant shall not change its form of organization and shall not enter into or engage in any business other than as contemplated by the Operative Documents and the activities related thereto. SECTION 10.5 BANKRUPTCY FILINGS. The Owner Participant agrees that it will not file a petition, or join in the filing of a petition, seeking reorganization, arrangement, adjustment or composition of, or in respect of, the Owner Lessor under the 59 Bankruptcy Code, or any other applicable Federal or state law or the law of the District of Columbia. SECTION 10.6 INSTRUCTIONS. The Owner Participant agrees that it will not instruct the Owner Lessor to take any action prohibited by this Agreement or any other Operative Document. SECTION 10.7 APPOINTMENT OF SUCCESSOR OWNER TRUSTEE. Notwithstanding any other provision of this Agreement, a successor Owner Trustee shall not be appointed by the Owner Participant without the consent of Midwest and, so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees unless such successor Owner Trustee (a) meets the requirements of the Trust Agreement, (b) has a combined capital and surplus of at least $150 million, and (c) Midwest and, so long as Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees shall have received at the expense of the Owner Participant: (i) an opinion or opinions of counsel, such counsel and such opinion to be reasonably acceptable to such parties, to the effect that no regulatory consents or approvals are required, or (ii) such other documentation reasonably satisfactory to Midwest, the Lease Indenture Trustee or Pass Through Trustees, as the case may be; PROVIDED, HOWEVER, that if Wilmington Trust Company resigns as Owner Trustee, is terminated for cause, or shall become incapable of acting or shall be adjudged bankrupt or insolvent or a receiver of the Owner Trustee or its properties shall be appointed or any public officer shall take charge or control of the Owner Trustee or its property or affairs for the purpose of rehabilitation, conservation or liquidation, the opinion required by clause (c) shall be at the expense of Midwest. SECTION 10.8 COOPERATION. Owner Lessor agrees, and each of the Owner Participant and the Owner Trustee agree to cause the Owner Lessor to, at the request of Midwest and at the sole cost and expense of EME on an After-Tax Basis, take such actions as may be necessary for the Owner Lessor to take as the owner of the Facility for purposes of obtaining the valid and effective issue, transfer or amendment, as the case may be, of all Governmental Approvals to the extent the same are required for the use, ownership, operation or maintenance of the Facility, the Facility Site, the Undivided Interest, the Ground Interest or any Component by Midwest or any permitted assignee of Midwest in the manner contemplated by the Operative Documents. Midwest shall pay on an After-Tax Basis all reasonable costs and 60 expenses (including, without limitation, the reasonable fees and expenses of counsel) of Owner Lessor and each other Person party to an Operative Document incurred in connection with any such action. It is understood and agreed that, with respect to any action requested of it, and taken by it, under this Section, the Owner Lessor, the Owner Participant and the Owner Trustee shall make no representation or warranty as to, and shall have no responsibility for the effectiveness of such action to accomplish or promote the objective intended by the Person making such request. SECTION XI COVENANTS OF THE LEASE INDENTURE TRUSTEE SECTION 11.1 THE INDENTURE TRUSTEE'S LIENS. Neither the Lease Indenture Company nor the Lease Indenture Trustee will directly or indirectly create, incur, assume or suffer to exist any Indenture Trustee's Lien attributable to it and arising out of events or conditions not related to its rights in the Indenture Estate or the administration thereof, and will promptly notify the Owner Participant, the Equity Investor, the Owner Trustee, Midwest and EME in writing of the imposition of any such Lien of which it has actual knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Indenture Trustee's Lien. SECTION XII EME'S INDEMNIFICATIONS SECTION 12.1 GENERAL INDEMNITY. (a) CLAIMS IDENTIFIED. Subject to the exclusions stated in paragraph (b) below, EME agrees to indemnify, protect, defend and hold harmless, and does hereby indemnify the Owner Participant, the OP Guarantor, the Owner Lessor, the Trust Company in its individual capacity, the Owner Trustee, the Equity Investor, the Lease Indenture Trustee, the Lease Indenture Company in its individual capacity, the Pass Through Trustees, the Pass Through Company in its individual capacity and their respective Affiliates, successors, assigns, agents, members, partners, directors, officers or employees (each an "INDEMNITEE") against any and all Claims (including Environmental Claims) (whether or not any of the transactions contemplated by the Operative Documents are consummated) imposed on, incurred or suffered by or asserted against such Indemnitee in any way relating to or in connection with or resulting from or arising out of or attributable to: 61 (i) the construction, financing, refinancing, acquisition, operation, rebuilding, warranty, ownership, use, possession, maintenance, repair, lease, condition, alteration, modification, restoration, refurbishing, return, purchase, sale or other disposition, insuring, sublease, or other use or non-use of the Facility, the Facility Site, the Undivided Interest, the Ground Interest or any Component or any portion thereof or any interest therein; (ii) the conduct of the business or affairs of Midwest at the Facility and the Facility Site or in connection therewith; (iii) the manufacture, design, purchase, acceptance, rejection, delivery or condition of, or improvement to, the Facility, the Facility Site, the Undivided Interest, the Ground Interest, or any Component, or any portion of any thereof or any interest therein; (iv) the Facility Lease, the Facility Site Lease, the Facility Site Sublease, any other Operative Document (including any Claims arising under this SECTION 12.1(a)(iv) or SECTION 12.1(a)(i) hereof relating directly or indirectly to ComEd Consent) or the Offering Circular, the execution or delivery thereof or the perfor- mance, enforcement, attempted enforcement or amendment, supplement or modification or any waiver of any terms thereof, or the transactions contemplated thereby or resulting therefrom; (v) any actual or alleged Environmental Condition or Environmental Claim at, in, on, under, from or related in any way to the Facility or the Facility Site or any portion thereof or any Component; (vi) the reasonable costs and expenses of any Indemnitee in connection with amendments or supplements to the Operative Documents requested or consented to by Midwest or EME or required or necessary as a result of a Lease Event of Default; 62 (vii) the imposition of any Lien other than, with respect to a particular Indemnitee (or a Related Party), a Lien arising by or through such Indemnitee that is prohibited by the terms of this Agreement or other Operative Documents; (viii) any violation by, or liability relating to, Midwest or EME of, or under, any Requirement of Law, whether now or hereafter in effect (including Environmental Laws), or any action of any Governmental Authority or other Person taken with respect to the Facility or the Facility Site, the Operative Documents or the interest of any Indemnitee under the Operative Documents, the Offering Circular, or the presence, Release, generation, management, recycling, use, storage, transportation, treatment or manufacture of any Hazardous Material in, at, under, to or from the Facility, the Facility Site or any Component; (ix) the non-performance or breach by Midwest or EME of any obligation contained in this Agreement or any other Operative Document or the falsity or inaccuracy of any representation, warranty or obligation of Midwest or EME contained in this Agreement, any other Operative Document or the Offering Circular; (x) the continuing fees (if any) and ex- penses of the Owner Lessor, the Owner Trustee (including the reasonable compensation and expenses of their counsel, accountants and other professional persons) arising out of the Owner Lessor's or the Owner Trustee's discharge of their respective duties under or in connection with the Operative Documents; (xi) the continuing fees (if any) and ex- penses of the Lease Indenture Company, the Lease Indenture Trustee, the Pass Through Company and the Pass Through Trustees (including the reasonable compensation and expenses of their respective counsel, accountants and other professional persons) arising out of the dis- charge of their respective duties under or in connection with the Operative Documents; 63 (xii) the applications of Part 4 and 5 of Subtitle B of Title I of ERISA (including, without limitation, any penalties imposed under Section 501(i) or (1) of ERISA) or any excise taxes, charges or penalties imposed under Section 4975 of the Code; (xiii) the issuance of the Initial Lessor Notes in accordance with Section 2.4 of the Lease Indenture and the issuance of any Additional Lessor Notes or New Lessor Notes pursuant to Section 2.12 or Section 2.13 of the Lease Indenture; and (xiv) in any other way relating to the transactions contemplated by the Operative Documents. (b) CLAIMS EXCLUDED. Any Claim, to the extent or resulting from or arising out of or attributable to any of the following, is excluded from EME's agreement to indemnify any Indemnitee under this SECTION 12.1: (i) acts, omissions or events occurring after expiration or other termination of the Facility Lease and, where required by the Facility Lease, return of the Facility to the Owner Lessor or its designee in compliance with the provisions of the Facil- ity Lease, except to the extent such Claim is (A) an Environmental Claim that relates to, results from, arises out of or is attributable to an Environmental Condition that was in existence at the Facility or the Facility Site prior to or as of such expiration or termination of the Facility Lease and the return of the Facility or (B) is a Claim that relates to, results from, arises out of or is attributable to the ComEd Consent; (ii) with respect to a particular Indemnitee and Related Parties, any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) by or on behalf of (a) in the case of the Owner Participant of any of its interest in the Beneficial Interest, or (b) in the case of the Owner Lessor, and if such action is taken at the written direction of the Owner Participant, the Owner Participant and Related Parties, of all or any of the Owner Lessor's 64 interest in the Facility or the Facility Site, or (c) all or any of either Pass Through Trust's interest in the Lessor Notes or the collateral therefor, unless such transfer is required by the terms of the Operative Documents or occurs in connection with the exercise of remedies during a Lease Event of Default; (iii) with respect to any Indemnitee and Related Parties, any Claim attributable to the gross negligence or willful misconduct of the Indemnitee seeking indemnification or a Related Party of such Indemnitee; (iv) as to any Indemnitee, any Claim attributable to the noncompliance of such Indemnitee or a Related Party, with any of the terms of, or any misrepresentation or breach of warranty by such Indemnitee contained in any Operative Document or any breach by such Indemnitee or a Related Party of any covenant contained in any Operative Document attributable to such Indemnitee or Related Party, unless attributable to Midwest or EME or the breach by another Person of its obligations under the Operative Documents or imputed to the Indemnitee; (v) with respect to the Owner Trustee and the Trust Company, any Claim constituting or arising from an Owner Lessor's Lien attributable to it; (vi) with respect to the Lease Indenture Trustee, any Claim arising from an Indenture Trustee's Lien prohibited by SECTION 11.1 hereof; (vii) with respect to the Pass Through Trustee and the Pass Through Company, any Claim arising from a Lien prohibited by Section 7.16 of either Pass Through Trust Agreement; (viii) with respect to the Owner Participant, any claim constituting or arising from an Owner Participant's Lien; 65 (ix) any Claim which constitutes Transac- tion Costs which the Owner Participant is obligated to pay pursuant to SECTION 2.3(a) hereof; (x) any Claim relating to the payment of any other amount to the extent such Indemnitee or a Related Party has expressly agreed in any Operative Document to pay such amount without a right of reimbursement; (xi) any Claim that is a Tax, or is a cost of contesting a Tax, whether or not EME is required to indemnify therefor pursuant to SECTION 14.2 or under the Tax Indemnity Agreement; (xii) any failure on the part of the Owner Trustee to distribute in accordance with the Trust Agreement any amounts received by it under the Operative Documents and distributable by it thereunder; (xiii) any Claim relating to the costs and expenses of any Indemnitee in connection with any amendments or supplements to the Operative Documents requested by such Indemnitee or a Related Party if such amendment or supplement is not required by the Operative Documents; (xiv) any Claim that constitutes principal and/or interest on the Lessor Notes, any Additional Lessor Notes or the corresponding payments under the Certificates or any Additional Certificates, respectively; and (xv) any Claim arising out of obligations expressly assumed by the Indemnitee seeking indemnification or a Related Party thereof. PROVIDED that the terms "omission," "gross negligence" and "willful misconduct," when applied with respect to the Owner Trustee, the Owner Participant, the OP Guarantor, the Equity Investor, the Owner Lessor, the Lease Indenture Trustee, the Pass Through Trustees or any Certificateholder or any Affiliate of any thereof, shall 66 not include any liability imputed as a matter of law to such Indemnitee solely by reason of such entity's interest in the Facility or the Facility Site or such Indemnitee's failure to act in respect of matters which are or were the obligation of Midwest under this Agreement or any other Operative Document. (c) INSURED CLAIMS. Subject to the provisions of paragraph (e) of this SECTION 12.1, in the case of any Claim indemnified by EME hereunder which is covered by a policy of insurance maintained by EME, each Indemnitee agrees, unless it and each other Indemnitee shall waive its rights to indemnification (for itself and each Related Party thereto) in a manner reasonably acceptable to EME, to cooperate, at the sole cost and expense of EME, with insurers in exercise of their rights to investigate, defend or compromise such Claim. (d) AFTER-TAX BASIS. EME agrees that any payment or indemnity pursuant to this SECTION 12.1 in respect of any Claim shall be made on an After-Tax Basis to the Indemnitees. (e) CLAIMS PROCEDURE. Each Indemnitee shall promptly after such Indemnitee shall have actual knowledge thereof notify EME in writing of any Claim as to which indemnification is sought; PROVIDED, that the failure so to notify EME shall not reduce or affect EME's liability which it may have to such Indemnitee under this SECTION 12.1. Any amount payable to any Indemnitee pursuant to this SECTION 12.1 shall be paid within fifteen (15) days after receipt of such written demand therefor from such Indemnitee, accompanied by a certificate of such Indemnitee stating in reasonable detail the basis for the indemnification thereby sought and (if such Indemnitee is not a party hereto) an agreement to be bound by the terms hereof as if such Indemnitee were such a party. The foregoing shall not, however, constitute an obligation to disclose confidential information of any kind without the execution of an appropriate confidentiality agreement. Promptly after EME receives notification of such Claim accompanied by a written statement describing in reasonable detail the Claims which are the subject of and basis for such indemnity and the computation of the amount so payable, EME shall notify such Indemnitee in writing whether it intends to pay, object to, compromise or defend any matter involving the asserted liability of such Indemnitee. EME shall have the right to investigate and so long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing, EME shall have the right in its sole discretion, to defend or compromise any Claim for which indemnification is sought under this 67 SECTION 12.1 which EME acknowledges in writing to the applicable Indemnitee is subject to indemnification hereunder; PROVIDED that no such defense or compromise shall involve any danger of (i) foreclosure, sale, forfeiture or loss of, or imposition of a Lien on any part of the Undivided Interest, the Ground Interest, the Trust Estate or the Indenture Estate or the impairment of the Facility in any material respect or (ii) any criminal liability being incurred or any material adverse effect on such Indemnitee, PROVIDED, FURTHER, that no Claim shall be compromised by EME on a basis that admits any criminal violation or gross negligence or willful misconduct on the part of such Indemnitee without the express written consent of such Indemnitee; and PROVIDED, FURTHER, that to the extent that other Claims unrelated to the transactions contemplated by the Operative Documents are part of the same proceeding involving such Claim, EME may assume responsibility for the contest or compromise of such Claim only if the same may be and is severed from such other Claims (and each Indemnitee agrees to use reasonable efforts to obtain such a severance). If EME elects, subject to the foregoing, to compromise or defend any such asserted liability, it may do so at its own expense and by counsel selected by it and reasonably satisfactory to such Indemnitee. Upon EME's election to compromise or defend such asserted liability and prompt notification to such Indemnitee of its intent to do so, such Indemnitee shall cooperate at EME's expense with all reasonable requests of EME in connection therewith and will provide EME with all information not within the control of EME as is reasonably available to such Indemnitee which EME may reasonably request; PROVIDED, HOWEVER, that such Indemnitee shall not, unless otherwise required by Requirement of Law, be obligated to disclose to EME or any other Person, or permit EME or any other Person to examine (i) any income tax returns of the Owner Participant or (ii) any confidential information or pricing information not generally accessible by the public possessed by the Owner Participant (and, in the event that any such information is made available, EME shall treat such information as confidential and shall take all actions reasonably requested by such Indemnitee for purposes of obtaining a stipulation from all parties to the related proceeding providing for the confidential treatment of such information from all such parties). Where EME, or the insurers under a policy of insurance maintained by EME, undertake the defense of such Indemnitee with respect to a Claim (with counsel reasonably satisfactory to each such Person such Indemnitee and without reservation of rights against such Indemnitee), no additional legal fees or expenses of such Indemnitee in connection with the defense of such Claim shall be indemnified hereunder unless such fees or expenses were incurred at the request of EME or such insurers. Notwithstanding the foregoing, an Indemnitee may participate at its own 68 expense in any judicial proceeding controlled by EME pursuant to the preceding provisions, but only to the extent that such party's participation does not in the reasonable opinion of counsel to EME interfere with such control; PROVIDED, HOWEVER, that such party's participation does not constitute a waiver of the indemnification provided in this SECTION 12.1; PROVIDED, FURTHER, that if and to the extent that (i) such Indemnitee is advised by counsel that an actual or potential conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel or (ii) there is a risk that such Indemnitee may be indicted or otherwise charged in a criminal complaint and such Indemnitee informs EME that such Indemnitee desires to be represented by separate counsel, such Indemnitee shall have the right to control its own defense of such Claim and the reasonable fees and expenses of such defense (including, without limitation, the reasonable fees and expenses of such separate counsel) shall be borne by EME. So long as no Lease Event of Default shall have occurred and be continuing, no Indemnitee shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of EME unless (i) the Indemnitee waives its rights to indemnification hereunder or (ii) EME has not acknowledged its indemnity obligation with respect thereto and there is a significant risk that a default judgment will be entered against such Indemnitee. Nothing contained in this SECTION 12.1(e) shall be deemed to require an Indemnitee to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. (f) SUBROGATION. To the extent that a Claim indemnified by EME under this SECTION 12.1 is in fact paid in full by EME or an insurer under an insurance policy maintained by EME, EME (so long as no Lease Event of Default shall have occurred and be continuing) or such insurer shall be subrogated to the rights and remedies of the Indemnitee on whose behalf such Claim was paid to the extent of such payment (other than rights of such Indemnitee under insurance policies maintained at its own expense) with respect to the transaction or event giving rise to such Claim. Should an Indemnitee receive any refund, in whole or in part, with respect to any Claim paid by EME hereunder, it shall promptly pay over to EME the lesser of (i) the amount refunded reduced by the amount of any Tax incurred by reason of the receipt or accrual of such refund and increased by the amount of any Tax (but not in excess of the amount of such reduction) saved as a result of such payment or (ii) the amount EME or any of its insurers has paid in respect of such Claim; PROVIDED that, so long as a Material Lease Default or Lease Event of Default shall have occurred and is continuing such amount may be held by 69 the Owner Lessor as security for Midwest's and EME's respective obligations under the Operative Documents. Any Person seeking indemnity under this SECTION 12.1 who is not a party to this Agreement shall agree to the terms and conditions set forth in this SECTION 12.1 as a condition to making any such claim for indemnity under this SECTION 12.1. SECTION 12.2 GENERAL TAX INDEMNITY. (a) INDEMNITY. Except as provided in paragraph (b), EME agrees to indemnify on an After-Tax Basis each of the Owner Participant, the OP Guarantor, the Equity Investor, the Owner Lessor, the Trust Company in its individual capacity, the Owner Trustee, the OP Member, the Noteholders, the Lease Indenture Trustee, the Lease Indenture Company in its individual capacity, the Pass Through Trustees and the Pass Through Company in its individual capacity, their respective successors and assigns, the past and present partners or members of or holders of the ownership interests in, as the case may be, the Owner Participant and the Affiliates of each of the foregoing (each a "TAX INDEMNITEE") and to hold each Tax Indemnitee harmless from and to defend each Tax Indemnitee against all Taxes that are imposed upon any Tax Indemnitee, the Facility, the Facility Site, the Undivided Interest, the Ground Interest, or any portion or Component thereof or any interest therein, or upon any Operative Document or interest therein, arising out of, in connection with or relating to, any of the following: (i) the construction, financing, refinancing, acquisition, operation, warranty, ownership, use, possession, maintenance, repair, lease, condition, alteration, modification, restoration, refurbishing, return, purchase, sale or other disposition, insuring, sublease, or other use or non-use of the Facility, Undivided Interest, Ground Interest or the Facility Site, or any portion or Component thereof or any interest therein; (ii) the conduct of the business or affairs of Midwest at the Facility and the Facility Site; (iii) the manufacture, design, purchase, acceptance, rejection, delivery or condition of, or improvement to, the 70 Facility, the Undivided Interest, the Ground Interest, the Facility Site, or any portion or Component thereof, or any interest therein; (iv) the Facility Lease, the Facility Site Lease, the Facility Site Sublease or any other Operative Document, the execution or delivery thereof, or the performance, enforcement or amendment of any terms thereof; (v) the payment or receipt of Basic Lease Rent, Renewal Lease Rent, Supplemental Lease Rent or any other amount payable under the Facility Lease; or (vi) otherwise relating to the transactions contemplated by the Operative Documents. (b) EXCLUDED TAXES. The indemnity provided for in paragraph (a) above shall not extend to any of the following Taxes (the "EXCLUDED TAXES"): (i) Taxes imposed on, based on or mea- sured by gross or net income or receipts or capital or net worth (other than sales, use, property, ad valorem, rental, stamp, transfer, excise, license and value added taxes, and other than franchise tax imposed by the State of Illinois upon the Owner Participant, the Owner Lessor or their respective Affiliates under the Business Corporation Act of 1983, as amended, or any successor legislation thereto); (ii) Taxes attributable to any period after expiration or other termination of the Facility Lease and, where required by the Facility Lease, return of the Facility to the Owner Lessor or its designee in accordance with the Facility Lease (or, in the case of the Lease Indenture Trustee, after the repayment of the Lessor Notes); (iii) Taxes imposed on a Tax Indemnitee attributable to the gross negligence or willful misconduct of such Tax Indemnitee or any Related Party of such Tax Indemnitee; 71 (iv) Taxes in the nature of capital gain, accumulated earnings, personal holding company, excess profits, succession or estate, minimum, alternative minimum, preference, franchise, conduct of business and other similar taxes (other than franchise tax imposed by the State of Illinois upon the Owner Partici- pant, the Owner Lessor or their respective Affiliates under the Busi- ness Corporation Act of 1983, as amended, or any successor legislation thereto); (v) Taxes imposed on a Tax Indemnitee that arise out of, or are caused by, any act or omission of such Tax Indemnitee (or any Related Party thereof) that is expressly prohibited by any Operative Document or by a breach by such Tax Indemnitee (or any Related Party thereof) of any of its representations, warranties or covenants under any Operative Document; (vi) Taxes arising out of, or caused by, any voluntary assignment, sale, transfer or other voluntary disposition, or any involuntary transfer or disposition resulting from a bankruptcy or similar proceeding for relief of debtors in which such Tax Indemnitee is a debtor, by (or a foreclosure by a creditor of) (A) the Owner Participant of any of its Beneficial Interest, (B) the Owner Lessor of all or any of its interest in the Facility or the Facility Site, or (C) the Lease Indenture Trustee of any interest in the Lessor Notes or the Indenture Estate unless (i) such transfer or disposition occurs during the continuance of a Lease Event of Default, or (ii) such transfer or disposition is required under, or occurs pursuant to, the Operative Documents and the price paid is other than Fair Market Sales Value; (vii) Taxes arising in connection with Owner Participant's Liens or Owner Lessor's Liens; (viii) Taxes imposed on any assignee or successor-in-interest to a Tax Indemnitee to the extent any such Taxes exceed the Taxes that would have been imposed had no assignment or transfer taken place determined under the law as in effect on the date 72 of transfer; PROVIDED that this exclusion shall not apply to the compu- tation of the gross-up amounts necessary to make a payment on an After-Tax Basis, nor to a transferee, assignee or successor in interest that acquires the interest of a Tax Indemnitee pursuant to a transfer or disposition in connection with the exercise of remedies during the continuance of a Lease Event of Default; (ix) Taxes that are included as a part of Transaction Costs; (x) Taxes imposed on, based on, or mea- sured by any compensation that any Owner Trustee or the Lease Indenture Trustee receives for its services; (xi) any U.S. federal income taxes, including with respect to the Owner Participant, Taxes for which EME is obligated to indemnify the Owner Participant under the Tax Indem- nity Agreement (or which are expressly excluded from indemnification thereunder); (xii) other than with respect to the Certificateholders, the Lease Indenture Trustee and the Pass Through Trustees or any Related Party in respect of any thereof (a "LENDER INDEMNITEE"), Taxes resulting from the Owner Lessor not being treated as a grantor trust or a nonentity for federal, state or local income tax purposes; (xiii) Taxes attributable to the failure of any Tax Indemnitee to comply with certification, information, documentation, reporting or other similar requirements concerning the nationality, residence, identity, connection with the jurisdiction imposing such Taxes or other similar matters; PROVIDED that the foregoing exclusion shall only apply if such Tax Indemnitee is eligible and obligated to comply with such requirement and shall have been given timely written notice of such requirement by EME; 73 (xiv) Taxes imposed on a Tax Indemnitee where the Tax Indemnitee's breach of its contest obligations under SECTION 12.2(g) effectively precludes EME's ability to contest the Taxes; (xv) Taxes imposed on any Tax Indemnitee resulting from an amendment, modification, supplement or waiver to any Operative Document which was not requested by Midwest or EME and as to which Midwest or EME is not a party and the Tax Indemnitee (or, in the case of the Owner Participant, the Facility Lessor if acting at the express direction of the Owner Participant) is a party unless such amendment, modification, supplement or waiver (A) was required by applicable law or the Operative Documents, (B) may be necessary or appropriate to, and is in conformity with, any amendment, modification, supplement or waiver to any Operative Document agreed to by Midwest or EME in writing, or (C) is made while a Lease Event of Default shall have occurred and be continuing; (xvi) Taxes imposed under Section 4975 of the Code, Section 406 of ERISA or any comparable laws of any governmental authority to the extent resulting from action by such Tax Indemnitee other than, in the case of the Owner Participant, the taking of any action at the request or direction of EME; (xvii) Taxes imposed to the extent such Taxes result from the Tax Indemnitee (and in the case of the Owner Lessor, only if acting at the written direction of the Owner Participant) being organized under the laws of a jurisdiction other than the United States or any State thereof (other than, in the case of a Lender Indemnitee, such Taxes which did not exist under law in effect on the date such Lender Indemnitee became a party to this transaction); (xviii) Any Taxes imposed on a Tax Indemnitee to the extent that such taxes would not have been imposed but for the activities of such Tax Indemnitee unrelated to the transac- tions contemplated hereby; 74 (xix) Taxes imposed on a Tax Indemnitee in the nature of interest, penalties, fines and additions to tax (i) payable as a result of such Tax Indemnitee's failure to file, in a procedurally proper manner and on a timely basis, any tax reports, returns or statements as to which EME has timely notified such Tax Indemnitee in writing of the requirement to file, unless such failure is otherwise caused by the failure of EME to fulfill its obligations, if any, with respect to such return (including provision of information sufficient to enable such Tax Indemnitee to file such report, return or statement), or (ii) to the extent not attributable to or resulting from Taxes for which an indemnity is provided hereunder; and (xx) Taxes for as long as such Taxes are being contested pursuant to the contest provisions contained in SEC- TION 12.2(g). (c) PAYMENT. Each payment required to be made by EME to a Tax Indemnitee pursuant to this SECTION 12.2 shall be paid either (i) when due directly to the applicable taxing authority by EME if it is permitted to do so, or (ii) where direct payment is not permitted and with respect to gross up amounts in immediately available funds to such Tax Indemnitee by the latest of (A) 15 days following EME's receipt of the Tax Indemnitee's written demand for the payment (which demand shall be accompanied by a statement of the Tax Indemnitee describing in reasonable detail the Taxes for which the Tax Indemnitee is demanding indemnity and the computation of such Taxes), (B) in the case of amounts which are being contested pursuant to such paragraph (g), 15 days following the time and in accordance with a final determination of such contest or (C) in the case of any indemnity demand for which EME has requested review and determination pursuant to paragraph (d) below, the completion of such review and determination, but in no event later than the date which is three Business Days prior to the date payment of such Taxes is due. Any amount payable to EME pursuant to paragraph (e) or (f) below shall be paid within 15 days after the Tax Indemnitee realizes a Tax Benefit giving rise to a payment under paragraph (e) or receives a refund or credit giving rise to a payment under paragraph (f), as the case may be, and shall be accompanied by a statement of the Tax Indemnitee computing in reasonable detail the amount of such payment. Upon the final determination of any contest pursuant to paragraph (g) below in respect of any Taxes for which EME has made a Tax Advance, the amount 75 of EME's obligation under paragraph (a) above shall be determined as if such Tax Advance had not been made. Any obligation of EME under this SECTION 12.2 and the Tax Indemnitee's obligation to repay the Tax Advance will be satisfied first by set off against each other, and any difference owing by either party will be paid within 10 days of such final determination. (d) INDEPENDENT EXAMINATION. Within 15 days after EME receives any computation from the Tax Indemnitee, EME may request in writing that an independent public accounting firm selected by the Tax Indemnitee and reasonably acceptable to EME review and determine on a confidential basis the amount of any indemnity payment by EME to the Tax Indemnitee pursuant to this SECTION 12.2 or any payment by a Tax Indemnitee to EME pursuant to paragraph (e) or (f) below. The Tax Indemnitee and EME shall cooperate with such accounting firm and supply it with all information reasonably necessary for the accounting firm to conduct such review and determination, PROVIDED that such accounting firm shall agree in writing in a manner satisfactory to the Tax Indemnitee, or EME, as the case may be, to maintain the confidentiality of such information, and PROVIDED FURTHER that neither any Tax Indemnitee nor EME shall be required to disclose any of its tax returns or books that such Tax Indemnitee or EME, as the case may be, reasonably deems to be confidential in connection with such verification, and the parties hereto agree that such Tax Indemnitee, or EME, as the case may be, shall have sole control over the positions taken with respect to such party's tax returns and filings. The fees and disbursements of such accounting firm will be paid by EME; PROVIDED that such fees and disbursements will be paid by the Tax Indemnitee if the accountants determine that the present value of the total payments as calculated by the Tax Indemnitee is more than 105 percent of the present value of the correct payments (such present values in each case to be determined by the Discount Rate). In the event such accounting firm determines that such computations are incorrect, then such firm shall determine what it believes to be the correct computations. The computations of the accounting firm shall be final, binding and conclusive upon EME and the Tax Indemnitee. The parties hereto agree that the independent public accounting firm's sole responsibility shall be to verify the computation of any payment pursuant to this SECTION 12.2 and that matters of interpretation of this Participation Agreement or any other Operative Document are not within the scope of the independent accountant's responsibility. Such accounting firm shall be requested to make its determination within 30 days. 76 (e) TAX BENEFIT. If, as the result of any Taxes paid or indemnified against by EME under this SECTION 12.2, the aggregate Taxes actually paid by the Tax Indemnitee in connection with such payment for any taxable year and not subject to indemnification pursuant to this SECTION 12.2 are less (whether by reason of a deduction, credit, allocation or apportionment of income or otherwise) than the amount of such Taxes that otherwise would have been payable by such Tax Indemnitee (a "TAX BENEFIT"); then to the extent such Tax Benefit was not taken into account in determining the amount of indemnification payable by EME under paragraph (a) above and provided no Lease Event of Default shall have occurred and be continuing (in which event the payment provided under this SECTION 12.2(e) shall be deferred until the Lease Event of Default has been cured), such Tax Indemnitee shall pay to EME the lesser of (A) (y) the amount of such Tax Benefit, plus (z) an amount equal to any United States federal, state or local income tax benefit resulting to the Tax Indemnitee from the payment under clause (y) above and this clause (z) (determined using the same assumptions as set forth in the second sentence under the definition of After-Tax Basis) and (B) the amount of the indemnity paid pursuant to this SECTION 12.2 giving rise to such Tax Benefit, PROVIDED that any excess of the amount described in clause (A) over the amount described in clause (B) shall be carried forward and applied to reduce pro tanto any subsequent obligations of EME to make payment to such Tax Indemnitee pursuant to this SECTION 12.2. If it is subsequently determined that the Tax Indemnitee was not entitled to such Tax Benefit, the portion of such Tax Benefit that is required to be repaid or recaptured will be treated as Taxes for which EME must indemnify the Tax Indemnitee pursuant to this SECTION 12.2 without regard to paragraph (b) hereof. (f) REFUND. If a Tax Indemnitee obtains a refund or credit or would have received such refund or credit but for a counterclaim or other claim not indemnified by EME hereunder against which such refund or credit has not been applied (an "offset refund or credit") of all or part of any Taxes paid, reimbursed or advanced by EME pursuant to this SECTION 12.2, the Tax Indemnitee shall pay to EME within 15 days of such receipt, or in the case of an offset refund or credit, within 15 days of the resolution of such contest (x) the amount of such refund or credit (net of any Tax payable by the Tax Indemnitee as a result of the receipt or accrual of such refund or credit) plus (y) an amount equal to any Tax Benefit realized by such Tax Indemnitee by reason of such payment to EME (determined using the same assumptions as set forth in the second sentence under the definition of After-Tax Basis), PROVIDED that (A) if at the time such payment is due to EME a Lease 77 Event of Default shall have occurred and be continuing, such amount shall not be payable until such Lease Event of Default has been cured, and (B) the amount payable to EME pursuant to this sentence shall not exceed the amount of the indemnity payment in respect of such refunded or credited Taxes that was made by EME (and such excess shall be carried forward and applied to reduce pro tanto any subsequent obligations of EME to make payments to such Tax Indemnitee pursuant to this SECTION 12.2). If it is subsequently determined that the Tax Indemnitee was not entitled to such refund or credit, the portion of such refund or credit that is required to be repaid or recaptured will be treated as Taxes for which EME must indemnify the Tax Indemnitee pursuant to this SECTION 12.2 without regard to paragraph (b) hereof. If, in connection with a refund or credit of all or part of any Taxes paid, reimbursed or advanced by EME pursuant to this SECTION 12.2, a Tax Indemnitee receives an amount representing interest on such refund or credit, the Tax Indemnitee shall pay to EME within 15 days (1) the amount of such interest that shall be fairly attributable to such Taxes paid, reimbursed or advanced by EME prior to the receipt of such refund or credit (net of Taxes payable in respect of the receipt or accrual of such interest) and (2) any Tax savings resulting from payments made by the Tax Indemnitee under this SECTION 12.2. (g) CONTEST. (i) NOTICE OF CONTEST. If a written claim is made by any taxing authority against a Tax Indemnitee for any Taxes with respect to which EME may be required to indemnify against hereunder (a "TAX CLAIM"), such Tax Indemnitee shall give EME written notice of such Tax Claim promptly after its receipt, and shall furnish EME with copies of such Tax Claim and all other writings received from the taxing authority to the extent relating to such claim, PROVIDED that failure so to notify EME shall not relieve EME of any obligation to indemnify the Tax Indemnitee hereunder except to the extent such failure effectively precludes EME from contesting such Tax. The Tax Indemnitee shall not pay such Tax Claim until at least 30 days after providing EME with such written notice, unless (a) the Tax Indemnitee is required to do so by law or regulation and (b) in the written notice described above, the Tax Indemnitee has notified EME of such requirement. 78 (ii) CONTROL OF CONTEST. Subject to subsection (g)(iii) below, EME will be entitled to contest (acting through counsel selected by EME and reasonably satisfactory to the Tax Indemnitee), and control the contest of, any Tax Claim if (i) such Tax Claim may be segregated procedurally and contested independently from tax claims for which EME is not obligated to indemnify the Tax Indemnitee, PROVIDED that if the Tax Indemnitee reasonably determines at any time that permitting EME to conduct or continue to conduct such contest could have material adverse business or other consequences to such Tax Indemnitee, such Tax Indemnitee shall have the right to control or reassert control over such contest, or (ii) the Tax Indemnitee requests that EME control such contest; PROVIDED that in the case of any such contest pursuant to (i) or (ii) EME shall use all reasonable efforts to contest such Tax Claim in its own name, and PROVIDED FURTHER that such contest shall be at EME's sole cost and expense. EME shall consult in good faith with the Tax Indemnitee and its counsel and shall provide the Tax Indemnitee with copies of any reports or claims issued by the relevant auditing agent or taxing authority, but the decisions regarding what actions to be taken shall be made by EME in its sole judgment. In the case of all other Tax Claims, the Tax Indemnitee will contest the Tax Claim at EME's expense if EME shall request that the Tax be contested (in accordance with subsection (g)(iii) below), and the following rules shall apply with respect to such contest: (1) the Tax Indemnitee will control the contest of such Tax Claim in good faith (acting through counsel selected by the Tax Indemnitee and reasonably satisfactory to EME), (2) at EME's written request, if payment is made to the applicable taxing authority, the Tax Indemnitee shall use all reasonable efforts to obtain a refund thereof in appropriate administrative or judicial proceedings, 79 (3) the Tax Indemnitee conducting such contest shall consult with and keep reasonably informed EME and its designated counsel with respect to such Tax Claim and shall consider and consult in good faith with EME regarding any request (a) to resist payment of Taxes if practical and (b) not to pay such Taxes except under protest if protest is necessary and proper, but the deci- sion regarding what actions to be taken shall be made by the Tax Indemnitee in its sole judgment. (4) Notwithstanding paragraph (3), above, the Tax Indemnitee shall not otherwise settle, compromise or abandon such contest without EME's prior written consent except as provided in paragraph (g)(iv) below. (iii) CONDITIONS OF CONTEST. Notwithstanding the foregoing, no contest with respect to a Tax Claim will be required or permitted pursuant to this SECTION 12.2, and EME shall be required to pay the applicable Taxes without contest, unless: (1) within 30 days after notice by the Tax Indemnitee to EME of such Tax Claim, EME shall request in writing to the Tax Indemnitee that such Tax Claim be contested, PROVIDED that if a shorter period is required for taking action with respect to such Tax Claim and the Tax Indemnitee notifies EME of such requirement, EME shall use reasonable best efforts to request such contest within such shorter period, and such Tax Indemnitee shall take no action for as long as it is legally able to do so, (2) no Lease Event of Default has occurred and is continuing, (3) there is no risk of sale, forfeiture or loss of, or the creation of a Lien (other than a Permitted Lien) on the Facility, Owner Lessor's or Owner Participant's interest in the Facility, the Facility Site, the Undivided Interest, the Ground Interest or any portion or Component thereof or any interest therein as a result of such Tax Claim; PROVIDED that this clause (3) shall not apply if 80 EME shall have posted and maintained a bond or otherwise provided security for EME's obligations under SECTION 12.2 satisfactory to the Tax Indemnitee in its reasonable discretion, or the Tax is fully paid in either manner specified in clause (5) below, (4) there is no risk of imposition of any criminal penalties, (5) if such contest involves payment of such Tax, EME will either advance to the Tax Indemnitee on an interest-free basis and with no after-tax cost to such Tax Indemnitee (a "TAX ADVANCE") or pay such Tax Indemnitee the amount payable by EME pursuant to SECTION 12.2(a) above with respect to such Tax, and such Tax Indemnitee shall promptly pay to EME any net Tax Benefit recognized which results from any imputed interest deduction arising from such interest free Tax Advance plus any net Tax Benefit recognized which result from making any such payment. (6) EME agrees to pay (and pays on demand) and with no after-tax cost to such Tax Indemnitee all reasonable costs, losses and expenses incurred by the Tax Indemnitee in connection with the contest of such claim (including, without limita- tion, all reasonable legal, accounting and investigatory fees and disbursements), (7) the Tax Indemnitee has been provided at EME's sole expense with an opinion, reasonably acceptable to such Tax Indemnitee, of independent tax counsel of recognized standing selected by EME and reasonably acceptable to the Tax Indemnitee to the effect that there is a Reasonable Basis for contesting such Tax Claim, (8) in the case of a judicial appeal, no appeal to the U.S. Supreme Court shall be required of the Tax Indemnitee or shall be permitted by EME. 81 (9) In the case of a judicial contest, EME shall have delivered to the Tax Indemnitee a written acknowledgment of its liability under this SECTION 12.2 for such Taxes, PROVIDED, HOWEVER, that EME shall not be bound by its acknowledgment of liability if the contest is resolved on the basis of a written decision of the adjudicator that clearly indicates the basis for the conclusion that EME has no liability under this SECTION 12.2 with respect to such Tax, unless EME's conduct of the contest has materially prejudiced the Tax Indemnitee. (iv) WAIVER OF INDEMNIFICATION. Notwith- standing anything to the contrary contained in this SECTION 12.2, the Tax Indemnitee at any time may elect to decline to take any action or any further action with respect to a Tax Claim and may in its sole discretion settle or compromise any contest with respect to such Tax Claim without EME's consent if the Tax Indemnitee: (1) waives its right to any indemnity payment by EME pursuant to this SECTION 12.2 in respect of such Tax Claim (and any other claim for Taxes with respect to any other taxable year the contest of which is effectively precluded by the Tax Indemnitee's declination to take action with respect to the Tax Claim), and (2) promptly repays to EME any Tax Advance and any amount paid to such Tax Indemnitee under SECTION 12.2(a) above in respect of such Taxes. Except as provided in the preceding sentence, any such waiver shall be without prejudice to the rights of the Tax Indemnitee with respect to any other Tax Claim. (h) REPORTS. (i) If any report, statement or return is required to be filed by a Tax Indemnitee with respect to any Tax that is subject to indemnification under this SECTION 12.2, EME will (1) 82 notify the Tax Indemnitee in writing of such requirement not later than 30 days prior to the date such report, statement or return is required to be filed (determined without regard to extensions) and (2) either (y) if permitted by applicable law, prepare such report, statement or return for filing by EME in such manner as will show the ownership of the Facility by the Owner Lessor for United States federal, state and local income tax purposes (if applicable), send a copy of such report, statement or return to the Tax Indemnitee and timely file such report, statement or return with the appropriate taxing authority, or (z) if so directed by the Tax Indemnitee or in any event if practicable and if the return to be filed reflects only information in respect of the transactions contemplated by the Operative Documents, prepare and furnish to such Tax Indemnitee not later than 30 days prior to the date such report, statement or return is required to be filed (determined without regard to extensions) a proposed form of such report, statement or return for filing by the Tax Indemnitee. (ii) Each of the Tax Indemnitee or EME, as the case may be, will timely provide the other, at EME's expense, with all information in its possession that the other party may reasonably require and request to satisfy its obligations under this paragraph (h), but only if and to the extent that such Tax Indemnitee is legally entitled to furnish such information. (i) NON-PARTIES. If a Tax Indemnitee is not a party to this Agreement, EME may require such Tax Indemnitee to agree in writing, in a form reasonably acceptable to Midwest, to the terms of this SECTION 12 (to the extent applicable to such Tax Indemnitee) prior to making any payment to such Tax Indemnitee under this Section. SECTION XIII MIDWEST'S RIGHT OF QUIET ENJOYMENT Each party to this Agreement acknowledges notice of, and consents in all respects to, the terms of the Facility Lease, and the Facility Site Sublease and expressly, severally and as to its own actions only, agrees that, so long as no Lease Event of Default has occurred and is continuing, neither it nor any party acting by, through or under such party shall take or cause to be taken any action contrary to 83 Midwest's rights under the Facility Lease and the Facility Site Sublease, including the right to possession, use and quiet enjoyment of the Undivided Interest and the Ground Interest. SECTION XIV SUPPLEMENTAL FINANCING OF IMPROVEMENTS; OPTIONAL REFINANCINGS SECTION 14.1 FINANCING IMPROVEMENTS. Upon the written request of Midwest delivered at least 90 days prior to any proposed financing of the cost of any Required or Non-Severable Improvement, the Owner Lessor, the Lease Indenture Trustee and the Pass Through Trustees agree to cooperate with Midwest to (a) issue Additional Lessor Notes under the Lease Indenture to finance such Improvement which will rank pari passu with the Lessor Notes then outstanding; and (b) execute and deliver an amendment to the Facility Lease to reflect the adjustments required by clause (v) below; PROVIDED, HOWEVER, that the Owner Participant shall have been given the opportunity, but shall have no obligation, to provide all or part of the funds required to finance the Owner Lessor's Percentage of any such Improvement by making an Additional Equity Investment in such amount, if any, as it may determine in its sole discretion. Midwest shall have no obligation to accept and the Owner Participant shall not be obligated to provide such Additional Equity Investment. The obligation to finance such Improvement through the issuance of Additional Lessor Notes (any financing of Improvements through the issuance of such Additional Lessor Notes being called a "SUPPLEMENTAL FINANCING") is subject to the limitations on incurrence of additional Indebtedness set forth in the Operative Documents and the following additional conditions: (i) there shall be no more than one such financing in any calendar year; (ii) Improvements shall be made in compliance with the Operative Documents; (iii) such Improvement is a Required Improvement; 84 (iv) the Additional Lessor Notes shall have a final maturity date no later than the expiration date of the Basic Lease Term or any Renewal Term then in effect or already elected by Midwest and will be fully repaid out of additional Basic Lease Rent or Renewal Rent and Termination Value as adjusted pursuant to the Operative Documents; (v) appropriate adjustments to Basic Lease Rent and Termination Value (determined without regard to any tax benefits associated with such Improvements, unless the Owner Partic- ipant is making an Additional Equity Investment) shall also be made to protect the Owner Participant's Expected Return; (vi) EME shall have paid, on an After-Tax Basis, all reasonable out-of-pocket costs and expenses of the Lease Financing Parties, including the reasonable fees and expenses of counsel to the Owner Participant, the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee, the Lease Indenture Company in its individual capacity, the Pass Through Trustees and the Pass Through Company in its individual capacity, in each case to the extent incurred in connection with any financing or refinancing pursuant to this SECTION 14; (vii) no Lease Event of Default shall have occurred and be continuing unless the Improvements to be constructed with the proceeds of the Additional Lessor Notes shall cure such Lease Event of Default, and any such Improvements shall be made in compliance with the Operative Documents; (viii) the sum of (y) the principal amount of such Additional Lessor Notes and (z) the principal amount of all comparable additional lessor notes used to finance such Improvements pursuant to the Other Facility Lease, is not less than $20 million and not greater than 100% of the cost of the Improvements being financed; PROVIDED that the sum of (I) the outstanding balance of the Lessor Notes and (II) all comparable lessor notes issued and outstanding of the Other Owner Lessor under the lease indenture to which 85 such Other Owner Lessor are party never exceeds (x) 90% of the lesser of (1) the fair market value of the Facility taking into account such Improvements, as determined pursuant to the Appraisal Procedure, and (2) the sum of (t) the Purchase Price, (u) the comparable purchase price for the Other Undivided Interest and (v) the cost of the Improvement being financed; (ix) the Owner Participant shall have re- ceived a favorable opinion reasonably satisfactory to it from Hunton & Williams, or from nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to EME, to the effect that such financing would not result in any material indemnified, or any unindemnified, incremental tax risk to the Owner Participant; (x) the Owner Participant shall not suffer any material adverse accounting effects under GAAP as a result of providing such additional financing; (xi) the cost of the Improvement, together with the cost of all previous Improvements financed with Additional Lessor Notes is not greater than 25% of the sum of (x) the Purchase Price and (y) the comparable purchase price for the Other Undivided Interest; unless the Facility Lessee shall have received confirmation that after giving effect to the financing in connection with such Improvement, the Lease Debt rating will not fall below BBB- or Baa3 from S&P and Moody's, respectively; (xii) Midwest and EME shall have made or delivered such representations, warranties, covenants, opinions or certificates as the Owner Participant may reasonably request; and (xiii) such Additional Lessor Notes are issued pursuant to and in accordance with SECTION 2.13 of the Lease Indenture and Midwest and EME shall have delivered such certificates, reports and other documents and shall have taken all other actions which are required to be delivered or taken by them pursuant to SECTION 2.13 of the Lease Indenture. 86 Notwithstanding the prior provision dealing with the financing of Improvements through the Facility Lease, Midwest shall at all times have the right to finance Improvements to the Facility other than through the Facility Lease; PROVIDED that Improvements may only be financed other than through the Facility Lease if such financing would not result in any Lien on the Facility or the Facility Land and shall be subject to the limitations on incurrence of additional Indebtedness contained in the other Operative Documents; PROVIDED FURTHER, that providers of financing for such Improvements made other than through the Facility Lease agree to be bound by Section 18.19 of this Agreement and by the Subordination Agreement; PROVIDED FURTHER, that Required Improvements and Non-Severable Improvements shall automatically, upon being affixed to the Facility, become the property of the Owner Lessor and subject to the Facility Lease. SECTION 14.2 OPTIONAL REFINANCING OF LESSOR NOTES. Midwest will have the right, exercisable on no more than three occasions, for as long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing, to request the Owner Lessor, and the Owner Lessor shall reasonably consider and shall not unreasonably refuse, to refund or refinance the Lessor Notes, in the public or private market, in whole but not in part, through the issuance of new notes to the public (notes issued in such refinancing, the "NEW LESSOR NOTES"), to a pass through trust or to such other funding vehicles as may be used at that time or to any other party that is not the Facility Lessee or any Affiliate thereof; PROVIDED that any refinancing under this SECTION 14.2 shall also be subject to satisfaction of the following conditions: (i) the Owner Lessor shall be able to issue and sell the New Lessor Notes in an amount adequate to accomplish such refunding or refinancing; (ii) the Owner Participant shall receive an opinion reasonably satisfactory to it from Hunton & Williams or from nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee and EME, to the effect that such refinancing (as opposed to the right to request such refinancing) would not result in any material indemnified or any unindemnified incremental tax risk to the Owner Participant (including tax risks relating to the classification of the Lessor Notes as 87 qualified nonrecourse indebtedness; PROVIDED, HOWEVER, that absent a change in law or judicial, administrative or legislative interpretation thereof after the Closing Date, there would not be incremental tax risk with respect to the allocation of interest expense for foreign tax credit purposes from a refinancing consummated in accordance with the provisions set forth below); (iii) all documentation in connection with such refinancing shall be reasonably satisfactory to the Owner Lessor, the Owner Trustee, and the Owner Participant and conditions set forth therein shall be met; (iv) the Owner Participant shall be entitled to a consent fee of $25,000 in connection therewith; (v) the refinancing shall not result in any other material adverse effect on the rights or interests of the Owner Lessor or the Owner Participant; (vi) New Lessor Notes shall be issued in compliance with Section 467 of the Code and any proposed, temporary, or final regulation thereunder, in each case as modified and in effect on the date of such issuance. (vii) all necessary authorizations, approvals and consents in connection with such refinancing shall have been obtained from each Person whose authorization, approval or consent is necessary to consummate such refinancing with respect to the Facility Lessee, the Owner Lessor, the Lease Indenture Trustee and the Pass Through Trustees, and such authorizations, approvals and consents shall be in full force and effect on the closing date of such refinancing; (viii) the consummation of the transactions contemplated by the refinancing shall not cause the Owner Participant to account for the transactions contemplated by the Operative Docu- ments as other than a "leveraged lease" under FAS 13; 88 (ix) all payment dates for principal and interest payments on the New Lessor Notes shall become Rent Payment Dates; (x) on the closing date of such refinancing, each of the Facility Lessee, the Owner Lessor and the Lease Indenture Trustee shall have executed and delivered all appropriate supplements to the Operative Documents that are necessary to consummate such refinancing, in form and substance reasonably satisfactory to the Owner Lessor and the Lease Indenture Trustee; (xi) each of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustees shall have received an opinion of counsel for the Facility Lessee on such matters as they may reasonably request and in form and substance reasonably satisfactory to the Owner Participant and the Lease Indenture Trustee; (xii) Midwest and EME shall have delivered such certificates, reports and other documents and shall have taken all other actions which are required to be delivered or taken by them pursuant to SECTION 2.13 of the Lease Indenture; (xiii) each of the Owner Lessor, the Owner Participant and the Lease Indenture Trustee shall have received from the Facility Lessee a certificate dated the date of the issuance of the New Lessor Notes executed on behalf of the Facility Lessee by an Authorized Officer thereof stating that all conditions precedent to the issuance of such New Lessor Notes have been satisfied or waived; (xiv) the consummation of any transaction contemplated by such refinancing shall not violate any Requirements of Law except to the extent that such non-compliance with the Requirements of Law would not have a material adverse effect on the Owner Lessor. 89 (xv) the New Lessor Notes shall have a final maturity date no later than six months after the stated maturity date of the Initial Lessor Notes as set forth in Section 2.4 of the Lease Indenture and the weighted average life to maturity of the New Lessor Notes shall not vary from the remaining weighted average life-to-maturity of the Lessor Notes (immediately prior to such refinancing) by more than six months; (xvi) the principal amount of the New Lessor Notes shall not exceed by more than 5 percent the remaining principal amount of the Lessor Notes (immediately prior to such refinancing); (xvii) the New Lessor Notes shall satisfy the requirements of Temp. Treas. Reg. Section 1.861 - 10T(b)(2)(iii), (iv) and (v) and not be excluded by reason of Temp. Treas. Reg. Section 1.861 - 10T(b)(4); and (xviii) if New Lessor Notes are not issued under the Lease Indenture, the holders of New Lessor Notes must agree to be bound by Section 18.19 of this Agreement and by the Subordination Agreement. SECTION 14.3 COOPERATION. The Owner Participant will cooperate with and reasonably assist Midwest in connection with any refinancing and/or assumption of the Lessor Notes, so long as such refinancing is in accordance with the terms of the Operative Documents. The Owner Participant will execute such agreements and documents as may be necessary with respect to any such refinancing and will instruct the Owner Lessor to act accordingly. Nothing contained in this SECTION 14 shall limit Midwest's right to request a refinancing in accordance with SECTION 14.2, above, refinance the Lessor Notes and to make corresponding changes to Basic Lease Rent and the Termination Value in accordance with the rent adjustment provisions set forth in SECTION 3 of the Facility Lease. SECTION XV PRE-CLOSING ADJUSTMENTS TO BASIC LEASE RENT AND TERMINATION VALUE 90 (a) Prior to or on the Closing Date, Basic Lease Rent and Termination Values, the Equity Portion of Basic Lease Rent and the Equity Portion of Termination Value (and the allocations of Basic Lease Rent and 467 Fixed Rent) shall be adjusted, either upward or downward, in accordance with the Facility Lease: (i) to re-optimize the loans evidenced by the Initial Lessor Notes; and (ii) to reflect any changes in the Pricing Assumptions, including, without limitation, (x) the initial interest rate on any of the Lessor Notes which is different from the applicable interest rate under the Initial Lessor Notes set forth in the Pricing Assumptions, (y) an increase in the Maximum Transaction Costs amount assumed in the Pricing Assumptions, unless Midwest has elected to pay such increase, and (z) a Closing Date other than the Scheduled Closing Date; and (iii) to reflect any enactment, promulgation, release or adoption of, amendment to or change in the Code, Treasury Regulations, Revenue Rulings or Revenue Procedures ("TAX LAW CHANGE") enacted prior to the Closing; PROVIDED that if any adjustment required by this paragraph would cause (x) on an After-Tax Basis the present value of Basic Lease Rent as a percentage of the Purchase Price discounted at 6% per annum to increase by more than 100 basis points or (y) the total Basic Lease Rent to increase by more than 2.0%, Midwest shall not be obligated to close the Overall Transaction. (b) Any adjustment pursuant to this SECTION 15 shall be calculated (A) so as not to negatively affect the Owner Participant's Expected Return through the Basic Lease Term and (B) to maintain operating lease treatment for EME; PROVIDED, HOWEVER, that to the extent it is not possible as the transaction is then structured to achieve both (A) and (B), the Owner Trust, the Owner Participant and Midwest shall work in good faith to restructure the transaction in a manner which would achieve both results; and PROVIDED, FURTHER, that to the extent consistent with preserving both such objectives, all adjustments shall at the option of Midwest be calculated to (x) minimize the average annual Basic Lease Rent over the Basic Lease 91 Term for Midwest's GAAP accounting purposes and/or (y) minimize, to the extent possible, the present value to Midwest of the Basic Lease Rent; and PROVIDED, FURTHER, that to the extent that any adjustment pursuant to this SECTION 15 fails to maintain operating lease treatment for EME, EME shall not be obligated to close the Overall Transaction. Adjustments will be made using the same method of computation, assumptions and pricing constraints originally used (other than those that have changed as the result of the event giving rise to the adjustment) in the calculation of the Basic Lease Rent (and the allocation of Basic Lease Rent and 467 Fixed Rent) and corresponding adjustments to Termination Values will be made. Adjustments may not result in a book loss to the Owner Participant in the year of adjustment and will be computed by the Owner Participant (or the Equity Investor if prior to the Closing Date) based upon the Tax Assumptions and the Pricing Assumptions used to calculate the Basic Lease Rent and Termination Values and shall be subject to verification procedure set forth in the Facility Lease. SECTION XVI RIGHT OF FIRST REFUSAL; RIGHT OF FIRST OFFER SECTION 16.1 RIGHT OF FIRST OFFER. In the event the Owner Participant desires to sell, lease, convey or otherwise transfer some or all of its Beneficial Interest other than to an Affiliate of the Owner Participant (other than in connection with the exercise of remedies following a Lease Event of Default) prior to the expiration of the Facility Lease Term, the Owner Participant must first offer to sell such Beneficial Interest to the Facility Lessee on the terms and conditions set forth in this SECTION 16.1. Such offer shall be made to the Facility Lessee in the form of a proposed term sheet, which proposed term sheet shall include an outline of the price and of the terms, conditions and provisions upon which the Owner Participant would be willing to transfer such Beneficial Interest or any part thereof. The Facility Lessee will thereafter have the right within a period of forty-five (45) days from and after the receipt by the Facility Lessee of such proposed term sheet to notify the Owner Participant of its intent to exercise its right to purchase hereunder. If the Facility Lessee elects to exercise the right provided in the preceding sentence, it shall within 60 days of such notice purchase, and the Owner Participant shall sell, the Beneficial Interest on the same terms and conditions as the offer giving rise to such right. If the Facility Lessee does not give such notice to the Owner Participant within the forty-five (45) day period or does not purchase the Beneficial Interest within 60 days of such notice, the Owner Participant will be free to so sell, lease, convey or otherwise transfer such Beneficial Interest, or a portion thereof, at a price ------------------------------------- 92 no less than the price set forth in the proposed term sheet and on terms and conditions, taken as a whole, that, other than in an immaterial respect, are no less favorable to the Owner Participant than the terms and conditions set forth in the proposed term sheet, unless the failure to purchase the Beneficial Interest within 60 days is attributable to the Owner Participant. In the event that the terms or conditions are revised in any way that the price is reduced or any of the other terms and conditions thereof, taken as a whole change the agreement for sale, lease, conveyance or transfer such that the terms and conditions of any such subsequent transaction are less favorable, other than in an immaterial respect, to the Owner Participant, the Owner Participant must again comply with the notice and acceptance provisions of this SECTION 16.1. It is understood and agreed among the parties hereto that the transaction contemplated by this SECTION 16.1 shall not effect a merger of the Facility Lessee's ownership interest in the Facility and the Facility Site with the Owner Lessor's Interest. SECTION 16.2 RIGHT OF FIRST REFUSAL. In the event the Owner Participant desires to sell, lease, convey or otherwise transfer some or all of its Beneficial Interest or cause the Owner Lessor to sell, lease, convey or otherwise transfer its Owner Lessor's Interest at any time within three years after expiration or termination of the Facility Lease (other than pursuant to SECTION 13 and 14 of the Facility Lease) to any Person other than an Affiliate of the Owner Participant, the Facility Lessee or an Affiliate thereof, the Facility Lessee shall have the right, unless such sale, lease, conveyance or transfer is in connection with the exercise of remedies upon a Lease Event of Default, to purchase, lease or otherwise acquire such interest on the terms and conditions set forth in the bid that the Owner Participant intends to accept. The Owner Participant shall give the Facility Lessee prompt written notice of all bona fide offers that have been received from any other Person to purchase or acquire the Owner Lessor's Interest or Owner Participant's Beneficial Interest or any part of either during such three-year period following the expiration or termination of the Facility Lease, and which offers it wishes to accept, together with a full and complete statement of the price and all of the material terms, conditions and provisions contained in such offers. The Facility Lessee shall thereafter have the right within a period of forty-five (45) days from and after the receipt by the Facility Lessee of such notice to notify the Owner Participant of its intent to exercise its rights of first refusal. If the Facility Lessee elects to exercise the right provided in the preceding sentence, it shall within 60 days of such notice purchase, and the Owner Participant shall sell, the Beneficial Interest on the same terms and conditions as the offer giving rise to such right. If the Facility Lessee does not give such notice to the Owner 93 Participant within the forty-five (45) day period or does not purchase the Beneficial Interest within sixty (60) days of such notice, the Owner Participant shall be free to proceed under the terms and conditions as set forth in its irrevocable notice to the Facility Lessee, unless the failure to purchase the Beneficial Interest within sixty (60) days is attributable to the Owner Participant. In the event that the terms or conditions are revised in any way that changes the agreement for sale, lease, conveyance or transfer such that the terms and conditions thereof, other than in immaterial respects, are less favorable to the Owner Participant (including any reduction in price or a change in the terms of payment thereof in a manner that is beneficial to the potential purchaser), the Owner Participant must again comply with the notice and acceptance provisions of this SECTION 16.2. In connection with the Facility Lessee's exercise of the right of first refusal pursuant to this SECTION 16.2 with respect to the Owner Lessor's Interest, the Ground Interest shall be conveyed to the Facility Lessee. SECTION XVII SPECIAL LESSEE TRANSFER In the case of a Regulatory Event of Loss or Burdensome Buyout Event under the Facility Lease, the Facility Lessee (or its designee), so long as the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and all other payments under the Facility Lease, upon not less than 30 days' written notice to the Owner Participant and the Lease Indenture Trustee, on the applicable Termination Date, may purchase the Owner Participant's Beneficial Interest, or, in the case of a Burdensome Buyout Event, the membership interest in the Owner Participant, and keep the Facility Lease in place; PROVIDED, that (i) the Owner Participant shall not suffer any detriment (including tax or book consequences) from such purchase (as compared to that which would have resulted had the Facility Lessee terminated the Facility Lease and purchased the Owner Lessor's Interest), (ii) the Facility Lessee satisfies the transferee requirements contained in SECTION 12.1 hereof applicable to transfers by the Owner Participant, if applicable and (iii) EME pays all expenses incurred by the other Lease Financing Parties in connection therewith. If the Facility Lessee chooses to purchase the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be, pursuant to the preceding sentence, on the applicable Termination Date, EME (or its designee) shall pay to the Owner Participant or to the Equity Investor, as the case may be, the Special Lessee Transfer Amount determined as of such date, plus all amounts due and payable to the Owner Participant or Equity Investor, as the case may be, on such date under the Operative Documents. 94 Concurrently with the payment of all sums required to be paid pursuant to this SECTION 17 (or on such later date of transfer of the Owner Participant's Beneficial Interest or membership interest in the Owner Participant, as the case may be, in accordance with clause (ii) below) (i) the Facility Lessee shall cease to have any liability to the Owner Participant with respect to the Operative Documents, except for obligations surviving pursuant to the express terms of any Operative Document or which have otherwise accrued but not been paid as of such date and (ii) the Owner Participant or the Equity Investor, as the case may be, will transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessor and prepared and recorded at EME's expense) the Owner Participant's Beneficial Interest or membership interest in the Owner Participant, as the case may be, to the Facility Lessee (or its designee); PROVIDED, HOWEVER, that if the Lien of the Lease Indenture has not been terminated or discharged, such transfer shall not be made to the Facility Lessee, but shall be made to the Facility Lessee's designee promptly upon the Facility Lessee's designation of such designee and such designee will agree not to transfer the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be, to the Facility Lessee until such Lien is discharged. The Owner Participant or Equity Investor, as the case may be, shall make any transfer under this SECTION 17 on an "as is," "where is" basis, without warranty other than as to the absence of Owner Lessor's Liens and Owner Participant's Liens on the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be. It is understood and agreed among the parties hereto that the transaction contemplated by this SECTION 17 shall not effect a merger of the Facility Lessee's leasehold interest in the Facility and subleasehold interest in the Facility Site with the Owner Lessor's Interest. EME will pay all reasonable costs and expenses of the Lease Financing Parties in connection with any transfer pursuant to this SECTION 17. Subsequent to such transfer, the Facility Lessee and the Owner Lessor may, without the consent of the Lease Indenture Trustee or the Pass Through Trustees, waive the Regulatory Event of Loss or Burdensome Buyout Event that gave rise to the right to purchase the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be, and the Facility Lease shall continue in full force and effect in accordance with its terms. 95 SECTION XVIII MISCELLANEOUS SECTION 18.1 CONSENTS. The Owner Participant covenants and agrees that it shall not unreasonably withhold its consent to any consent requested of the Owner Lessor under the terms of the Operative Documents that by its terms is not to be unreasonably withheld by the Owner Lessor. SECTION 18.2 SUCCESSOR OWNER LESSOR. The parties hereto agree that the transfer or assignment pursuant to the terms of the Trust Agreement by the Owner Lessor to a successor Owner Lessor, pursuant to the trust created thereunder, will not violate the terms of any Operative Document. SECTION 18.3 BANKRUPTCY OF TRUST ESTATE. If (i) all or any part of the Trust Estate becomes the property of a debtor subject to the reorganization provisions of Title 11 of the United States Code, as amended from time to time, (ii) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal or interest on the Lessor Notes, and (iii) the Lease Indenture Trustee actually receives any Excess Amount, as defined below, which reflects any payment by the Owner Participant on account of clause (ii) above, the Lease Indenture Trustee shall promptly refund to the Owner Participant such Excess Amount. For purposes of this SECTION 18.3, "EXCESS AMOUNT" means the amount by which such payment exceeds the amount which would have been received by the Lease Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in clause (ii) above. Nothing contained in this SECTION 18.3 shall prevent the Lease Indenture Trustee from enforcing any personal recourse obligations (and retaining the proceeds thereof) of the Owner Participant as contemplated by this Agreement (other than referred to in clause (ii)). SECTION 18.4 AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition of this Agreement may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing, executed by each party hereto. 96 SECTION 18.5 NOTICES. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, PROVIDED such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to each party hereto at its address set forth below or, in the case of any such party hereto, at such other address as such party may from time to time designate by written notice to the other parties hereto: If to Midwest: One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Facsimile No.: (312) 583-6111 Attention: President with a copy to EME at the address below If to EME: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612 Facsimile No.: (949) 752-1420 Attention: General Counsel 97 If to the Owner Lessor, the Owner Trustee or the Trust Company: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Telephone No.: (302) 651-1000 Facsimile No. (302) 651-8882 Attention: Corporate Trust Administration with a copy to the Owner Participant If to the Owner Participant: Powerton Generation I, LLC c/o PSEG Resources Inc. 80 Park Plaza, Suite T-22 Newark, NJ 07101 Telephone No.: (973) 456-3560 Facsimile No.: (973)-456-3569 Attention: President If to the Lease Indenture Trustee or the Lease Indenture Company: United States Trust Company of New York 114 West 47th Street, 25th Floor New York, New York 10036 Facsimile No.: (212) 852-1625 Attention: Christopher J. Grell, Vice President If to Pass Through Trustees or the Pass Through Company: United States Trust Company of New York 114 West 47th Street, 25th Floor New York, New York 10036 Facsimile No.: (212) 852-1625 Attention: Christopher J. Grell, Vice President 98 A copy of all notices provided for herein shall be sent by the party giving such notice to each of the other parties hereto. In addition, Midwest and EME, without duplication, shall (unless otherwise directed by the applicable Rating Agency) provide to each Rating Agency a copy of any information, report or notice it gives to the Lease Indenture Trustee hereunder or any other Operative Documents. SECTION 18.6 SURVIVAL. All warranties, representations, indemnities and covenants made by any party hereto, herein or in any certificate or other instrument delivered by any such party or on the behalf of any such party under this Agreement shall be considered to have been relied upon by each other party hereto and shall survive the consummation of the transactions contemplated hereby and in the other Operative Documents regardless of any investigation made by any such party or on behalf of any such party. In addition, the indemnifications by EME under SECTIONS 12.1 and 12.2 of this Agreement shall, subject to SECTIONS 12.1(b) and 12.2(b), respectively, expressly survive the expiration or early termination (in either case, for whatever reason) of the Facility Lease or the transfer or other disposition (including by resignation and removal) of the respective interests of the Owner Participant, the Owner Lessor, the Trust Company, the Owner Trustee and the Lease Indenture Company, the Lease Indenture Trustee, the Pass Through Trustees and the Pass Through Company in, to and under this Agreement and other Operative Documents. SECTION 18.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof, including each successive holder of the Owner Participant's Beneficial Interest permitted under SECTION 10.1. Except as expressly provided herein or in the other Operative Documents, no party hereto may assign its interests herein without the consent of the other parties hereto. SECTION 18.8 GOVERNING LAW. This Agreement has been delivered in the State of New York and shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance without giving effect to the conflicts of laws provisions thereof except New York General Obligations Law Section 5-1401. 99 SECTION 18.9 SEVERABILITY. If any provision hereof shall be invalid, illegal or unenforceable under Requirement of Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. SECTION 18.10 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. SECTION 18.11 HEADINGS AND TABLE OF CONTENTS. The headings of the sections of this Agreement and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. SECTION 18.12 LIMITATION OF LIABILITY. (a) None of the Owner Participant, the Owner Lessor, the Owner Trustee, the Trust Company, the Lease Indenture Company, the Lease Indenture Trustee, the Pass Through Trustees or the Pass Through Company shall have any obligation or duty to Midwest, EME or to others with respect to the transactions contemplated hereby, except those obligations or duties expressly set forth in this Agreement and the Operative Documents, and neither the Owner Lessor, the Owner Participant, the Owner Trustee, the Trust Company, the Lease Indenture Company, the Lease Indenture Trustee, the Pass Through Trustees or the Pass Through Company shall be liable for performance by any other party hereto of such other party's obligations or duties hereunder. Without limitation of the generality of the foregoing, under no circumstances whatsoever shall the Owner Participant be liable to Midwest, EME, the Lease Indenture Trustee, the Pass Through Trustees or the Pass Through Company for any action or inaction on the part of the Owner Lessor or the Owner Trustee in connection with the transactions contemplated herein, whether or not such action or inaction is caused by willful misconduct or gross negligence of the Owner Lessor, unless such action or inaction is at the written direction of the Owner Participant. (b) The Trust Company is executing the Operative Documents to which it is a party solely as trustee under the Trust Agreement and not in its individual capacity, except as expressly provided herein or therein, and in no case whatsoever shall the Trust Company be personally liable for, or for any loss in 100 respect of, any of the statements, representations, warranties, agreements or obligations of the Owner Lessor or the Owner Trustee hereunder or under any other Operative Document, as to all of which the other parties hereto agree to look solely to the Trust Estate; PROVIDED, HOWEVER, that the Trust Company shall be liable hereunder for its own gross negligence or willful misconduct or for a breach of its representations, warranties and covenants made in its individual capacity. (c) The Lease Indenture Company and the Pass Through Company are each entering into the Operative Documents to which they are parties solely as trustees under the Lease Indenture and the Pass Through Trust Agreement, respectively, and not in their individual capacities, except as expressly provided herein or therein, and in no case whatsoever shall the Lease Indenture Company or the Pass Through Company be personally liable for, or for any loss in respect of, any of the statements, representations, warranties, agreements or obligations of the Owner Lessor hereunder or under any other Operative Document, as to all of which the other parties hereto agree to look solely to the Trust Estate and the Indenture Estate; PROVIDED, HOWEVER, that such party shall be liable hereunder for its own gross negligence, willful misconduct, bad faith or a breach of its representations, warranties and covenants made in its individual capacity. (d) The right of the Lease Indenture Company or the Pass Through Company to perform any discretionary act enumerated herein or in any other Operative Document (including, without limitation, the right to consent to any action which requires its consent and the right to waive any provision of, or consent to any change or amendment to, any of the Operative Documents) shall not be construed as a duty, and neither the Lease Indenture Company nor the Pass Through Company shall be accountable or liable for other than its gross negligence, willful misconduct or bad faith in the performance or non-performance of such acts. In connection with any such discretionary acts, the Lease Indenture Trustee may in its own judgement (but shall not, except as otherwise provided in the Lease Indenture or as otherwise required by Requirement of Law, have any obligation to) request in writing the approval of the Pass Through Trustees as holders of Lessor Notes and each Pass Through Trustee may in its sole discretion (but shall not, except as otherwise provided for in the Operative Documents or as otherwise required by Requirement of Law, have any obligation to) request the approval of the holders of the Certificates. 101 (e) The Owner Participant will give Midwest and EME at least 15 days' prior notice of any proposed amendment or supplement to the Trust Agreement (other than amendments solely effecting a transfer of the Owner Participant's interest in the Trust Estate or with respect to administrative matters) and deliver true, complete and fully executed copies to Midwest and EME of any amendment or supplement to the Trust Agreement. No amendment or supplement to the Trust Agreement that could materially adversely affect the interests of the Lease Indenture Trustee or the Pass Through Trustees shall become effective without the prior written consent of the Lease Indenture Trustee or the Pass Through Trustees, as applicable. SECTION 18.13 CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY, PROCESS AGENT. (a) Each of the parties hereto (i) hereby irrevocably submits to the nonexclusive jurisdiction of the Supreme Court of the State of New York, New York County (without prejudice to the right of any party to remove to the United States District Court for the Southern District of New York) and to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of this Agreement, the other Operative Documents, or the subject matter hereof or thereof or any of the transactions contemplated hereby or thereby brought by any of the parties hereto or their successors or assigns; (ii) hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court, or in such federal court; and (iii) to the extent permitted by Requirement of Law, hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding any claim that it is not personally subject to the jurisdiction of the above-named courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement, the other Operative Documents, or the subject matter hereof or thereof may not be enforced in or by such court. (b) TO THE EXTENT PERMITTED BY REQUIREMENT OF LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES THE RIGHT TO DEMAND A TRIAL BY JURY, IN ANY SUCH SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS 102 AGREEMENT, THE OTHER OPERATIVE DOCUMENTS, OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY BROUGHT BY ANY OF THE PARTIES HERETO OR THEIR SUCCESSORS OR ASSIGNS. (c) By the execution and delivery of this Agreement, Midwest and EME designate, appoint and empower CT Corporation System as their authorized agent to receive for and on their behalf service of any summons, complaint or other legal process in any such action, suit or proceeding in the State of New York for so long as any obligation of Midwest and EME shall remain outstanding hereunder or under any of the other Operative Documents. Midwest and EME shall grant an irrevocable power of attorney to CT Corporation System in respect of such appointment and shall maintain such power of attorney in full force and effect for so long as any obligation of Midwest and EME shall remain outstanding hereunder or under any of the Operative Documents. SECTION 18.14 FURTHER ASSURANCES. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Agreement and the other Operative Documents. SECTION 18.15 EFFECTIVENESS. This Agreement has been dated as of the date first above written for convenience only. This Agreement shall be effective on the date of execution and delivery by each of the parties hereto. SECTION 18.16 MEASURING LIFE. If and to the extent that any of the options, rights and privileges granted under this Agreement, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Agreement, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Agreement of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. 103 Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Agreement, whichever of (a) and (b) is shorter. SECTION 18.17 NO PARTNERSHIP, ETC. The parties hereto intend that nothing contained in this Agreement or any other Operative Document shall be deemed or construed to create a partnership, joint venture or other co-ownership arrangement by and among any of them. SECTION 18.18 RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTEREST. (a) No OP Member shall, during the Facility Lease Term, assign, convey or transfer any of its right, title or interest in the Membership Interest or cause the Owner Participant to issue additional membership interests without the prior written consent of Midwest and EME and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees; PROVIDED, HOWEVER, that an OP Member may assign, convey or transfer all or any part of its interest in the Membership Interest without such consent to a Person (the "MEMBER TRANSFEREE"), if the Owner Participant Guaranty shall remain outstanding and in full force and effect or each of the following condi- tions shall have been satisfied: (i) the Member Transferee shall be either (A) an Affiliate of the Owner Participant which does not otherwise qualify under clause (B) below provided the Owner Participant Guaranty shall remain in full force and effect, or (B) a Person which guarantees all of the Owner Participant's obligations under the Operative Documents pursuant to a guaranty substantially in the form of Exhibit Y hereto and meets the following criteria: (1) the tangible net worth of the Member Transferee is at least equal to $75 million calculated in accordance with GAAP; and (2) unless waived by Midwest and EME, and so long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing, such Member Transferee is not a Competitor (as defined in SECTION 12.1(b)) of, or in material litigation with, Midwest or any Affiliate of Midwest; 104 (ii) the total number of Unrelated Members, after giving effect to such transactions shall not exceed three; and (iii) the Member Transferee agrees in the guaranty or in another written instrument reasonably acceptable to Midwest and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees to be bound by this SECTION 18.18 and by provisions of SECTION 18.19 of this Agreement. (b) Neither the Facility Lessee nor EME shall not be responsible for any adverse tax consequence to the Owner Lessor, the Owner Participant or the Guarantor resulting from any transfer pursuant to this SECTION 18.18 and the Pricing Assumptions shall not be changed as a result of any such transfer. (c) The OP Member shall give the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee, the Pass Through Trustees, Midwest and EME 30 days prior written notice of such transfer, or 10 days in the case of a transfer to an Affiliate of the Owner Participant, specifying the name and address of any proposed Member Transferee and such additional information as shall be necessary to determine whether the proposed transfer satisfies the requirements of this SECTION 18.18. If requested by the OP Member, the Owner Participant, the Lease Indenture Trustee or the Pass Through Trustees, Midwest or EME shall acknowledge qualifying transfers. All reasonable fees, expenses and charges of the Lease Indenture Trustee, the Pass Through Trustees, Midwest and EME (including reasonable attorneys' fees and expenses in connection with any such transfer or proposed transfer), including any of the foregoing relating to any amendments to the Operative Documents required in connection therewith, shall be paid by the OP Member, without any right of indemnification from Midwest, EME, the Lease Indenture Trustee, the Pass Through Trustees or any other Person; PROVIDED, HOWEVER, that the OP Member shall have no obligation to pay fees, expenses or charges of Midwest and EME as a result of any transfer while a Material Lease Default or a Lease Event of Default is continuing, in which case Midwest or EME shall be obligated to pay such costs. 105 (d) Upon any transfer to a Member Transferee specified in clause (a)(i)(B) of this SECTION 18.18 and compliance with all of the other provisions of this SECTION 18.18, (i) the Member Transferee shall, to the extent of the Membership Interest conveyed to the Member Transferee, be deemed an "OP Member" for purposes of this SECTION 18.18 and the Person executing the guaranty pursuant to such clause (a)(i)(B) shall be deemed a "OP Guarantor" for all purposes and each reference in this Agreement and each other Operative Document to the "OP Guarantor" shall thereafter be deemed to include such Member Transferee or the Person executing such guaranty, as the case may be, to the extent of the obligations expressly transferred to the Member Transferee and guaranteed by such Person, for all purposes and (ii) the existing OP Guarantor shall be released from all obligations under its Owner Participant Guaranty to the extent such obligations are expressly guaranteed by the Member Transferee or such Affiliate; PROVIDED, HOWEVER, that in no event shall any such transfer waive or release the existing OP Guarantor from any liability existing immediately prior to or occurring simultaneously with such transfer. Except as expressly provided in the immediately preceding sentence, no transfer of any Membership Interest shall effect the obligations of the existing OP Guarantor under the Owner Participant Guaranty or any other OP Guarantor under its Owner Participant Guaranty. (e) Notwithstanding anything herein to the contrary, any transfer of Membership Interest pursuant to this SECTION 18.18 shall be subject to Midwest's right of first offer and right of first refusal set forth in SECTION 16.1 and 16.2, respectfully, to the same extent as if such transfer were a transfer by the Owner Participant of its Beneficial Interest. SECTION 18.19 LIMITATION ON CLAIMS AGAINST MIDWEST; SUBORDINATION OF CLAIMS AGAINST MIDWEST. Notwithstanding any provision to the contrary contained in this Participation Agreement, the Facility Lease or any other Operative Document, except as expressly provided in the proviso to this sentence, claims against Midwest for Rent (including Termination Value) or any other amounts due and unpaid as at any date to the Lease Financing Parties under or arising out of any of the Operative Documents (such other amounts, "OTHER MIDWEST LIABILITIES") (to the extent not paid by EME under the EME Guarantee or the EME OP Guarantee) shall be limited to the aggregate Free Cashflow amount attributable to the Fiscal Quarters during which Rent and Other Midwest Liabilities became due and remain undischarged; PROVIDED that (a) as set forth in SECTION 17.2 of the Facility Lease, claims shall be permitted 106 against Midwest for any amounts of Rent (including Termination Value) and Other Midwest Liabilities due and unpaid to the Lease Financing Parties in excess of the aggregate Free Cashflow amount attributable to the Fiscal Quarters during which Rent and Other Midwest Liabilities became due and remain undischarged but such claims shall be subordinated to Specified Midwest Indebtedness on the terms and conditions set forth in the Subordination Agreement substantially in the form attached hereto as Exhibit AA, (b) the EME Note shall be subject to set-off as contemplated by, and in accordance with, SECTION 8 of the EME Note and (c) the Guarantor shall be entitled to rights of subrogation as contemplated by, and in accordance with SECTION 2.05 of the EME Guarantee. Notwithstanding anything contained in this Participation Agreement, the Facility Lease or any other Operative Document to the contrary, the Guarantor shall be liable under the EME Guarantees for any and all Rent (including Termination Value) or Other Midwest Liabilities due and unpaid and in accordance with the EME Guarantee and the EME OP Guarantee, subject to the limitation set forth in SECTION 2.03 of the EME Guarantee, notwithstanding the limitation on claims against Midwest contained in the preceding sentence. The Owner Participant, the Owner Trustee, the Equity Investor, the Lease Indenture Trustee, the Pass Through Trustees and the Guarantor (and by its acceptance of any Lessor Note, any holder of such Lessor Note and by its acceptance of any Certificate, any Certificateholder) each acknowledge notice of, and consent in all respects to the provisions of this SECTION 18.19, SECTION 17.2 of the Facility Lease and the Subordination Agreement. Notwithstanding the foregoing, no provision of this Agreement (including this SECTION 18.19) or the Subordination Agreement shall limit or impair, or be deemed to limit or impair, in any way the right of any party to this Agreement to take (or cause to be taken) any of the following actions: (i) the giving of any notice necessary to cause a default, breach, failure or misrepresentation to become a Lease Event of Default, (ii) the declaration of the Facility Lease to be in default; (iii) the election or exercise of any remedy arising out of or in connection with a Lease Event of Default (including making any demand for payment of Termination Value, terminating the Facility Lease, exercising the rights of the Owner Lessor as owner of the Undivided Interest or any other remedy under SECTION 17 of the Facility Lease); (iv) the making of demand for payment of any claim required to be subordinated pursuant to this SECTION 18.19; and (v) the exercise of any other right or remedy in the Operative Documents or at law with respect to any claim not constituting a claim required to be subordinated pursuant to this SECTION 18.19; PROVIDED, HOWEVER, that in 107 no event shall any party to this Agreement be entitled to seek to collect or enforce payment of any amount constituting a claim required to be subordinated pursuant to this SECTION 18.19. SECTION 18.20 GUARANTEED TV AMOUNT. Each party to this Agreement acknowledges notice of, and consents in all respects to, the terms of the EME Guarantee, including clause 2.03 of the EME Guarantee which limits obligations of EME under the EME Guarantee in certain specific instances to the Guaranteed TV Amount. 108 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized. POWERTON TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ James P. Lawler ------------------------------------ Name: James P. Lawler Title: Vice President Date: August 24, 2000 WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee By: /s/ James P. Lawler ------------------------------------ Name: James P. Lawler Title: Vice President Date: August 24, 2000 POWERTON GENERATION I, LLC By: /s/ Christopher P. Kelleher ------------------------------------ Name: Christopher P. Kelleher Title: Vice President Date: August 24, 2000 EDISON MISSION ENERGY By: /s/ John P. Finneran ------------------------------------ Name: John P. Finneran Title: Vice President Date: August 24, 2000 MIDWEST GENERATION, LLC By: /s/ Gary Garcia ------------------------------------ Name: Gary Garcia Title: Treasurer & Vice President Date: August 24, 2000 UNITED STATES TRUST COMPANY OF NEW YORK, not in its individualcapacity, except to the extent provided herein, but solely as Lease Indenture Trustee under the Lease Indenture By: /s/ Christopher J. Grell ------------------------------------ Name: Christopher J. Grell Title: Assistant Vice President Date: August 24, 2000 UNITED STATES TRUST COMPANY OF NEW YORK, not in its individual capacity, except to the extent provided herein, but as Pass Through Trustee under the Pass Through Trust Agreements By: /s/ Christopher J. Grell ------------------------------------ Name: Christopher J. Grell Title: Assistant Vice President Date: August 24, 2000 POWERTON PARTICIPATION AGREEMENT (T1) APPENDIX A TO PARTICIPATION AGREEMENT DEFINITIONS APPENDIX A - DEFINITIONS (T1) GENERAL PROVISIONS In this Appendix A and each Operative Document (as hereinafter defined), unless, otherwise provided herein or therein: (a) the terms set forth in this Appendix A or in any such Operative Document shall have the meanings herein provided for and any term used in an Operative Document and not defined therein or in this Appendix A but in another Operative Document shall have the meaning, herein or therein provided for in such other Operative Document; (b) any term defined in this Appendix A by reference to another document, instrument or agreement shall continue to have the meaning ascribed thereto whether or not such other document, instrument or agreement remains in effect; (c) words importing the singular include the plural and vice versa; (d) words importing a gender include any gender; (e) a reference to a part, clause, section, paragraph, article, party, annex, appendix, exhibit, schedule or other attachment to or in respect of an 1 Operative Document is a reference to a part, clause, section, paragraph, or article of, or a party, annex, appendix, exhibit, schedule or other attachment to, such Operative Document unless, in any such case, otherwise expressly provided in any such Operative Document; (f) a reference to any statute, regulation, proclamation, ordinance or law includes all statutes, regulations, proclamations, ordinances or laws varying, consolidating or replacing the same from time to time, and a reference to a statute includes all regulations, policies, protocols, codes, proclamations and ordinances issued or otherwise applicable under that statute unless, in any such case, otherwise expressly provided in any such statute or in such Operative Document; (g) a definition of or reference to any document, instrument or agreement includes an amendment or supplement to, or restatement, replacement, modification or novation of, any such document, instrument or agreement unless otherwise specified in such definition or in the context in which such reference is used; (h) a reference to a particular section, paragraph or other part of a particular statute shall be deemed to be a reference to any other section, paragraph or other part substituted therefor from time to time; (i) if a capitalized term describes, or shall be defined by reference to, a document, instrument or agreement that has not as of any particular date been executed and delivered and such document, instrument or agreement is attached as an exhibit to the Participation Agreement (as hereinafter defined), such reference shall be deemed to be to such form and, following such execution and delivery and subject to paragraph (vii) above, to the document, instrument or agreement as so executed and delivered; (j) a reference to any Person (as hereinafter defined) includes such Person's successors and permitted assigns; (k) any reference to "days" shall mean calendar days unless "Business Days" (as hereinafter defined) are expressly specified; 2 (l) if the date as of which any right, option or election is exercisable, or the date upon which any amount is due and payable, is stated to be on a day that is not a Business Day, such right, option or election may be exercised, and such amount shall be deemed due and payable, on the next succeeding Business Day with the same effect as if the same was exercised or made on such date or day and interest shall accrue and be payable with respect to such payment; (m) words such as "hereunder," "hereto," "hereof" and "herein" and other words of similar import shall, unless the context requires otherwise, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof; (n) a reference to "including" means including without limiting the generality of any description preceding such term, and for purposes hereof and of each Operative Document the rule of EJUSDEM GENERIS shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned; and (o) each term defined by reference to the Holdings Credit Agreement shall have the meaning assigned to such term therein and, following any amendment to, or restatement or replacement of the Holdings Credit Agreement, the meaning assigned to such term or the respective correlative term, as the case may be, in such amendment, restatement or replacement. 3 DEFINED TERMS "467 FIXED RENT" shall mean the amount specified as 467 Fixed Rent as set forth in Schedule 1-3 to the Facility Lease. "ACCESS ROUTES" shall have the meaning set forth in the recitals to the Facility Site Lease. "ADDITIONAL CERTIFICATES" shall mean any additional certificates issued by any Pass Through Trust in connection with the issuance of Additional Lessor Notes relating, thereto. "ADDITIONAL EQUITY INVESTMENT" shall mean the amount, if any, the Owner Participant shall provide (in its sole and absolute discretion) to finance all or a portion of the Owner Lessor's Percentage of the cost of any Required Improvement or Non-Severable Improvement financed pursuant to SECTION 16.1 of the Participation Agreement. "ADDITIONAL INSUREDS" shall have the meaning specified in SECTION 11.3 of the Facility Lease. "ADDITIONAL LESSOR NOTES" shall have the meaning specified in SECTION 2.13 of the Lease Indenture. "AFFILIATE" of any particular Person shall mean 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; PROVIDED, HOWEVER, that under no circumstances shall the Trust Company be considered to be an Affiliate of any of the Owner Lessor, the Owner Trustee, or the Owner Participant, nor shall any of the Owner Lessor, the Owner Trustee, or the Owner Participant be considered to be an Affiliate of the Trust Company and that neither Owner Lessor nor Owner Trustee shall be treated as an Affiliate of the Owner Participant except that the Owner Lessor will be treated as an Affiliate of the Owner Participant to the extent that the Owner Lessor acts on the 4 express written direction or with the express written consent of the Owner Participant. "AFTER-TAX BASIS" shall mean, in the context of determining the amount of a payment to be made on such basis, the payment of an amount which, after reduction by the net increase in Taxes of the recipient (actual or constructive) of such payment, which net increase shall be calculated by taking into account any reduction in such Taxes resulting from any tax benefits realized or to be realized by the recipient as a result of such payment, shall be equal to the amount required to be paid. In calculating the amount payable by reason of this provision in the case of any person that is a U.S. Person, all income taxes payable and tax benefits realized or to be realized shall be determined on the assumptions that (i) the recipient is subject to (a) U.S. Federal income taxes at the highest marginal rate then applicable to corporations for the relevant period or periods, and (b) state and local income taxes at the highest marginal rates then applicable to corporations for the relevant period or periods, and (ii) all related tax benefits are utilized (a) with regard to U.S. Federal income taxes, at the highest marginal rates then applicable to corporations for the relevant period or periods, and (b) with regard to state and local income taxes, at the highest marginal rate then applicable to corporations for the relevant period or periods. "APPLICABLE RATE" shall mean (i) in respect of any amount due under any Lessor Note or any amount of Basic Rent attributable to the principal and interest on any Lessor Note (including Make Whole Premium, if any), the per annum fixed rate of interest (including, without limitation, additional interest resulting from an Illiquidity Event or a Reporting Cessation (as each such term is defined in the Lessor Notes), if any) then borne by the relevant Lessor Note and (ii) in respect of any other amount due under the Operative Documents, 8.45% per annum (in each case, computed on the basis of a 360-day year of twelve 30-day months). "APPRAISAL PROCEDURE" shall mean (except with respect to the Closing Date Appraisal), an appraisal conducted by an appraiser or appraisers in accordance with the following procedures. The Owner Participant and the Facility Lessee will consult with the intent of selecting a mutually acceptable Independent Appraiser. If a mutually acceptable Independent Appraiser is selected, the Fair Market Sales Value, the Fair Market Rental Value, the remaining useful life or other determination that is the subject of the appraisal shall be determined by such Independent Appraiser. If 5 the Facility Lessee and the Owner Participant are unable to agree upon a single Independent Appraiser within a 15-day period, one shall be appointed by the Owner Participant, and one shall be appointed by the Facility Lessee (or its designee), which Independent Appraisers shall attempt to agree upon the value, period, amount or other determination that is the subject of the appraisal. If either the Owner Participant or the Facility Lessee or its designee does not appoint its Independent Appraiser, the determination of the other Independent Appraiser shall be conclusive and binding on the Owner Participant and the Facility Lessee. If the Independent Appraisers appointed by the Owner Participant and the Facility Lessee are unable to agree upon the value, period, amount or other determination that is the subject of the appraisal, such Independent Appraisers shall jointly appoint a third Independent Appraiser or, if such Independent Appraisers do not appoint a third Independent Appraiser, the Owner Participant and the Facility Lessee shall jointly appoint the third Independent Appraiser. In such case, the average of the determinations of the three Independent Appraisers shall be conclusive and binding on the Owner Participant and the Facility Lessee, unless the determination of one such Independent Appraiser is disparate from the middle determination by more than twice the amount by which the third determination is disparate from the middle determination, in which case the determination of the most disparate Independent Appraiser shall be excluded, and the average of the remaining two determinations shall be conclusive and binding on the Owner Participant and the Facility Lessee. "APPRAISER" shall mean Deloitte and Touche LLP Valuation Group. "ASA" shall mean the Asset Sale Agreement, dated as of March 22, 1999, by and between ComEd and EME. "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean an assignment and assumption agreement in form and substance substantially in the form of Exhibit LL to the Participation Agreement. "ASSOCIATES" shall mean Associates Capital Investments, L.L.C., a Delaware limited liability company. "AUTHORIZED OFFICER" shall mean, with respect to any Person, (i) its Chairman of the Board, its President, any Senior Vice President, the Chief Financial Officer, any Vice President, the Treasurer or any other person authorized by or pursuant to the 6 Organic Documents or any resolution of the board of directors or managers (or managing members) of such Person, and (ii) with respect to the Owner Trustee, an officer in its corporate trust department. "BANKRUPTCY CODE" shall mean the United States Bankruptcy Code of 1978, as amended from time to time, 11 U.S.C. Section 101 ET SEQ. "BASE FREE CASH FLOW" shall have the meaning set forth in the definition of "Free Cash Flow." "BASIC LEASE RENT" shall have the meaning specified in SECTION 3.2 of the Facility Lease. "BASIC LEASE TERM" shall have the meaning specified in SECTION 3.1 of the Facility Lease. "BENEFICIAL INTEREST" shall mean the interest of the Owner Participant in the Owner Lessor. "BILL OF SALE" shall mean the Bill of Sale (I), dated as of August 17, 2000, executed by Midwest in favor of the Owner Lessor, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "BURDENSOME BUYOUT EVENT" shall mean any event giving rise to the Facility Lessee's Burdensome Buyout Option under the Facility Lease. "BURDENSOME BUYOUT OPTION" shall have the meaning specified in SECTION 13.3 of the Facility Lease. "BURDENSOME BUYOUT PERIOD" shall have the meaning specified in SECTION 13.3 of the Facility Lease. "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday, or a day on which commercial banking institutions are authorized or required by law, regulation or executive order to be closed in New York, New York or the city and the state in 7 which the Corporate Trust Office of the Lease Indenture Trustee, the Owner Trustee or either Pass Through Trustee is located. "CAPEX CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of May 9, 2000, by and among Holdings, Societe Generale and Bayerische Landesbank Girozentrale. "CAPITAL LEASE" shall mean, with respect to any Person, a lease of (or other Indebtedness arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability set forth on the balance sheet of such Person or such Person's Subsidiaries in accordance with GAAP. "CAPITALIZED LEASE LIABILITIES" of any Person shall mean all monetary obligations of such Person under any Capital Lease, and, for purposes of each Operative Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "CASH EQUIVALENT INVESTMENTS" shall mean, at any time: (i) 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; (ii) 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 (iii) other securities as to which the Person incurring such Indebtedness has demonstrated adequate liquidity through secondary markets or deposit agreements. "CASHFLOW AVAILABLE FOR FIXED CHARGES" shall mean, in respect of any period, the excess, if any, of Revenues (excluding, without duplication, (i) proceeds of any permitted asset sale, (ii) amounts available in the Cashflow Recapture Fund and (iii) payments made by Edison Mission Energy under or in respect of the Synthetic Lease 8 Intercompany Note or the Combined Lease Note) during such period OVER Operating Expenses during such period. "CASHFLOW RECAPTURE FUND" shall have the meaning ascribed thereto in the Holdings Credit Agreement. "CERCLIS" shall mean the Comprehensive Environmental Response, Compensation and Liability Information System list. "CERTIFICATEHOLDERS" shall mean each of the holders of Certificates, and each of such holder's successors and permitted assigns. "CERTIFICATE PURCHASE AGREEMENT" shall mean the Purchase Agreement, dated as of August 17, 2000 between Midwest, EME and Credit Suisse First Boston Corporation and Lehman Brothers Inc., as representatives of the Initial Purchasers. "CERTIFICATES" shall mean the pass through certificates issued pursuant to the Pass Through Trust Agreements. "CLAIM" shall mean any liability (including, without limitation, in respect of negligence (whether passive or active or other torts), strict or absolute liability in tort or otherwise, warranty, latent or other defects (regardless of whether or not discoverable), statutory liability, property damage, bodily injury or death), obligation, loss, settlement, damage, penalty, claim, Environmental Claim, action, suit, proceeding (whether civil or criminal), judgment, penalty, fine and other legal or administrative sanction, judicial or administrative proceeding, cost, expense or disbursement, including reasonable legal, investigation and expert fees, expenses and related charges, of whatsoever kind and nature. "CLOSING" shall have the meaning specified in SECTION 2.2(a) of the Participation Agreement. "CLOSING DATE" shall mean the Scheduled Closing Date or such later date on which the Closing shall occur. 9 "CLOSING DATE APPRAISAL" shall mean the appraisal, dated the Closing Date, addressed to the Equity Investor prepared by the Appraiser with respect to the Facility. "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COLLINS HOLDINGS" shall mean Collins Holdings EME, LLC, a wholly-owned Subsidiary of MGE and a special purpose, bankruptcy-remote limited liability company organized under the laws of the State of Delaware. "COLLINS LEASE OBLIGATIONS" shall mean the obligations of Midwest to make payments of basic lease rent, renewal lease rent, supplemental lease rent and other payments under the Facility Leases (as defined in the Holdings Credit Agreement). "COMBINED LEASE NOTE" shall mean the EME Note, the comparable promissory note issued by EME to Midwest pursuant to the Other Powerton Lease Transaction and each comparable promissory note issued by EME to Midwest pursuant to the Joliet Lease Transactions. "COMBINED LEVERAGE LEASE LIABILITIES" shall mean Leveraged Lease Liabilities, Other Leveraged Lease Liabilities and Joliet Leveraged Lease Liabilities. "COMED" shall mean the Commonwealth Edison Company, an Illinois corporation or its successors or assigns. "COMED CONSENT" shall mean the Consent to the Sale of Assets, dated as of August 17, 2000 among ComEd, Midwest and the Owner Lessor. "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "COMPETITOR" shall have the meaning specified in SECTION 10.1(b) of the Participation Agreement. "COMPONENT" shall mean any appliance, part, instrument, appurtenance, accessory, furnishing, equipment or other property of whatever nature that may from time to time be incorporated in the Facility, except to the extent constituting Improvements. 10 "CONSOLIDATED SUBSIDIARY" shall mean, at any date, any Subsidiary or other entity the accounts of which would be consolidated with those of EME in its consolidated financial statements if its consolidated financial statements were prepared as of such date. "CONSOLIDATED TANGIBLE NET ASSETS" shall mean, with respect to any Person, as of the date of any determination thereof, the total amount of all assets of such Person and its Subsidiaries (determined on a consolidated basis in accordance with GAAP), less the sum of (a) the consolidated liabilities of such Person and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) and (b) assets properly classified as "intangible assets" in accordance with GAAP. "CONTINGENT LIABILITY" shall mean 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. "CONTRACTUAL OBLIGATION" shall mean, 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" shall mean all corporations which are members of a controlled group of corporations within the meaning of Section 1563(a) of the Code determined without regard to Sections 1563(a)(4) and 1563(e)(3)(C) and all trades or businesses 11 (whether or not incorporated) under common control which, together with EME and its Consolidated Subsidiaries, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "CORPORATE TRUST OFFICE" shall mean with respect to any Pass Through Trustee, the Owner Trustee and the Lease Indenture Trustee, the office of such trustee in the city in which at any particular time its corporate trust business shall be principally administered. "DEBT RATING" shall mean, as to any Person, a rating by each of Moody's and S&P of such Person'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 classification after the date of the Participation Agreement, a Person'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 COVERAGE RATIO" shall mean, for any period, the ratio of (a) Cashflow Available for Fixed Charges for such period to (b) Fixed Charges for such period. "DESIGNATED LEASE LIABILITIES" shall have the meaning ascribed thereto in the Holdings Credit Agreement. "DISCOUNT RATE" shall mean 9.0% per annum. "DOLLARS" and the sign "$" shall mean lawful money of the United States. "EDISON MISSION ENERGY" or "EME" shall mean Edison Mission Energy, a California corporation. "EME GUARANTEE" shall mean the guaranty agreement dated as of August 17, 2000 entered into between EME and the Owner Lessor. "EME GUARANTEES" shall mean the EME Guarantee, the Reimbursement Agreement and the EME OP Guarantee. 12 "EME INDEBTEDNESS" shall mean any indebtedness for borrowed money that is incurred, issued or guaranteed by EME. "EME JOLIET (T1) PLEDGE AGREEMENT" shall mean the EME Joliet (T1) Pledge Agreement, dated as of August 17, 2000, between Midwest and the Holdings Collateral Agent. "EME JOLIET (T2) PLEDGE AGREEMENT" shall mean the EME Joliet (T2) Pledge Agreement, dated as of August 17, 2000, between Midwest and the Holdings Collateral Agent. "EME NOTE" shall have the meaning set forth in the recitals to the Participation Agreement. "EME POWERTON (T1) PLEDGE AGREEMENT" shall mean the EME Powerton (T1) Pledge Agreement, dated as of August 17, 2000, between Midwest and the Holdings Collateral Agent. "EME POWERTON (T2) PLEDGE AGREEMENT" shall mean the EME Powerton (T2) Pledge Agreement, dated as of August 17, 2000, between Midwest and the Holdings Collateral Agent. "EME OP GUARANTEE" shall mean the guaranty agreement dated as of August 17, 2000 entered into between EME, the Owner Participant and the Equity Investor. "EMOC" shall mean Edison Mission Overseas Co., a Subsidiary of Holdings and a limited liability company organized under the laws of Delaware. "ENGINEERING CONSULTANT" shall mean Stone & Webster Management Consultants, Inc. "ENGINEERING REPORT" shall mean the report of the Engineering Consultant, dated August 17, 2000. "ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory or judicial action, fee, cause of action, obligation, suit, liability, loss, damage, proceeding, decree, judgment, penalty, fine, demand, demand letter, order, directive, claim 13 (including any claim involving liability in tort, strict, absolute or otherwise), lien, sanction, notice of noncompliance or violation, legal or consultant fee or expense, or cost of investigation or proceeding, relating in any way to any Environmental Law, or arising from the actual or alleged presence or Release of any Hazardous Material (hereinafter "LIABILITIES") including, without limitation, and regardless of the merit of such Liability, any and all Liabilities for (i) investigation, assessment, abatement, correction, enforcement, mitigation, cleanup, removal, response, remediation or other activities related to the actual or alleged presence or Release of Hazardous Materials, (ii) damages, contribution, indemnification, cost recovery, compensation or injunctive or declaratory relief related to violations of Environmental Law or the actual or alleged presence or Release of Hazardous Materials, or (iii) any alleged or actual injury or threat of injury to human health, safety, natural resources or the environment in connection with a violation of Environmental Law or the actual or alleged presence or Release of Hazardous Materials. "ENVIRONMENTAL CONDITION" shall mean the presence or Release of any Hazardous Material at, into, on or under any land, water, air or otherwise into the environment, which does or reasonably could (i) require assessment, investigation, abatement, correction, clean-up, mitigation, removal, remediation or any other response action, (ii) give rise to an Environmental Claim or any obligation or liability of any nature (whether civil or criminal, arising under a theory of negligence or strict liability, or otherwise) under any Environmental Law, (iii) create or constitute a public or private nuisance or trespass, (iv) constitute a violation of or non-compliance with any Environmental Law or (v) result in or contribute to the actual or threatened loss of or damage to any property, natural resource or environmental media, or the death of or injury to any Person. "ENVIRONMENTAL LAWS" shall mean all federal, state and local statutes, laws, ordinances, codes, rules, regulations, consent decrees, administrative orders, administrative directives, injunctions, deed restrictions, applicable judgments and any other legally enforceable requirements of any Governmental Authority relating to, regulating or imposing liability or standards of conduct concerning Hazardous Materials, public health, safety or the environment or natural resources, as have been, are now, or may at any time hereafter be in effect. "EQUITY COMMITMENT LETTER" shall mean the written commitment by the Equity Investor to participate in the lease financing. 14 "EQUITY INVESTMENT" shall mean $88,390,800.00. "EQUITY INVESTOR" shall mean PSEGR Midwest, LLC, a Delaware limited liability company. "EQUITY INVESTOR'S ADVISOR" shall mean Cornerstone Financial Advisors Limited Partnership. "EQUITY PORTION OF BASIC LEASE RENT" shall mean the amounts set forth as Component A of Basic Lease Rent (Column A) as set forth on SCHEDULE 1-1 to the Facility Lease. "EQUITY PORTION OF TERMINATION VALUE" shall mean the amounts under the column titled "Equity Portion of Termination Value" in SCHEDULE 2 to the Facility Lease. "ERISA" shall mean 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 LOSS" shall mean any of the following events: (i) the loss of the Facility or use thereof, due to destruction or damage to the Facility or the Facility Site that renders repair uneconomic or that renders the Facility permanently unfit for normal use; or (ii) any damage to the Facility that results in an insurance settlement with respect thereto on the basis of a total loss or an agreed constructive or a compromised total loss of the Facility; or (iii) seizure, condemnation, confiscation or taking of, or requisition of title to or use of, the Facility or the Facility Site by any Governmental Authority (a "REQUISITION") that shall have resulted in loss by the Owner Lessor of title to or use of the Undivided Interest or the Ground Interest following exhaustion of all permitted appeals or an election by the Facility Lessee not to pursue such appeals; PROVIDED, that (i) no such contest may be conducted if a Material Lease Default or a Lease Event of Default shall have occurred and be continuing and (ii) no such contest 15 shall extend beyond the earlier of (x) the date which is one year after the loss of such title, or (y) the date which is 36 months prior to the end of the Basic Lease Term or any Renewal Term then in effect or already elected by the Facility Lessee; PROVIDED, FURTHER, that in any case involving Requisition of use of the Facility or the Facility Site, but not of the Owner Lessor's title to the Undivided Interest or interest in the Facility Lease, such event shall be an Event of Loss only if such Requisition of use continues beyond the Basic Lease Term or any Renewal Lease Term then in effect or already elected by the Facility Lessee; or (iv) if elected by the Owner Participant, and only in circumstances where the termination of the Facility Lease and transfer of the Facility to the Facility Lessee (or its designee) shall remove the basis of the regulation described below, the Owner Participant's interest in the Facility, the Facility Lease or the Trust Estate shall become subject to any rate of return regulation by any Governmental Authority, or the Owner Participant or the Owner Lessor shall become subject to any public utility regulation of any Governmental Authority (other than Requirements of Law in effect on the Closing Date) or law which in the reasonable opinion of the Owner Participant is burdensome, in either case by reason of the participation of the Owner Lessor or the Owner Participant in the transactions contemplated by the Operative Documents but, in any event, not if the Owner Participant or the Owner Lessor shall have become subject thereto as a result of (a) investments, loans or other business activities of the Owner Participant or any of its Affiliates in respect of equipment or facilities similar in nature to the Facility or any part thereof or in any other electrical, steam, cogeneration or other energy or utility related equipment or facilities or the general business or other activities of the Owner Participant or any of its Affiliates or the nature of any of the properties or assets from time to time owned, leased, operated, managed or otherwise used or made available for use by the Owner Participant or any of its Affiliates or (b) a failure of the Owner Participant, the Owner Lessor or any of their respective Affiliates to perform routine, administrative or ministerial actions the performance of which would not subject the Owner Participant, the Owner Lessor or such Affiliate to any adverse consequence (in the reasonable opinion of the Owner Participant or the Owner Lessor, as the case may be, acting in good faith), PROVIDED THAT the Facility Lessee, the Owner Lessor and the Owner Participant agree to cooperate and to take reasonable measures to alleviate the source or consequence of any regulation constituting an Event of Loss under this paragraph (iv), at the cost and expense of the party requesting such cooperation and 16 so long as there shall be no adverse consequences to the Owner Lessor or Owner Participant as a result of such cooperation or the taking of such reasonable measures. "EVENT OF LOSS PAYMENT" shall have the meaning specified in SECTION 10.2(a) of the Facility Lease. "EXCEPTED PAYMENTS" shall mean and include (i)(A) any indemnity (whether or not constituting Supplemental Lease Rent and whether or not a Lease Event of Default exists) payable to either the Trust Company, the Owner Trustee or the Owner Participant or to their respective Indemnitees and successors and permitted assigns (other than the Lease Indenture Trustee) pursuant to SECTION 2.3, 12.1, 12.2, 14.1 OR 14.2 of the Participation Agreement or SECTION 5.03, 7.01 OR 7.05 of the Trust Agreement and any payments under the Tax Indemnity Agreement or (B) any amount payable to the Owner Lessor or the Owner Participant to reimburse any such Person for its costs and expenses in exercising its rights or complying with its obligations under the Operative Documents, (ii)(A) insurance proceeds, if any, payable to the Owner Lessor or the Owner Participant under insurance separately maintained by the Owner Lessor, the Equity Investor or the Owner Participant with respect to the Facility as permitted by SECTION 11.5 of the Facility Lease or (B) proceeds of personal injury, property damage liability or other liability insurance maintained under any Operative Document for the benefit of the Owner Lessor, the Equity Investor or the Owner Participant, (iii) any amount payable to the Owner Participant as the purchase price for the Beneficial Interest or to any OP Member as the purchase price for such OP Member's membership interest in the Owner Participant, (iv) any amounts payable to the Owner Participant upon exercise by the Facility Lessee (or its designee) of the rights pursuant to SECTION 16 OR 17 of the Participation Agreement, (v) all other fees expressly payable to the Owner Participant, the Owner Trustee or the Trust Company under the Operative Documents, (vi) any payments in respect of interest, or any payments made on an After-Tax Basis, to the extent attributable to payments referred to in clause (i) through (vi) above that constitute Excepted Payments, and (vii) any amount payable in respect of the foregoing by any Person on behalf of the Facility Lessee. "EXCESS AMOUNT" shall have the meaning specified in SECTION 18.3 of the Participation Agreement. 17 "FACILITY" shall mean the Powerton Station, a 1,538 megawatt coal fired electric generating plant located in Tazewell County, Illinois and more fully described in Exhibit B to the Facility Lease. "FACILITY DEED" shall mean the Facility Deed, dated as of August 17, 2000, between Midwest and the Owner Lessor pursuant to which Midwest transferred the Undivided Interest to the Owner Lessor. "FACILITY LAND" shall have the meaning set forth in the recitals to the Facility Site Lease. "FACILITY LEASE" shall mean the Facility Lease Agreement (T1), dated as of August 17, 2000, between the Owner Lessor and the Facility Lessee. "FACILITY LEASE TERM" shall mean the term of the Facility Lease, including the Basic Lease Term and all Renewal Lease Terms. "FACILITY LESSEE" shall mean Midwest, as lessee of the Undivided Interest under the Facility Lease. "FACILITY LESSEE'S INTEREST" shall mean the Facility Lessee's right, title and interest in and to the Undivided Interest under the Facility Lease and the Ground Interest under the Facility Site Sublease. "FACILITY LESSOR" shall mean the Owner Lessor, as lessor of the Undivided Interest under the Facility Lease. "FACILITY SITE" shall have the meaning specified in the recitals to the Facility Site Lease. "FACILITY SITE LEASE" shall mean the Facility Site Lease Agreement (T1), dated as of August 17, 2000, between Midwest as Ground Lessor and the Owner Lessor as Ground Lessee. "FACILITY SITE SUBLEASE" shall mean the Facility Site Sublease Agreement (T1), dated as of August 17, 2000, between the Owner Lessor as Ground Sublessor and Midwest as Ground Sublessee. 18 "FACILITY SUBLESSEE" shall mean any Person which shall have become a sublessee of the Facility from the Facility Lessee in accordance with the Facility Lease. "FAIR MARKET RENTAL VALUE" or "FAIR MARKET SALES VALUE" shall mean with respect to any property or service as of any date, the cash rent or cash price obtainable in an arm's length lease, sale or supply, respectively, between an informed and willing lessee or purchaser under no compulsion to lease or purchase and an informed and willing lessor or seller or supplier under no compulsion to lease or sell or supply the property or service in question, and shall, in the case of the Undivided Interest or the Owner Lessor's Interest, be determined (except pursuant to SECTION 17 of the Facility Lease or as otherwise provided below or in the Operative Documents) on the basis that (i) the conditions contained in SECTIONS 7 and 8 of the Facility Lease shall have been complied with in all respects, (ii) the lessee or buyer shall have rights in, or an assignment of, the Operative Documents to which the Owner Lessor is a party and the obligations relating thereto, (iii) the Undivided Interest or the Owner Lessor's Interest, as the case may be, is free and clear of all Liens (other than Owner Lessor's Liens, Owner Participant's Liens and Indenture Trustee Liens), (iv) taking into account the remaining term of the Facility Site Lease, and (v) in the case the Fair Market Rental Value, taking into account the terms of the Facility Lease and the other Operative Documents. If the Fair Market Sales Value of the Owner Lessor's Interest is to be determined during the continuance of a Lease Event of Default or in connection with the exercise of remedies by the Owner Lessor pursuant to SECTION 17 of the Facility Lease, such value shall be determined by an appraiser appointed solely by the Owner Lessor on an "as-is," "where-is" and "with all faults" basis and shall take into account all Liens (other than Owner Lessor's Liens, Owner Participant's Liens and Indenture Trustee Liens); PROVIDED, HOWEVER, in any such case where the Owner Lessor shall be unable to obtain constructive possession sufficient to realize the economic benefit of the Owner Lessor's Interest, Fair Market Sales Value of the Owner Lessor's Interest shall be deemed equal to $0. If in any case other than in the preceding sentence the parties are unable to agree upon a Fair Market Sales Value of the Owner Lessor's Interest within 30 days after a request therefor has been made, the Fair Market Sales Value of the Owner Lessor's Interest shall be determined by appraisal pursuant to the Appraisal Procedure. Any fair market value determination of a Severable Improvement shall take into consideration any liens or encumbrances to which the Severable Improvement being appraised is subject and which are being assumed by the transferee. 19 "FAS 13" shall mean Statement of Financial Accounting Standards (SFAS) No. 13, as amended and interpreted from time to time. "FEDERAL POWER ACT" shall mean the Federal Power Act, 16 U.S.C. Sections 791a-825r (1994), as amended. "FERC" shall mean the Federal Energy Regulatory Commission of the United States or any successor or predecessor agency thereto. "FERC EWG ORDERS" shall mean (i) the order issued by the FERC on November 9, 1999, in Docket No. EG99-224-000 granting to Midwest "exempt wholesale generator" status under the Holding Company Act, and (ii) each of the orders issued by the FERC on July 24, 2000, in Docket Nos. EG00-164-000 and EG00-165-000 granting to the Owner Lessor and the Other Owner Lessor "exempt wholesale generator" status under the Holding Company Act. "FERC ORDERS" shall mean, collectively, the FERC EWG Orders, the FERC Section 203 Order and the FERC Section 205 Orders. "FERC SECTION 203 ORDER" shall mean the order issued by the FERC on June 26, 2000, in Docket No. EC00-94-000, granting approval under Section 203 of the Federal Power Act for the transfer of the facilities for financing purposes to the Owner Lessor and the Other Owner Lessor and lease of the facilities by the Owner Lessor and the Other Owner Lessor to Midwest. "FERC SECTION 205 ORDERS" shall mean (i) the order issued by the FERC on September 15, 1999, in Docket No. ER99-3693-000, granting approval under Section 205 of the Federal Power Act for Midwest to sell power at market based rates and granting blanket preapproval under Section 204 of the Federal Power Act for all future issuances of securities and assumptions of liabilities by Midwest, and (ii) the order issued by the FERC on September 3, 1999, in Docket No. ER99-3691-000, accepting for filing three Facilities and Interconnection Agreements. "FINAL DETERMINATION" shall have the meaning specified in SECTION 1 of the Tax Indemnity Agreement. 20 "FIRST WINTERGREEN RENEWAL LEASE TERM" shall have the meaning specified in SECTION 15.1(a) of the Facility Lease. "FISCAL QUARTER" shall mean any quarter of a Fiscal Year. "FISCAL YEAR" shall mean 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") shall refer to the Fiscal Year ending on December 31 occurring during such calendar year. "FIXED CHARGES" shall mean, in respect of any period, an amount equal to the aggregate of, without duplication, (i) all interest due and payable on any Indebtedness of Holdings PLUS or MINUS any net amount due and payable in respect of Interest Rate Hedging Transactions during such period, including (A) all capitalized interest and (B) the interest portion of any deferred payment obligation, (ii) amounts due and payable in respect of fees on Indebtedness permitted to be incurred by Holdings during such period, (iii) amounts due and payable to any lenders of Holdings with respect to the deduction of withholding tax on such payments during such period, (iv) the interest portion of any deferred payment obligation due and payable during such period, (v) the aggregate amount of the Collins Lease Obligations due and payable during such period, (vi) all other amounts due and payable by the Holdings Loan Parties with respect to Indebtedness other than Designated Lease Liabilities, Synthetic Lease Liabilities and Combined Leveraged Lease Liabilities permitted to be incurred by the Holdings Loan Parties under the Lessee Financing Documents during such period, and (vii) all amounts due and payable by Holdings Loan Parties to unaffiliated third parties during such period in respect of any preferred stock or other similar obligations. "FMV RENEWAL LEASE TERM" shall have the meaning specified in SECTION 15.2 of the Facility Lease. "FREE CASHFLOW" shall mean, for any period, the sum of (a) payments made by EME under or in respect of the Synthetic Lease Intercompany Note and (to the extent permitted to be retained by Midwest under the Pledge Agreements) the Combined Lease Note during such period to the extent not distributed by Midwest directly or indirectly to EME during such period plus (b) the excess if any, of (i) Cashflow Available for Fixed Charges for such period OVER (ii) the sum of (x) Fixed Charges 21 for such period and (y) amounts required to be deposited into the Cashflow Recapture Fund (such excess "BASE FREE CASH FLOW") MINUS (c) Designated Lease Liabilities, Synthetic Lease Liabilities and Combined Leveraged Lease Liabilities paid by Midwest during such period; PROVIDED that Base Free Cashflow shall be zero in the event that any of the following conditions has not been satisfied: (i) Holdings has paid all amounts then due and payable in respect of (x) all monetary obligations of the Holdings Loan Parties arising under or in connection with the Holdings Credit Agreement and any agreements or instruments related thereto and (y) any Indebtedness of Holdings that is a Secured Obligation; (ii) no Default, Event of Default or Maturity Event (each as defined in the Holdings Credit Agreement) shall have occurred and be continuing or will occur after giving effect to the making of the payments referred to in clauses (i)(x) and (y); and (iii) (A) the Debt Service Coverage Ratio for the 12-month period ended on the last day of the immediately preceding Fiscal Quarter (or, in respect of any Quarterly Payment Date prior to January 1, 2001, the Debt Service Coverage Ratio for the period commencing on January 1, 2000 and ending 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 1.75 to 1.00. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time, consistently applied. "GOOD FAITH CONTEST" shall mean the contest of an item if (i) the item is diligently being contested in good faith by appropriate proceedings timely instituted, (ii) adequate reserves are established in accordance with GAAP with respect to the contested item, if the contested item individually or when taken together with all other contested items for which reserves are not at the time being held could reasonably be expected to result in liability of EME in excess of $1,000,000, (iii) during the period of such contest, the enforcement of any contested item is effectively stayed, unless such enforcement would not reasonably be expected to result in a Material Adverse Effect with respect to EME, (iv) any lien filed in connection therewith shall have been removed from the record by bonding arrangements by a reputable surety company, or title insurance or cash deposits or otherwise provided to assure the discharge of EME'S obligation in connection 22 therewith, provided that such cash deposits, in the aggregate, shall not exceed $2,000,000, (v) such payment shall have been made as is necessary to prevent the recordation of a tax deed or other similar instrument conveying the property of EME or any portion thereof, (vi) the failure to pay or comply with the contested item during the period of such Good Faith Contest would not reasonably be expected to result in a Material Adverse Effect with respect to EME and (vii) EME has no knowledge of any actual or proposed deficiency or additional assessment in connection therewith not otherwise satisfying the requirements of clauses (i) through (vi). "GOVERNMENTAL APPROVAL" shall mean any authorization, consent, approval, license, permit, order, certificate, waiver, variance, filing or registration with or issued by any Governmental Authority. "GOVERNMENTAL AUTHORITY" shall mean 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. "GROUND INTEREST" shall have the meaning specified in the recitals to the Facility Site Lease. "GROUND LESSEE" shall mean the Owner Lessor as lessee of the Ground Interest under the Facility Site Lease. "GROUND LESSOR" shall mean Midwest as lessor of the Ground Interest under the Facility Site Lease. "GROUND SUBLESSEE" shall mean Midwest as sublessee of the Ground Interest under the Facility Site Sublease. "GROUND SUBLESSOR" shall mean the Owner Lessor as sublessor of the Ground Interest under the Facility Site Sublease. 23 "GUARANTEED TV AMOUNT" shall mean for any Termination Date the Guaranteed TV Amount set forth on Schedule 1 to the EME Guarantee for such Termination Date. "GUARANTOR" shall mean Edison Mission Energy, as issuer of the EME Guarantees. "HAZARDOUS MATERIAL" shall mean: (i) any "hazardous substance," as defined by any Environmental Law; (ii) any "hazardous waste," as defined by any Environmental Law; (iii) any petroleum product (including crude oil or any fraction thereof); or (iv) 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, prohibited or restricted pursuant to any Environmental Laws or that could give rise to an Environmental Claim. "HOLDING COMPANY ACT" or "PUHCA" shall mean the Public Utility Holding Company Act of 1935, as amended. "HOLDINGS LOAN PARTIES" shall mean Holdings and each of Holdings' direct and indirect Subsidiaries. "HOLDINGS" shall mean Edison Mission Midwest Holdings Co., a Delaware corporation. "HOLDINGS COLLATERAL AGENT" shall mean Citibank, N.A. as the collateral agent under the Intercreditor Agreement. "HOLDINGS CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of December 15, 1999, by and among Holdings, the Holdings Lenders and The Chase Manhattan Bank, as the administrative agent. 24 "HOLDINGS LENDERS" shall mean The Chase Manhattan Bank, Citicorp USA, Inc., Societe Generale and Westdeutsche Landesbank Girozentrale, New York Branch and such other institutions that become lenders in accordance with the Holdings Credit Agreement. "HOLDINGS SECURED PARTIES" shall mean the Secured Parties as such term is defined in the Intercreditor Agreement. "IMPROVEMENT" shall mean a modification, alteration, addition or improvement to the Facility. "INDEBTEDNESS" of any Person shall mean, without duplication: (i) all indebtedness for borrowed money; (ii) 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; (iii) 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); (iv) 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; (v) 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); (vi) all Capitalized Lease Liabilities and Operating Lease Liabilities; 25 (vii) 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; (viii) all indebtedness referred to in clauses (i) through (vii) 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 (ix) all Contingent Liabilities. 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. "INDEMNITEE" shall have the meaning specified in SECTION 12.1(a) of the Participation Agreement. "INDENTURE ESTATE" shall have the meaning specified in the Granting Clause of the Lease Indenture. "INDENTURE TRUSTEE LIENS" shall mean any Lien on the Trust Estate or any part thereof arising as a result of (i) Taxes against or affecting the Lease Indenture Company or the Lease Indenture Trustee, or any Affiliate thereof that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby, (ii) Claims against or any act or omission of the Lease Indenture Company or the Lease Indenture Trustee, or Affiliate thereof that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of the Lease Indenture Company or the Lease Indenture Trustee specified therein, (iii) Taxes imposed upon the Lease Indenture Company or the Lease Indenture Trustee, or any Affiliate thereof that are not indemnified against by EME pursuant to any Operative Document or (iv) Claims against or affecting the Lease Indenture Company or the Lease Indenture Trustee, or any Affiliate thereof arising out of the voluntary or involuntary transfer by the Lease Indenture Company or the Lease Indenture Trustee 26 of any portion of the interest of the Lease Indenture Company or the Lease Indenture Trustee in the Trust Estate, other than pursuant to the Operative Documents. "INDEPENDENT APPRAISER" shall mean a disinterested, licensed professional appraiser of industrial property who (a) meets the personal property qualifications criteria established by the Appraisal Foundation; (b) is a member of the Appraisal Institute or holds the senior accreditation of the American Society of Appraisers; (c) is in the regular employ, or is a principal of, a nationally recognized appraisal firm; and (d) has substantial experience in the business of appraising facilities similar to the Facility. "INITIAL LESSOR NOTES" shall have the meaning specified in SECTION 2.2 of the Lease Indenture. "INITIAL PURCHASERS" shall mean Credit Suisse First Boston Corporation, Lehman Brothers Inc., Chase Securities Inc., Salomon Smith Barney Inc. and SG Cowen Securities Corp. "INSOLVENCY" shall mean, with respect to any Multiemployer Plan, the condition that such plan is insolvent within the meaning of Section 4245 of ERISA. "INSURANCE CONSULTANT" shall mean Marsh USA Risk & Insurance Services. "INTERCONNECTION AGREEMENT" shall mean the Facilities, Interconnection and Easement Agreement (Powerton Generating Station) dated as of December 15, 1999 between Midwest and ComEd, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "INTERCREDITOR AGREEMENT" shall mean the Collateral Agency and Intercreditor Agreement dated as of December 15, 1999, among MGE, Holdings, EMOC, Midwest, Collins Holdings, Collins Trust I, Collins Trust II, Collins Trust III, Collins Trust IV, Midwest Funding LLC, the Administrative Agent (as defined therein), each Holder Representative (as defined therein), each Other Representative (as defined therein), the Depositary Bank (as defined therein), the Depositary Agent (as defined therein), the Midwest LC Issuer (as defined therein) and the Holdings Collateral Agent. 27 "INTEREST ON 467 FIXED RENT" shall mean the amount set forth on Schedule 1-3 to the Facility Lease. "INTEREST RATE HEDGING TRANSACTIONS" shall mean, as to any Loan Party, 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" shall mean, relative to any person: (i) 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); (ii) any Contingent Liability of such Person; and (iii) any ownership or similar interest held by such person in any other Person. "JOLIET FACILITY LEASES" shall mean the Facility Lease Agreement (T1), dated as of August 17, 2000, between Midwest and Joliet Trust I and the Facility Lease Agreement (T2), dated as of August 17, 2000, between Midwest and Joliet Trust II. "JOLIET LEASE OPERATIVE DOCUMENTS (T1)" shall mean, collectively, the Operative Documents as defined in the Joliet Lease Participation Agreement (T1). "JOLIET LEASE OPERATIVE DOCUMENTS (T2)" shall mean, collectively, the Operative Documents as defined in the Joliet Lease Participation Agreement (T2). "JOLIET LEASE PARTICIPATION AGREEMENT (T1)" shall mean the Participation Agreement (T1), dated as of August 17, 2000 by and among Midwest, EME, Joliet Trust I, Wilmington Trust Company, Joliet Generation I, LLC, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. "JOLIET LEASE PARTICIPATION AGREEMENT (T2)" shall mean the Participation Agreement (T2), dated as of August 17, 2000 by and among Midwest, EME, Joliet Trust II, Wilmington Trust Company, Joliet Generation II, LLC, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. 28 "JOLIET LEASE TRANSACTION (T1)" shall mean the transactions consummated pursuant to the Joliet Lease Participation Agreement (T1) and the Joliet Lease Operative Documents (T1). "JOLIET LEASE TRANSACTION (T2)" shall mean the transactions consummated pursuant to the Joliet Lease Participation Agreement (T2) and the Joliet Lease Operative Documents (T2). "JOLIET LEASE TRANSACTIONS" shall mean, collectively, the Joliet Lease Transaction (T1) and the Joliet Lease Transaction (T2). "JOLIET LEVERAGED LEASE LIABILITIES" shall mean the basic rent, supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Joliet Facility Leases or the operative documents for the Joliet Lease Transactions. "LEASE DEBT" shall mean the debt evidenced by the Lessor Notes and (without duplication) the Certificates. "LEASE EVENT OF DEFAULT" shall have the meaning set forth in the Facility Lease. "LEASE FINANCING DOCUMENTS" shall mean the Lease Indenture, the Lessor Notes, the EME Guarantees, the Pass Through Trust Agreements, the Certificates and the other agreements, documents and instruments delivered in connection with the Lease Indenture and the Lessor Notes. "LEASE FINANCING PARTY" shall mean, individually or collectively, as the context shall require, all or any of the parties to the Operative Documents, including the Trust Company and excluding ComEd and the Holdings Collateral Agent. "LEASE INDENTURE" shall mean the Indenture of Trust, Mortgage and Security Agreement (T1) dated as of August 17, 2000, between the Owner Lessor and the Lease Indenture Trustee. "LEASE INDENTURE COMPANY" shall mean United States Trust Company of New York, in its individual capacity under the Operative Documents. 29 "LEASE INDENTURE DEFAULT" shall mean any event or occurrence which, with the passage of time or the giving of notice or both, would become a Lease Indenture Event of Default. "LEASE INDENTURE EVENT OF DEFAULT" shall have the meaning specified in SECTION 4.2 of the Lease Indenture. "LEASE INDENTURE TRUSTEE" shall mean United States Trust Company of New York, not in its individual capacity, but solely as Lease Indenture Trustee under the Lease Indenture, and each other Person which may from time to time be acting as Lease Indenture Trustee in accordance with the provisions of the Lease Indenture. "LEASE INDENTURE TRUSTEE'S ACCOUNT" shall mean the account No. 049 65900 at the United States Trust Company of New York, for the account of Powerton Trust I, Attention: Christopher J. Grell, or such other account of the Lease Indenture Trustee, as the Lease Indenture Trustee may from time to time specify in a notice to the other parties to the Participation Agreement. "LEASE PERMITTED LIENS" shall mean (i) any Lien created by any Operative Document; (ii) the Owner Lessor's Liens and the Owner Participant's Liens; (iii) Liens for Taxes, water, sewage, license, permit or inspection fees either not yet due and payable or being contested in good faith by appropriate proceedings so long as such proceedings do not involve a material danger of the sale, forfeiture or loss of the Facility; (iv) construction materialmen's, mechanics', workers', repairmen's, employees' or other like Liens arising in the ordinary course of business for amounts either not overdue for a period of not more than 45 days or being contested in good faith by appropriate proceedings so long as such proceedings do not involve a material danger of the sale, forfeiture or loss of the Facility or are bonded for the amount required under Requirements of Law to release any such Lien; (v) Liens arising out of judgments or awards against the Facility Lessee which at the time are being contested in good faith by appropriate proceedings so long as such proceedings do not involve a material danger of the sale, forfeiture or loss of the Facility but in any event not to exceed $1,000,000 in the aggregate at any one time unless the full amount in dispute is bonded in a manner reasonably acceptable to the Owner Lessor; (vi) applicable zoning and building regulations and ordinances from time to time in effect which do not affect the use or operation of the Facility (or the Undivided Interest therein) except to an insignificant extent; (vii) the interest of a sublessee in 30 the Undivided Interest in the Facility under a permitted sublease; and (viii) Liens, easements, encumbrances, restrictions, defects or irregularity of title which in the aggregate are not substantial in amount, do not materially detract from the value of the Facility or the Facility Site (or the Undivided Interest therein) and do not materially impair the use of the Facility or the Facility Site (or the Undivided Interest therein) in the ordinary course of business. "LEASES" shall mean, collectively, the Facility Lease and the Other Facility Lease. "LESSEE FINANCING DOCUMENTS" shall mean the Holdings Credit Agreement, the CAPEX Credit Agreement and all other agreements and instruments evidencing Indebtedness of Holdings and Midwest. "LESSOR NOTES" shall mean any Initial Lessor Notes, Additional Lessor Notes or New Lessor Notes issued pursuant to the Lease Indenture. "LEVERAGED LEASE LIABILITIES" means the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that the Midwest is obligated to pay under the Facility Lease or the other Operative Documents. "LIEN" shall mean 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. "LIST OF COMPETITORS" shall mean the initial list attached to the Participation Agreement as EXHIBIT MM, as amended from time to time pursuant to SECTION 10.1(b) of the Participation Agreement, which list shall not exceed six unaffiliated entities at any one time. "MAKE-WHOLE PREMIUM" shall have the meaning set forth in Annex A to the Lease Indenture. "MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person, 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 such Person and its Subsidiaries since the Closing Date, (ii) the ability 31 of such Person to perform or comply with its obligations under any of the Operative Documents or (iii) the validity and enforceability of the Operative Documents, the liens granted thereunder or the rights and remedies thereto. "MATERIAL LEASE DEFAULT" shall mean any event which, with notice, lapse of time or both notice and lapse of time, would become a Lease Event of Default described in clause (a), (b), (f) or (g) of the definition thereof set forth in SECTION 16 of the Facility Lease. "MAXIMUM TRANSACTION COST" shall mean 1.3% of the Purchase Price. "MEMBERSHIP INTEREST" shall mean the membership interest in the Owner Participant. "MEMBER TRANSFEREE" shall have the meaning specified in SECTION 18.18(a) of the Participation Agreement. "MEMORANDUM OF THE FACILITY LEASE" shall mean the Memorandum of the Facility Lease (T1), dated as of August 17, 2000, between the Owner Lessor and the Facility Lessee and filed with the Registries of Deeds, Tazewell County, Illinois. "MEMORANDUM OF THE FACILITY SITE LEASE" shall mean the Memorandum of the Facility Site Lease (T1), dated as of August 17, 2000, between the Ground Lessor and the Ground Lessee and filed with the Registries of Deeds, Tazewell County, Illinois. "MEMORANDUM OF THE FACILITY SITE SUBLEASE" shall mean the Memorandum of the Facility Site Sublease (T1), dated as of August 17, 2000, between the Ground Sublessor and the Ground Sublessee and filed with the Registries of Deeds, Tazewell County, Illinois. "MGE" shall mean Midwest Generation EME LLC, a Subsidiary of Edison Mission Energy and a limited liability company organized under the laws of the State of Delaware. "MIDWEST" shall mean Midwest Generation LLC, a limited liability company organized under the laws of the State of Delaware. 32 "MIDWEST ADVISOR" shall mean Babcock & Brown Inc. "MOODY'S" shall mean Moody's Investors Service, Inc., a division of Dun & Bradstreet Corporation, and its successors and assigns. "MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as such term is defined in Section 4001(a)(3) of ERISA. "NATIONAL PRIORITIES LIST" shall have the meaning set forth in 40 C.F.R. Section 300.5. "NET TANGIBLE ASSETS" shall mean, as of the date of any determination thereof, the total amount of all assets of EME and its Subsidiaries (determined on a consolidated basis in accordance with GAAP), less the sum of (i) the consolidated current liabilities of EME and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) and (ii) assets properly classified as "intangible assets" in accordance with GAAP. "NEW LESSOR NOTES" shall have the meaning specified in SECTION 2.13 of the Lease Indenture. "NON-RECOURSE DEBT" shall mean, with respect to any Person, Indebtedness which such Person is not directly or indirectly obligated to repay. "NON-SEVERABLE IMPROVEMENTS" shall mean any Improvement to the Facility that is not a Severable Improvement. "NOTEHOLDERS" shall mean each of the holders of the Lessor Notes, and each of such holder's successors and permitted assigns. "OBSOLESCENCE TERMINATION DATE" shall have the meaning specified in SECTION 14.1 of the Facility Lease. "OFFERING CIRCULAR" shall mean the Offering Circular, dated August 17, 2000, with respect to the Certificates. 33 "OFFICER'S CERTIFICATE" shall mean with respect to any Person, a certificate signed by any Authorized Officer of such Person. "OPERATING EXPENSES" shall mean, in respect of any period, all cash amounts paid by the Holdings 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, necessary capital expenditures and all other fees and expenses necessary for the continued operation and maintenance of the Generating Assets (as defined in the Holdings Credit Agreement) and the conduct of the business of the Holdings Loan Parties. Operating Expenses shall exclude (to the extent included) Collins Lease Obligations, Synthetic Lease Liabilities (other than payments of Synthetic Lease Environmental Indemnity Obligations) and Combined Leveraged Lease Liabilities and shall include (to the extent excluded) Designated Lease Liabilities (other than Collins Lease Obligations). "OPERATING LEASE" shall mean any lease other than a Capital Lease (and, solely by virtue of the intended classification under GAAP, shall include the Leases). "OPERATING LEASE LIABILITIES" of any Person shall mean all monetary obligations of such Person under any Operating Lease. "OPERATION AGREEMENT" shall mean the Operation Agreement, dated as of August 17, 2000, among Midwest, the Owner Lessor and the Other Owner Lessor. "OPERATIVE DOCUMENTS" shall mean the Participation Agreement, the Facility Deed, the Facility Lease, the Memorandum of the Facility Lease, the Facility Site Lease, the Memorandum of the Facility Site Lease, the Facility Site Sublease, the Memorandum of the Facility Site Sublease, the Lease Indenture, the Lessor Notes, the Trust Agreement, the Pass Through Trust Agreements, the Certificates, the Certificate Purchase Agreement, EME Guarantee, the OP LLC Agreement, the Tax Indemnity Agreement, the Purchase Agreement, the Assignment and Assumption Agreement, the Owner Participant Guaranty, the ComEd Consent, the EME OP Guarantee, the Bill of Sale, the Registration Rights Agreement, the Operation 34 Agreement, the Reimbursement Agreement, the Subordination Agreement and, when executed and delivered, any agreement with respect to Support Arrangements contemplated by, and defined in, SECTION 5.2(e) of the Facility Lease. "OP GUARANTOR" shall mean PSEG Resources Inc. or any other Person that shall guarantee the obligations of the Owner Participant or a Member Transferee under the Operative Documents pursuant to the Owner Participant Guaranty. "OP LLC AGREEMENT" shall mean the Amended and Restated Limited Liability Company Agreement of Powerton Generation I, LLC, dated as of August 17, 2000. "OP MEMBER" shall mean any Person holding a membership interest in the Owner Participant pursuant to the OP LLC Agreement. "OPTIONAL IMPROVEMENT" shall have the meaning specified in SECTION 8.2 of the Facility Lease. "ORGANIC DOCUMENT" shall mean, 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; with respect to any Person that is a limited partnership, its certificate of limited partnership and partnership agreement; and with respect to any Person that is a limited liability company, its certificate of formation and its limited liability company agreement, in each case, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "OTHER FACILITY LEASE" shall mean the other Facility Lease Agreement, dated as of August 17, 2000, by and between Midwest and the Other Owner Lessor relating to the Other Powerton Lease Transaction, pursuant to which Midwest will lease the Other Undivided Interest from the Other Owner Lessor. "OTHER FACILITY LESSEE" shall mean the Facility Lessee under the Other Facility Lease. "OTHER FACILITY SITE LEASE" shall mean the other Facility Site Lease, dated as of August 17, 2000, by and between Midwest and the Other Owner Lessor, pursuant to which Midwest will lease the Other Ground Interest to the Other Owner Lessor. 35 "OTHER FACILITY SITE SUBLEASE" shall mean the other Facility Site Sublease, dated as of August 17, 2000, by and between the Other Owner Lessor and Midwest, pursuant to which the Other Owner Lessor will sublease the Other Ground Interest to Midwest. "OTHER GROUND INTEREST" shall mean the undivided leasehold interest in the Facility Site not conveyed to the Owner Lessor under the Facility Site Lease. "OTHER LEVERAGED LEASE LIABILITIES" shall mean the basic rent, supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Other Facility Lease or the operative documents for the Other Powerton Lease Transaction. "OTHER MIDWEST LIABILITIES" shall have the meaning set forth in SECTION 18.19 of the Participation Agreement. "OTHER OWNER LESSOR" shall mean Powerton Trust II, a Delaware business trust. "OTHER OWNER PARTICIPANT" shall mean Powerton Generation II, LLC, a Delaware limited liability company. "OTHER POWERTON LEASE TRANSACTION" shall mean the transaction involving the transfer of the Other Undivided Interest and the lease of the Other Ground Interest to the Other Owner Lessor, and the simultaneous lease of the Other Undivided Interest to Midwest and the simultaneous sublease of the Other Ground Interest to Midwest on substantially the same terms and conditions as under, and dated the same date as, the Overall Transaction. "OTHER UNDIVIDED INTEREST" shall mean the undivided ownership interest in the Facility not conveyed to the Owner Lessor under the Facility Deed and the Land Deed. "OVERALL TRANSACTION" shall mean the transactions contemplated by the Operative Documents. "OVERDUE RATE" shall mean the Applicable Rate plus 2% per annum. 36 "OWNER LESSOR" shall mean Powerton Trust I, a Delaware business trust created for the benefit of the Owner Participant. "OWNER LESSOR'S INTEREST" shall mean the Owner Lessor's right, title and interest in and to (i) the Undivided Interest and (ii) the Ground Interest under the Facility Site Lease. "OWNER LESSOR'S LEASEHOLD TITLE POLICY" shall mean that certain Leasehold Owner's policy, No. 121914-1, issued by Chicago Title Insurance Company to the Owner Lessor dated August 24, 2000, to be redated the date of the recording of the Memorandum of the Facility Site Lease, insuring the Owner Lessor's (i) 63.6% undivided leasehold interest in the Facility Site as lessee under the Facility Site Lease, and (ii) 63.6% undivided fee interest in the Facility. "OWNER LESSOR'S LIEN" shall mean any Lien on the Trust Estate or any part thereof arising as a result of (i) Claims against or any act or omission of the Trust Company or the Owner Trustee, or Affiliate thereof that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of the Trust Company or the Owner Trustee specified therein, (ii) Taxes imposed upon the Trust Company or the Owner Trustee, or any Affiliate thereof that are not indemnified against by EME or the Facility Lessee pursuant to any Operative Document or are not related to, or that are in violation of any Operative Document or the transactions contemplated thereby, (iii) Claims against or affecting, the Trust Company or the Owner Trustee, or any Affiliate thereof arising out of the voluntary or involuntary transfer by the Trust Company or the Owner Trustee of any portion of the interest of the Trust Company or the Owner Trustee in the Owner Lessor's Interest, other than as contemplated or permitted by the Operative Documents. "OWNER LESSOR'S PERCENTAGE" shall mean 63.6%. "OWNER PARTICIPANT" shall mean Powerton Generation I, LLC, a Delaware limited liability company. "OWNER PARTICIPANT GUARANTY" shall mean the guaranty provided by the OP Guarantor pursuant to SECTION 4.20 of the Participation Agreement. 37 "OWNER PARTICIPANT'S BENEFICIAL INTEREST" shall mean the Owner Participant's interest in the Owner Lessor. "OWNER PARTICIPANT'S COMMITMENT" shall mean the Owner Participant's investment in the Owner Lessor contemplated by SECTION 2.1 of the Participation Agreement. "OWNER PARTICIPANT'S EXPECTED RETURN" with respect to the Owner Participant's Commitment shall mean the Owner Participant's anticipated (i) net after-tax yield, calculated according to the multiple investment sinking fund method of analysis (as described in FAS 13) and (ii) aggregate GAAP income, general pattern of after-tax earnings and after-tax cash flow. "OWNER PARTICIPANT'S LIEN" shall mean any Lien on the Trust Estate or any part thereof arising as a result of (i) Claims against or any act or omission of the Owner Participant that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of the Owner Participant set forth therein, (ii) Taxes against the Owner Participant that are not indemnified against by EME pursuant to the Operative Documents or (iii) Claims against or affecting the Owner Participant arising out of the voluntary or involuntary transfer by the Owner Participant (except as contemplated or permitted by the Operative Documents) of any portion of the interest of the Owner Participant in the Beneficial Interest. "OWNER TRUST" shall mean the Owner Lessor. "OWNER TRUSTEE" shall mean Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement and each other Person which may from time to time be acting as Owner Trustee in accordance with the provisions of the Trust Agreement. "PARENT" shall mean any Person, any corporation, partnership, limited liability company or other entity which, directly or indirectly, owns 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 any 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 38 contingency) or controls the management of any partnership, limited liability company or other entity. "PARTICIPATION AGREEMENT" shall mean the Participation Agreement (T1), dated as of August 17, 2000, among the Owner Lessor, the Owner Trustee, the Owner Participant, EME, Midwest, United States Trust Company of New York, as Lease Indenture Trustee and United States Trust Company of New York, as Pass Through Trustees. "PASS THROUGH COMPANY" shall mean United States Trust Company of New York, in its individual capacity. "PASS THROUGH TRUST AGREEMENTS" shall mean one or more, as the context may require, of (i) the Pass Through Trust Agreement A, dated as of August 17, 2000, and (ii) the Pass Through Trust Agreement B, dated as of August 17, 2000, in each case between Midwest and a Pass Through Trustee. "PASS THROUGH TRUSTEES" shall mean United States Trust Company of New York, not in its individual capacity, but solely as Pass Through Trustee under each of the Pass Through Trust Agreements, and each other Person which may from time to time be acting as a Pass Through Trustee in accordance with the provisions of a Pass Through Trust Agreement. "PASS THROUGH TRUSTS" shall mean each of the pass through trusts created pursuant to the Pass Through Trust Agreements. "PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "PENSION PLAN" shall mean a "pension plan," as such term is defined in Section 3(2) of ERISA (other than a Multiemployer Plan), and to which 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 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. 39 "PERMITTED ENCUMBRANCES" shall mean all matters shown as exceptions on Schedule B to the Owner Lessor's Leasehold Title Policy as in effect on the Closing Date, together with (to the extent it affects the Facility Site) that certain unrecorded permit dated January 5, 1971 and unrecorded permit supplement dated September 18, 1973 made by and between Chicago & Illinois Midland Railway Company and ComEd, whereby Chicago & Illinois Midland Railway grants to ComEd permission to construct, maintain, repair and utilize a vehicular turnaround over a portion of the railway's main tract located in the Southwest quarter of Section 9, Township 24 North, Bange 5 West of the Third Principal Meridan, on the terms and conditions contained therein. "PERMITTED INVESTMENTS" shall mean: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; and (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above. 40 "PERMITTED LIENS" shall mean the Liens permitted under SECTION 4.02 of the EME OP Guarantee. "PERMITTED SECURED INDEBTEDNESS" shall mean Indebtedness permitted by each of SECTION 8.2.1(b),(f),(g) or (j) of the Holdings Credit Agreement, SECTION 8.1(c), (g), (h) or (k) of each Applicable Participation Agreement (as defined in the Intercreditor Agreement), and the correlative provisions of any other Financing Document (as defined in the Intercreditor Agreement). "PERSON" shall mean 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. "PHASE I ENVIRONMENTAL SURVEY" shall mean a study, conducted in accordance with standards promulgated by the American Society for Testing and Materials or an equivalent environmental site assessment conducted pursuant to current good customary and commercial practice, that (i) evaluates the potential for Environmental Conditions to exist at the property that is the subject of the study as a result of historical or current operations or activities at said property and (ii) evaluates whether the subject property is in substantial compliance with applicable Environmental Laws. "PHASE II ENVIRONMENTAL SURVEY" shall mean a study, conducted pursuant to current good customary and commercial practice, to evaluate potential Environmental Conditions identified as a result of a Phase I Environmental Survey through the collection and analysis of samples of environmental media (including, in the reasonable judgment of the consultant performing the study, samples of soils, subsurface soils, groundwater, surface water, sediments, air or other environmental media) at the site which is the subject of the study. Such study shall be designed to confirm the existence (or nonexistence) of Environmental Conditions at the subject property that may require further investigation, abatement, removal, monitoring, clean-up, remediation or other response actions in accordance with applicable Environmental Laws and, consistent with customary and commercial practice, determine the nature, scope and extent of such Environmental Conditions. "PLAN" shall mean any "employee benefit plan" (as defined in Section 3(3) of ERISA) that is subject to ERISA, any "plan" (as defined in Section 4975(e)(1) of the 41 Code) that is subject to Section 4975 of the Code, any trust created under any such plan or any "governmental plan" (as defined in Section 3(32) of ERISA or Section 414(d) of the Code) that is organized in a jurisdiction having prohibitions on transactions with government plans similar to those contained in Section 406 of ERISA or Section 4975 of the Code. "PLEDGE AGREEMENTS" shall mean the EME Powerton (T1) Pledge Agreement, the EME Powerton (T2) Pledge Agreement, the EME Joliet (T1) Pledge Agreement and the EME Joliet (T2) Pledge Agreement. "POWER PURCHASE AGREEMENT" shall mean the Power Purchase Agreement (Coal Fired Stations) dated as of December 15, 1999 between Midwest and ComEd, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "POWERTON STATION SITE" shall mean the Facility Site and the Retained Facilities Site, as more fully described on Exhibit A attached to the Facility Site Lease. "PRICING ASSUMPTIONS" shall mean the "Pricing Assumptions" attached as Schedule 10.1(c) to the Participation Agreement. "PROCEEDS" shall mean the proceeds from the sale of the Certificates by the Pass Through Trusts to the Certificateholders on the Closing Date. "PRUDENT INDUSTRY PRACTICE" shall mean, at a particular time, (i) any of the practices, methods and acts engaged in or approved by a significant portion of the competitive electric generating industry operating in the United States at such time, or (ii) with respect to any matter to which clause (i) 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. 42 "PSEGR" shall mean PSEG Resources, Inc., a New Jersey corporation. "PUHCA" -- see "Holding Company Act." "PURCHASE AGREEMENT" shall mean the Purchase and Sale Agreement (T1), dated as of August 17, 2000 between Midwest and the Equity Investor. "PURCHASE PRICE" shall mean the Owner Lessor's Percentage of $785,300,000. "RATING AGENCIES" shall mean S&P and Moody's. "REASONABLE BASIS" for a position shall exist if tax counsel may properly advise reporting such position on a tax return in accordance with Formal Opinion 85-352 issued by the Standing Committee on Ethics and Professional Responsibility of the American Bar Association (or any successor to such opinion). "REBUILDING CLOSING DATE" shall have the meaning specified in of SECTION 10.4(f) of the Facility Lease. "REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights Agreement, dated as of August 17, 2000 among EME, Midwest and Credit Suisse First Boston Corporation and Lehman Brothers Inc., as representatives of the Initial Purchasers. "REGULATIONS T, U AND X" shall mean Regulations T, U and X of the Federal Reserve System of the United States (or any successors thereto). "REGULATORY EVENT OF LOSS" shall mean an Event of Loss specified in clause (iv) of the definition of "Event of Loss." "REGULATORY VIOLATION" shall mean (i) Midwest (A) becoming subject to regulation as a "holding company" or a "subsidiary company" or an "affiliate" of a "holding company" required to register under PUHCA or (B) becoming subject to public utility regulation under the laws of the State of Illinois or (ii) the failure of Midwest to (A) be an "exempt wholesale generator" under PUHCA, (B) be interconnected with the high voltage network or to have access to transmission services and ancillary services to sell wholesale electric power or (C) have the authority to sell wholesale electric power at market-based rates and, in the case of clause (i) or (ii), 43 such circumstance could reasonably be expected to result in a Material Adverse Effect on Midwest. "REIMBURSEMENT AGREEMENT" shall mean the reimbursement agreement, dated as of August 17, 2000, between EME and Midwest. "RELATED PARTY" shall mean, with respect to any Person or its successors and assigns, an Affiliate of such Person or its successors and assigns and any director, officer, servant, employee or agent of that Person or any such Affiliate or their respective successors and assigns; PROVIDED, THAT the Trust Company shall not be treated as a Related Party to any other party, the Owner Trustee and the Owner Lessor shall not be treated as Related Parties to each other and neither Owner Lessor nor Owner Trustee shall be treated as a Related Party to any Owner Participant except that, for purposes of SECTION 14.1 of the Participation Agreement, the Owner Lessor will be treated as a Related Party to an Owner Participant to the extent that the Owner Lessor acts on the express written direction or with the express written consent of an Owner Participant. "RELEASE" shall mean the actual or threatened release, deposit, disposal or leakage of any Hazardous Material at, into, upon or under any land, water or air, or otherwise into the environment, including, without limitation, by means of burial, disposal, discharge, emission, injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring, escaping, emptying and placement, except as expressly authorized by a Governmental Approval. "RENEWAL LEASE RENT" shall mean the scheduled Rent payable on each Rent Payment Date during any First Wintergreen Renewal Lease Term, Second Wintergreen Renewal Lease Term or FMV Renewal Lease Term, in each case as determined in accordance with SECTION 15.3 of the Facility Lease. "RENEWAL LEASE TERM" shall mean the First Wintergreen Renewal Lease Term, the Second Wintergreen Renewal Lease Term or any FMV Renewal Lease Term. "RENT" shall mean Basic Lease Rent, Renewal Lease Rent, if any, and Supplemental Lease Rent. 44 "RENT PAYMENT DATE" shall mean the January 2 and July 2 of each year during the Facility Lease Term. "REPLACEMENT COMPONENT" shall have the meaning specified in SECTION 7.2 of the Facility Lease. "REPORTABLE EVENT" shall mean 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 IMPROVEMENT' shall have the meaning specified in SECTION 8.1 of the Facility Lease. "REQUIREMENT OF LAW" shall mean, as to any person, the Organic Documents of such Person, and any law (including any Environmental 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. "REQUISITION" shall have the meaning specified in clause (iii) of the definition of "Event of Loss." "RETAINED FACILITIES SITE" shall mean all the land comprising the Powerton Station Site, excluding the Facility Site. "RETURN ACCEPTANCE TESTS" shall mean the testing procedures (Part IV - Testing Procedures to Demonstrate Capability) set forth in Appendix D to the Power Purchase Agreement. "REVENUES" shall mean in respect of any period, all cash amounts (other than any payment under any intercompany note) received by the Holdings 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 Cashflow Recapture Fund. "REVENUE PROCEDURES" shall mean any revenue procedure issued by the Department of Treasury. 45 "REVENUE RULINGS" shall mean any revenue ruling issued by the Department of Treasury. "S&P" shall mean Standard & Poor's Ratings Services (a division of McGraw-Hill Companies, Inc.) and its successors and assigns. "SASM&F" shall mean Skadden, Arps, Slate, Meagher & Flom LLP. "SCHEDULED CLOSING DATE" shall mean August 24, 2000 and any date set for Closing in a notice of postponement pursuant to SECTION 2.2(c) of the Participation Agreement. "SECOND WINTERGREEN RENEWAL LEASE TERM" shall have the meaning specified in SECTION 15.1(b) of the Facility Lease. "SECURED OBLIGATIONS" shall mean all obligations of Holdings, the Facility Lessee, MGE or EMOC, under, with respect to or arising out of, without duplication, (i) the principal of, premium (if any) and interest on, the Loans (as defined in the Holdings Credit Agreement), (ii) the obligations of Holdings under each Lease Obligations Guarantee (as defined in the Holdings Credit Agreement) with respect to the Collins Lease Obligations, (iii) the obligations of Holdings under the Letter of Credit Guarantee (as defined in the Holdings Credit Agreement) and (iv) the principal of, premium (if any) and interest on, Permitted Secured Indebtedness subject of a Designation Letter (as defined in the Intercreditor Agreement). "SECURITIES ACT" shall mean the Securities Act of 1933, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "SEVERABLE IMPROVEMENT" shall mean any Improvement that is removable without, other than in an immaterial respect, causing irreparable damage to the Facility. "SPECIAL LESSEE TRANSFER AMOUNT" shall mean for any date the Equity Portion of Termination Value on such date; PLUS (i) any unpaid Basic Lease Rent or Renewal Lease Rent, as the case may be, due on or before the date of such determination, PLUS (ii) if the determination date is a Rent Payment Date or an Additional Rent Payment Date, the Basic Lease Rent or Renewal Lease Rent due on such Rent Payment Date, 46 PLUS (iii) any other Rent payment under the Facility Lease or the Other Operative Documents due and unpaid on such date. "SPECIFIED MIDWEST INDEBTEDNESS" shall mean Indebtedness of the Holdings Loan Parties held by or for the benefit of the Holdings Secured Parties, any other Indebtedness permitted under the Lessee Financing Documents and any preferred stock or other similar obligation of Holdings or Midwest held by unaffiliated third parties. "SUBLEASE GROUND INTEREST" shall mean Ground Interest as such term is incorporated by reference into the Facility Site Sublease pursuant to SECTION 3 of the Facility Site Sublease. "SUBORDINATION AGREEMENT" shall mean the Subordination Agreement, dated as of August 17, 2000, among the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Holdings Collateral Agent. "SUBSIDIARY" shall mean, 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. "SUPPLEMENTAL FINANCING" shall have the meaning specified in SECTION 14.1 of the Participation Agreement. "SUPPLEMENTAL LEASE RENT" shall mean any and all amounts, liabilities, indemnities and obligations (other than Basic Lease Rent) of Midwest which arise out of, or which Midwest assumes or agrees to pay under, the Operative Documents (whether or not identified as "Supplemental Lease Rent") to the Owner Lessor or any other Person, including, but not limited to, Termination Value, Make-Whole Premium, and Transaction Costs (other than costs, fees and expenses associated with 47 or resulting from a Lease Indenture Event of Default which is not a Lease Event of Default). "SUPPORT SERVICES" shall mean all services and rights necessary for the Facility Lessor (or any of its successors or permitted assigns) to own, operate, use and maintain (and to transmit the power generated from) the Facility during and after expiration or termination of the Facility Lease in addition to and together with those services or rights provided pursuant to the conveyance of the Ground Interest by the Ground Lessor to the Ground Lessee under the Facility Site Lease. "SURVEY" shall mean the survey No. 232-00064 prepared by Maurer Stutz, Inc. for Edison Mission Energy, dated August 16, 2000, including revisions thereto. "SYNTHETIC LEASE" means the Lease Agreement dated as of June 23, 2000 between Midwest and Synthetic Lease Trust. "SYNTHETIC LEASE BASIC DOCUMENTS" means the Basic Documents as defined in the Synthetic Lease Participation Agreement. "SYNTHETIC LEASE ENVIRONMENTAL INDEMNITY OBLIGATIONS" has the meaning set forth in the Synthetic Lease Participation Agreement. "SYNTHETIC LEASE INTERCOMPANY NOTE" means the Intercompany Note dated June 23, 2000 issued by Edison Mission Energy to Midwest. "SYNTHETIC LEASE LIABILITIES" means the basic rent, the supplemental rent or any other amount, liability or obligation that Midwest is obligated to pay under the Synthetic Lease or the other Synthetic Lease Basic Documents. "SYNTHETIC LEASE PARTICIPATION AGREEMENT" means the Participation Agreement dated as of June 23, 2000 by and among Midwest, Edison Mission Energy, EME/CDL Trust, investors party thereto, noteholders party thereto, Wilmington Trust Company, and Citicorp North America, Inc. "SYNTHETIC LEASE TRUST" means EME/CDL Trust, a Delaware statutory business trust. 48 "TANGIBLE NET WORTH" shall mean the net worth of EME and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) after subtracting therefrom the aggregate amount of any intangible assets of EME 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. "TAX" or "TAXES" shall mean all fees (including, without limitation, license, documentation and registration fees), taxes (including, without limitation, income, gross receipt, franchise, rental, turn over, excise, sales taxes, use taxes, stamp taxes, value-added taxes, ad valorem taxes and property taxes (personal and real, tangible and intangible), license, levies, exports, duties, recording charges or fees, assessments, withholdings and other charges and impositions of any nature, plus all related interest, penalties, fines and additions to tax, now or hereafter imposed by any federal, state, local or foreign government or other taxing authority. "TAX INDEMNITY AGREEMENT" shall mean the Tax Indemnity Agreement (T1), dated as of August 17, 2000 between EME and the Owner Participant. "TAX LAW CHANGE" shall have the meaning specified in SECTION 15 of the Participation Agreement. "TERMINATION DATE" shall mean each of the monthly dates during the Facility Lease Term identified as a "Termination Date" on Schedule 2 of the Facility Lease, which dates shall be the same days on which Basic Lease Rent and Renewal Lease Rent, if any, are payable under the Facility Lease. "TERMINATION VALUE" shall mean for any Termination Date shall mean the Termination Values set forth in Column D on Schedule 2 of the Facility Lease for such Termination Date. "TITLE POLICIES" shall mean the following title policies, issued by Chicago Title Insurance Company: (a) that certain Leasehold Owner's policy, No. 121914-1, issued to the Owner Lessor dated August 24, 2000, to be redated the date of the recording of the Memorandum of the Facility Site Lease, insuring the Owner Lessor's (i) 63.6% undivided leasehold interest in the Facility Site as lessee under the Facility Site Lease, and (ii) 63.6% undivided fee interest in the Facility and (b) that 49 certain Leasehold Loan policy No. 121914-1, issued to United States Trust Company of New York, as Lease Indenture Trustee, dated August 24, 2000, to be redated the date of the recording of the Memorandum of the Facility Site Lease, insuring the Lease Indenture Trustee's security interest in the Owner Lessor's (i) leasehold interests in the Facility Site Lease and (ii) fee interest in the Facility. "TRANSACTION COSTS" shall mean the following costs and expenses incurred in connection with the negotiation, due diligence and consummation of the Overall Transaction: (a) the cost of the Closing Date Appraisal, the cost of title insurance, if obtained, filing and recording fees, the fees and expenses of the Engineering Consultant, the environmental consultant, R.W. Beck, special engineering consultant, the Insurance Consultant, and any other consultants retained by the Owner Participant (excluding any fees or compensation to its advisors) and approved by EME, which approval may not be unreasonably withheld; (b) the reasonable legal fees, expenses and disbursements of the Equity Investor, the Owner Participant, the Owner Lessor and the Owner Trustee and out-of-pocket expenses of the Equity Investor's Advisor; (c) the reasonable legal fees, expenses and disbursements of the other Lease Financing Parties associated with the Lessor Notes and the Certificates; (d) the Midwest Advisor's fee and its reasonable out-of-pocket costs and expenses; (e) at EME's option, all or a portion of EME's and Midwest's legal fees and reasonable out-of-pocket cost and expenses related thereto; (f) other reasonable, documented out-of-pocket expenses of the Lease Financing Parties; (g) ongoing fees and expenses of any independent director of the Owner Participant required to give any non-consolidation opinion, but only in the event that such opinion is requested with respect to both (i) the Owner Participant owned, 50 directly or indirectly, by PSEGR and (ii) the Owner Participant owned, directly or indirectly, by Associates; and (h) the fees and expenses of the Rating Agencies. "TRANSFEREE" shall have the meaning specified in SECTION 10.1(a) of the Participation Agreement. "TREASURY REGULATIONS" shall mean regulations, including temporary regulations, promulgated under the Code. "TRUST AGREEMENT" shall mean the Amended and Restated Trust Agreement (T1), dated as of August 17, 2000, between the Owner Participant and the Trust Company relating to Powerton Trust I. "TRUST COMPANY" shall mean the Wilmington Trust Company. "TRUST ESTATE" shall have the meaning specified in SECTION 2.03 of the Trust Agreement. "UNDIVIDED INTEREST" shall have the meaning specified in the Recitals to the Facility Lease. "UNDIVIDED INTEREST PERCENTAGE" shall mean 63.6%. "UNIFORM COMMERCIAL CODE" or "UCC" shall mean the Uniform Commercial Code as in effect in the applicable jurisdiction. "UNITED STATES" or "U.S." shall mean the United States of America. "UNRELATED MEMBERS" shall mean any members of the Owner Participant or the Other Owner Participant which are not Affiliates of the other members of either the Owner Participant or the Other Owner Participant; PROVIDED, HOWEVER, that for purposes of this definition, if any two or more members are Affiliates, such members, together, shall be considered as one Unrelated Member. 51 "VERIFIER" shall mean Warren & Selbert, Inc. or a nationally recognized firm of accountants or lease advisors chosen by the Owner Participant and reasonably acceptable to the Facility Lessee. "WELFARE PLAN" shall mean a "welfare plan," as such term is defined in Section 3(1) of ERISA. "WILMINGTON TRUST COMPANY" shall mean Wilmington Trust Company, a Delaware banking corporation. 52 EX-4.12-1 21 a2031364zex-4_121.txt EXHIBIT 4-12-1 Exhibit 4.12.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 4.12 - -------------------------------------------------------------------------- Participation Agreement (T2), dated as of August 17, 2000, by and among Midwest Generation, LLC, Powerton Trust II, Wilmington Trust Company, as Owner Trustee, Powerton Generation II, LLC, Edison Mission Energy, United States Trust Company of New York, as Lease Indenture Trustee, and United States Trust Company of New York, as Pass Through Trustees. This Participation Agreement differs from Exhibit 4.12 in the following respects: In the Appendix A, in the definition of "Bill of Sale," "Bill of Sale I" is replaced by "Bill of Sale II" In the definition of "Equity Investor," "PSEGR Midwest, LLC, a Delaware limited liability company" is replaced by Associates Capital Investment, L.L.C., a Delaware limited liability company. In the definition of "Facility Lease," "Facility Lease Agreement (T1)" is replaced by "Facility Lease Agreement (T2)." In the definition of "Facility Site Lease," "Facility Site Lease Agreement (T1)" is replaced by "Facility Site Lease Agreement (T2)." In the definition of "Facility Site Sublease," "Facility Site Sublease Agree- ment (T1)" is replaced by "Facility Site Sublease Agreement (T2)." In the definition of "Lease Indenture," "(T1)" is replaced by "(T2)." In the definition of "Lease Indenture Trustee's Account," "account No. 049 65900" is replaced by "account No. 049 66000." In the definitions of "Memorandum of the Facility Lease," "Memorandum of the Facility Site Lease" and "Memorandum of the Facility Site Sublease," "(T1)" is replaced by "(T2)." In the definitions of "Facility Site Sublease," "Purchase Agreement," "Tax Indemnity Agreement," "Trust Agreement" and "Participation Agreement," "(T1)" is replaced by "(T2)." In the definition of "OP Guarantor," "PSEG Resources Inc." is replaced by "Associates Corporation of North America." In the definitions of "OP LLC Agreement," "Trust Agreement," "Owner Participant" and "Owner Lessor," "I" is replaced by "II." In the definitions of "Other Owner Lessor" and "Other Owner Participants," "II" is replaced by "I." In the definitions of "Owner Lessor's Leasehold Title Policy"and "Title Policies," "No. 121914-1" is replaced by "No. 121914-2" and "63.6%" is replaced by "36.4%." In the definitions of "Owner Lessor's Percentage"and "Undivided Interest Percentage," "63.6%" is replaced by "36.4%." "And (iii) monthly weighted average return on assets" has been added to the definition of "Owner Participant's Expected Return." 2 EX-4.13 22 a2031364zex-4_13.txt EXHIBIT 4.13 Exhibit 4.13 - -------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (T1) Dated as of August 17, 2000 among MIDWEST GENERATION, LLC JOLIET TRUST I, WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee, JOLIET GENERATION I, LLC, EDISON MISSION ENERGY, UNITED STATES TRUST COMPANY OF NEW YORK, not in its individual capacity, except as expressly provided herein, but solely as Lease Indenture Trustee, and UNITED STATES TRUST COMPANY OF NEW YORK, not in its individual capacity, except as expressly provided herein, but solely as Pass Through Trustees, JOLIET STATION, UNITS 7 AND 8 FOSSIL COAL-FIRED ELECTRIC GENERATING FACILITY - --------------------------------------------------------------------------------
TABLE OF CONTENTS Page ---- SECTION I DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT.........................................................................3 SECTION II PARTICIPATION; CLOSING DATE; TRANSACTION COSTS....................................3 Section 2.1 Agreements to Participate.........................................................3 Section 2.2 Closing Date; Procedure for Participation.........................................5 Section 2.3 Transaction Costs.................................................................7 SECTION III REPRESENTATIONS AND WARRANTIES....................................................7 Section 3.1 Representations and Warranties of Midwest.........................................7 Section 3.2 Representations and Warranties of EME............................................14 Section 3.3 Representations and Warranties of the Owner Lessor...............................18 Section 3.4 Representations and Warranties of the Owner Trustee and the Trust Company..........................................................20 Section 3.5 Representations and Warranties of the Owner Participant..........................22 Section 3.6 Representations and Warranties of Lease Indenture Trustee and the Lease Indenture Company........................................................24 Section 3.7 Representations and Warranties of Pass Through Trustees and the Pass Through Company...........................................................26 SECTION IV CLOSING CONDITIONS...............................................................28 Section 4.1 Operative Documents..............................................................28 Section 4.2 Certificates and the Lessor Notes................................................29 Section 4.3 Purchase Agreement...............................................................29 Section 4.4 Other Documents..................................................................29 Section 4.5 Representations and Warranties...................................................29 Section 4.6 Defaults, Events of Default, Events of Loss......................................29 Section 4.7 Consents.........................................................................29 Section 4.8 Governmental Actions.............................................................30 Section 4.9 Insurance........................................................................30 Section 4.10 Engineering Report...............................................................30 Section 4.11 Appraisal; Condition of the Facility.............................................30 Section 4.12 Opinion with Respect to Certain Tax Aspects......................................30 Section 4.13 Opinions of Counsel..............................................................31 Section 4.14 Recordings and Filings...........................................................31 Section 4.15 Taxes............................................................................31 Section 4.16 No Changes in Requirements of Law................................................31 Section 4.17 Registered Agent for Midwest and EME.............................................32 Section 4.18 FAS 13...........................................................................32 Section 4.19 Rent Adjustments.................................................................32 Section 4.20 Parent Guaranty..................................................................32 Section 4.21 Title Insurance..................................................................32 Section 4.22 EME Guarantees...................................................................32 Section 4.23 Non-consolidation Opinion........................................................32 Section 4.24 Rating of Certificates...........................................................32 Section 4.25 EME Note.........................................................................33 Section 4.26 No Material Adverse Change.......................................................33 Section 4.27 Subordination Agreement and Reimbursement Agreement..............................33 Section 4.28 Survey...........................................................................33 SECTION V AFFIRMATIVE COVENANTS OF MIDWEST.................................................33 Section 5.1 Delivery of Certain Information..................................................33 Section 5.2 Financial Information............................................................35 Section 5.3 Information Concerning the Facility..............................................36 Section 5.4 Maintenance of Existence; Conduct of Business....................................36 Section 5.5 Compliance with Requirements of Law and Contractual Obligations..................36 Section 5.6 Environmental Covenant with Respect to the Facility and the Facility Site...........................................................................37 Section 5.7 Further Assurances...............................................................37 SECTION VI NEGATIVE COVENANTS OF MIDWEST....................................................37 Section 6.1 Merger and Consolidation.........................................................37 Section 6.2 Changes in Legal Form or Business................................................38 SECTION VII AFFIRMATIVE COVENANTS OF EME.....................................................39 Section 7.1 Financial Information, Reports, Notices..........................................39 Section 7.2 Maintenance of Corporate Existence...............................................41 Section 7.3 Further Assurances...............................................................41 Section 7.4 Taxes............................................................................41 SECTION VIII NEGATIVE COVENANTS OF EME........................................................41 Section 8.1 Liens............................................................................41 Section 8.2 Consolidation, Merger; Asset Disposition.........................................42 Section 8.3 Amendment, Waiver or Assignment of Certain Documents.............................43 SECTION IX COVENANTS OF THE TRUST COMPANY, THE OWNER TRUSTEE AND THE OWNER LESSOR.....................................................43 Section 9.1 Compliance with the Trust Agreement..............................................43 Section 9.2 Owner Lessor's Liens.............................................................43 Section 9.3 Amendments to Operative Documents................................................44 Section 9.4 Transfer of the Owner Lessor's Interest..........................................44 Section 9.5 Owner Lessor; Trust Estate.......................................................44 Section 9.6 Limitation on Indebtedness and Actions...........................................44 Section 9.7 Change of Location...............................................................44 Section 9.8 Bankruptcy of Trust..............................................................45 SECTION X COVENANTS OF THE OWNER PARTICIPANT...............................................45 Section 10.1 Restrictions on Transfer of Beneficial Interest..................................45 Section 10.2 Owner Participant's Liens........................................................47 Section 10.3 Amendments or Revocation of Trust Agreement......................................48 Section 10.4 Prohibition on Fundamental Changes...............................................48 Section 10.5 Bankruptcy Filings...............................................................48 Section 10.6 Instructions.....................................................................48 Section 10.7 Appointment of Successor Owner Trustee...........................................48 Section 10.8 Cooperation......................................................................49 SECTION XI COVENANTS OF THE LEASE INDENTURE TRUSTEE.........................................49 Section 11.1 The Indenture Trustee's Liens....................................................49 SECTION XII EME'S INDEMNIFICATIONS...........................................................49 Section 12.1 General Indemnity................................................................49 Section 12.2 General Tax Indemnity............................................................56 SECTION XIII MIDWEST'S RIGHT OF QUIET ENJOYMENT...............................................67 SECTION XIV SUPPLEMENTAL FINANCING OF IMPROVEMENTS; OPTIONAL REFINANCINGS............................................................67 Section 14.1 Financing Improvements...........................................................67 Section 14.2 Optional Refinancing of Lessor Notes.............................................70 Section 14.3 Cooperation......................................................................73 SECTION XV PRE-CLOSING ADJUSTMENTS TO BASIC LEASE RENT AND TERMINATION VALUE............................................................73 SECTION XVI RIGHT OF FIRST REFUSAL; RIGHT OF FIRST OFFER.....................................74 Section 16.1 Right of First Offer.............................................................74 Section 16.2 Right of First Refusal...........................................................75 SECTION XVII SPECIAL LESSEE TRANSFER..........................................................76 SECTION XVIII MISCELLANEOUS....................................................................77 Section 18.1 Consents.........................................................................77 Section 18.2 Successor Owner Lessor...........................................................77 Section 18.3 Bankruptcy of Trust Estate.......................................................77 Section 18.4 Amendments and Waivers...........................................................78 Section 18.5 Notices..........................................................................78 Section 18.6 Survival.........................................................................80 Section 18.7 Successors and Assigns...........................................................80 Section 18.8 Governing Law....................................................................80 Section 18.9 Severability.....................................................................80 Section 18.10 Counterparts.....................................................................80 Section 18.11 Headings and Table of Contents...................................................81 Section 18.12 Limitation of Liability..........................................................81 Section 18.13 Consent to Jurisdiction; Waiver of Trial by Jury, Process Agent..................82 Section 18.14 Further Assurances...............................................................83 Section 18.15 Effectiveness....................................................................83 Section 18.16 Measuring Life...................................................................83 Section 18.17 No Partnership, Etc..............................................................84 Section 18.18 Restrictions on Transfer of Membership Interest..................................84 Section 18.19 Limitation on Claims Against Midwest; Subordination of Claims Against Midwest................................................................86 Section 18.20 Guaranteed TV Amount.............................................................87
APPENDICES: Appendix A Definitions EXHIBITS: Exhibit A Form of Bill of Sale Exhibit B Form of Facility Deed Exhibit C Form of Facility Lease Exhibit A: Description of Facility Site Exhibit B: Description of Facility Schedule 1-1: Basic Lease Rent Schedule 1-2: Allocation of Basic Lease Rent Schedule 1-3: 467 Rent Allocation Schedule 2: Termination Values Exhibit D Form of Memorandum of the Facility Lease Exhibit A: Description of Facility Exhibit B: Description of Site Exhibit C: Form of Facility Site Lease Exhibit E Form of Facility Site Lease Exhibit F Form of Facility Site Sublease Exhibit G Form of Memorandum of the Facility Site Lease Exhibit H Form of Memorandum of the Facility Site Sublease Exhibit I Form of Lease Indenture Exhibit J Form of Lessor Notes (A&B) Exhibit K Form of Pass Through Trust Agreements (A&B) Exhibit L Form of Pass Through Certificates (A&B) Exhibit M Form of Certificate Purchase Agreement Exhibit N Form of (Amended and Restated) Trust Agreement Exhibit O Form of OP LLC Agreement Exhibit P Form of Tax Indemnity Agreement Exhibit Q Form of Purchase Agreement Exhibit R Form of EME Guarantee Exhibit S Form of EME OP Guarantee Exhibit T Form of EME Note Exhibit U Form of ComEd Consent Exhibit V Form of Joliet Shared Facilities Agreement No. 1 Exhibit V-1 Form of Joliet Shared Facilities Agreement No. 2 Exhibit W Form of Registration Rights Agreement Exhibit X Form of Operation Agreement Exhibit Y Form of Owner Participant Guaranty Exhibit Z Form of Reimbursement Agreement Exhibit AA Form of Subordination Agreement Exhibit BB [Intentionally Omitted] Exhibit CC Form of Opinion of SASM&F, special counsel to Midwest and EME Exhibit DD Form of Opinion of Sonnenschein, Nath and Rosenthal, special Illinois counsel to Midwest and EME Exhibit EE Form of Opinion of Hunton & Williams, special New York counsel to the Owner Participant and the Equity Investor Exhibit FF Form of Opinion of In-House Counsel to Midwest, EME and the Owner Participant Exhibit GG Form of Opinion of Richards, Layton & Finger, P.A., counsel to the Owner Lessor, the Trust Company, and the Owner Trustee, Exhibit HH Form of Opinion of Stadtmauer Bailkin LLP, special counsel to the Lease Indenture Trustee and the Lease Indenture Company and counsel to the Pass Through Trustees and the Pass Through Company Exhibit II [Intentionally Omitted] Exhibit JJ Form of Opinion of Van Ness Feldman, special federal regulatory to Midwest and EME Exhibit KK Form of Opinion of In-house counsel to the Owner Participant and Equity Investor Exhibit LL Form of Assignment and Assumption Agreement Exhibit MM List of Competitors SCHEDULES: Schedule 3.1(c) Midwest Governmental Approvals Part B - Non-final Approvals Part C - Threatened Approvals Schedule 3.1(y) Midwest Projections and other "forward looking" information Schedule 3.2(c) EME Governmental Approvals Part B - Non-final Approvals Part C - Threatened Approvals Schedule 3.2(o) EME Projections and other "forward looking" information Schedule 4.14 Recordings and Filings Schedule 10.1(c) Pricing Assumptions
PARTICIPATION AGREEMENT (T1) This PARTICIPATION AGREEMENT (T1), dated as of August 17, 2000 (as amended, supplemented or otherwise modified from time to time, in accordance with the provisions hereof, this "PARTICIPATION AGREEMENT" or this "AGREEMENT"), among, (i) MIDWEST GENERATION, LLC, a Delaware limited liability company as the Facility Lessee and as the Ground Lessor (herein, together with its successors and permitted assigns, called "MIDWEST"), (ii) JOLIET TRUST I, a Delaware business trust created for the benefit of Joliet Generation I, LLC, as the Facility Lessor and as the Ground Lessee (herein, together with its successors and permitted assigns, called the "OWNER LESSOR"), (iii) WILMINGTON TRUST COMPANY, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, except as expressly provided herein, but solely as trustee under the Trust Agreement (herein in its capacity as a trustee under the Trust Agreement, together with its successors and permitted assigns, called the "OWNER TRUSTEE," and herein in its individual capacity, together with its successors and permitted assigns, called the "TRUST COMPANY"), (iv) JOLIET GENERATION I, LLC, a Delaware limited liability company (herein, together with its successors and permitted assigns, called the "OWNER PARTICIPANT"), (v) EDISON MISSION ENERGY, a corporation organized under the laws of the State of California (herein, together with its successors and permitted assigns, called "EME"), (vi) UNITED STATES TRUST COMPANY OF NEW YORK, not in its individual capacity, except as expressly provided herein, but solely as trustee under the Lease Indenture (herein in its capacity as trustee under the Lease Indenture, together with its successors and permitted assigns, the "LEASE INDENTURE TRUSTEE," and herein in its individual capacity, together with its successors and permitted assigns, the "LEASE INDENTURE COMPANY"), and (vii) UNITED STATES TRUST COMPANY OF NEW YORK, not in its individual capacity, except as expressly provided herein, but solely as trustee under each of the Pass Through Trust Agreements (herein in its capacity solely as trustee under the Pass Through Trust Agreements, together with its successors and permitted assigns, the "PASS THROUGH TRUSTEES," and herein in its individual capac- JOLIET PARTICIPATION AGREEMENT (T1) ity, together with its successors and permitted assigns, called the "PASS THROUGH COMPANY"). WITNESSETH: WHEREAS, Midwest owns certain electric generation and related assets located in the State of Illinois, including the coal-fired electric generating facility known as Joliet Station with an aggregate capacity of approximately 1,358 MW, located in Will County, Illinois; WHEREAS, Midwest desires to (i) sell to the Owner Lessor the Undivided Interest (which as described in Appendix A is an undivided ownership interest in such facility) pursuant to the Bill of Sale and the Deed, (ii) lease to the Owner Lessor the Ground Interest (which is a corresponding undivided leasehold interest in the land upon which such facility is located) and grant certain non-exclusive easements to the Owner Lessor pursuant to the Facility Site Lease, (iii) lease the Undivided Interest from the Owner Lessor pursuant to the Facility Lease and (iv) sublease the Ground Interest from the Owner Lessor pursuant to the Facility Site Sublease; WHEREAS, concurrently with the execution and delivery of this Agreement, the Equity Investor and Midwest have entered into the Purchase Agreement pursuant to which the Equity Investor will acquire from Midwest its membership interest in the Owner Participant; WHEREAS, Midwest will make an intercompany loan to EME in the aggregate amount equal to the Purchase Price (the "INTERCOMPANY LOAN") and EME will issue a note to evidence such intercompany loan (the "EME NOTE"); WHEREAS, in consideration of the Intercompany Loan, and concurrently with the execution and delivery of this Agreement, EME will issue (i) the EME Guarantee in favor of the Owner Trust that, among other things, guarantees the payment by Midwest of all Rent and (ii) the EME OP Guarantee in favor of the Owner Participant, the Equity Investor and their respective affiliates, successors, assigns, agents, members, partners, directors, officers or employees, but excluding in 2 all cases the Owner Lessor, that guarantees the payment by Midwest of all amounts owed by Midwest to the beneficiaries of the EME OP Guarantee; WHEREAS, the Owner Participant has entered into the Trust Agreement, pursuant to which the Owner Participant has authorized the Owner Lessor to, among other things and subject to the terms and conditions hereof and thereof, (i) issue the Lessor Notes and sell such Lessor Notes to the Pass Through Trusts, (ii) lease the Ground Interest from Midwest pursuant to the Facility Site Lease, (iii) lease the Undivided Interest to the Facility Lessee pursuant to the Facility Lease, (iv) sublease the Ground Interest to the Facility Lessee pursuant to the Facility Site Sublease and (v) grant to the Lease Indenture Trustee for the benefit of the Holders liens and security interests in the Indenture Estate to secure the Owner Lessor's obligations with respect to the Lessor Notes; WHEREAS, in order to provide a portion of the Purchase Price payable by the Owner Lessor in respect of its acquisition of the Undivided Interest pursuant to the Bill of Sale and Facility Deed, the Owner Participant is willing to make an investment in the Owner Trust in an amount equal to the Equity Investment, all in the manner and subject to the conditions set forth herein; WHEREAS, in order to provide the Owner Trust with the balance of the Purchase Price, the Pass Through Trusts are willing to acquire the Initial Lessor Notes for the amounts, in the manner and subject to the conditions set forth herein and in the Lease Indenture; WHEREAS, in order to provide funding to the Pass Through Trusts, the Initial Purchasers are willing to acquire the Certificates for the amounts, in the manner and subject to the conditions set forth in the Pass Through Trust Agreements; WHEREAS, the OP Guarantor will guarantee the payment and performance obligations of the Owner Participant under the Operative Documents pursuant to the Owner Participant Guaranty; and WHEREAS, the parties hereto desire to consummate the transactions contemplated hereby. 3 NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION I DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT The capitalized terms used in this Agreement, including the foregoing recitals, and not otherwise defined herein shall have the respective meanings specified in Appendix A hereto. The general provisions of Appendix A shall apply to terms used in this Agreement and specifically defined herein. SECTION II PARTICIPATION; CLOSING DATE; TRANSACTION COSTS SECTION 2.1 AGREEMENTS TO PARTICIPATE. Subject to the terms and conditions of this Agreement, and in reliance on the agreements, representations and warranties made herein, the parties agree to participate in the transactions described in this SECTION 2.1 on the Closing Date as follows: (a) The Owner Participant will provide funds in an amount sufficient to (i) fund the Equity Investment and (ii) pay the Transaction Costs which the Owner Lessor is responsible to pay pursuant to SECTION 2.3(a) hereof (collectively, the "OWNER PARTICIPANT'S COMMITMENT"); (b) The Owner Lessor will (i) issue the Initial Lessor Notes, (ii) sell the Initial Lessor Notes to the relevant Pass Through Trustee and (iii) grant to the Lease Indenture Trustee, for the benefit of the Pass Through Trustees, certain liens and security interests in the Indenture Estate to secure its obligations with respect to the Lessor Notes; (c) The Pass Through Trusts will use the Proceeds to purchase the Initial Lessor Notes from the Owner Lessor; 4 (d) The Owner Lessor will use the proceeds of the (i) Owner Participant's Commitment and (ii) sale of the Initial Lessor Notes to pay (x) the Purchase Price for the Undivided Interest to Midwest and (y) the Transaction Costs which the Owner Lessor is responsible to pay pursuant to SECTION 2.3(a) hereof; (e) Midwest will transfer the Undivided Interest to the Owner Lessor by issuing the Facility Deed and a Bill of Sale to the Owner Lessor; (f) The Owner Lessor and Midwest will enter into the Facility Lease, pursuant to which the Owner Lessor will lease the Undivided Interest to Midwest and Midwest will lease the Undivided Interest from the Owner Lessor; (g) Midwest will enter into the Facility Site Lease with the Owner Lessor, pursuant to which Midwest will lease the Ground Interest to the Owner Lessor and grant to the Owner Lessor certain non-exclusive easements and the Owner Lessor will lease the Ground Interest from Midwest; (h) The Owner Lessor and Midwest will enter into the Facility Site Sublease, pursuant to which the Owner Lessor will sublease the Ground Interest to Midwest and Midwest will sublease the Ground Interest from the Owner Lessor; (i) Midwest and the Equity Investor will enter into the Purchase Agreement, pursuant to which Midwest will sell its membership interest in the Owner Participant to the Equity Investor and the Equity Investor will purchase Midwest's membership interest in the Owner Participant from Midwest; (j) The OP Guarantor will guarantee the performance and payment obligations of the Owner Participant under the Operative Documents pursuant to the Owner Participant Guaranty; (k) The Owner Participant and EME will enter into the Tax Indemnity Agreement; (l) EME will issue (i) the EME Guarantee, (ii) the EME OP Guarantee and the Reimbursement Agreement; 5 (m) The Owner Lessor will pay all Transaction Costs which the Owner Lessor is responsible to pay pursuant to SECTION 2.3 hereof; and (n) the parties will enter into the agreements referred to above and the other Operative Documents, in each case, in substantially the form attached hereto. SECTION 2.2 CLOSING DATE; PROCEDURE FOR PARTICIPATION. (a) CLOSING DATE. The closing of the transactions contemplated hereby (the "CLOSING") shall take place after 10:00 a.m., New York City time, on the Scheduled Closing Date or such other date as the parties hereto shall mutually agree (the "CLOSING DATE"), at the offices of SASM&F, Four Times Square, New York, New York 10036. (b) PROCEDURES FOR FUNDING. Unless the Closing Date shall have been postponed pursuant to SECTION 2.2(c), subject to the terms and conditions of this Agreement, the Owner Participant shall make the Owner Participant's Commitment available not later than 10:00 a.m., New York City time, on the Scheduled Closing Date, by transferring or delivering such amount, in funds immediately available on the Scheduled Closing Date to the Trust Company. (c) POSTPONEMENT OF THE CLOSING. The Scheduled Closing Date may be postponed from time to time for any reason if EME gives the Equity Investor, the Owner Participant, the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee and the Pass Through Trustees a telex, telegraphic, facsimile or telephonic (confirmed in writing) notice of such postponement and notice of the date to which the Closing has been postponed, such notice of postponement to be received by each party no later than 10:00 a.m., New York City time, on the Business Day immediately preceding the Scheduled Closing Date. If, prior to receipt of a postponement notice under this SECTION 2.2(c), the Owner Participant shall have provided funds in accordance with SECTION 2.2(b), such funds shall be returned to the Owner Participant as soon as reasonably practicable, but in no event later than the Business Day following the Scheduled Closing Date, unless the Owner Participant shall have otherwise directed. All funds made available pursuant to SECTION 2.2(b) will be held by the Trust Company in trust for the Owner Participant and shall not be part of the 6 Indenture Estate or the Trust Estate, shall be invested by the Trust Company in accordance with clause (d) below and such funds shall remain the sole property of the Owner Participant unless and until released by the Owner Participant and made available to the Owner Trustee and applied to pay the Purchase Price or Transaction Costs or returned to the Owner Participant, as provided in this Agreement. (d) INVESTMENT OF FUNDS. If, on the Scheduled Closing Date, the Owner Participant has made the Owner Participant's Commitment available to the Trust Company in accordance with SECTION 2.2(b), the Closing does not occur on such date and the Trust Company is unable to return such funds to the Owner Participant, the Trust Company shall, subject to SECTION 2.2(c) above, use reasonable efforts to invest such funds from time to time at the written direction of EME, and at EME's sole expense and risk, in Permitted Investments until such funds can be returned to the Owner Participant. If, on the Scheduled Closing Date, the Owner Participant has made the Owner Participant's Commitment available to the Trust Company in accordance with SECTION 2.2(b), the Closing does not occur on such date and the Trust Company has not returned such funds to the Owner Participant on or before 1:00 p.m., New York City time, on such date, then EME shall reimburse the Owner Participant for loss of the use of such funds at the Applicable Rate for each day, from and including the day that such funds were made available to the Trust Company by the Owner Participant to, but excluding the earlier of (i) the day that such funds have been returned to the Owner Participant pursuant to SECTION 2.2(c) (funds received by the Owner Participant after 1:00 p.m., New York City time, of any day shall be deemed to be returned on the next succeeding Business Day) and (ii) the Closing Date. Subject to payment for the account of the Owner Participant of any reimbursement for loss of use of funds due to it at the Applicable Rate, any net gain realized on the investment of such funds (including interest) shall be paid to EME by the Trust Company on the earlier of (i) the date such funds are returned to the Owner Participant pursuant to SECTION 2.2(c) and (ii) the Closing Date. The Trust Company shall not be liable for any interest on or loss resulting from such investments and, if such funds are made available to the Owner Lessor and utilized to pay the Purchase Price or Transaction Costs on the Closing Date, EME shall reimburse the Trust Company for any net loss realized on the investment of such funds. If such funds are not so utilized, EME shall, in addition to its obligation to reimburse the Owner Participant for loss of use as provided above, reimburse the Owner Participant on the date such funds are returned to the Owner Participant for any net loss realized on the investment of such funds. In order to obtain funds for payment of the Purchase 7 Price or Transaction Costs or to return funds made available to the Owner Lessor by the Owner Participant, the Trust Company is authorized to sell any investments or obligations purchased as aforesaid. (e) EXPIRATION OF COMMITMENTS. The obligations of the parties hereto shall expire at 11:59 p.m., New York City time, on September 30, 2000. If the Closing Date has not occurred on or before September 30, 2000, the parties hereto shall have no obligation to consummate the transactions contemplated under this Agreement and, except as provided in SECTIONS 2.3, 14.1 and 14.2, all obligations of the Lease Financing Parties shall cease and terminate. SECTION 2.3 TRANSACTION COSTS AND OVERDUE RATE. (a) If the transactions contemplated by this Agreement are consummated, all Transaction Costs not to exceed the Maximum Transaction Costs, which shall be substantiated by an appropriate invoice or otherwise supported in reasonable detail, shall be paid by the Owner Lessor with the funds provided by the Owner Participant pursuant to SECTION 2.2(b) above. EME shall be responsible for Transaction Costs in excess of the Maximum Transaction Costs. All other fees, costs and expenses incurred by the parties hereto shall be for their respective accounts. (b) If the transactions contemplated by this Agreement are not consummated due to the failure of the Equity Investor to negotiate in good faith or consummate the transactions on the basis of the Equity Terms and Conditions and Equity Commitment Letter, each dated July 24, 2000, then the Equity Investor and Owner Participant shall pay their own out-of-pocket expenses and the fees and expenses of their legal counsels and advisors. (c) Subject to Section 2.3(b), if the transactions contemplated by this Agreement are not consummated for any reason, EME shall pay all Transaction Costs and reimburse each of the other parties hereto for Transaction Costs of such parties, which shall be substantiated by a reasonably detailed invoice. (d) Following the Closing Date, EME will be responsible for, and will pay at no after-tax cost to the Owner Lessor (i) the annual administration fees, if any, of the Owner Lessor (ii) fees and expenses of the Owner Trustee and (iii) other fees and costs (but in no event (but without derogation of EME's obliga- 8 tions under the EME Guarantee) interest, Make-Whole Premium, if any, or principal) payable with respect to the Lessor Notes or Certificates, (other than costs, fees and expenses associated with or resulting from a Lease Indenture Event of Default which is not a Lease Event of Default). EME agrees to pay, from and after the Closing Date, as and when due, to the Persons entitled thereto, all amounts indicated in the Facility Lease to be paid by EME. (e) EME agrees to reimburse Midwest for all Transaction Costs paid by the Owner Lessor pursuant to SECTION 2.3(a) above. (f) EME shall pay, from and after the Closing Date, interest, at the Overdue Rate, on any amounts that it has agreed or is obligated to pay under the Operative Documents but that are not paid as and when due. SECTION III REPRESENTATIONS AND WARRANTIES SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF MIDWEST. Midwest represents and warrants that, as of the date of execution and delivery hereof and as of the Closing Date: (a) ORGANIZATION; POWER. Midwest (i) is a Delaware limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) is duly qualified to do business and in good standing in each jurisdiction where the nature of its business requires such qualification, and (iii) has all requisite power and authority and holds all material requisite Governmental Approvals to enter into and perform its obligations under this Agreement and each of the other Operative Documents to which it is or will be a party and to conduct the business of owning and operating the Facility and the sale and marketing of wholesale electric power and other products and service related thereto, except, with respect to clauses (ii) and (iii) above, where 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, result in a Material Adverse Effect on Midwest. Midwest is a direct, wholly owned subsidiary of Holdings, which is, in turn, an indirect wholly owned subsidiary of EME. 9 (b) DUE AUTHORIZATION; NON-CONTRAVENTION. The execution, delivery and performance of this Agreement and each of the other Operative Documents to which it is or will be a party have been or when executed and delivered will be duly authorized by all necessary company action and do not and will not: (i) contravene the Organic Documents of Midwest; (ii) contravene any Requirement of Law or Contractual Obligation, binding on or affecting Midwest; or (iii) result in, or require the creation or imposition of, any Lien (other than pursuant to the Operative Docu- ments) on any of the properties of Midwest; except, in case of clauses (ii) and (iii) where such contravention, creation or imposition would not result in a Material Adverse Effect on Midwest. (c) GOVERNMENT APPROVALS. (i) All Governmental Approvals required in connection with the execution and delivery of, or performance of the transactions contemplated by, this Agreement and the other Operative Documents to which Midwest is or will be a party and the conduct of the business by Midwest are listed on SCHEDULE 3.1(c) and have been duly obtained or made and are in full force and effect, in each case, other than (A) as may be required under existing Requirements of Law to be obtained, given, accomplished or renewed at any time after the date of execution and delivery hereof or from time to time after the Closing Date in connection with the maintenance or operation of the Facility, (B) which are routine in nature and which cannot be obtained and such failure to obtain would not result in a Material Adverse Effect on Midwest, or are not normally applied for, prior to the time they are required, and which Midwest has no reason to believe will not be timely obtained, (C) as may be required in connection with any refinancing of the Lessor Notes or the issuance of Additional Lessor Notes, (D) as may be required in consequence of any transfer of the Beneficial Interest or any transfer of ownership of the Undivided Interest or the Trust Estate by the Owner Lessor or any relinquishment of the use or operation of the Undivided Interest by Midwest and (E) filing and recording to perfect the Lien of the Lease Indenture Trustee and the ownership and leasehold interests conveyed pursuant to this Agreement to the extent arrangements 10 have been made satisfactory to the Owner Participant, the Owner Lessor and the Lease Indenture Trustee. Except as noted in Part B of SCHEDULE 3.1(c), all Governmental Approvals that have been obtained pursuant to the first sentence of this SECTION 3.1(c) 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. No such Governmental Approval is the subject of any pending or, except as indicated in PART C of SCHEDULE 3.1(c), threatened judicial or administrative proceeding. (ii) All consents and approvals required to be obtained from Persons other than Governmental Authorities in connections with the transactions contemplated by the Operative Documents 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, result in a Material Adverse Effect on Midwest. (d) DISCLOSURE; NO MATERIAL OMISSION. The Offering Circular does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading; PROVIDED, HOWEVER, that no representation is given or made with regard to (i) any forecasts or projections included therein or omitted therefrom, or (ii) the descriptions of the Operative Documents or the tax consequences to beneficial owners of Certificates. (e) SECURITIES ACT. Neither Midwest nor anyone authorized by it has directly or indirectly offered or sold any interest in the Beneficial Interest, the Lessor Notes or the Certificates or any part thereof, or, except as disclosed in the Offering Circular in any similar security or lease, or in any security or lease the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Lessor Notes or the Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (f) VALIDITY. Each of the Operative Documents to which Midwest is or will be a party constitutes, or, upon the due execution and delivery thereof by Midwest, will constitute, the legal, valid and binding obligation of 11 Midwest 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 and except as indicated in the legal opinion of SASM&F delivered pursuant to SECTION 4.13 hereof). (g) COMPLIANCE WITH REQUIREMENTS OF LAW. Midwest is in compliance with all Requirements of Law (including ERISA and regulations of the Federal Reserve System) and Contractual Obligations applicable to it, except to the extent that failure to so comply would not result or has not resulted in a Material Adverse Effect on Midwest. (h) MARGIN REGULATION. Midwest is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Lessor Notes and the Equity Investment as contemplated by this Agreement and the other Operative Documents will be used for a purpose which violates, or would be inconsistent with, the Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in the Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this SECTION 3.1 with such meanings. (i) LITIGATION. There is no pending or, to the knowledge of Midwest, threatened, action, suit, investigation or proceeding or labor controversy against Midwest or any of its properties, business, assets or revenues or affecting any Governmental Approval before any Governmental Authority which, if determined adversely to Midwest (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without any reservations), would result in a Material Adverse Effect on Midwest or the Facility Site. (j) TITLE; LIENS. (i) Midwest has good, clear, marketable record fee title to the Facility, free and clear of all Liens, encumbrances or title defects other than Permitted Encumbrances and Lease Permitted Liens. (ii) Midwest has good, clear, marketable record fee title in the Facility Site, free and clear of all Liens, encumbrances or title defects other than Permitted Encumbrances and Lease Permitted Liens. 12 (iii) Upon execution and delivery of the Operative Documents and recording of the instruments referred to in SCHEDULE 4.14, good, clear, record and valid leasehold interest in the Ground Interest will be duly, validly and effectively conveyed to the Owner Lessor upon the terms and conditions in the Facility Site Lease, free and clear of all Liens, encumbrances or title defects other than Permitted Encumbrances and Lease Permitted Liens. (iv) Upon execution and delivery of the Operative Documents, good, clear, record and marketable fee simple title to the Undivided Interest will be duly, validly and effectively conveyed to the Owner Lessor, free and clear of all Liens, encum- brances or title defects other than Permitted Encumbrances and Lease Permitted Liens. (v) None of the Permitted Encumbrances and Lease Permitted Liens will, on and after the date of execution and delivery hereof and the Closing, materially interfere with the use, operation or possession of the Facility (as contemplated by the Opera- tive Documents) or the use of or the exercise by the Owner Lessor of its rights under the Facility Site Lease with respect to the Facility. (k) TAX RETURNS. Midwest has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by Midwest and with respect to which adequate reserves have to the extent required by GAAP been set aside on its books). (l) INVESTMENT COMPANY ACT. Midwest is not subject to any regulation as an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (m) HOLDING COMPANY ACT. (i) Midwest is an "exempt wholesale generator" under PUHCA, is interconnected with the high voltage network and has access to transmission services and ancillary services to sell wholesale 13 electric power, and has the authority to sell wholesale electric power at market-based rates. (ii) Midwest is not subject to (i) regulation as a "holding company," a "public utility company" or a "subsidiary company" or an "affiliate" of a "holding company" required to register under PUHCA or (ii) public utility regulation or regulation as an alternative retail electric supplier under the laws of the State of Illinois. (n) ENVIRONMENTAL WARRANTIES. Except as has not or would not, individually or in the aggregate, result in a Material Adverse Effect on Midwest: (i) (A) To the knowledge of Midwest, the Facility and the Facility Site have been, and continue to be, owned, leased and operated in compliance with all applicable Environmental Laws and (B) Midwest is and has been in compliance with all applicable Environmental Laws. (ii) There are no pending or, to the knowledge of Midwest, threatened Environmental Claims involving or against Midwest, the Facility or Facility Site. (iii) Midwest has obtained and is in compliance with all Governmental Approvals required under any applicable Environmental Law necessary for its business and, with respect to the Governmental Approvals not obtained by the date of execution and delivery hereof, (a) Midwest has no reason to believe that such approvals will not be timely obtained and (b) the failure to have obtained such Governmental Approvals by the date of execution and delivery hereof will not result in a Material Adverse Effect on Mid- west. (iv) Neither the Facility nor the Facility Site is listed or, to the knowledge of Midwest, is proposed for listing on the National Priorities List pursuant to any Environmental Law, on 14 the CERCLIS or on any similar state or local list of sites requiring investigation or clean-up. (v) To the knowledge of Midwest, no Environmental Conditions exist at, on, under or about the Facility or the Facility Site which, with the passage of time, or the giving of notice or both, would give rise to any Environmental Claim. (vi) Other than as provided in the ASA, Midwest has not 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. (o) 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, 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 Midwest 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 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 Midwest or any member of the Controlled Group: (i) a Reportable Event; (ii) a complete or partial withdrawal from any Multiemployer Plan by Midwest or any member of the Controlled Group; (iii) any liability of Midwest or any member of the Controlled Group under ERISA if Midwest 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 Midwest 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 on Midwest, other than liability for continuation coverage described in Part 6 of Title I of ERISA. 15 (p) LOCATION OF CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS, ETC. The chief executive office and principal place of business of Midwest and the office where Midwest keeps its corporate records concerning the Facility, the Facility Site and the other Operative Documents is located at One Finance Place, 440 South LaSalle Street, Suite 3500, Chicago, Illinois 60605. (q) ACCESS; EGRESS. Midwest has sufficient access to public roads, easements of ingress and egress and other rights of access to permit use and operation of the Facility and the Facility Site as contemplated by the Operative Documents. (r) ABILITY TO DELIVER POWER. Midwest has rights necessary to deliver power to the point of interconnection to the electricity grid. (s) POWER SALES AGREEMENTS AND OTHER CONTRACTS. There are no contracts or agreements providing for sales of power and ancillary services produced by the Facility or for the use and operation of the Facility that have a term which extends beyond the expiration of the Basic Lease Term other than the Interconnection Agreement. (t) UTILITY SERVICES. The Facility and the Facility Site have available all necessary public utility services for the use and operation of the Facility as currently being used and as contemplated by the Operative Documents. (u) SUBDIVISION. No subdivision is necessary in connection with the transaction contemplated by Operative Documents. (v) ADEQUATE RIGHTS. Based upon Requirements of Law in effect on the Closing Date, the rights and interests made, or to be made available to the Owner Lessor or its permitted transferees pursuant to the Operative Documents, together with the rights of the Owner Lessor as owner of the Undivided Interest, are sufficient to permit the following actions by the Owner Lessor or any such permitted transferee following the expiration or termination of the Facility Lease: (i) the occupation, interconnection, maintenance and repair of the Facility, (ii) the use, operation and possession of the Facility, (iii) the construction, use, operation, possession, maintenance and renewal of all modifications, additions, improvements, replacements and substitutions thereof and thereto, (iv) appropriate ingress to and 16 egress from the Facility for any reasonable purpose in connection with the exercise of rights under the Operation Agreement and such Person's interest in the Facility, (v) access to the off-site unloading dock, transportation and storage areas for fuel handling, storage and transportation and access to the off-site lake for water-cooling, (vi) transmission of the electric energy and ancillary services provided by the Facility to the nearest point of interconnection to the relevant electricity grid and (vii) the disposal of by-products and waste from the Facility. (w) RETURN ACCEPTANCE TESTS. Midwest has no reason to believe that the Facility will not be able to satisfy the return conditions set forth in SECTION 5 of the Facility Lease as of the expiration of the Facility Lease Term if the Facility is maintained in accordance with SECTION 7 of the Facility Lease. (x) NO DEFAULTS. NO EVENT OF LOSS. No Lease Event of Default, Material Lease Default or event that with the passage of time or notice or both would constitute a Lease Event of Default has occurred or will occur upon execution and delivery of the Operative Documents. No Event of Loss has occurred or will occur upon the execution and delivery of the Operative Documents. (y) ACCURACY OF INFORMATION. (A) All factual information provided in writing by Midwest or its Affiliates to (i) the Engineering Consultant, in connection with the preparation of the Engineering Report and (ii) the Appraiser, in connection with the preparation of the Closing Date Appraisal (other than projections and "forward-looking" information) is true and materially accurate in every material respect on the date as of which such information is dated or certified, and to the knowledge of Midwest, such information is not incomplete by omitting to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. (B) All projections and other "forward looking" information contained in the items specified on SCHEDULE 3.1(y) were prepared in good faith and are based upon reasonable assumptions. 17 SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF EME. EME represents and warrants that, as of the date of execution and delivery hereof and as of the Closing Date: (a) ORGANIZATION; POWER. EME (i) is a California corporation, duly organized, validly existing and in good standing under the laws of the State of California, (ii) is duly qualified to do business and in good standing in each jurisdiction where the nature of its business requires such qualification, and (iii) has all requisite power and authority and holds all material requisite Governmental Approvals to enter into and perform its obligations under this Agreement and each of the other Operative Documents to which it is or will be a party and to conduct its business as currently conducted and currently expected to be conducted, except, with respect to clauses (ii) and (iii) above, where failure to be so qualified or be in good standing or the failure to obtain such Governmental Approvals could not, individually or in the aggregate, reasonably be expected to cause a Material Adverse Effect on EME. (b) DUE AUTHORIZATION; NON-CONTRAVENTION. The execution, delivery and performance of this Agreement and each of the Operative Documents to which it is or will be a party have been or when executed and delivered will be duly authorized by all necessary company action and do not and will not: (i) contravene the Organic Documents of EME; (ii) contravene any Requirement of Law or Contractual Obligation, binding on or affecting EME; or (iii) result in, or require the creation or imposition of, any Lien (other than pursuant to the Operative Documents) on any of the properties of EME; except, in case of clauses (ii) and (iii) where such contravention, creation or imposition would not result in a Material Adverse Effect on EME. (c) GOVERNMENT APPROVALS. (i) All Governmental Approvals required in connection with the execution and delivery of, or performance of the transactions contemplated by, this Agreement and the other Operative Docu- 18 ments to which EME is or will be a party and the conduct of the business by EME are listed on SCHEDULE 3.2(c) and have been duly obtained or made and are in full force and effect, in each case, other than (A) as may be required under existing Requirements of Law to be obtained, given, accomplished or renewed at any time after the date of execution and delivery hereof or from time to time after the Closing Date in connection with the transactions contemplated by the Operative Documents and (B) which are routine in nature and which cannot be obtained and such failure to obtain would not result in a Material Adverse Effect on EME, or are not normally applied for, prior to the time they are required, and which EME has no reason to believe will not be timely obtained. Except as noted in Part B of SCHEDULE 3.2(c), all Governmental Approvals that have been obtained pursuant to the first sentence of this SECTION 3.2(c) 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. No such Governmental Approval is the subject of any pending or, except as indicated in PART C of SCHEDULE 3.2(c), threatened judicial or administrative proceeding. (ii) All consents and approvals required to be obtained from Persons other than Governmental Authorities in connection with the transactions contemplated by the Operative Documents 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, result in a Material Adverse Effect on EME. (d) DISCLOSURE; NO MATERIAL OMISSION. The Offering Circular does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading; PROVIDED, HOWEVER, that no representation is given or made with regard to (i) any forecasts or projections included therein or omitted therefrom or (ii) the descriptions of the Operative Documents or the tax consequences to beneficial owners of Certificates. (e) VALIDITY. Each of the Operative Documents to which EME is a party constitutes, or, upon the due execution and delivery thereof by EME, will constitute, the legal, valid and binding obligation of EME 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 19 principles of equity and except as indicated in the legal opinion of SASM&F delivered pursuant to SECTION 4.13 hereof). (f) COMPLIANCE WITH REQUIREMENTS OF LAW. EME is in compliance with all Requirements of Law (including ERISA and regulations of the Federal Reserve System) and Contractual Obligations applicable to it, except to the extent that failure to so comply would not result or has not resulted in a Material Adverse Effect on EME. (g) MARGIN REGULATION. EME is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Lessor Notes and the Equity Investment as contemplated by this Agreement and other Operative Documents will be used for a purpose which violates, or would be inconsistent with, the Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in the Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this SECTION 3.2 with such meanings. (h) LITIGATION. There is no pending or, to the knowledge of EME, threatened, action, suit, Environmental Claim, investigation, proceeding or labor controversy against EME or any of its properties, business, assets or revenues or affecting any Governmental Approval before any Governmental Authority hereto which, if determined adversely to EME (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without any reservations), would result in a Material Adverse Effect on EME. (i) TAX RETURNS. EME has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by Holdings by appropriate proceedings and with respect to which adequate reserves have to the extent required by GAAP been set aside on its books). (j) INVESTMENT COMPANY ACT. EME is not subject to regulation as an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 20 (k) HOLDING COMPANY ACT. EME is not subject to (i) regulation as a "holding company," a "public utility company," or a "subsidiary company" or an "affiliate " of a "holding company" required to register under PUHCA except that it 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. (l) 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, 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 EME 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 which could reasonably be expected to have a Material Adverse Effect with respect to it. Neither EME 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 on EME, other than liability for continuation coverage described in Part 6 of Title I of ERISA. (m) LOCATION OF CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS, ETC. The chief executive office and principal place of business of EME and the office where EME keeps its corporate records is located at 18101 Von Karman Avenue, Suite 1700, Irvine, California 92612. (n) RANKING OF GUARANTEES. The obligations of EME under each of the EME Guarantees are senior, unsecured Indebtedness of EME ranking at least pari passu with all other senior unsecured Indebtedness of EME. (o) ACCURACY OF INFORMATION. (A) All factual information provided in writing by EME or its Affiliates to (i) the Engineering Consultant, in connection with the preparation of the Engineering Report and (ii) the Appraiser, in connection with the preparation of the Closing Date Appraisal (other than projections and "forward-looking" information) is true and materially accurate in every material respect on the date as of which such information is dated or certified, and to the 21 knowledge of EME, such information is not incomplete by omitting to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. (B) All projections and "forward looking" information contained in items specified on SCHEDULE 3.2(o) were prepared in good faith and are based on reasonable assumptions. SECTION 3.3 REPRESENTATIONS AND WARRANTIES OF THE OWNER LESSOR. The Owner Lessor represents and warrants that as of the date of execution and delivery hereof and as of the Closing Date: (a) DUE ORGANIZATION. The Owner Lessor is a duly organized and validly existing "business trust" as such term is defined in 12 Del. C. Section 3801 (a) under the laws of the State of Delaware of which the Owner Participant is the beneficial owner, and has the power and authority to enter into and perform its obligations under this Agreement and each of the other Operative Documents to which it is or will be a party. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. (i) This Agreement and each of the other Operative Documents (other than the Lessor Notes) to which the Owner Lessor is or will be a party has been or when executed and delivered will be duly authorized, executed and delivered by the Owner Lessor, and assuming the due authorization, execution and delivery of this Agreement by each party hereto other than the Owner Lessor, this Agreement constitutes, and when executed and delivered each of the other Operative Documents (other than the Lessor Notes) to which it is or will be a party, will be the legal, valid and binding obligations of the Owner Lessor, enforceable against the Owner Lessor in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (ii) Upon the execution of the Lessor Notes by the Owner Lessor, authentication of the Lessor Notes by the Lease Indenture Trustee and delivery of such Lessor Notes against payment therefor, the Lessor Notes will constitute legal, valid and binding obligations of the Owner Lessor, enforceable against the Owner 22 Lessor in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorgani- zation, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) NON-CONTRAVENTION. The execution and delivery by the Owner Lessor of this Agreement and the other Operative Documents to which it is or will be a party, the consummation by the Owner Lessor of the transactions contemplated hereby and thereby, and the compliance by the Owner Lessor with the terms and provisions hereof and thereof, do not and will not contravene (except where such contravention would not result in a Material Adverse Effect on the Owner Lessor) (i) the Trust Agreement or any of the Organic Documents of the Owner Lessor or (ii) any Requirement of Law or the provisions of, or constitute a default by the Owner Lessor under any indenture, mortgage, deed of trust or other material contract, agreement or instrument to which the Owner Lessor is a party or by which the Owner Lessor or its property is bound, or in the creation of any Owner Lessor's Lien upon the Trust Estate; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Owner Lessor to act as operator of the Facility following a Lease Event of Default or the expiration or termination of the Facility Lease. (d) GOVERNMENTAL ACTIONS. Assuming the representation and warranties of Midwest contained in paragraphs (c), (g), (l), (m) and (n) of SECTION 3.1 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority is required for the due execution, delivery or performance by the Owner Lessor, as the case may be, of the Trust Agreement, the Lessor Notes, this Agreement or the other Operative Documents to which the Owner Lessor is or will be a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Owner Lessor to act as operator of the Facility following a Lease Event of Default or the expiration or termination of the Facility Lease. (e) LITIGATION. There is no pending or, to the knowledge of the Owner Lessor, threatened, action, suit, investigation or proceeding against the Owner Lessor before any Governmental Authority which, if determined adversely to it, would materially adversely affect the ability of the Owner Lessor to perform its 23 obligations under the Trust Agreement, the Lessor Notes, this Agreement or the other Operative Documents to which it is or will be a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the Lien of the Lease Indenture Trustee on the Trust Estate or which questions the validity or enforceability of any Operative Document to which the Owner Lessor is or will be a party. (f) LIENS. The Owner Lessor's right, title and interest in and to the Trust Estate is free of any Owner Lessor's Liens. (g) COMPLIANCE WITH REQUIREMENTS OF LAW. The Owner Lessor is in compliance with all Requirements of Law, rules, regulations, orders, judgments, writs and decrees (including ERISA and regulations of the Federal Reserve System), except where failure to so comply, individually or in the aggregate, would not result or has not resulted in a Material Adverse Effect on the Owner Lessor. (h) INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. The Owner Lessor is not (i) an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, (ii) a "holding company," a "public utility company" or a "subsidiary company" of a "holding company" within the meaning of PUHCA, or (iii) subject to any other Requirement of Law which purports to restrict or regulate its ability to borrow money. (i) SECURITIES ACT. Neither the Owner Lessor nor anyone authorized by it has directly or indirectly offered or sold any interest in the Lessor Notes or any part thereof, or, except as disclosed in the Offering Circular, in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Lessor Notes or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (j) LOCATION OF CHIEF EXECUTIVE OFFICE; PRINCIPAL PLACE OF BUSINESS; SITUS. The chief executive office and principal place of business of the Owner Lessor where the Owner Lessor will keep its corporate records concerning the 24 Facility, the Facility Site and the Operative Documents is located in Wilmington, Delaware. The situs of the Owner Lessor is in Delaware. (k) PAYMENT OF TAXES. The Owner Lessor has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by the Owner Lessor and with respect to which adequate reserve have, to the extent required by GAAP, been set aside on its books). SECTION 3.4 REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE AND THE TRUST COMPANY. The Trust Company (only with respect to representations and warranties relating to the Trust Company) and the Owner Trustee hereby severally represent and warrant that, as of the date of execution and delivery hereof and as of the Closing Date: (a) DUE INCORPORATION; ETC. The Trust Company is a banking corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority, as the Owner Trustee and/or in its individual capacity to the extent expressly provided herein or in the Trust Agreement, to enter into and perform its obligations under the Trust Agreement, this Agreement and each of the other Operative Documents to which it is or will be a party. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. (w) The Trust Agreement has been duly authorized, executed and delivered by the Trust Company, and (x) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, the Trust Agreement constitutes the legal, valid and binding obligation of the Trust Company, enforceable against it in its individual capacity or as Owner Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (i) (y) This Agreement has been duly authorized, executed and delivered by the Owner Trustee and the Trust Company, and (z) assuming the due authorization, execution 25 and delivery of this Agreement by each party hereto other than the Owner Trustee and the Trust Company, this Agreement constitutes a legal, valid and binding obligation of the Owner Trustee and the Trust Company, enforceable against the Trust Company or the Owner Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (ii) (x) Each of the other Operative Documents to which the Trust Company or the Owner Trustee is or will be a party has been or when executed and delivered will be duly authorized, executed and delivered by the Trust Company or the Owner Trustee and (y) assuming the due authorization, execution and delivery of each of the other Operative Documents by each party thereto other than the Trust Company or the Owner Trustee, each of the other Operative Documents to which the Trust Company or the Owner Trustee is or will be a party constitutes or when executed and delivered will constitute a legal, valid and binding obligation of the Trust Company or the Owner Trustee, as the case may be, enforceable against the Trust Company or the Owner Trustee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) NON-CONTRAVENTION. The execution and delivery by the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, of the Trust Agreement, this Agreement and the other Operative Documents to which it is or will be a party, the consummation by the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, of the transactions contemplated hereby and thereby, and the compliance by the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, with the terms and provisions hereof and thereof, do not and will not (i) contravene any Requirement of Law of the State of Delaware or the United States governing the banking or trust powers of the Trust Company, the Trust Agreement, or its Organic Documents, or (ii) contravene 26 the provisions of, or constitute a default by the Trust Company under, or result in the creation of any Owner Lessor's Lien attributable to it in its individual capacity and unrelated to the transactions contemplated by the Operative Documents upon the Trust Estate under any indenture, mortgage or other material contract, agreement or instrument to which the Trust Company is a party or by which the Trust Company or its property is bound; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Trust Company or the Owner Trustee to act as operator of the Facility following a Lease Event of Default. (d) GOVERNMENTAL ACTIONS. Assuming the representations and warranties of Midwest contained in paragraphs (c), (g), (l), (m) and (n) of SECTION 3.1 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority of the State of Delaware or the United States governing the banking or trust powers of the Trust Company is required for the due execution, delivery or performance by the Trust Company or the Owner Trustee, as the case may be, of the Trust Agreement, this Agreement or the other Operative Documents to which the Trust Company or the Owner Trustee is or will be a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given. (e) LITIGATION. There is no pending or, to the actual knowledge of the Trust Company, threatened action, suit, investigation or proceeding against the Trust Company either in its individual capacity or as the Owner Trustee, as the case may be, before any Governmental Authority of the State of Delaware or the United States governing its banking and trust powers which, if determined adversely to it, would materially adversely affect the ability of the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, to perform its obligations under the Trust Agreement, this Agreement or the other Operative Documents to which it is or will be a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the security interest of the Lease Indenture Trustee in the Trust Estate or which question the validity or enforceability of any Operative Document to which the Trust Company, in its individual capacity or as the Owner Trustee, is or will be a party. (f) LIENS. The Trust Estate is free of any Owner Lessor's Liens attributable to the Trust Company or the Owner Trustee. 27 SECTION 3.5 REPRESENTATIONS AND WARRANTIES OF THE OWNER PARTICIPANT. The Owner Participant represents and warrants that, as of the Closing Date and giving effect to the transactions contemplated by the Purchase Agreement: (a) DUE ORGANIZATION. The Owner Participant is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the necessary power and authority to enter into and perform its obligations under this Agreement, the Trust Agreement, the OP LLC Agreement and the Tax Indemnity Agreement. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. This Agreement, the Trust Agreement, the Tax Indemnity Agreement and the other Operative Documents to which it is or will be a party have been or when executed and delivered will be duly authorized, executed and delivered by the Owner Participant and assuming the due authorization, execution and delivery by each other party thereto, this Agreement, the Trust Agreement, the Tax Indemnity Agreement and the other Operative Documents to which it is or will be a party constitute or when executed and delivered will constitute the legal, valid and binding obligations of the Owner Participant, enforceable against the Owner Participant in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) NON-CONTRAVENTION. The execution and delivery by the Owner Participant of this Agreement, the Trust Agreement, the OP LLC Agreement and the Tax Indemnity Agreement, the consummation by the Owner Participant of the transactions contemplated hereby and thereby, and the compliance by the Owner Participant with the terms and provisions hereof and thereof, do not and will not contravene any Requirement of Law binding on the Owner Participant (except where such contravention would not result in a Material Adverse Effect on the Owner Participant), or its Organic Documents, or contravene the provisions of, or constitute a default under, or result in the creation of any Owner Participant's Lien (other than any Lien created under any Operative Document) upon the Trust Estate under any indenture, mortgage or other material contract, agreement or instrument to which the Owner Participant is a party or by which the Owner Participant or its property is bound (it being understood that no representation or warranty is being made as to any 28 Requirement of Law relating to the Facility or the Facility Site other than its representations set forth in SECTION 3.3(g) hereof or Section 4975 of the Code). (d) GOVERNMENTAL ACTION. Assuming the representations and warranties of EME contained in paragraphs (c), (f), (j) and (k) of SECTION 3.2 and the representation and warranties of Midwest contained in paragraphs (c), (g), (l), (m) and (n) of SECTION 3.1 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority is required for the due execution, delivery or performance by the Owner Participant of this Agreement, the Trust Agreement, the OP LLC Agreement or the Tax Indemnity Agreement, other than any authorization or approval or other action or notice or filing as has been duly obtained, taken or given (it being understood that no representation or warranty is being made as to any Requirements of Law relating to the ownership or operation of the Facility or the Facility Site). (e) LITIGATION. There is no pending or, to the knowledge of the Owner Participant, threatened action, suit, investigation or proceeding against the Owner Participant before any Governmental Authority which, if determined adversely to it, would materially adversely affect the Owner Participant's ability to perform its obligations under this Agreement, the Trust Agreement, the OP LLC Agreement or the Tax Indemnity Agreement or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the Lien of the Lease Indenture Trustee in the Trust Estate or which questions the validity or enforceability of any Operative Document to which the Owner Participant is or will be a party. (f) LIENS. The Trust Estate is free of any Owner Participant's Liens. (g) ERISA. No part of the funds to be used by the Owner Participant to make its investment pursuant to this Agreement, directly or indirectly, constitutes or is deemed to constitute assets (within the meaning of ERISA and any applicable rules, regulations and court decisions thereunder) of any Plan. (h) REGULATORY EVENT OF LOSS. The Owner Participant is not aware of any fact or circumstance that would constitute or cause a Regulatory Event of Loss. 29 (i) SECURITIES ACT. Neither the Owner Participant nor anyone authorized by it has directly or indirectly offered or sold any interest in the Beneficial Interest, the Lessor Notes or any part thereof, or, except as disclosed in the Offering Circular, in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Lessor Notes or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (j) HOLDING COMPANY ACT AND FEDERAL POWER ACT. Immediately prior to executing this Agreement, the Owner Participant is not (i) an "electric utility," "electric utility company," "public utility," "public-utility company," "holding company" under the Federal Power Act or PUHCA or (ii) a "subsidiary" or "affiliate" of a "holding company" required to register under PUHCA. (k) PAYMENT OF TAXES. The Owner Participant has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by the Owner Participant and with respect to which adequate reserves have, to the extent required by GAAP, been set aside on its books). SECTION 3.6 REPRESENTATIONS AND WARRANTIES OF LEASE INDENTURE TRUSTEE AND THE LEASE INDENTURE COMPANY. The Lease Indenture Company and the Lease Indenture Trustee hereby severally represents and warrants that, as of the date of execution hereof and as of the Closing Date: (a) DUE ORGANIZATION. The Lease Indenture Company is a banking corporation duly organized, validly existing and in good standing under the laws of the State of New York, has the corporate power and authority, as Lease Indenture Trustee and/or in its individual capacity to the extent expressly provided herein or in the Lease Indenture, to enter into and perform its obligations under the Lease Indenture, this Agreement and each of the other Operative Documents to which it is or will be a party. 30 (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. (i) (A) This Agreement has been duly authorized, executed and delivered by the Lease Indenture Trustee and the Lease Indenture Company, and (B) assuming the due authorization, execution and delivery of this Agreement by each party hereto other than the Lease Indenture Trustee and the Lease Indenture Company, this Agreement constitutes a legal, valid and binding obligation of the Lease Indenture Company and the Lease Indenture Trustee, enforceable against the Lease Indenture Company or the Lease Indenture Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (ii) (A) Each of the other Operative Documents to which the Lease Indenture Trustee is or will be a party has been or when executed and delivered will be duly authorized, executed and delivered by the Lease Indenture Trustee, and (B) assuming the due authorization, execution and delivery of each of the other Operative Documents by each party thereto other than the Lease Indenture Trustee, each of the other Operative Documents to which the Lease Indenture Trustee is or will be a party constitutes or when executed and delivered will be a legal, valid and binding obligation of the Lease Indenture Trustee, enforceable against the Lease Indenture Trustee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) NON-CONTRAVENTION. The execution and delivery by the Lease Indenture Company, in its individual capacity or as Lease Indenture Trustee, as the case may be, of this Agreement and the other Operative Documents to which it is or will be a party, the consummation by the Lease Indenture Company, in its individual capacity or as Lease Indenture Trustee, as the case may be, of the transactions contemplated hereby and thereby, and the compliance by the Lease Indenture Company, in its individual capacity or as Lease Indenture Trustee, as the case may be, with the terms and provisions hereof and thereof, do not and will not contravene any Requirement of Law of the United States of America governing the Lease Indenture Company or the banking or trust powers of the Lease Indenture Company, or its organizational documents or by-laws, or contravene the provisions of, or 31 constitute a default by the Lease Indenture Company under, or result in the creation of any Lien attributable to the Lease Indenture Company upon the Indenture Estate or any indenture, mortgage or other material contract, agreement or instrument to which the Lease Indenture Company is a party or by which the Lease Indenture Company or its property is bound which would materially adversely affect the ability of the Lease Indenture Company, in its individual capacity or as Lease Indenture Trustee, as the case may be, to perform its obligations under this Agreement or the other Operative Documents to which it is or will be a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the security interest of the Lease Indenture Trustee in the Indenture Estate; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Lease Indenture Company or the Lease Indenture Trustee to act as operator of the Facility following a Lease Event of Default. (d) GOVERNMENTAL ACTION. Assuming the representations and warranties of Midwest contained in paragraphs (c), (g), (l), (m) and (n) of SECTION 3.1 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority governing its banking or trust powers is required for the due execution, delivery or performance by the Lease Indenture Company or the Lease Indenture Trustee, as the case may be, of this Agreement or the other Operative Documents to which the Lease Indenture Trustee is or will be a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given. (e) LITIGATION. There is no pending or, to the knowledge of the Lease Indenture Company, threatened action, suit, investigation or proceeding against the Lease Indenture Company either in its individual capacity or as Lease Indenture Trustee, before any Governmental Authority which, if determined adversely to it, would materially adversely affect the ability of the Lease Indenture Company, in its individual capacity or as Lease Indenture Trustee, as the case may be, to perform its obligations under this Agreement or the other Operative Documents to which it is or will be a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the security interest of the Lease Indenture Trustee in the Indenture Estate. 32 SECTION 3.7 REPRESENTATIONS AND WARRANTIES OF PASS THROUGH TRUSTEES AND THE PASS THROUGH COMPANY. The Pass Through Company and each Pass Through Trustee hereby severally represents and warrants that, as of the date of execution hereof and as of the Closing Date: (a) DUE ORGANIZATION. The Pass Through Company is a banking corporation duly organized, validly existing and in good standing under the laws of the State of New York, has the corporate power and authority, as Pass Through Trustee and/or in its individual capacity to the extent expressly provided herein or in the Pass Through Trust Agreements, to enter into and perform its obligations under the Pass Through Trust Agreement, this Agreement and each of the other Operative Documents to which it is or will be a party. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. (i) (A) This Agreement has been duly authorized, executed and delivered by the Pass Through Trustees and the Pass Through Company and (B) assuming the due authorization, execution and delivery of this Agreement by each party hereto other than each Pass Through Trustee and the Pass Through Company, as the case may be, this Agreement constitutes a legal, valid and binding obligation of the Pass Through Company and each Pass Through Trustee, enforceable against the Pass Through Company or each Pass Through Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (ii) (A) Each of the other Operative Documents to which the Pass Through Company or such Pass Through Trustee is or will be a party has been or when executed and delivered will be duly authorized, executed and delivered by the Pass Through Company or such Pass Through Trustee, as the case may be, and (B) assuming the due authorization, execution and delivery of each of the other Operative Documents by each party thereto other than the Pass Through Company or such Pass Through Trustee, as the case may be, each of the other Operative Documents to which the Pass Through Company or such Pass Through Trustee is or will be a party constitutes or when executed and delivered will constitute a legal, valid and binding obligation of the Pass Through Company or such Pass Through Trustee, enforceable against the Pass Through Company or such Pass 33 Through Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) NON-CONTRAVENTION. The execution and delivery by the Pass Through Company, in its individual capacity or as Pass Through Trustee, as the case may be, of this Agreement and the other Operative Documents to which it is or will be a party, the consummation by the Pass Through Company, in its individual capacity or as Pass Through Trustee, as the case may be, of the transactions contemplated hereby and thereby, and the compliance by the Pass Through Company, in its individual capacity or as Pass Through Trustee, as the case may be, with the terms and provisions hereof and thereof, do not and will not contravene any Requirement of Law of the United States of America or the State of New York governing the Pass Through Company or the banking or trust powers of the Pass Through Company, or its organizational documents or by-laws, or contravene the provisions of, or constitute a default by the Pass Through Company under, or result in the creation of any Lien attributable to the Pass Through Company upon the Certificates or any indenture, mortgage or other material contract, agreement or instrument to which the Pass Through Company is a party or by which the Pass Through Company or its property is bound which would materially adversely affect the ability of the Pass Through Company, in its individual capacity or as Pass Through Trustee, as the case may be, to perform its obligations under this Agreement or the other Operative Documents to which it is a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the security interest of any Pass Through Trustee in the Indenture Estate; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Pass Through Company or any Pass Through Trustee to act as operator of the Facility following a Lease Event of Default. (d) GOVERNMENTAL ACTION. Assuming the representation and warranties of Midwest contained in paragraphs (c), (g), (1), (m) and (n) of SECTION 3.1 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority governing its banking or trust powers is required for the due execution, delivery or performance by the Pass Through Company or any Pass Through Trustee, as the case may be, of this Agreement or the other Operative Documents to which such Pass Through Trustee is or 34 will be a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given. (e) LITIGATION. There is no pending or, to the knowledge of the Pass Through Company, threatened action, suit, investigation or proceeding against the Pass Through Company either in its individual capacity or as Pass Through Trustee, before any Governmental Authority which, if determined adversely to it, would materially adversely affect the ability of the Pass Through Company, in its individual capacity or as Pass Through Trustee, as the case may be, to perform its obligations under this Agreement or the other Operative Documents to which it is a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the security interest of any Pass Through Trustee in the Indenture Estate. SECTION IV CLOSING CONDITIONS The obligations of the Owner Participant, the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee, the Pass Through Trustees, Midwest and EME to consummate the transactions contemplated hereby on the Closing Date shall be subject to prior or concurrent satisfaction or waiver of the following conditions, except that the obligations of any Person shall not be subject to such Person's own performance or compliance. SECTION 4.1 OPERATIVE DOCUMENTS. On or before the Closing Date, each of the Operative Documents to be delivered at the Closing shall have been duly authorized, executed and delivered by the parties thereto in substantially the form attached as an Exhibit hereto, shall each be in full force and effect, and executed counterparts of each shall have been delivered to each of the parties hereto. SECTION 4.2 CERTIFICATES AND THE LESSOR NOTES. Each of the conditions precedent contained in the Certificate Purchase Agreement shall have been satisfied or waived by the Initial Purchasers and such Initial Purchasers shall have purchased the Certificates pursuant to, and in accordance with, the terms of the Certificate Purchase Agreement and the Proceeds shall have been provided to the Owner Lessor through the purchase by the Pass Through Trustees of the applicable Initial Lessor Notes; 35 SECTION 4.3 PURCHASE AGREEMENT. The Equity Investor shall have purchased Midwest's membership interest in the Owner Participant pursuant to the Purchase Agreement. SECTION 4.4 OTHER DOCUMENTS. Each of the Lease Financing Parties shall have received certified copies of the Organic Documents of each of the other parties hereto (except for the Lease Indenture Trustee and the Pass Through Trustees, who shall not be required to provide such documents) and resolutions of the board of directors or managers (or managing members), as the case may be, of each such other Lease Financing Party duly authorizing the Overall Transaction and such documents and such evidence as each party may reasonably request in order to establish the authority of each such other party to consummate the transactions contemplated by this Agreement, the taking of all corporate and other proceedings in connection therewith and compliance with the conditions herein or therein set forth and the incumbency of all officers signing any of the Operative Documents. Each of the foregoing documents shall be reasonably satisfactory to the recipient. SECTION 4.5 REPRESENTATIONS AND WARRANTIES. The representation and warranties set forth in SECTION 3 hereof shall be true and correct on and as of the Closing Date with the same effect as though made on and as of the Closing Date and each of the Lease Financing Parties shall have received a certificate of each of the parties hereto to such effect. SECTION 4.6 DEFAULTS, EVENTS OF DEFAULT, EVENTS OF LOSS. No Lease Event of Default, Lease Indenture Event of Default or Event of Loss or event that, with the passage of time or giving of notice or both, would constitute a Lease Event of Default, Lease Indenture Event of Default or an Event of Loss shall have occurred and be continuing. SECTION 4.7 CONSENTS. All material permits, licenses, approvals and consents necessary to consummate the Overall Transaction (including any consent required from ComEd or any lenders to EME, Holdings, Midwest or their Affiliates) shall have been duly obtained and shall be in full force and effect and in form and substance satisfactory to each of the Lease Financing Parties. 36 SECTION 4.8 GOVERNMENTAL ACTIONS. All actions, if any, required to have been taken by any Governmental Authority on or prior to the Closing Date in connection with the transactions contemplated by any Operative Documents on the Closing Date, including, without limitation, the FERC Orders, shall have been taken and all orders, permits, waivers, exemptions, authorizations and approvals of and registrations with such Governmental Authorities required to be in effect on the Closing Date in connection with the transactions contemplated by the Operative Documents on the Closing Date shall have been issued; and all such orders, permits, waivers, exemptions, authorizations and approvals shall be in full force and effect on the Closing Date. SECTION 4.9 INSURANCE. Insurance (including all related endorsements) complying with the requirements of SECTION 11 of the Facility Lease shall be in full force and effect and all premiums thereon shall be current. The Owner Participant, the Equity Investor, the Owner Trustee, the Owner Lessor, the Lease Indenture Trustee and the Pass Through Trustees shall have received a certificate or certificates dated the Closing Date of an independent insurance broker or carrier reasonably satisfactory to such Persons stating that such insurance is in full force and effect. The Equity Investor and the Owner Participant shall have received a report from their insurance consultant in form and substance satisfactory to them. SECTION 4.10 ENGINEERING REPORT. The Owner Participant, the Equity Investor, the Lease Indenture Trustee and the Pass Through Trustees shall have received, on or before the Closing Date, a copy of the Engineering Report and the Owner Participant and the Equity Investor shall have received a report of R. W. Beck, each such document in form and substance reasonably satisfactory to the recipients. SECTION 4.11 APPRAISAL; CONDITION OF THE FACILITY. The Owner Participant and the Equity Investor shall have received the Closing Date Appraisal prepared by the Appraiser addressed and delivered only to the Equity Investor and the Owner Participant and satisfactory in form and substance to the recipients. The Owner Participant shall be satisfied that the Facility shall be in the condition described in the Closing Date Appraisal. The Lease Indenture Trustee, the Pass Through Trustees and the Initial Purchasers shall have received a copy of the verification of value, useful life and estimated residual value prepared by the Appraiser in connection with 37 the appraisal of assets subject to the Facility Lease, each of which will be reasonably satisfactory to the recipient. SECTION 4.12 OPINION WITH RESPECT TO CERTAIN TAX ASPECTS. The Owner Participant and the Equity Investor shall have received a satisfactory tax opinion, dated the Closing Date, of Hunton & Williams addressed and delivered only to the Owner Participant and the OP Guarantor. SECTION 4.13 OPINIONS OF COUNSEL. Each of the relevant Lease Financing Parties shall have received an opinion or opinions, dated the Closing Date, of (a) SASM&F, special counsel to Midwest and EME, substantially in the form of Exhibit CC, (b) Sonnenschein, Nath and Rosenthal, special Illinois counsel to Midwest and EME, substantially in the form of Exhibit DD, (c) Hunton & Williams, special New York counsel to the Owner Participant and the Equity Investor, substantially in the form of Exhibit EE, (d) in-house counsel to Midwest, EME and the Owner Participant, substantially in the form of Exhibit FF, (e) Richards, Layton & Finger, P.A., counsel to the Owner Lessor, the Trust Company, and the Owner Trustee, substantially in the form of Exhibit GG, (f) Stadtmauer Bailkin LLP, special counsel to the Lease Indenture Trustee and the Lease Indenture Company, substantially in the form of Exhibit HH addressed to such Person, (g) Stadtmauer Bailkin LLP, counsel to the Pass Through Trustees and the Pass Through Company, substantially in the form of Exhibit II, (h) Van Ness Feldman, special federal regulatory counsel to Midwest and EME, substantially in the form of Exhibit JJ, and (i) in-house counsel to the Owner Participant and the Equity Investor, substantially in the form of Exhibit KK. Each such Person expressly consents to the rendering by its counsel of the opinion referred to in this SECTION 4.13 and acknowledges that such opinion shall be deemed to be rendered at the request and upon the instructions of such Person, each of whom has consulted with and has been advised by its counsel as to the consequences of such request, instructions and consent. Furthermore, each such counsel shall, to the extent requested, permit the Rating Agencies and the Initial Purchasers to rely on their opinion as if such opinion were addressed to such parties. SECTION 4.14 RECORDINGS AND FILINGS. All filings and recordings listed on Schedule 4.14 hereto shall have been duly made and all filing, recordation, transfer and other fees payable in connection therewith shall have been paid; and the filing of all precautionary financing statements under the Uniform Commercial Code of Illinois and any other mortgages, security agreements or other documents as may be 38 reasonably requested by counsel to the Owner Participants, the Lease Indenture Trustee or the Pass Through Trustees to perfect the right, title and interest of the Owner Lessor in the Owner Lessor's Interest, or any part thereof or interest therein and the Lien of the Lease Indenture Trustee in the Indenture Estate, shall have been made. SECTION 4.15 TAXES. All Taxes, if any, due and payable on or before the Closing Date in connection with the execution, delivery, recording and filing of this Agreement or any other Operative Document, or any document or instrument contemplated thereby shall have been duly paid in full. SECTION 4.16 NO CHANGES IN REQUIREMENTS OF LAW. No change shall have occurred in Requirements of Law or the interpretation thereof by any competent court or other Governmental Authority that would make it illegal for the Equity Investor, the Owner Participant, the Owner Lessor, the Owner Trustee or Midwest to participate in any of the transactions contemplated by the Operative Documents or would materially adversely affect the Facility, the Undivided Interest or the Ground Interest. No change in the Tax law shall have occurred with respect to which no adjustment has been made pursuant to SECTION 15 hereof. SECTION 4.17 REGISTERED AGENT FOR MIDWEST AND EME. CT Corporation System shall have been appointed by Midwest and EME as registered agent for service of process in the State of New York as provided in the Operative Documents and CT Corporation System shall have accepted such appointment. SECTION 4.18 FAS 13. The present value of Basic Lease Rent payable during the Basic Lease Term under the Facility Lease (taking into account any rent adjustment through or contemplated on the Closing Date), together with all rent payable under the Facility Site Sublease and all Transaction Costs financed through the Facility Lease, discounted at the Discount Rate, shall satisfy the 90 percent test for operating lease treatment under FAS 13. SECTION 4.19 RENT ADJUSTMENTS. No rent adjustment made or contemplated on the Closing Date (other than adjustments to reflect a change in Transaction Costs or the actual interest rate on the Initial Lessor Notes) shall cause either (i) the after-tax present value of Basic Lease Rent discounted at 6% per annum, compounded 39 annually to increase by more than 100 basis points or (ii) the total Basic Lease Rent to increase by more than 2.0%. SECTION 4.20 PARENT GUARANTY. The OP Guarantor shall have executed and delivered to the other Lease Financing Parties an Owner Participant Guaranty substantially in the form of Exhibit Y hereto. SECTION 4.21 TITLE INSURANCE. Each of the Title Policies shall have been delivered to the Owner Participant, the Equity Investor, the Lease Indenture Trustee and Pass Through Trustees. SECTION 4.22 EME GUARANTEES. EME shall have executed and delivered (i) to the Owner Lessor the EME Guarantee substantially in the form of Exhibit R hereto and (ii) the EME OP Guarantee to the beneficiaries thereof substantially in the form of Exhibit S hereto. SECTION 4.23 NON-CONSOLIDATION OPINION. Hunton & Williams, Special New York counsel to the Owner Participant shall have delivered to the Rating Agencies a non-consolidation opinion, if requested by any Rating Agency, with respect to non-consolidation of the Owner Participant into its immediate parent. SECTION 4.24 RATING OF CERTIFICATES. The Certificates shall be rated at least Baa1 by Moody's and A- by S&P. SECTION 4.25 EME NOTE. EME shall have issued to Midwest the EME Note substantially in the form of Exhibit T attached hereto. SECTION 4.26 NO MATERIAL ADVERSE CHANGE. No material adverse change has occurred with respect to Midwest, the Facility or the Facility Site since March 31, 2000. SECTION 4.27 SUBORDINATION AGREEMENT AND REIMBURSEMENT AGREEMENT. On or before the Closing Date, each of the Subordination Agreement and the Reimbursement Agreement shall have been duly authorized, executed and delivered by the parties thereto in substantially the form attached as Exhibits AA and Z respectively, and shall each be in full force and effect, and executed counterparts of each shall have been delivered to each of the parties hereto and thereto. 40 SECTION 4.28 SURVEY. The Owner Participant, the Equity Investor, the Lease Indenture Trustee and Pass Through Trustees shall have received a copy of the Survey in form and substance reasonably satisfactory to the recipients. SECTION 4.29 SHARED FACILITIES AGREEMENTS. On or prior to the Closing Date, the Owner Lessor and Midwest shall have duly authorized, executed and delivered to each other the Shared Facilities Agreements, in substantially the form attached hereto as Exhibits V and V-1, respectively, and executed counterparts of each Shared Facilities Agreement shall have been delivered to each of the other parties hereto. SECTION V AFFIRMATIVE COVENANTS OF MIDWEST Midwest covenants and agrees that it will perform the obligations set forth in this SECTION 5. SECTION 5.1 DELIVERY OF CERTAIN INFORMATION. Midwest shall furnish prompt written notice to the Owner Trustee, the Owner Lessor, the Owner Participant and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees: (a) as soon as possible and in any event within five Business Days after any Authorized Officer of Midwest obtains knowledge of the occurrence of any default under any material agreement to which Midwest is a party or any termination thereof, in each case, together with a statement of an Authorized Officer of Midwest setting forth details of such event of default, default or termination and the action Midwest has taken and proposes to take with respect thereto; (b) as soon as possible and in any event within five Business Days after 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 3.1(i), notice thereof; (c) immediately upon becoming aware of the institution of any steps by Midwest to terminate any Pension Plan (other than a standard termination under ERISA Section 4041(b)), or the failure to make a required contribution to 41 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 Midwest 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 Midwest 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 Midwest 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 Midwest or any member of the Controlled Group from a Multiemployer Plan, notice thereof and copies of all documentation relating thereto; (d) as soon as possible and in any event within five Business Days after any Authorized Officer of Midwest obtains knowledge of the occurrence thereof, notice that any Governmental Authority may revoke, or refuse to grant or renew, or materially modify, any material Governmental Approval described in SECTION 3.1(c); (e) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Midwest, or compliance with the terms of this Agreement or the other Operative Documents, as the Owner Trustee, the Owner Lessor, the Owner Participant and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees may reasonably request; (f) immediately upon becoming aware of any change in operations of Midwest that would cause Midwest to fail to qualify for EWG status or to lose exemption from regulation under PUHCA; and (g) concurrently with the delivery of any notice, report, request, demand, certificate, financial statement or other instrument to the Owner Lessor pursuant to the Facility Lease (but without duplication of deliveries required under SECTION 5.1(a)), for so long as the Lien of the Lease Indenture has not been terminated or discharged, Midwest shall furnish a copy of the same to the Lease Indenture Trustee and the Pass Through Trustees. 42 SECTION 5.2 FINANCIAL INFORMATION. Midwest shall caused to be delivered to the Owner Trustee, the Owner Lessor, the Owner Participant, and for as long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees: (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 Midwest, consolidated balance sheets of Midwest (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 Midwest (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; (b) as soon as available and in any event within 120 days after the end of each Fiscal Year of Holdings, commencing with the 1999 Fiscal Year, a copy of the annual audited report for such Fiscal Year for Holdings (which will include results for its Consolidated Subsidiaries), including therein consolidated balance sheets of Holdings (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 Holdings (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 Holdings, 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, PROVIDED HOWEVER, that in the event annual audited report of Midwest becomes and for as long as it continues to be available, information delivery requirements of this Section 5.2(b) shall be deemed to refer to such annual audited report of Midwest and not Holdings; (c) concurrently with the delivery of the financial statements referred to in Section 5.2(b) hereof, Midwest shall deliver an Officer's Certificate of Midwest stating that (i) the signer has made, or caused to be made under its supervision, a review of this Agreement and the other Operative Documents; and (ii) such review has not disclosed the existence during such fiscal year (and the signer does not have knowledge of the existence as of the date of such certificate) of any condition or event constituting a Lease Event of Default or an Event of Loss or, if 43 any such condition or event existed or exists, specifying the nature thereof, the period of existence thereof and what action Midwest has taken or proposes to take with respect thereto; (d) as soon as available, one copy of any documents filed by Midwest with the Securities and Exchange Commission or any successor agency pursuant to Section 13(a), 13(c), 14 or 15(d) (or any successor sections) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"); (e) within ten Business Days after each anniversary of the Closing Date, a certificate from Midwest's insurers or insurance agents evidencing that the insurance policies in place satisfy the requirements of the Operative Documents; (f) as soon as possible and in any event within five Business Days after any Authorized Officer of Midwest obtains (i) knowledge of the occurrence thereof, notice of any casualty, damage or loss to the Facility, whether or not insured, through fire, theft, other hazard or casualty, involving a probable loss of $5,000,000 or more or (ii) knowledge of (A) the occurrence, notice of any cancellation, notice of threatened or potential cancellation or (B) any material change in the terms, coverage or amounts of any policy of insurance which would result in such policy deviating from Prudent Industry Practice. SECTION 5.3 INFORMATION CONCERNING THE FACILITY. Concurrently with the delivery of the financial statements referred to in SECTION 5.2(b), Midwest shall furnish the Owner Trustee, the Owner Lessor, the Owner Participant and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees and their respective authorized representatives either: (i) the annual report provided to senior management and shareholders of Midwest or its Affiliates, and (ii) a report for the preceding calendar year with respect to the Facility, in each case, 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 Midwest or the Guarantor or any of its Subsidiaries; (D) significant plant activities, such as major plant overhauls, Alterations, modifications and other capital expenditures, significant changes in plant operations and major operating incidents; 44 and (E) markets activities, including quantities and average price of energy and capacity delivered. SECTION 5.4 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. Midwest shall continue to engage in the business of owning and operating the Facility 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 limited liability company 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 SECTIONS 6.1 OR 6.2. SECTION 5.5 COMPLIANCE WITH REQUIREMENTS OF LAW AND CONTRACTUAL OBLIGATIONS. Midwest shall 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 such non-compliance would not result in a Material Adverse Effect on Midwest. SECTION 5.6 ENVIRONMENTAL COVENANT WITH RESPECT TO THE FACILITY AND THE FACILITY SITE. Midwest shall: (a) comply, and make all reasonable efforts to cause other Persons to comply, with all applicable Environmental Laws and obtain, comply with and maintain all necessary Governmental Approvals required under any applicable Environmental Law in connection with the use, operation and maintenance of the Facility and the Facility Site, in each case, except where such noncompliance or failure, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect on Midwest; (b) promptly upon the request of the Owner Trustee, the Owner Lessor, the Owner Participant or, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee or the Pass Through Trustees, if there has been a Lease Event of Default which has not been fully and timely cured, arrange for, and EME shall be responsible for all costs and expenses incurred in connection with, the environmental surveys in accordance with the terms of SECTION 5.2(f) of the Facility Lease. 45 (c) provide copies of such information to evidence compliance with this SECTION 5.6 as the Owner Trustee, the Owner Lessor, the Owner Participant or, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees, may reasonably request from time to time. SECTION 5.7 FURTHER ASSURANCES. Upon written request of the Owner Trustee, the Owner Lessor, the Owner Participant, or, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee or the Pass Through Trustees, Midwest shall 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 preserve, protect and perfect the ownership of the Undivided Interest and the interest of the Owner Lessor in the Facility Site Lease and to maintain the first priority Lien intended to be created by the Lease Indenture therein. SECTION VI NEGATIVE COVENANTS OF MIDWEST Midwest covenants and agrees that it will perform the obligations set forth in this SECTION 6. SECTION 6.1 MERGER AND CONSOLIDATION. Midwest shall not consolidate or merge with any other Person (unless it is the surviving entity) or sell, transfer or otherwise dispose of all or substantially all of its assets in one or a series of transactions, unless (i) no Lease Event of Default shall have occurred and be continuing prior to and after giving effect to such merger, consolidation or sale, (ii) the entity resulting from such consolidation, surviving such merger or to whom such assets are transferred shall (a) be a corporate entity (including a limited liability company) organized under the laws of the United States of America, any state thereof or the District of Columbia, and (b) expressly assume, pursuant to an agreement reasonably acceptable to the other Lease Financing Parties, each obligation of Midwest under the Operative Documents, (iii) the Owner Participant shall have received an opinion reasonably satisfactory to it from Hunton & Williams, or from a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to Midwest to the effect that such consolidation, merger or sale of assets would not 46 result in any material indemnified, or any unindemnified, incremental tax risk to the Owner Participant, (iv) the Owner Participant and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee and Pass Through Trustees, shall have received an opinion of counsel reasonably satisfactory to each such Person (y) with respect to the agreement referred to in the immediately preceding clause (ii) (b) and (z) addressing other customary matters, (v) after giving effect to such transaction (A) while the Certificates are outstanding, the ratings of the Certificates shall be equal to or greater than the ratings of the Certificates immediately prior to consummating such transaction and (B) if the Certificates are no longer outstanding, the credit rating of the long-term senior unsecured indebtedness of Midwest or any successor or surviving entity shall be equal to or greater than the credit rating of the long-term senior unsecured indebtedness of Midwest immediately prior to consummating such transaction and, (vi) for as long as the EME Guarantees are in effect, EME shall have delivered written affirmations of its obligations under the EME Guarantees to the beneficiaries of the EME Guarantees. Midwest shall not sell more than 50% of its assets without the prior written consent of the Owner Lessor and, for as long as the Lessor Notes are outstanding, the Lease Indenture Trustee and the Pass Through Trustees which consent shall not be unreasonably withheld, PROVIDED, HOWEVER, that such consent shall not be required in connection with such sale or disposition if (x) the Certificates are rated at least Baa3 by Moody's and BBB- by S&P taking into account such sale of assets or (y) if the Certificates are no longer outstanding, the long-term senior unsecured indebtedness of Midwest is rated at least Baa3 by Moody's and BBB- by S&P taking into account such sale of assets. SECTION 6.2 CHANGES IN LEGAL FORM OR BUSINESS. Midwest shall not change its legal form or Organic Documents except as permitted by SECTION 6.1, change its Fiscal Year or engage in any business other than the construction, ownership, maintenance and operation of the Generating Assets, the sale of wholesale electric power therefrom and related products and services and such other business as may be reasonably incidental thereto. 47 SECTION VII AFFIRMATIVE COVENANTS OF EME EME covenants and agrees that it will perform the obligations set forth in this SECTION 7. SECTION 7.1 FINANCIAL INFORMATION, REPORTS, NOTICES. EME shall furnish to the Owner Trustee, the Owner Lessor, the Owner Participant and, for as long as the Lien of the Lease Indenture Trustee has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees: (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 EME, consolidated balance sheets of EME (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 EME (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 Officer of EME 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 EME, a copy of the annual audited report for such Fiscal Year for EME (which will include results for its Consolidated Subsidiaries), including therein consolidated balance sheets of EME (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 EME (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 EME, 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) for so long as any Certificates remain outstanding, unless EME is at the time subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, to holders of Certificates, Certificate Owners (as defined in the Pass Through Trust Agreements) and prospective investors, upon their request, 48 the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act; (d) following the effectiveness of any registration statement pursuant to the Registration Rights Agreement, whether or not required by the rules and regulations of the Securities and Exchange Commission (the "SEC"), EME shall maintain its status as a reporting company under the Exchange Act and file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to the Lease Financing Parties upon request, unless otherwise provided in the Operative Documents and so long as the requirements of SECTION 3.4 of the Facility Lease are complied with; (e) concurrently with the delivery of the financial statements referred to in SECTION 7.1(a), a certificate, executed by an Authorized Officer of EME with responsibility for financial matters, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Owner Lessor and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees) compliance with the financial covenant set forth in SECTION 4.09 of the EME OP Guarantee; (f) as soon as possible and in any event within five Business Days after any Authorized Officer of EME obtains knowledge of the occurrence of (i) each Lease Event of Default or (ii) any default under any other material agreement to which EME or any of its subsidiaries is a party or any termination thereof, if such event could reasonably be expected to result in a Material Adverse Effect on EME, in each case, together with a statement of such Authorized Officer setting forth details of such Default, default or termination and the action which EME or such subsidiary of EME 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 occurrence of any material adverse development with respect to any litigation, action, proceeding, or labor controversy of the type described in SECTION 3.2(h) or (ii) the commencement of any labor controversy, litigation, action, proceeding of the type described in SECTION 3.2(h) hereof, notice 49 thereof and, upon request of the Owner Lessor and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees, copies of all non-privileged documentation relating thereto; (h) immediately upon becoming aware of the institution of any steps by EME 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 EME 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 EME 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 EME with respect to any post-retirement Welfare Plan benefit, which has a Material Adverse Effect on EME notice thereof and copies of all documentation relating thereto; (i) as soon as known, any changes in EME's Debt Rating by Moody's or S&P or any other rating agency which maintains a Debt Rating on EME; (j) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of EME, or compliance with the terms of this Agreement or the other Operative Documents, as Owner Lessor, the Owner Participant, the Lease Indenture Trustee or the Pass Through Trustees may reasonably request. SECTION 7.2 MAINTENANCE OF CORPORATE EXISTENCE. Subject to the provisions of SECTION 8.2 hereof, EME shall at all times preserve and maintain in full force and effect (i) its corporate existence and good standing under the laws of the State of California and (ii) its qualification to do business in each other jurisdiction in which the character of its properties or the nature of its activities make such qualification necessary, except where the failure to be so qualified would not reasonably be expected to result in a Material Adverse Effect with respect to EME. 50 SECTION 7.3 FURTHER ASSURANCES. Upon written request of the Owner Lessor, the Owner Participant, and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees, EME shall 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 preserve, protect and perfect the ownership of the Undivided Interest and the interest of the Owner Lessor in the Ground Lease and to maintain the first priority Lien intended to be created by the Lease Indenture therein. SECTION 7.4 TAXES. EME shall, prior to the time penalties attach thereto, (i) file, or cause to be filed, all tax and information returns that are required to be, or are required to have been, filed by it in any jurisdiction, and (ii) pay or cause to be paid all taxes shown to be, or to have been, due and payable on such returns and all other taxes lawfully imposed and payable by it, except to the extent there is a Good Faith Contest thereof by EME. SECTION VIII NEGATIVE COVENANTS OF EME SECTION 8.1 LIENS. EME shall not pledge, mortgage or hypothecate, or permit to exist, any mortgage, pledge or other lien upon any property at any time directly owned by EME to secure any EME Indebtedness, without making effective provisions whereby the EME Guarantees shall be equally and ratably secured with any and all such EME Indebtedness and with any other EME Indebtedness similarly entitled to be equally and ratably secured; provided, however, that this restriction shall not apply to or prevent the creation or existence of (i) liens existing on the Closing Date, (ii) purchase money liens not to exceed the cost or value of the purchased property, (iii) other liens not to exceed 10 percent of EME's Consolidated Tangible Net Assets, and (iv) liens granted in connection with extending, renewing, replacing or refinancing, in whole or in part, EME Indebtedness (including, without limitation, increasing the principal amount of such EME Indebtedness) secured by liens described in the foregoing clauses (i) through (iii). In the event that EME proposes to pledge, mortgage or hypothecate any property at any time directly owned by it to secure any EME Indebtedness, other than as permitted by clauses (i) through (iv) of the previous paragraph, EME shall give prior written notice thereof to the Owner Trust, the Lease Indenture Trustee and the Pass Through Trustees, and EME 51 shall, prior to or simultaneously with such pledge, mortgage or hypothecation, effectively secure all the EME Guarantees equally and ratably with such EME Indebtedness. SECTION 8.2 CONSOLIDATION, MERGER; ASSET DISPOSITION. (a) EME shall not merge or consolidate with or into any other person and EME shall not sell, lease or convey all or substantially all of its assets to any person, unless (1) EME is the continuing corporation, or the successor corporation or the person that acquires all or substantially all of EME's assets is a corporation organized and existing under the laws of the United States or a State thereof or the District of Columbia and expressly assumes all EME's obligations under the EME Guarantees, the Participation Agreement and the other Operative Documents to which EME is a party, (2) immediately after such merger, consolidation, sale, lease or conveyance, there is no default or Lease Event of Default under the Lease Financing Documents, (3) if, as a result of the merger, consolidation, sale, lease or conveyance, any or all of EME's property would become the subject of a lien that would not be permitted by this Agreement, EME secures the EME Guarantees equally and ratably with the obligations secured by that lien and (4) EME delivers or causes to be delivered to the Owner Trust, the Owner Participant and as long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees an Officers' Certificate and an opinion of legal counsel, each stating that the merger, consolidation, sale, lease or conveyance comply with this Agreement and each in a form reasonably acceptable to the Owner Trust and Lease Indenture Trustee. (b) Except for the sale of the properties and assets of EME substantially as an entirety pursuant to subsection (a) above, and other than assets required to be sold to conform with governmental regulations, EME shall not sell or otherwise dispose of any assets (other than short-term, readily marketable investments purchased for cash management purposes with funds not representing the proceeds of other assets sales) if, on a pro forma basis, the aggregate net book value of all such sales during the most recent 12-month period would exceed 10 percent of EME's Consolidated Net Tangible Assets computed as of the end of the most recent fiscal quarter preceding such sale; provided, however, that any such sales shall be disregarded for purposes of this 10 percent limitation if the proceeds are invested in assets in similar or related lines of business of EME and, provided further, that EME 52 may sell or otherwise dispose of assets in excess of such 10 percent limitation if the proceeds from such sales or dispositions, which are not reinvested as provided above, are retained by EME as cash or cash equivalents or are used by EME to reduce or retire EME Indebtedness ranking pari passu in right of payment to the EME Guarantees or indebtedness of EME's Subsidiaries. SECTION 8.3 AMENDMENT, WAIVER OR ASSIGNMENT OF CERTAIN DOCUMENTS. EME shall not, and shall not permit any of its Subsidiaries to terminate, amend, supplement or otherwise modify any ComEd Agreement (i) in any materially adverse manner with respect to its term, offtake requirement or payment provision (ii) in a manner which would result in renewal or extension of the ComEd Agreements or which would otherwise limit in any way the Owner Lessor's or, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee's rights in respect of the Undivided Interest or (iii) otherwise in a manner which would result in a Material Adverse Effect on Midwest or the Owner Lessor or the Lease Indenture Trustee, as the case may be, without the prior written consent of the Owner Lessor or the Lease Indenture Trustee, as the case may be, which consent shall not be unreasonably withheld or delayed. SECTION IX COVENANTS OF THE TRUST COMPANY, THE OWNER TRUSTEE AND THE OWNER LESSOR SECTION 9.1 COMPLIANCE WITH THE TRUST AGREEMENT. Each of the Owner Lessor, the Trust Company and the Owner Trustee hereby severally covenants and agrees severally and as to itself only that it will: (a) comply with all of the terms of the Trust Agreement applicable to it; and (b) not amend, supplement, or otherwise modify SECTION 9.01, SECTION 10.01 or SECTION 10.02 of the Trust Agreement without the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default has occurred and is continuing or the Lease Indenture Trustee so long as the Lessor Notes are outstanding. 53 SECTION 9.2 OWNER LESSOR'S LIENS. The Trust Company, the Owner Trustee and the Owner Lessor each covenants severally and as to itself only that it will not directly or indirectly create, incur, assume or suffer to exist any Owner Lessor's Lien attributable to it and unrelated to the transactions contemplated hereby and will promptly notify in writing Midwest, EME, the Owner Participant and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees of the imposition of any such Lien of which it has actual knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Owner Lessor's Lien attributable to it. SECTION 9.3 AMENDMENTS TO OPERATIVE DOCUMENTS. The Owner Trustee and the Trust Company each covenants severally and as to itself only that it will not unless such action is expressly contemplated by the Operative Documents, or with respect to the Owner Trustee and the Owner Lessor, unless it is expressly directed by the Owner Participant in writing, (a) through its own action terminate any Operative Document to which it is a party, (b) amend, supplement, waive or modify (or consent to any such amendment, supplement, waiver or modification) any Operative Document (other than the Trust Agreement, amendments to and modifications of which are governed by SECTION 9.1 hereof) in any manner other than with respect to administrative or ministerial matters or (c) except as provided in SECTION 14.2 hereof, take any action to prepay or refund the Lessor Notes or amend any of the payment terms of the Lessor Notes without, in each case, the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing and, in the case of clause (a) or (b), the Lease Indenture Trustee and the Pass Through Trustees as long as the Lien of the Lease Indenture has not been terminated or discharged. SECTION 9.4 TRANSFER OF THE OWNER LESSOR'S INTEREST. Other than as contemplated by the Operative Documents, each of the Owner Lessor and the Owner Trustee covenants severally and as to itself only that it will not assign, pledge, sell, lease, convey or otherwise transfer any of its then existing right, title or interest in and to the Owner Lessor's Interest, the Trust Estate or the other Operative Documents without the consent of Midwest and, so long as the Lessor Notes are outstanding, the Lease Indenture Trustee, which consent may not be unreasonably withheld. Nothing in this SECTION 9.4 shall limit the ability of the Owner Trustee or the Owner 54 Participant to appoint a successor Owner Trustee pursuant to SECTION 9 of the Trust Agreement. SECTION 9.5 OWNER LESSOR; TRUST ESTATE. Each of the Owner Trustee and the Owner Lessor covenants severally and as to itself only that it will not voluntarily take any action to subject the Owner Lessor or the Trust Estate to the provisions of any applicable bankruptcy or insolvency law (as now or hereafter in effect). SECTION 9.6 LIMITATION ON INDEBTEDNESS AND ACTIONS. Each of the Owner Trustee and the Owner Lessor covenants severally and as to itself only that it will not incur any indebtedness nor enter into any business or activity except as required or expressly permitted or contemplated by any Operative Document. SECTION 9.7 CHANGE OF LOCATION. The Owner Trustee shall use all reasonable efforts to give the Owner Participant, the Lease Indenture Trustee, the Pass Through Trustees, Midwest and EME 30 days' written notice of any relocation of the Owner Trustee's chief executive office or the place where documents and records relating to the Owner Trustee or the Trust Estate are kept from the location set forth in SECTION 3.3(j) and of any change in its name, but in any event the Owner Trustee and the Owner Lessor shall give such notice within 30 days after such relocation or name change. SECTION 9.8 BANKRUPTCY OF TRUST. Each of the Trust Company, the Owner Trustee and the Owner Lessor hereby agrees severally and as to itself only that it shall not voluntarily take any action that shall, or cause any action to be taken that is intended to, submit the Owner Lessor, as debtor, to any proceeding under any Requirement of Law involving bankruptcy, insolvency, reorganization or other laws affecting the rights of creditors generally unless a Lease Event of Default or a Material Lease Default shall have occurred and be continuing (in which case, if the Lien of the Lease Indenture shall not have been discharged, the Trust Company or the Owner Lessor shall not take such action unless the Lease Indenture Trustee shall have given its prior written consent to such action in its sole discretion). SECTION 9.9 COMED CONSENT. The Owner Lessor and its successors and assigns, as the case may be, agree not to invoice ComEd pursuant to the ComEd Consent prior to exercise of remedies by the Owner Lessor or its successors and assigns under the Facility Lease. Following such exercise of remedies by the Owner 55 Lessor or its successors and assigns, as the case may be, the Owner Lessor and its successors and assigns hereby agree to cooperate with Midwest in preparing invoices under the Power Purchase Agreement with respect to electrical output of the Facility equal to the Undivided Interest Percentage. SECTION X COVENANTS OF THE OWNER PARTICIPANT SECTION 10.1 RESTRICTIONS ON TRANSFER OF BENEFICIAL INTEREST. (a) The Owner Participant covenants and agrees that it shall not during the Facility Lease Term assign, convey or transfer any of its right, title or interest in the Beneficial Interest without the prior written consent of Midwest and, so long as the Lien of the Lease Indenture has not been terminated or discharged, without the prior written consent of the Lease Indenture Trustee and the Pass Through Trustees; PROVIDED, HOWEVER, that the Owner Participant may assign, convey or transfer all or any part of its interest in the Beneficial Interest without such consent to a Person (the "TRANSFEREE") which shall assume the duties and obligations of the Owner Participant under the Operative Documents with respect to the interest being transferred pursuant to an Assignment and Assumption Agreement substantially in the form of Exhibit LL hereto, if each of the following conditions shall have been satisfied: (i) Midwest, EME, the Owner Trustee and, so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees shall have received an opinion of counsel, which opinion and counsel are reasonably satisfactory to each recipient thereof, to the effect that such Assignment and Assumption Agreement is a legal, valid and binding obligation of, and is enforceable against, each party thereto, that all regulatory approvals required in connection with such transfer or necessary to assume the Owner Participant's obligations under the Operative Documents shall have been obtained and that the proposed transfer of the Beneficial Interest will not require registration the Securities Act; (ii) the Transferee shall be a "United States person" within the meaning of Section 7701(a)(30) of the Code; 56 (iii) the Transferee or a guarantor of such Transferee meets the following criteria: (1) the Consolidated Tangible Net Assets of at least equal to $75 million calculated in accordance with GAAP, (2) agrees to be bound by the terms of the Operative Documents pursuant to an Assumption and Assignment Agreement substantially in the form of Exhibit LL hereto, and (3) so long as no Lease Event of Default shall have occurred and be continuing, such Transferee is not a Competitor of, or in material litigation with, Midwest or any Affiliate of Midwest, unless waived by Midwest; (iv) the transferring Owner Participant shall pay, without any right of indemnification from Midwest or any other Person, all reasonable documented out-of-pocket costs, fees and expenses incurred in connection with any such transfer by (x) the other Lease Financing Parties, except Midwest and EME, and (y) Midwest and EME, so long as no Lease Event of Default shall have occurred and be continuing; and (v) following such transfer, there shall be not more than two Owner Participants with interests (Undivided Interests or beneficial trust interests) in the Facility. (b) For purposes of the preceding clause (a), a "COMPETITOR" of Midwest shall be an entity (other than an entity which on the Closing Date is Other Owner Participant or an Affiliate thereof) which, or an Affiliate of which, is significantly involved as a seller or trader of capacity or energy in the electricity market; PROVIDED that, the foregoing restriction shall not apply in the case of a Transferee that is an Affiliate of such a seller or trader so long as (i) such Transferee is an entity involved in making passive investments such as the Owner Participant's contemplated investment in this transaction, (ii) such Transferee has in place procedures which shall be reasonably acceptable to Midwest to prevent such Affiliate that is a seller or trader of capacity from acquiring confidential information relating to such passive investments and agrees in writing with Midwest to maintain and abide by such procedures, and (iii) neither such Transferee nor any Affiliate thereof is an entity that is (x) actively involved in the generation of electricity in Mid-American Interconnected Network and/or the East Central Reliability Council or any 57 successor thereto, or (y) on the List of Competitors, attached hereto as Exhibit MM, which may, from time to time, but no more often than once per year, be modified by Midwest, and shall contain a list of up to six entities (including Affiliates) which Midwest reasonably believes in its good faith judgment are Competitors of Midwest. Notwithstanding the foregoing, the restrictions set forth in clause (i) or (iii)(1) and (iii)(3) of SECTION 10.1(a) above shall not inure to the benefit of Midwest if such transfer is in connection with the exercise of remedies during a Lease Event of Default. (c) Neither Midwest nor EME shall be responsible for any adverse tax consequence to the Owner Lessor or the Owner Participant resulting from any transfer pursuant to this SECTION 10.1 and the Pricing Assumptions (as set forth on SCHEDULE 10.1(c) hereto) shall not be changed as a result of any such transfer except if such transfer is in connection with the exercise of remedies during a Lease Event of Default. (d) The Owner Participant shall give the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee, the Pass Through Trustees, EME and Midwest 30 days' prior written notice of such transfer, or 10 days in the case of a transfer to an Affiliate of the Owner Participant, specifying the name and address of any proposed Transferee and such additional information as shall be necessary to determine whether the proposed transfer satisfies the requirements of this SECTION 10.1. If requested by the Owner Participant, the Lease Indenture Trustee or any Pass Through Trustee, Midwest shall acknowledge qualifying transfers. (e) Upon any such transfer in compliance with this SECTION 10.1, (i) such Transferee shall, to the extent of the Beneficial Interest conveyed to the Transferee, (x) be deemed the "Owner Participant" for all purposes, and (y) enjoy the rights and privileges and perform the obligations of the Owner Participant hereunder and under the Assignment and Assumption Agreement, the Owner Participant Guaranty and each other Operative Document to which such Owner Participant is a party, and each reference in this Agreement, the Assignment and Assumption Agreement, the Owner Participant Guaranty and each other Operative Document to the "Owner Participant" shall thereafter be deemed to include such Transferee, to the extent of the Beneficial Interest conveyed to the Transferee, for all purposes and (ii) the transferor Owner Participant and the Guarantor, if any, of such transferor Owner Participant's obligations shall be released from all obligations hereunder and under 58 each other Operative Document to which such transferor or Guarantor is a party or by which such transferor Owner Participant or Guarantor is bound to the extent such obligations are expressly assumed by a Transferee; PROVIDED, HOWEVER, that in no event shall any such transfer waive or release the transferor or its Guarantor from any liability existing immediately prior to or occurring simultaneously with such transfer. SECTION 10.2 OWNER PARTICIPANT'S LIENS. The Owner Participant covenants that it will not directly or indirectly create, incur, assume or suffer to exist any Owner Participant's Lien and the Owner Participant shall promptly notify Midwest, EME, the Lease Indenture Trustee and the Pass Through Trustees, in writing of the imposition of any such Lien of which the Owner Participant has actual knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Owner Participant's Lien. SECTION 10.3 AMENDMENTS OR REVOCATION OF TRUST AGREEMENT. The Owner Participant covenants that it will not (a) amend, supplement, or otherwise modify SECTION 9.01, SECTION 10.01 or SECTION 10.02 of the Trust Agreement except for amendments required by the Operative Documents or by Requirement of Law or which are administrative or ministerial in nature without the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default has occurred and is continuing, and without the prior written consent of the Lease Indenture Trustee and the Pass Through Trustees, so long as the Lien of the Lease Indenture has not been terminated or discharged, or (b) revoke, or otherwise waive compliance with or terminate the Trust Agreement without the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default has occurred and is continuing, and the Lease Indenture Trustee so long as the Lien of the Lease Indenture has not been terminated or discharged. SECTION 10.4 PROHIBITION ON FUNDAMENTAL CHANGES. The Owner Participant shall not change its form of organization and shall not enter into or engage in any business other than as contemplated by the Operative Documents and the activities related thereto. SECTION 10.5 BANKRUPTCY FILINGS. The Owner Participant agrees that it will not file a petition, or join in the filing of a petition, seeking reorganization, arrangement, adjustment or composition of, or in respect of, the Owner Lessor under the 59 Bankruptcy Code, or any other applicable Federal or state law or the law of the District of Columbia. SECTION 10.6 INSTRUCTIONS. The Owner Participant agrees that it will not instruct the Owner Lessor to take any action prohibited by this Agreement or any other Operative Document. SECTION 10.7 APPOINTMENT OF SUCCESSOR OWNER TRUSTEE. Notwithstanding any other provision of this Agreement, a successor Owner Trustee shall not be appointed by the Owner Participant without the consent of Midwest and, so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees unless such successor Owner Trustee (a) meets the requirements of the Trust Agreement, (b) has a combined capital and surplus of at least $150 million, and (c) Midwest and, so long as Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees shall have received at the expense of the Owner Participant: (i) an opinion or opinions of counsel, such counsel and such opinion to be reasonably acceptable to such parties, to the effect that no regulatory consents or approvals are required, or (ii) such other documentation reasonably satisfactory to Midwest, the Lease Indenture Trustee or Pass Through Trustees, as the case may be; PROVIDED, HOWEVER, that if Wilmington Trust Company resigns as Owner Trustee, is terminated for cause, or shall become incapable of acting or shall be adjudged bankrupt or insolvent or a receiver of the Owner Trustee or its properties shall be appointed or any public officer shall take charge or control of the Owner Trustee or its property or affairs for the purpose of rehabilitation, conservation or liquidation, the opinion required by clause (c) shall be at the expense of Midwest. SECTION 10.8 COOPERATION. Owner Lessor agrees, and each of the Owner Participant and the Owner Trustee agree to cause the Owner Lessor to, at the request of Midwest and at the sole cost and expense of EME on an After-Tax Basis, take such actions as may be necessary for the Owner Lessor to take as the owner of the Facility for purposes of obtaining the valid and effective issue, transfer or amendment, as the case may be, of all Governmental Approvals to the extent the same are required for the use, ownership, operation or maintenance of the Facility, the Facility Site, the Undivided Interest, the Ground Interest or any Component by Midwest or any permitted assignee of Midwest in the manner contemplated by the Operative Documents. Midwest shall pay on an After-Tax Basis all reasonable costs and 60 expenses (including, without limitation, the reasonable fees and expenses of counsel) of Owner Lessor and each other Person party to an Operative Document incurred in connection with any such action. It is understood and agreed that, with respect to any action requested of it, and taken by it, under this Section, the Owner Lessor, the Owner Participant and the Owner Trustee shall make no representation or warranty as to, and shall have no responsibility for the effectiveness of such action to accomplish or promote the objective intended by the Person making such request. SECTION XI COVENANTS OF THE LEASE INDENTURE TRUSTEE SECTION 11.1 THE INDENTURE TRUSTEE'S LIENS. Neither the Lease Indenture Company nor the Lease Indenture Trustee will directly or indirectly create, incur, assume or suffer to exist any Indenture Trustee's Lien attributable to it and arising out of events or conditions not related to its rights in the Indenture Estate or the administration thereof, and will promptly notify the Owner Participant, the Equity Investor, the Owner Trustee, Midwest and EME in writing of the imposition of any such Lien of which it has actual knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Indenture Trustee's Lien. SECTION XII EME'S INDEMNIFICATIONS SECTION 12.1 GENERAL INDEMNITY. (a) CLAIMS IDENTIFIED. Subject to the exclusions stated in paragraph (b) below, EME agrees to indemnify, protect, defend and hold harmless, and does hereby indemnify the Owner Participant, the OP Guarantor, the Owner Lessor, the Trust Company in its individual capacity, the Owner Trustee, the Equity Investor, the Lease Indenture Trustee, the Lease Indenture Company in its individual capacity, the Pass Through Trustees, the Pass Through Company in its individual capacity and their respective Affiliates, successors, assigns, agents, members, partners, directors, officers or employees (each an "INDEMNITEE") against any and all Claims (including Environmental Claims) (whether or not any of the transactions contemplated by the Operative Documents are consummated) imposed on, incurred or suffered by or asserted against such Indemnitee in any way relating to or in connection with or resulting from or arising out of or attributable to: 61 (i) the construction, financing, refinancing, acquisition, operation, rebuilding, warranty, ownership, use, possession, maintenance, repair, lease, condition, alteration, modification, restoration, refurbishing, return, purchase, sale or other disposition, insuring, sublease, or other use or non-use of the Facility, the Facility Site, the Undivided Interest, the Ground Interest or any Component or any portion thereof or any interest therein; (ii) the conduct of the business or affairs of Midwest at the Facility and the Facility Site or in connection therewith; (iii) the manufacture, design, purchase, acceptance, rejection, delivery or condition of, or improvement to, the Facility, the Facility Site, the Undivided Interest, the Ground Interest, or any Component, or any portion of any thereof or any interest therein; (iv) the Facility Lease, the Facility Site Lease, the Facility Site Sublease, any other Operative Document (including any Claims arising under this SECTION 12.1(a)(iv) or SECTION 12.1(a)(i) hereof relating directly or indirectly to ComEd Consent) or the Offering Circular, the execution or delivery thereof or the performance, enforcement, attempted enforcement or amendment, supplement or modification or any waiver of any terms thereof, or the transactions contemplated thereby or resulting therefrom; (v) any actual or alleged Environmental Condition or Environmental Claim at, in, on, under, from or related in any way to the Facility or the Facility Site or any portion thereof or any Component; (vi) the reasonable costs and expenses of any Indemnitee in connection with amendments or supplements to the Operative Documents requested or consented to by Midwest or EME or required or necessary as a result of a Lease Event of Default; 62 (vii) the imposition of any Lien other than, with respect to a particular Indemnitee (or a Related Party), a Lien arising by or through such Indemnitee that is prohibited by the terms of this Agreement or other Operative Documents; (viii) any violation by, or liability relating to, Midwest or EME of, or under, any Requirement of Law, whether now or hereafter in effect (including Environmental Laws), or any action of any Governmental Authority or other Person taken with respect to the Facility or the Facility Site, the Operative Documents or the interest of any Indemnitee under the Operative Documents, the Offering Circular, or the presence, Release, generation, management, recycling, use, storage, transportation, treatment or manufacture of any Hazardous Material in, at, under, to or from the Facility, the Facility Site or any Component; (ix) the non-performance or breach by Midwest or EME of any obligation contained in this Agreement or any other Operative Document or the falsity or inaccuracy of any representation, warranty or obligation of Midwest or EME contained in this Agreement, any other Operative Document or the Offering Circular; (x) the continuing fees (if any) and expenses of the Owner Lessor, the Owner Trustee (including the reason- able compensation and expenses of their counsel, accountants and other professional persons) arising out of the Owner Lessor's or the Owner Trustee's discharge of their respective duties under or in connection with the Operative Documents; (xi) the continuing fees (if any) and expenses of the Lease Indenture Company, the Lease Indenture Trustee, the Pass Through Company and the Pass Through Trustees (including the reasonable compensation and expenses of their respective counsel, accountants and other professional persons) arising out of the dis- charge of their respective duties under or in connection with the Operative Documents; 63 (xii) the applications of Part 4 and 5 of Subtitle B of Title I of ERISA (including, without limitation, any penalties imposed under Section 501(i) or (1) of ERISA) or any excise taxes, charges or penalties imposed under Section 4975 of the Code; (xiii) the issuance of the Initial Lessor Notes in accordance with Section 2.4 of the Lease Indenture and the issuance of any Additional Lessor Notes or New Lessor Notes pursuant to Section 2.12 or Section 2.13 of the Lease Indenture; and (xiv) in any other way relating to the transactions contemplated by the Operative Documents. (b) CLAIMS EXCLUDED. Any Claim, to the extent or resulting from or arising out of or attributable to any of the following, is excluded from EME's agreement to indemnify any Indemnitee under this SECTION 12.1: (i) acts, omissions or events occurring after expiration or other termination of the Facility Lease and, where required by the Facility Lease, return of the Facility to the Owner Lessor or its designee in compliance with the provisions of the Facil- ity Lease, except to the extent such Claim is (A) an Environmental Claim that relates to, results from, arises out of or is attributable to an Environmental Condition that was in existence at the Facility or the Facility Site prior to or as of such expiration or termination of the Facility Lease and the return of the Facility or (B) is a Claim that relates to, results from, arises out of or is attributable to the ComEd Consent; (ii) with respect to a particular Indemnitee and Related Parties, any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) by or on behalf of (a) in the case of the Owner Participant of any of its interest in the Beneficial Interest, or (b) in the case of the Owner Lessor, and if such action is taken at the written direction of the Owner Participant, the Owner Participant and Related Parties, of all or any of the Owner Lessor's 64 interest in the Facility or the Facility Site, or (c) all or any of either Pass Through Trust's interest in the Lessor Notes or the collateral therefor, unless such transfer is required by the terms of the Operative Documents or occurs in connection with the exercise of remedies during a Lease Event of Default; (iii) with respect to any Indemnitee and Related Parties, any Claim attributable to the gross negligence or willful misconduct of the Indemnitee seeking indemnification or a Related Party of such Indemnitee; (iv) as to any Indemnitee, any Claim attributable to the noncompliance of such Indemnitee or a Related Party, with any of the terms of, or any misrepresentation or breach of warranty by such Indemnitee contained in any Operative Document or any breach by such Indemnitee or a Related Party of any covenant contained in any Operative Document attributable to such Indemnitee or Related Party, unless attributable to Midwest or EME or the breach by another Person of its obligations under the Operative Documents or imputed to the Indemnitee; (v) with respect to the Owner Trustee and the Trust Company, any Claim constituting or arising from an Owner Lessor's Lien attributable to it; (vi) with respect to the Lease Indenture Trustee, any Claim arising from an Indenture Trustee's Lien prohibited by SECTION 11.1 hereof; (vii) with respect to the Pass Through Trustee and the Pass Through Company, any Claim arising from a Lien prohibited by Section 7.16 of either Pass Through Trust Agreement; (viii) with respect to the Owner Participant, any claim constituting or arising from an Owner Participant's Lien; 65 (ix) any Claim which constitutes Transac- tion Costs which the Owner Participant is obligated to pay pursuant to SECTION 2.3(a) hereof; (x) any Claim relating to the payment of any other amount to the extent such Indemnitee or a Related Party has expressly agreed in any Operative Document to pay such amount without a right of reimbursement; (xi) any Claim that is a Tax, or is a cost of contesting a Tax, whether or not EME is required to indemnify therefor pursuant to SECTION 14.2 or under the Tax Indemnity Agreement; (xii) any failure on the part of the Owner Trustee to distribute in accordance with the Trust Agreement any amounts received by it under the Operative Documents and distributable by it thereunder; (xiii) any Claim relating to the costs and expenses of any Indemnitee in connection with any amendments or supplements to the Operative Documents requested by such Indemnitee or a Related Party if such amendment or supplement is not required by the Operative Documents; (xiv) any Claim that constitutes principal and/or interest on the Lessor Notes, any Additional Lessor Notes or the corresponding payments under the Certificates or any Additional Certificates, respectively; and (xv) any Claim arising out of obligations expressly assumed by the Indemnitee seeking indemnification or a Related Party thereof. PROVIDED that the terms "omission," "gross negligence" and "willful misconduct," when applied with respect to the Owner Trustee, the Owner Participant, the OP Guarantor, the Equity Investor, the Owner Lessor, the Lease Indenture Trustee, the Pass Through Trustees or any Certificateholder or any Affiliate of any thereof, shall 66 not include any liability imputed as a matter of law to such Indemnitee solely by reason of such entity's interest in the Facility or the Facility Site or such Indemnitee's failure to act in respect of matters which are or were the obligation of Midwest under this Agreement or any other Operative Document. (c) INSURED CLAIMS. Subject to the provisions of paragraph (e) of this SECTION 12.1, in the case of any Claim indemnified by EME hereunder which is covered by a policy of insurance maintained by EME, each Indemnitee agrees, unless it and each other Indemnitee shall waive its rights to indemnification (for itself and each Related Party thereto) in a manner reasonably acceptable to EME, to cooperate, at the sole cost and expense of EME, with insurers in exercise of their rights to investigate, defend or compromise such Claim. (d) AFTER-TAX BASIS. EME agrees that any payment or indemnity pursuant to this SECTION 12.1 in respect of any Claim shall be made on an After-Tax Basis to the Indemnitees. (e) CLAIMS PROCEDURE. Each Indemnitee shall promptly after such Indemnitee shall have actual knowledge thereof notify EME in writing of any Claim as to which indemnification is sought; PROVIDED, that the failure so to notify EME shall not reduce or affect EME's liability which it may have to such Indemnitee under this SECTION 12.1. Any amount payable to any Indemnitee pursuant to this SECTION 12.1 shall be paid within fifteen (15) days after receipt of such written demand therefor from such Indemnitee, accompanied by a certificate of such Indemnitee stating in reasonable detail the basis for the indemnification thereby sought and (if such Indemnitee is not a party hereto) an agreement to be bound by the terms hereof as if such Indemnitee were such a party. The foregoing shall not, however, constitute an obligation to disclose confidential information of any kind without the execution of an appropriate confidentiality agreement. Promptly after EME receives notification of such Claim accompanied by a written statement describing in reasonable detail the Claims which are the subject of and basis for such indemnity and the computation of the amount so payable, EME shall notify such Indemnitee in writing whether it intends to pay, object to, compromise or defend any matter involving the asserted liability of such Indemnitee. EME shall have the right to investigate and so long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing, EME shall have the right in its sole discretion, to defend or compromise any Claim for which indemnification is sought under this 67 SECTION 12.1 which EME acknowledges in writing to the applicable Indemnitee is subject to indemnification hereunder; PROVIDED that no such defense or compromise shall involve any danger of (i) foreclosure, sale, forfeiture or loss of, or imposition of a Lien on any part of the Undivided Interest, the Ground Interest, the Trust Estate or the Indenture Estate or the impairment of the Facility in any material respect or (ii) any criminal liability being incurred or any material adverse effect on such Indemnitee, PROVIDED, FURTHER, that no Claim shall be compromised by EME on a basis that admits any criminal violation or gross negligence or willful misconduct on the part of such Indemnitee without the express written consent of such Indemnitee; and PROVIDED, FURTHER, that to the extent that other Claims unrelated to the transactions contemplated by the Operative Documents are part of the same proceeding involving such Claim, EME may assume responsibility for the contest or compromise of such Claim only if the same may be and is severed from such other Claims (and each Indemnitee agrees to use reasonable efforts to obtain such a severance). If EME elects, subject to the foregoing, to compromise or defend any such asserted liability, it may do so at its own expense and by counsel selected by it and reasonably satisfactory to such Indemnitee. Upon EME's election to compromise or defend such asserted liability and prompt notification to such Indemnitee of its intent to do so, such Indemnitee shall cooperate at EME's expense with all reasonable requests of EME in connection therewith and will provide EME with all information not within the control of EME as is reasonably available to such Indemnitee which EME may reasonably request; PROVIDED, HOWEVER, that such Indemnitee shall not, unless otherwise required by Requirement of Law, be obligated to disclose to EME or any other Person, or permit EME or any other Person to examine (i) any income tax returns of the Owner Participant or (ii) any confidential information or pricing information not generally accessible by the public possessed by the Owner Participant (and, in the event that any such information is made available, EME shall treat such information as confidential and shall take all actions reasonably requested by such Indemnitee for purposes of obtaining a stipulation from all parties to the related proceeding providing for the confidential treatment of such information from all such parties). Where EME, or the insurers under a policy of insurance maintained by EME, undertake the defense of such Indemnitee with respect to a Claim (with counsel reasonably satisfactory to each such Person such Indemnitee and without reservation of rights against such Indemnitee), no additional legal fees or expenses of such Indemnitee in connection with the defense of such Claim shall be indemnified hereunder unless such fees or expenses were incurred at the request of EME or such insurers. Notwithstanding the foregoing, an Indemnitee may participate at its own 68 expense in any judicial proceeding controlled by EME pursuant to the preceding provisions, but only to the extent that such party's participation does not in the reasonable opinion of counsel to EME interfere with such control; PROVIDED, HOWEVER, that such party's participation does not constitute a waiver of the indemnification provided in this SECTION 12.1; PROVIDED, FURTHER, that if and to the extent that (i) such Indemnitee is advised by counsel that an actual or potential conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel or (ii) there is a risk that such Indemnitee may be indicted or otherwise charged in a criminal complaint and such Indemnitee informs EME that such Indemnitee desires to be represented by separate counsel, such Indemnitee shall have the right to control its own defense of such Claim and the reasonable fees and expenses of such defense (including, without limitation, the reasonable fees and expenses of such separate counsel) shall be borne by EME. So long as no Lease Event of Default shall have occurred and be continuing, no Indemnitee shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of EME unless (i) the Indemnitee waives its rights to indemnification hereunder or (ii) EME has not acknowledged its indemnity obligation with respect thereto and there is a significant risk that a default judgment will be entered against such Indemnitee. Nothing contained in this SECTION 12.1(e) shall be deemed to require an Indemnitee to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. (f) SUBROGATION. To the extent that a Claim indemnified by EME under this SECTION 12.1 is in fact paid in full by EME or an insurer under an insurance policy maintained by EME, EME (so long as no Lease Event of Default shall have occurred and be continuing) or such insurer shall be subrogated to the rights and remedies of the Indemnitee on whose behalf such Claim was paid to the extent of such payment (other than rights of such Indemnitee under insurance policies maintained at its own expense) with respect to the transaction or event giving rise to such Claim. Should an Indemnitee receive any refund, in whole or in part, with respect to any Claim paid by EME hereunder, it shall promptly pay over to EME the lesser of (i) the amount refunded reduced by the amount of any Tax incurred by reason of the receipt or accrual of such refund and increased by the amount of any Tax (but not in excess of the amount of such reduction) saved as a result of such payment or (ii) the amount EME or any of its insurers has paid in respect of such Claim; PROVIDED that, so long as a Material Lease Default or Lease Event of Default shall have occurred and is continuing such amount may be held by 69 the Owner Lessor as security for Midwest's and EME's respective obligations under the Operative Documents. Any Person seeking indemnity under this SECTION 12.1 who is not a party to this Agreement shall agree to the terms and conditions set forth in this SECTION 12.1 as a condition to making any such claim for indemnity under this SECTION 12.1. SECTION 12.2 GENERAL TAX INDEMNITY. (a) INDEMNITY. Except as provided in paragraph (b), EME agrees to indemnify on an After-Tax Basis each of the Owner Participant, the OP Guarantor, the Equity Investor, the Owner Lessor, the Trust Company in its individual capacity, the Owner Trustee, the OP Member, the Noteholders, the Lease Indenture Trustee, the Lease Indenture Company in its individual capacity, the Pass Through Trustees and the Pass Through Company in its individual capacity, their respective successors and assigns, the past and present partners or members of or holders of the ownership interests in, as the case may be, the Owner Participant and the Affiliates of each of the foregoing (each a "TAX INDEMNITEE") and to hold each Tax Indemnitee harmless from and to defend each Tax Indemnitee against all Taxes that are imposed upon any Tax Indemnitee, the Facility, the Facility Site, the Undivided Interest, the Ground Interest, or any portion or Component thereof or any interest therein, or upon any Operative Document or interest therein, arising out of, in connection with or relating to, any of the following: (i) the construction, financing, refinancing, acquisition, operation, warranty, ownership, use, possession, maintenance, repair, lease, condition, alteration, modification, restoration, refurbishing, return, purchase, sale or other disposition, insuring, sublease, or other use or non-use of the Facility, Undivided Interest, Ground Interest or the Facility Site, or any portion or Component thereof or any interest therein; (ii) the conduct of the business or affairs of Midwest at the Facility and the Facility Site; (iii) the manufacture, design, purchase, acceptance, rejection, delivery or condition of, or improvement to, the 70 Facility, the Undivided Interest, the Ground Interest, the Facility Site, or any portion or Component thereof, or any interest therein; (iv) the Facility Lease, the Facility Site Lease, the Facility Site Sublease or any other Operative Document, the execution or delivery thereof, or the performance, enforcement or amendment of any terms thereof; (v) the payment or receipt of Basic Lease Rent, Renewal Lease Rent, Supplemental Lease Rent or any other amount payable under the Facility Lease; or (vi) otherwise relating to the transactions contemplated by the Operative Documents. (b) EXCLUDED TAXES. The indemnity provided for in paragraph (a) above shall not extend to any of the following Taxes (the "EXCLUDED TAXES"): (i) Taxes imposed on, based on or mea- sured by gross or net income or receipts or capital or net worth (other than sales, use, property, ad valorem, rental, stamp, transfer, excise, license and value added taxes, and other than franchise tax imposed by the State of Illinois upon the Owner Participant, the Owner Lessor or their respective Affiliates under the Business Corporation Act of 1983, as amended, or any successor legislation thereto); (ii) Taxes attributable to any period after expiration or other termination of the Facility Lease and, where required by the Facility Lease, return of the Facility to the Owner Lessor or its designee in accordance with the Facility Lease (or, in the case of the Lease Indenture Trustee, after the repayment of the Lessor Notes); (iii) Taxes imposed on a Tax Indemnitee attributable to the gross negligence or willful misconduct of such Tax Indemnitee or any Related Party of such Tax Indemnitee; 71 (iv) Taxes in the nature of capital gain, accumulated earnings, personal holding company, excess profits, succession or estate, minimum, alternative minimum, preference, franchise, conduct of business and other similar taxes (other than franchise tax imposed by the State of Illinois upon the Owner Partici- pant, the Owner Lessor or their respective Affiliates under the Busi- ness Corporation Act of 1983, as amended, or any successor legislation thereto); (v) Taxes imposed on a Tax Indemnitee that arise out of, or are caused by, any act or omission of such Tax Indemnitee (or any Related Party thereof) that is expressly prohibited by any Operative Document or by a breach by such Tax Indemnitee (or any Related Party thereof) of any of its representations, warranties or covenants under any Operative Document; (vi) Taxes arising out of, or caused by, any voluntary assignment, sale, transfer or other voluntary disposition, or any involuntary transfer or disposition resulting from a bankruptcy or similar proceeding for relief of debtors in which such Tax Indemnitee is a debtor, by (or a foreclosure by a creditor of) (A) the Owner Participant of any of its Beneficial Interest, (B) the Owner Lessor of all or any of its interest in the Facility or the Facility Site, or (C) the Lease Indenture Trustee of any interest in the Lessor Notes or the Indenture Estate unless (i) such transfer or disposition occurs during the continuance of a Lease Event of Default, or (ii) such transfer or disposition is required under, or occurs pursuant to, the Operative Documents and the price paid is other than Fair Market Sales Value; (vii) Taxes arising in connection with Owner Participant's Liens or Owner Lessor's Liens; (viii) Taxes imposed on any assignee or successor-in-interest to a Tax Indemnitee to the extent any such Taxes exceed the Taxes that would have been imposed had no assignment or transfer taken place determined under the law as in effect on the date 72 of transfer; PROVIDED that this exclusion shall not apply to the compu- tation of the gross-up amounts necessary to make a payment on an After-Tax Basis, nor to a transferee, assignee or successor in interest that acquires the interest of a Tax Indemnitee pursuant to a transfer or disposition in connection with the exercise of remedies during the continuance of a Lease Event of Default; (ix) Taxes that are included as a part of Transaction Costs; (x) Taxes imposed on, based on, or mea- sured by any compensation that any Owner Trustee or the Lease Indenture Trustee receives for its services; (xi) any U.S. federal income taxes, including with respect to the Owner Participant, Taxes for which EME is obligated to indemnify the Owner Participant under the Tax Indem- nity Agreement (or which are expressly excluded from indemnification thereunder); (xii) other than with respect to the Certificateholders, the Lease Indenture Trustee and the Pass Through Trustees or any Related Party in respect of any thereof (a "LENDER INDEMNITEE"), Taxes resulting from the Owner Lessor not being treated as a grantor trust or a nonentity for federal, state or local income tax purposes; (xiii) Taxes attributable to the failure of any Tax Indemnitee to comply with certification, information, documentation, reporting or other similar requirements concerning the nationality, residence, identity, connection with the jurisdiction imposing such Taxes or other similar matters; PROVIDED that the foregoing exclusion shall only apply if such Tax Indemnitee is eligible and obligated to comply with such requirement and shall have been given timely written notice of such requirement by EME; 73 (xiv) Taxes imposed on a Tax Indemnitee where the Tax Indemnitee's breach of its contest obligations under SECTION 12.2(g) effectively precludes EME's ability to contest the Taxes; (xv) Taxes imposed on any Tax Indemnitee resulting from an amendment, modification, supplement or waiver to any Operative Document which was not requested by Midwest or EME and as to which Midwest or EME is not a party and the Tax Indemnitee (or, in the case of the Owner Participant, the Facility Lessor if acting at the express direction of the Owner Participant) is a party unless such amendment, modification, supplement or waiver (A) was required by applicable law or the Operative Documents, (B) may be necessary or appropriate to, and is in conformity with, any amendment, modification, supplement or waiver to any Operative Document agreed to by Midwest or EME in writing, or (C) is made while a Lease Event of Default shall have occurred and be continuing; (xvi) Taxes imposed under Section 4975 of the Code, Section 406 of ERISA or any comparable laws of any governmental authority to the extent resulting from action by such Tax Indemnitee other than, in the case of the Owner Participant, the taking of any action at the request or direction of EME; (xvii) Taxes imposed to the extent such Taxes result from the Tax Indemnitee (and in the case of the Owner Lessor, only if acting at the written direction of the Owner Participant) being organized under the laws of a jurisdiction other than the United States or any State thereof (other than, in the case of a Lender Indemnitee, such Taxes which did not exist under law in effect on the date such Lender Indemnitee became a party to this transaction); (xviii) Any Taxes imposed on a Tax Indemnitee to the extent that such taxes would not have been imposed but for the activities of such Tax Indemnitee unrelated to the transac- tions contemplated hereby; 74 (xix) Taxes imposed on a Tax Indemnitee in the nature of interest, penalties, fines and additions to tax (i) payable as a result of such Tax Indemnitee's failure to file, in a procedurally proper manner and on a timely basis, any tax reports, returns or statements as to which EME has timely notified such Tax Indemnitee in writing of the requirement to file, unless such failure is otherwise caused by the failure of EME to fulfill its obligations, if any, with respect to such return (including provision of information sufficient to enable such Tax Indemnitee to file such report, return or statement), or (ii) to the extent not attributable to or resulting from Taxes for which an indemnity is provided hereunder; and (xx) Taxes for as long as such Taxes are being contested pursuant to the contest provisions contained in SEC- TION 12.2(g). (c) PAYMENT. Each payment required to be made by EME to a Tax Indemnitee pursuant to this SECTION 12.2 shall be paid either (i) when due directly to the applicable taxing authority by EME if it is permitted to do so, or (ii) where direct payment is not permitted and with respect to gross up amounts in immediately available funds to such Tax Indemnitee by the latest of (A) 15 days following EME's receipt of the Tax Indemnitee's written demand for the payment (which demand shall be accompanied by a statement of the Tax Indemnitee describing in reasonable detail the Taxes for which the Tax Indemnitee is demanding indemnity and the computation of such Taxes), (B) in the case of amounts which are being contested pursuant to such paragraph (g), 15 days following the time and in accordance with a final determination of such contest or (C) in the case of any indemnity demand for which EME has requested review and determination pursuant to paragraph (d) below, the completion of such review and determination, but in no event later than the date which is three Business Days prior to the date payment of such Taxes is due. Any amount payable to EME pursuant to paragraph (e) or (f) below shall be paid within 15 days after the Tax Indemnitee realizes a Tax Benefit giving rise to a payment under paragraph (e) or receives a refund or credit giving rise to a payment under paragraph (f), as the case may be, and shall be accompanied by a statement of the Tax Indemnitee computing in reasonable detail the amount of such payment. Upon the final determination of any contest pursuant to paragraph (g) below in respect of any Taxes for which EME has made a Tax Advance, the amount 75 of EME's obligation under paragraph (a) above shall be determined as if such Tax Advance had not been made. Any obligation of EME under this SECTION 12.2 and the Tax Indemnitee's obligation to repay the Tax Advance will be satisfied first by set off against each other, and any difference owing by either party will be paid within 10 days of such final determination. (d) INDEPENDENT EXAMINATION. Within 15 days after EME receives any computation from the Tax Indemnitee, EME may request in writing that an independent public accounting firm selected by the Tax Indemnitee and reasonably acceptable to EME review and determine on a confidential basis the amount of any indemnity payment by EME to the Tax Indemnitee pursuant to this SECTION 12.2 or any payment by a Tax Indemnitee to EME pursuant to paragraph (e) or (f) below. The Tax Indemnitee and EME shall cooperate with such accounting firm and supply it with all information reasonably necessary for the accounting firm to conduct such review and determination, PROVIDED that such accounting firm shall agree in writing in a manner satisfactory to the Tax Indemnitee, or EME, as the case may be, to maintain the confidentiality of such information, and PROVIDED FURTHER that neither any Tax Indemnitee nor EME shall be required to disclose any of its tax returns or books that such Tax Indemnitee or EME, as the case may be, reasonably deems to be confidential in connection with such verification, and the parties hereto agree that such Tax Indemnitee, or EME, as the case may be, shall have sole control over the positions taken with respect to such party's tax returns and filings. The fees and disbursements of such accounting firm will be paid by EME; PROVIDED that such fees and disbursements will be paid by the Tax Indemnitee if the accountants determine that the present value of the total payments as calculated by the Tax Indemnitee is more than 105 percent of the present value of the correct payments (such present values in each case to be determined by the Discount Rate). In the event such accounting firm determines that such computations are incorrect, then such firm shall determine what it believes to be the correct computations. The computations of the accounting firm shall be final, binding and conclusive upon EME and the Tax Indemnitee. The parties hereto agree that the independent public accounting firm's sole responsibility shall be to verify the computation of any payment pursuant to this SECTION 12.2 and that matters of interpretation of this Participation Agreement or any other Operative Document are not within the scope of the independent accountant's responsibility. Such accounting firm shall be requested to make its determination within 30 days. 76 (e) TAX BENEFIT. If, as the result of any Taxes paid or indemnified against by EME under this SECTION 12.2, the aggregate Taxes actually paid by the Tax Indemnitee in connection with such payment for any taxable year and not subject to indemnification pursuant to this SECTION 12.2 are less (whether by reason of a deduction, credit, allocation or apportionment of income or otherwise) than the amount of such Taxes that otherwise would have been payable by such Tax Indemnitee (a "TAX BENEFIT"); then to the extent such Tax Benefit was not taken into account in determining the amount of indemnification payable by EME under paragraph (a) above and provided no Lease Event of Default shall have occurred and be continuing (in which event the payment provided under this SECTION 12.2(e) shall be deferred until the Lease Event of Default has been cured), such Tax Indemnitee shall pay to EME the lesser of (A) (y) the amount of such Tax Benefit, plus (z) an amount equal to any United States federal, state or local income tax benefit resulting to the Tax Indemnitee from the payment under clause (y) above and this clause (z) (determined using the same assumptions as set forth in the second sentence under the definition of After-Tax Basis) and (B) the amount of the indemnity paid pursuant to this SECTION 12.2 giving rise to such Tax Benefit, PROVIDED that any excess of the amount described in clause (A) over the amount described in clause (B) shall be carried forward and applied to reduce pro tanto any subsequent obligations of EME to make payment to such Tax Indemnitee pursuant to this SECTION 12.2. If it is subsequently determined that the Tax Indemnitee was not entitled to such Tax Benefit, the portion of such Tax Benefit that is required to be repaid or recaptured will be treated as Taxes for which EME must indemnify the Tax Indemnitee pursuant to this SECTION 12.2 without regard to paragraph (b) hereof. (f) REFUND. If a Tax Indemnitee obtains a refund or credit or would have received such refund or credit but for a counterclaim or other claim not indemnified by EME hereunder against which such refund or credit has not been applied (an "offset refund or credit") of all or part of any Taxes paid, reimbursed or advanced by EME pursuant to this SECTION 12.2, the Tax Indemnitee shall pay to EME within 15 days of such receipt, or in the case of an offset refund or credit, within 15 days of the resolution of such contest (x) the amount of such refund or credit (net of any Tax payable by the Tax Indemnitee as a result of the receipt or accrual of such refund or credit) plus (y) an amount equal to any Tax Benefit realized by such Tax Indemnitee by reason of such payment to EME (determined using the same assumptions as set forth in the second sentence under the definition of After-Tax Basis), PROVIDED that (A) if at the time such payment is due to EME a Lease 77 Event of Default shall have occurred and be continuing, such amount shall not be payable until such Lease Event of Default has been cured, and (B) the amount payable to EME pursuant to this sentence shall not exceed the amount of the indemnity payment in respect of such refunded or credited Taxes that was made by EME (and such excess shall be carried forward and applied to reduce pro tanto any subsequent obligations of EME to make payments to such Tax Indemnitee pursuant to this SECTION 12.2). If it is subsequently determined that the Tax Indemnitee was not entitled to such refund or credit, the portion of such refund or credit that is required to be repaid or recaptured will be treated as Taxes for which EME must indemnify the Tax Indemnitee pursuant to this SECTION 12.2 without regard to paragraph (b) hereof. If, in connection with a refund or credit of all or part of any Taxes paid, reimbursed or advanced by EME pursuant to this SECTION 12.2, a Tax Indemnitee receives an amount representing interest on such refund or credit, the Tax Indemnitee shall pay to EME within 15 days (1) the amount of such interest that shall be fairly attributable to such Taxes paid, reimbursed or advanced by EME prior to the receipt of such refund or credit (net of Taxes payable in respect of the receipt or accrual of such interest) and (2) any Tax savings resulting from payments made by the Tax Indemnitee under this SECTION 12.2. (g) CONTEST. (i) NOTICE OF CONTEST. If a written claim is made by any taxing authority against a Tax Indemnitee for any Taxes with respect to which EME may be required to indemnify against hereunder (a "TAX CLAIM"), such Tax Indemnitee shall give EME written notice of such Tax Claim promptly after its receipt, and shall furnish EME with copies of such Tax Claim and all other writings received from the taxing authority to the extent relating to such claim, PROVIDED that failure so to notify EME shall not relieve EME of any obligation to indemnify the Tax Indemnitee hereunder except to the extent such failure effectively precludes EME from contesting such Tax. The Tax Indemnitee shall not pay such Tax Claim until at least 30 days after providing EME with such written notice, unless (a) the Tax Indemnitee is required to do so by law or regulation and (b) in the written notice described above, the Tax Indemnitee has notified EME of such requirement. 78 (ii) CONTROL OF CONTEST. Subject to subsection (g)(iii) below, EME will be entitled to contest (acting through counsel selected by EME and reasonably satisfactory to the Tax Indemnitee), and control the contest of, any Tax Claim if (i) such Tax Claim may be segregated procedurally and contested independently from tax claims for which EME is not obligated to indemnify the Tax Indemnitee, PROVIDED that if the Tax Indemnitee reasonably determines at any time that permitting EME to conduct or continue to conduct such contest could have material adverse business or other consequences to such Tax Indemnitee, such Tax Indemnitee shall have the right to control or reassert control over such contest, or (ii) the Tax Indemnitee requests that EME control such contest; PROVIDED that in the case of any such contest pursuant to (i) or (ii) EME shall use all reasonable efforts to contest such Tax Claim in its own name, and PROVIDED FURTHER that such contest shall be at EME's sole cost and expense. EME shall consult in good faith with the Tax Indemnitee and its counsel and shall provide the Tax Indemnitee with copies of any reports or claims issued by the relevant auditing agent or taxing authority, but the decisions regarding what actions to be taken shall be made by EME in its sole judgment. In the case of all other Tax Claims, the Tax Indemnitee will contest the Tax Claim at EME's expense if EME shall request that the Tax be contested (in accordance with subsection (g)(iii) below), and the following rules shall apply with respect to such contest: (1) the Tax Indemnitee will control the contest of such Tax Claim in good faith (acting through counsel selected by the Tax Indemnitee and reasonably satisfactory to EME), (2) at EME's written request, if payment is made to the applicable taxing authority, the Tax Indemnitee shall use all reasonable efforts to obtain a refund thereof in appropriate administrative or judicial proceedings, 79 (3) the Tax Indemnitee conducting such contest shall consult with and keep reasonably informed EME and its designated counsel with respect to such Tax Claim and shall consider and consult in good faith with EME regarding any request (a) to resist payment of Taxes if practical and (b) not to pay such Taxes except under protest if protest is necessary and proper, but the deci- sion regarding what actions to be taken shall be made by the Tax Indemnitee in its sole judgment. (4) Notwithstanding paragraph (3), above, the Tax Indemnitee shall not otherwise settle, compromise or abandon such contest without EME's prior written consent except as provided in paragraph (g)(iv) below. (iii) CONDITIONS OF CONTEST. Notwithstanding the foregoing, no contest with respect to a Tax Claim will be required or permitted pursuant to this SECTION 12.2, and EME shall be required to pay the applicable Taxes without contest, unless: (1) within 30 days after notice by the Tax Indemnitee to EME of such Tax Claim, EME shall request in writing to the Tax Indemnitee that such Tax Claim be contested, PROVIDED that if a shorter period is required for taking action with respect to such Tax Claim and the Tax Indemnitee notifies EME of such requirement, EME shall use reasonable best efforts to request such contest within such shorter period, and such Tax Indemnitee shall take no action for as long as it is legally able to do so, (2) no Lease Event of Default has occurred and is continuing, (3) there is no risk of sale, forfeiture or loss of, or the creation of a Lien (other than a Permitted Lien) on the Facility, Owner Lessor's or Owner Participant's interest in the Facility, the Facility Site, the Undivided Interest, the Ground Interest or any portion or Component thereof or any interest therein as a result of such Tax Claim; PROVIDED that this clause (3) shall not apply if 80 EME shall have posted and maintained a bond or otherwise provided security for EME's obligations under SECTION 12.2 satisfactory to the Tax Indemnitee in its reasonable discretion, or the Tax is fully paid in either manner specified in clause (5) below, (4) there is no risk of imposition of any criminal penalties, (5) if such contest involves payment of such Tax, EME will either advance to the Tax Indemnitee on an interest-free basis and with no after-tax cost to such Tax Indemnitee (a "TAX ADVANCE") or pay such Tax Indemnitee the amount payable by EME pursuant to SECTION 12.2(a) above with respect to such Tax, and such Tax Indemnitee shall promptly pay to EME any net Tax Benefit recognized which results from any imputed interest deduction arising from such interest free Tax Advance plus any net Tax Benefit recognized which result from making any such payment. (6) EME agrees to pay (and pays on demand) and with no after-tax cost to such Tax Indemnitee all reasonable costs, losses and expenses incurred by the Tax Indemnitee in connection with the contest of such claim (including, without limita- tion, all reasonable legal, accounting and investigatory fees and disbursements), (7) the Tax Indemnitee has been provided at EME's sole expense with an opinion, reasonably acceptable to such Tax Indemnitee, of independent tax counsel of recognized standing selected by EME and reasonably acceptable to the Tax Indemnitee to the effect that there is a Reasonable Basis for contesting such Tax Claim, (8) in the case of a judicial appeal, no appeal to the U.S. Supreme Court shall be required of the Tax Indemnitee or shall be permitted by EME. 81 (9) In the case of a judicial contest, EME shall have delivered to the Tax Indemnitee a written acknowledgment of its liability under this SECTION 12.2 for such Taxes, PROVIDED, HOWEVER, that EME shall not be bound by its acknowledgment of liability if the contest is resolved on the basis of a written decision of the adjudicator that clearly indicates the basis for the conclusion that EME has no liability under this SECTION 12.2 with respect to such Tax, unless EME's conduct of the contest has materially prejudiced the Tax Indemnitee. (iv) WAIVER OF INDEMNIFICATION. Notwith- standing anything to the contrary contained in this SECTION 12.2, the Tax Indemnitee at any time may elect to decline to take any action or any further action with respect to a Tax Claim and may in its sole discretion settle or compromise any contest with respect to such Tax Claim without EME's consent if the Tax Indemnitee: (1) waives its right to any indemnity payment by EME pursuant to this SECTION 12.2 in respect of such Tax Claim (and any other claim for Taxes with respect to any other taxable year the contest of which is effectively precluded by the Tax Indemnitee's declination to take action with respect to the Tax Claim), and (2) promptly repays to EME any Tax Advance and any amount paid to such Tax Indemnitee under SECTION 12.2(a) above in respect of such Taxes. Except as provided in the preceding sentence, any such waiver shall be without prejudice to the rights of the Tax Indemnitee with respect to any other Tax Claim. (h) REPORTS. (i) If any report, statement or return is required to be filed by a Tax Indemnitee with respect to any Tax that is subject to indemnification under this SECTION 12.2, EME will (1) 82 notify the Tax Indemnitee in writing of such requirement not later than 30 days prior to the date such report, statement or return is required to be filed (determined without regard to extensions) and (2) either (y) if permitted by applicable law, prepare such report, statement or return for filing by EME in such manner as will show the ownership of the Facility by the Owner Lessor for United States federal, state and local income tax purposes (if applicable), send a copy of such report, statement or return to the Tax Indemnitee and timely file such report, statement or return with the appropriate taxing authority, or (z) if so directed by the Tax Indemnitee or in any event if practicable and if the return to be filed reflects only information in respect of the transactions contemplated by the Operative Documents, prepare and furnish to such Tax Indemnitee not later than 30 days prior to the date such report, statement or return is required to be filed (determined without regard to extensions) a proposed form of such report, statement or return for filing by the Tax Indemnitee. (ii) Each of the Tax Indemnitee or EME, as the case may be, will timely provide the other, at EME's expense, with all information in its possession that the other party may reasonably require and request to satisfy its obligations under this paragraph (h), but only if and to the extent that such Tax Indemnitee is legally entitled to furnish such information. (i) NON-PARTIES. If a Tax Indemnitee is not a party to this Agreement, EME may require such Tax Indemnitee to agree in writing, in a form reasonably acceptable to Midwest, to the terms of this SECTION 12 (to the extent applicable to such Tax Indemnitee) prior to making any payment to such Tax Indemnitee under this Section. SECTION XIII MIDWEST'S RIGHT OF QUIET ENJOYMENT Each party to this Agreement acknowledges notice of, and consents in all respects to, the terms of the Facility Lease, and the Facility Site Sublease and expressly, severally and as to its own actions only, agrees that, so long as no Lease Event of Default has occurred and is continuing, neither it nor any party acting by, through or under such party shall take or cause to be taken any action contrary to 83 Midwest's rights under the Facility Lease and the Facility Site Sublease, including the right to possession, use and quiet enjoyment of the Undivided Interest and the Ground Interest. SECTION XIV SUPPLEMENTAL FINANCING OF IMPROVEMENTS; OPTIONAL REFINANCINGS SECTION 14.1 FINANCING IMPROVEMENTS. Upon the written request of Midwest delivered at least 90 days prior to any proposed financing of the cost of any Required or Non-Severable Improvement, the Owner Lessor, the Lease Indenture Trustee and the Pass Through Trustees agree to cooperate with Midwest to (a) issue Additional Lessor Notes under the Lease Indenture to finance such Improvement which will rank pari passu with the Lessor Notes then outstanding; and (b) execute and deliver an amendment to the Facility Lease to reflect the adjustments required by clause (v) below; PROVIDED, HOWEVER, that the Owner Participant shall have been given the opportunity, but shall have no obligation, to provide all or part of the funds required to finance the Owner Lessor's Percentage of any such Improvement by making an Additional Equity Investment in such amount, if any, as it may determine in its sole discretion. Midwest shall have no obligation to accept and the Owner Participant shall not be obligated to provide such Additional Equity Investment. The obligation to finance such Improvement through the issuance of Additional Lessor Notes (any financing of Improvements through the issuance of such Additional Lessor Notes being called a "SUPPLEMENTAL FINANCING") is subject to the limitations on incurrence of additional Indebtedness set forth in the Operative Documents and the following additional conditions: (i) there shall be no more than one such financing in any calendar year; (ii) Improvements shall be made in compliance with the Operative Documents; (iii) such Improvement is a Required Im- provement; 84 (iv) the Additional Lessor Notes shall have a final maturity date no later than the expiration date of the Basic Lease Term or any Renewal Term then in effect or already elected by Midwest and will be fully repaid out of additional Basic Lease Rent or Renewal Rent and Termination Value as adjusted pursuant to the Operative Documents; (v) appropriate adjustments to Basic Lease Rent and Termination Value (determined without regard to any tax benefits associated with such Improvements, unless the Owner Partic- ipant is making an Additional Equity Investment) shall also be made to protect the Owner Participant's Expected Return; (vi) EME shall have paid, on an After-Tax Basis, all reasonable out-of-pocket costs and expenses of the Lease Financing Parties, including the reasonable fees and expenses of counsel to the Owner Participant, the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee, the Lease Indenture Company in its individual capacity, the Pass Through Trustees and the Pass Through Company in its individual capacity, in each case to the extent incurred in connection with any financing or refinancing pursuant to this SECTION 14; (vii) no Lease Event of Default shall have occurred and be continuing unless the Improvements to be constructed with the proceeds of the Additional Lessor Notes shall cure such Lease Event of Default, and any such Improvements shall be made in compliance with the Operative Documents; (viii) the sum of (y) the principal amount of such Additional Lessor Notes and (z) the principal amount of all comparable additional lessor notes used to finance such Improvements pursuant to the Other Facility Lease, is not less than $20 million and not greater than 100% of the cost of the Improvements being financed; PROVIDED that the sum of (I) the outstanding balance of the Lessor Notes and (II) all comparable lessor notes issued and outstanding of the Other Owner Lessor under the lease indenture to which 85 such Other Owner Lessor are party never exceeds (x) 90% of the lesser of (1) the fair market value of the Facility taking into account such Improvements, as determined pursuant to the Appraisal Procedure, and (2) the sum of (t) the Purchase Price, (u) the comparable purchase price for the Other Undivided Interest and (v) the cost of the Improvement being financed; (ix) the Owner Participant shall have re- ceived a favorable opinion reasonably satisfactory to it from Hunton & Williams, or from nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to EME, to the effect that such financing would not result in any material indemnified, or any unindemnified, incremental tax risk to the Owner Participant; (x) the Owner Participant shall not suffer any material adverse accounting effects under GAAP as a result of providing such additional financing; (xi) the cost of the Improvement, together with the cost of all previous Improvements financed with Additional Lessor Notes is not greater than 25% of the sum of (x) the Purchase Price and (y) the comparable purchase price for the Other Undivided Interest; unless the Facility Lessee shall have received confirmation that after giving effect to the financing in connection with such Improvement, the Lease Debt rating will not fall below BBB- or Baa3 from S&P and Moody's, respectively; (xii) Midwest and EME shall have made or delivered such representations, warranties, covenants, opinions or certificates as the Owner Participant may reasonably request; and (xiii) such Additional Lessor Notes are issued pursuant to and in accordance with SECTION 2.13 of the Lease Indenture and Midwest and EME shall have delivered such certificates, reports and other documents and shall have taken all other actions which are required to be delivered or taken by them pursuant to SECTION 2.13 of the Lease Indenture. 86 Notwithstanding the prior provision dealing with the financing of Improvements through the Facility Lease, Midwest shall at all times have the right to finance Improvements to the Facility other than through the Facility Lease; PROVIDED that Improvements may only be financed other than through the Facility Lease if such financing would not result in any Lien on the Facility or the Facility Land and shall be subject to the limitations on incurrence of additional Indebtedness contained in the other Operative Documents; PROVIDED FURTHER, that providers of financing for such Improvements made other than through the Facility Lease agree to be bound by Section 18.19 of this Agreement and by the Subordination Agreement; PROVIDED FURTHER, that Required Improvements and Non-Severable Improvements shall automatically, upon being affixed to the Facility, become the property of the Owner Lessor and subject to the Facility Lease. SECTION 14.2 OPTIONAL REFINANCING OF LESSOR NOTES. Midwest will have the right, exercisable on no more than three occasions, for as long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing, to request the Owner Lessor, and the Owner Lessor shall reasonably consider and shall not unreasonably refuse, to refund or refinance the Lessor Notes, in the public or private market, in whole but not in part, through the issuance of new notes to the public (notes issued in such refinancing, the "NEW LESSOR NOTES"), to a pass through trust or to such other funding vehicles as may be used at that time or to any other party that is not the Facility Lessee or any Affiliate thereof; PROVIDED that any refinancing under this SECTION 14.2 shall also be subject to satisfaction of the following conditions: (i) the Owner Lessor shall be able to issue and sell the New Lessor Notes in an amount adequate to accomplish such refunding or refinancing; (ii) the Owner Participant shall receive an opinion reasonably satisfactory to it from Hunton & Williams or from nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee and EME, to the effect that such refinancing (as opposed to the right to request such refinancing) would not result in any material indemnified or any unindemnified incremental tax risk to the Owner Participant (including tax risks relating to the classification of the Lessor Notes as 87 qualified nonrecourse indebtedness; PROVIDED, HOWEVER, that absent a change in law or judicial, administrative or legislative interpretation thereof after the Closing Date, there would not be incremental tax risk with respect to the allocation of interest expense for foreign tax credit purposes from a refinancing consummated in accordance with the provisions set forth below); (iii) all documentation in connection with such refinancing shall be reasonably satisfactory to the Owner Lessor, the Owner Trustee, and the Owner Participant and conditions set forth therein shall be met; (iv) the Owner Participant shall be entitled to a consent fee of $25,000 in connection therewith; (v) the refinancing shall not result in any other material adverse effect on the rights or interests of the Owner Lessor or the Owner Participant; (vi) New Lessor Notes shall be issued in compliance with Section 467 of the Code and any proposed, temporary, or final regulation thereunder, in each case as modified and in effect on the date of such issuance. (vii) all necessary authorizations, approvals and consents in connection with such refinancing shall have been obtained from each Person whose authorization, approval or consent is necessary to consummate such refinancing with respect to the Facility Lessee, the Owner Lessor, the Lease Indenture Trustee and the Pass Through Trustees, and such authorizations, approvals and consents shall be in full force and effect on the closing date of such refinancing; (viii) the consummation of the transactions contemplated by the refinancing shall not cause the Owner Participant to account for the transactions contemplated by the Operative Documents as other than a "leveraged lease" under FAS 13; 88 (ix) all payment dates for principal and interest payments on the New Lessor Notes shall become Rent Payment Dates; (x) on the closing date of such refinancing, each of the Facility Lessee, the Owner Lessor and the Lease Indenture Trustee shall have executed and delivered all appropriate supplements to the Operative Documents that are necessary to consummate such refinancing, in form and substance reasonably satisfactory to the Owner Lessor and the Lease Indenture Trustee; (xi) each of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustees shall have received an opinion of counsel for the Facility Lessee on such matters as they may reasonably request and in form and substance reasonably satisfactory to the Owner Participant and the Lease Indenture Trustee; (xii) Midwest and EME shall have delivered such certificates, reports and other documents and shall have taken all other actions which are required to be delivered or taken by them pursuant to SECTION 2.13 of the Lease Indenture; (xiii) each of the Owner Lessor, the Owner Participant and the Lease Indenture Trustee shall have received from the Facility Lessee a certificate dated the date of the issuance of the New Lessor Notes executed on behalf of the Facility Lessee by an Authorized Officer thereof stating that all conditions precedent to the issuance of such New Lessor Notes have been satisfied or waived; (xiv) the consummation of any transaction contemplated by such refinancing shall not violate any Requirements of Law except to the extent that such non-compliance with the Requirements of Law would not have a material adverse effect on the Owner Lessor. 89 (xv) the New Lessor Notes shall have a final maturity date no later than six months after the stated maturity date of the Initial Lessor Notes as set forth in Section 2.4 of the Lease Indenture and the weighted average life to maturity of the New Lessor Notes shall not vary from the remaining weighted average life-to-maturity of the Lessor Notes (immediately prior to such refinancing) by more than six months; (xvi) the principal amount of the New Lessor Notes shall not exceed by more than 5 percent the remaining principal amount of the Lessor Notes (immediately prior to such refinancing); (xvii) the New Lessor Notes shall satisfy the requirements of Temp. Treas. Reg. Sections 1.861 - 10T(b)(2)(iii), (iv) and (v) and not be excluded by reason of Temp. Treas. Reg. Sections 1.861 - 10T(b)(4); and (xviii) if New Lessor Notes are not issued under the Lease Indenture, the holders of New Lessor Notes must agree to be bound by Section 18.19 of this Agreement and by the Subordination Agreement. SECTION 14.3 COOPERATION. The Owner Participant will cooperate with and reasonably assist Midwest in connection with any refinancing and/or assumption of the Lessor Notes, so long as such refinancing is in accordance with the terms of the Operative Documents. The Owner Participant will execute such agreements and documents as may be necessary with respect to any such refinancing and will instruct the Owner Lessor to act accordingly. Nothing contained in this SECTION 14 shall limit Midwest's right to request a refinancing in accordance with SECTION 14.2, above, refinance the Lessor Notes and to make corresponding changes to Basic Lease Rent and the Termination Value in accordance with the rent adjustment provisions set forth in SECTION 3 of the Facility Lease. SECTION XV PRE-CLOSING ADJUSTMENTS TO BASIC LEASE RENT AND TERMINATION VALUE 90 (a) Prior to or on the Closing Date, Basic Lease Rent and Termination Values, the Equity Portion of Basic Lease Rent and the Equity Portion of Termination Value (and the allocations of Basic Lease Rent and 467 Fixed Rent) shall be adjusted, either upward or downward, in accordance with the Facility Lease: (i) to re-optimize the loans evidenced by the Initial Lessor Notes; and (ii) to reflect any changes in the Pricing Assumptions, including, without limitation, (x) the initial interest rate on any of the Lessor Notes which is different from the applicable interest rate under the Initial Lessor Notes set forth in the Pricing Assumptions, (y) an increase in the Maximum Transaction Costs amount assumed in the Pricing Assumptions, unless Midwest has elected to pay such increase, and (z) a Closing Date other than the Scheduled Closing Date; and (iii) to reflect any enactment, promulgation, release or adoption of, amendment to or change in the Code, Treasury Regulations, Revenue Rulings or Revenue Procedures ("TAX LAW CHANGE") enacted prior to the Closing; PROVIDED that if any adjustment required by this paragraph would cause (x) on an After-Tax Basis the present value of Basic Lease Rent as a percentage of the Purchase Price discounted at 6% per annum to increase by more than 100 basis points or (y) the total Basic Lease Rent to increase by more than 2.0%, Midwest shall not be obligated to close the Overall Transaction. (b) Any adjustment pursuant to this SECTION 15 shall be calculated (A) so as not to negatively affect the Owner Participant's Expected Return through the Basic Lease Term and (B) to maintain operating lease treatment for EME; PROVIDED, HOWEVER, that to the extent it is not possible as the transaction is then structured to achieve both (A) and (B), the Owner Trust, the Owner Participant and Midwest shall work in good faith to restructure the transaction in a manner which would achieve both results; and PROVIDED, FURTHER, that to the extent consistent with preserving both such objectives, all adjustments shall at the option of Midwest be calculated to (x) minimize the average annual Basic Lease Rent over the Basic Lease 91 Term for Midwest's GAAP accounting purposes and/or (y) minimize, to the extent possible, the present value to Midwest of the Basic Lease Rent; and PROVIDED, FURTHER, that to the extent that any adjustment pursuant to this SECTION 15 fails to maintain operating lease treatment for EME, EME shall not be obligated to close the Overall Transaction. Adjustments will be made using the same method of computation, assumptions and pricing constraints originally used (other than those that have changed as the result of the event giving rise to the adjustment) in the calculation of the Basic Lease Rent (and the allocation of Basic Lease Rent and 467 Fixed Rent) and corresponding adjustments to Termination Values will be made. Adjustments may not result in a book loss to the Owner Participant in the year of adjustment and will be computed by the Owner Participant (or the Equity Investor if prior to the Closing Date) based upon the Tax Assumptions and the Pricing Assumptions used to calculate the Basic Lease Rent and Termination Values and shall be subject to verification procedure set forth in the Facility Lease. SECTION XVI RIGHT OF FIRST REFUSAL; RIGHT OF FIRST OFFER SECTION 16.1 RIGHT OF FIRST OFFER. In the event the Owner Participant desires to sell, lease, convey or otherwise transfer some or all of its Beneficial Interest other than to an Affiliate of the Owner Participant (other than in connection with the exercise of remedies following a Lease Event of Default) prior to the expiration of the Facility Lease Term, the Owner Participant must first offer to sell such Beneficial Interest to the Facility Lessee on the terms and conditions set forth in this SECTION 16.1. Such offer shall be made to the Facility Lessee in the form of a proposed term sheet, which proposed term sheet shall include an outline of the price and of the terms, conditions and provisions upon which the Owner Participant would be willing to transfer such Beneficial Interest or any part thereof. The Facility Lessee will thereafter have the right within a period of forty-five (45) days from and after the receipt by the Facility Lessee of such proposed term sheet to notify the Owner Participant of its intent to exercise its right to purchase hereunder. If the Facility Lessee elects to exercise the right provided in the preceding sentence, it shall within 60 days of such notice purchase, and the Owner Participant shall sell, the Beneficial Interest on the same terms and conditions as the offer giving rise to such right. If the Facility Lessee does not give such notice to the Owner Participant within the forty-five (45) day period or does not purchase the Beneficial Interest within 60 days of such notice, the Owner Participant will be free to so sell, lease, convey or otherwise transfer such Beneficial Interest, or a portion thereof, at a price 92 no less than the price set forth in the proposed term sheet and on terms and conditions, taken as a whole, that, other than in an immaterial respect, are no less favorable to the Owner Participant than the terms and conditions set forth in the proposed term sheet, unless the failure to purchase the Beneficial Interest within 60 days is attributable to the Owner Participant. In the event that the terms or conditions are revised in any way that the price is reduced or any of the other terms and conditions thereof, taken as a whole change the agreement for sale, lease, conveyance or transfer such that the terms and conditions of any such subsequent transaction are less favorable, other than in an immaterial respect, to the Owner Participant, the Owner Participant must again comply with the notice and acceptance provisions of this SECTION 16.1. It is understood and agreed among the parties hereto that the transaction contemplated by this SECTION 16.1 shall not effect a merger of the Facility Lessee's ownership interest in the Facility and the Facility Site with the Owner Lessor's Interest. SECTION 16.2 RIGHT OF FIRST REFUSAL. In the event the Owner Participant desires to sell, lease, convey or otherwise transfer some or all of its Beneficial Interest or cause the Owner Lessor to sell, lease, convey or otherwise transfer its Owner Lessor's Interest at any time within three years after expiration or termination of the Facility Lease (other than pursuant to SECTION 13 and 14 of the Facility Lease) to any Person other than an Affiliate of the Owner Participant, the Facility Lessee or an Affiliate thereof, the Facility Lessee shall have the right, unless such sale, lease, conveyance or transfer is in connection with the exercise of remedies upon a Lease Event of Default, to purchase, lease or otherwise acquire such interest on the terms and conditions set forth in the bid that the Owner Participant intends to accept. The Owner Participant shall give the Facility Lessee prompt written notice of all bona fide offers that have been received from any other Person to purchase or acquire the Owner Lessor's Interest or Owner Participant's Beneficial Interest or any part of either during such three-year period following the expiration or termination of the Facility Lease, and which offers it wishes to accept, together with a full and complete statement of the price and all of the material terms, conditions and provisions contained in such offers. The Facility Lessee shall thereafter have the right within a period of forty-five (45) days from and after the receipt by the Facility Lessee of such notice to notify the Owner Participant of its intent to exercise its rights of first refusal. If the Facility Lessee elects to exercise the right provided in the preceding sentence, it shall within 60 days of such notice purchase, and the Owner Participant shall sell, the Beneficial Interest on the same terms and conditions as the offer giving rise to such right. If the Facility Lessee does not give such notice to the Owner 93 Participant within the forty-five (45) day period or does not purchase the Beneficial Interest within sixty (60) days of such notice, the Owner Participant shall be free to proceed under the terms and conditions as set forth in its irrevocable notice to the Facility Lessee, unless the failure to purchase the Beneficial Interest within sixty (60) days is attributable to the Owner Participant. In the event that the terms or conditions are revised in any way that changes the agreement for sale, lease, conveyance or transfer such that the terms and conditions thereof, other than in immaterial respects, are less favorable to the Owner Participant (including any reduction in price or a change in the terms of payment thereof in a manner that is beneficial to the potential purchaser), the Owner Participant must again comply with the notice and acceptance provisions of this SECTION 16.2. In connection with the Facility Lessee's exercise of the right of first refusal pursuant to this SECTION 16.2 with respect to the Owner Lessor's Interest, the Ground Interest shall be conveyed to the Facility Lessee. SECTION XVII SPECIAL LESSEE TRANSFER In the case of a Regulatory Event of Loss or Burdensome Buyout Event under the Facility Lease, the Facility Lessee (or its designee), so long as the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and all other payments under the Facility Lease, upon not less than 30 days' written notice to the Owner Participant and the Lease Indenture Trustee, on the applicable Termination Date, may purchase the Owner Participant's Beneficial Interest, or, in the case of a Burdensome Buyout Event, the membership interest in the Owner Participant, and keep the Facility Lease in place; PROVIDED, that (i) the Owner Participant shall not suffer any detriment (including tax or book consequences) from such purchase (as compared to that which would have resulted had the Facility Lessee terminated the Facility Lease and purchased the Owner Lessor's Interest), (ii) the Facility Lessee satisfies the transferee requirements contained in SECTION 12.1 hereof applicable to transfers by the Owner Participant, if applicable and (iii) EME pays all expenses incurred by the other Lease Financing Parties in connection therewith. If the Facility Lessee chooses to purchase the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be, pursuant to the preceding sentence, on the applicable Termination Date, EME (or its designee) shall pay to the Owner Participant or to the Equity Investor, as the case may be, the Special Lessee Transfer Amount determined as of such date, plus all amounts due and payable to the Owner Participant or Equity Investor, as the case may be, on such date under the Operative Documents. 94 Concurrently with the payment of all sums required to be paid pursuant to this SECTION 17 (or on such later date of transfer of the Owner Participant's Beneficial Interest or membership interest in the Owner Participant, as the case may be, in accordance with clause (ii) below) (i) the Facility Lessee shall cease to have any liability to the Owner Participant with respect to the Operative Documents, except for obligations surviving pursuant to the express terms of any Operative Document or which have otherwise accrued but not been paid as of such date and (ii) the Owner Participant or the Equity Investor, as the case may be, will transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessor and prepared and recorded at EME's expense) the Owner Participant's Beneficial Interest or membership interest in the Owner Participant, as the case may be, to the Facility Lessee (or its designee); PROVIDED, HOWEVER, that if the Lien of the Lease Indenture has not been terminated or discharged, such transfer shall not be made to the Facility Lessee, but shall be made to the Facility Lessee's designee promptly upon the Facility Lessee's designation of such designee and such designee will agree not to transfer the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be, to the Facility Lessee until such Lien is discharged. The Owner Participant or Equity Investor, as the case may be, shall make any transfer under this SECTION 17 on an "as is," "where is" basis, without warranty other than as to the absence of Owner Lessor's Liens and Owner Participant's Liens on the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be. It is understood and agreed among the parties hereto that the transaction contemplated by this SECTION 17 shall not effect a merger of the Facility Lessee's leasehold interest in the Facility and subleasehold interest in the Facility Site with the Owner Lessor's Interest. EME will pay all reasonable costs and expenses of the Lease Financing Parties in connection with any transfer pursuant to this SECTION 17. Subsequent to such transfer, the Facility Lessee and the Owner Lessor may, without the consent of the Lease Indenture Trustee or the Pass Through Trustees, waive the Regulatory Event of Loss or Burdensome Buyout Event that gave rise to the right to purchase the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be, and the Facility Lease shall continue in full force and effect in accordance with its terms. 95 SECTION XVIII MISCELLANEOUS SECTION 18.1 CONSENTS. The Owner Participant covenants and agrees that it shall not unreasonably withhold its consent to any consent requested of the Owner Lessor under the terms of the Operative Documents that by its terms is not to be unreasonably withheld by the Owner Lessor. SECTION 18.2 SUCCESSOR OWNER LESSOR. The parties hereto agree that the transfer or assignment pursuant to the terms of the Trust Agreement by the Owner Lessor to a successor Owner Lessor, pursuant to the trust created thereunder, will not violate the terms of any Operative Document. SECTION 18.3 BANKRUPTCY OF TRUST ESTATE. If (i) all or any part of the Trust Estate becomes the property of a debtor subject to the reorganization provisions of Title 11 of the United States Code, as amended from time to time, (ii) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal or interest on the Lessor Notes, and (iii) the Lease Indenture Trustee actually receives any Excess Amount, as defined below, which reflects any payment by the Owner Participant on account of clause (ii) above, the Lease Indenture Trustee shall promptly refund to the Owner Participant such Excess Amount. For purposes of this SECTION 18.3, "EXCESS AMOUNT" means the amount by which such payment exceeds the amount which would have been received by the Lease Indenture Trustee if the Owner Participant had not become subject to the recourse liability referred to in clause (ii) above. Nothing contained in this SECTION 18.3 shall prevent the Lease Indenture Trustee from enforcing any personal recourse obligations (and retaining the proceeds thereof) of the Owner Participant as contemplated by this Agreement (other than referred to in clause (ii)). SECTION 18.4 AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition of this Agreement may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing, executed by each party hereto. 96 SECTION 18.5 NOTICES. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, PROVIDED such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to each party hereto at its address set forth below or, in the case of any such party hereto, at such other address as such party may from time to time designate by written notice to the other parties hereto: If to Midwest: One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Facsimile No.: (312) 583-6111 Attention: President with a copy to EME at the address below If to EME: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612 Facsimile No.: (949) 752-1420 Attention: General Counsel 97 If to the Owner Lessor, the Owner Trustee or the Trust Company: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Telephone No.: (302) 651-1000 Facsimile No. (302) 651-8882 Attention: Corporate Trust Administration with a copy to the Owner Participant If to the Owner Participant: Joliet Generation I, LLC c/o PSEG Resources Inc. 80 Park Plaza, Suite T-22 Newark, NJ 07101 Telephone No.: (973) 456-3560 Facsimile No.: (973) 456-3569 Attention: President If to the Lease Indenture Trustee or the Lease Indenture Company: United States Trust Company of New York 114 West 47th Street, 25th Floor New York, New York 10036 Facsimile No.: (212) 852-1625 Attention: Christopher J. Grell, Vice President If to Pass Through Trustees or the Pass Through Company: United States Trust Company of New York 114 West 47th Street, 25th Floor New York, New York 10036 Facsimile No.: (212) 852-1625 Attention: Christopher J. Grell, Vice President 98 A copy of all notices provided for herein shall be sent by the party giving such notice to each of the other parties hereto. In addition, Midwest and EME, without duplication, shall (unless otherwise directed by the applicable Rating Agency) provide to each Rating Agency a copy of any information, report or notice it gives to the Lease Indenture Trustee hereunder or any other Operative Documents. SECTION 18.6 SURVIVAL. All warranties, representations, indemnities and covenants made by any party hereto, herein or in any certificate or other instrument delivered by any such party or on the behalf of any such party under this Agreement shall be considered to have been relied upon by each other party hereto and shall survive the consummation of the transactions contemplated hereby and in the other Operative Documents regardless of any investigation made by any such party or on behalf of any such party. In addition, the indemnifications by EME under SECTIONS 12.1 and 12.2 of this Agreement shall, subject to SECTIONS 12.1(b) and 12.2(b), respectively, expressly survive the expiration or early termination (in either case, for whatever reason) of the Facility Lease or the transfer or other disposition (including by resignation and removal) of the respective interests of the Owner Participant, the Owner Lessor, the Trust Company, the Owner Trustee and the Lease Indenture Company, the Lease Indenture Trustee, the Pass Through Trustees and the Pass Through Company in, to and under this Agreement and other Operative Documents. SECTION 18.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof, including each successive holder of the Owner Participant's Beneficial Interest permitted under SECTION 10.1. Except as expressly provided herein or in the other Operative Documents, no party hereto may assign its interests herein without the consent of the other parties hereto. SECTION 18.8 GOVERNING LAW. This Agreement has been delivered in the State of New York and shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance without giving effect to the conflicts of laws provisions thereof except New York General Obligations Law Section 5-1401. 99 SECTION 18.9 SEVERABILITY. If any provision hereof shall be invalid, illegal or unenforceable under Requirement of Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. SECTION 18.10 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. SECTION 18.11 HEADINGS AND TABLE OF CONTENTS. The headings of the sections of this Agreement and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. SECTION 18.12 LIMITATION OF LIABILITY. (a) None of the Owner Participant, the Owner Lessor, the Owner Trustee, the Trust Company, the Lease Indenture Company, the Lease Indenture Trustee, the Pass Through Trustees or the Pass Through Company shall have any obligation or duty to Midwest, EME or to others with respect to the transactions contemplated hereby, except those obligations or duties expressly set forth in this Agreement and the Operative Documents, and neither the Owner Lessor, the Owner Participant, the Owner Trustee, the Trust Company, the Lease Indenture Company, the Lease Indenture Trustee, the Pass Through Trustees or the Pass Through Company shall be liable for performance by any other party hereto of such other party's obligations or duties hereunder. Without limitation of the generality of the foregoing, under no circumstances whatsoever shall the Owner Participant be liable to Midwest, EME, the Lease Indenture Trustee, the Pass Through Trustees or the Pass Through Company for any action or inaction on the part of the Owner Lessor or the Owner Trustee in connection with the transactions contemplated herein, whether or not such action or inaction is caused by willful misconduct or gross negligence of the Owner Lessor, unless such action or inaction is at the written direction of the Owner Participant. (b) The Trust Company is executing the Operative Documents to which it is a party solely as trustee under the Trust Agreement and not in its individual capacity, except as expressly provided herein or therein, and in no case whatsoever shall the Trust Company be personally liable for, or for any loss in 100 respect of, any of the statements, representations, warranties, agreements or obligations of the Owner Lessor or the Owner Trustee hereunder or under any other Operative Document, as to all of which the other parties hereto agree to look solely to the Trust Estate; PROVIDED, HOWEVER, that the Trust Company shall be liable hereunder for its own gross negligence or willful misconduct or for a breach of its representations, warranties and covenants made in its individual capacity. (c) The Lease Indenture Company and the Pass Through Company are each entering into the Operative Documents to which they are parties solely as trustees under the Lease Indenture and the Pass Through Trust Agreement, respectively, and not in their individual capacities, except as expressly provided herein or therein, and in no case whatsoever shall the Lease Indenture Company or the Pass Through Company be personally liable for, or for any loss in respect of, any of the statements, representations, warranties, agreements or obligations of the Owner Lessor hereunder or under any other Operative Document, as to all of which the other parties hereto agree to look solely to the Trust Estate and the Indenture Estate; PROVIDED, HOWEVER, that such party shall be liable hereunder for its own gross negligence, willful misconduct, bad faith or a breach of its representations, warranties and covenants made in its individual capacity. (d) The right of the Lease Indenture Company or the Pass Through Company to perform any discretionary act enumerated herein or in any other Operative Document (including, without limitation, the right to consent to any action which requires its consent and the right to waive any provision of, or consent to any change or amendment to, any of the Operative Documents) shall not be construed as a duty, and neither the Lease Indenture Company nor the Pass Through Company shall be accountable or liable for other than its gross negligence, willful misconduct or bad faith in the performance or non-performance of such acts. In connection with any such discretionary acts, the Lease Indenture Trustee may in its own judgement (but shall not, except as otherwise provided in the Lease Indenture or as otherwise required by Requirement of Law, have any obligation to) request in writing the approval of the Pass Through Trustees as holders of Lessor Notes and each Pass Through Trustee may in its sole discretion (but shall not, except as otherwise provided for in the Operative Documents or as otherwise required by Requirement of Law, have any obligation to) request the approval of the holders of the Certificates. 101 (e) The Owner Participant will give Midwest and EME at least 15 days' prior notice of any proposed amendment or supplement to the Trust Agreement (other than amendments solely effecting a transfer of the Owner Participant's interest in the Trust Estate or with respect to administrative matters) and deliver true, complete and fully executed copies to Midwest and EME of any amendment or supplement to the Trust Agreement. No amendment or supplement to the Trust Agreement that could materially adversely affect the interests of the Lease Indenture Trustee or the Pass Through Trustees shall become effective without the prior written consent of the Lease Indenture Trustee or the Pass Through Trustees, as applicable. SECTION 18.13 CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY, PROCESS AGENT. (a) Each of the parties hereto (i) hereby irrevocably submits to the nonexclusive jurisdiction of the Supreme Court of the State of New York, New York County (without prejudice to the right of any party to remove to the United States District Court for the Southern District of New York) and to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of this Agreement, the other Operative Documents, or the subject matter hereof or thereof or any of the transactions contemplated hereby or thereby brought by any of the parties hereto or their successors or assigns; (ii) hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court, or in such federal court; and (iii) to the extent permitted by Requirement of Law, hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding any claim that it is not personally subject to the jurisdiction of the above-named courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement, the other Operative Documents, or the subject matter hereof or thereof may not be enforced in or by such court. (b) TO THE EXTENT PERMITTED BY REQUIREMENT OF LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES THE RIGHT TO DEMAND A TRIAL BY JURY, IN ANY SUCH SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS 102 AGREEMENT, THE OTHER OPERATIVE DOCUMENTS, OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY BROUGHT BY ANY OF THE PARTIES HERETO OR THEIR SUCCESSORS OR ASSIGNS. (c) By the execution and delivery of this Agreement, Midwest and EME designate, appoint and empower CT Corporation System as their authorized agent to receive for and on their behalf service of any summons, complaint or other legal process in any such action, suit or proceeding in the State of New York for so long as any obligation of Midwest and EME shall remain outstanding hereunder or under any of the other Operative Documents. Midwest and EME shall grant an irrevocable power of attorney to CT Corporation System in respect of such appointment and shall maintain such power of attorney in full force and effect for so long as any obligation of Midwest and EME shall remain outstanding hereunder or under any of the Operative Documents. SECTION 18.14 FURTHER ASSURANCES. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Agreement and the other Operative Documents. SECTION 18.15 EFFECTIVENESS. This Agreement has been dated as of the date first above written for convenience only. This Agreement shall be effective on the date of execution and delivery by each of the parties hereto. SECTION 18.16 MEASURING LIFE. If and to the extent that any of the options, rights and privileges granted under this Agreement, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Agreement, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Agreement of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. 103 Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Agreement, whichever of (a) and (b) is shorter. SECTION 18.17 NO PARTNERSHIP, ETC. The parties hereto intend that nothing contained in this Agreement or any other Operative Document shall be deemed or construed to create a partnership, joint venture or other co-ownership arrangement by and among any of them. SECTION 18.18 RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTEREST. (a) No OP Member shall, during the Facility Lease Term, assign, convey or transfer any of its right, title or interest in the Membership Interest or cause the Owner Participant to issue additional membership interests without the prior written consent of Midwest and EME and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees; PROVIDED, HOWEVER, that an OP Member may assign, convey or transfer all or any part of its interest in the Membership Interest without such consent to a Person (the "MEMBER TRANSFEREE"), if the Owner Participant Guaranty shall remain outstanding and in full force and effect or each of the following conditions shall have been satisfied: (i) the Member Transferee shall be either (A) an Affiliate of the Owner Participant which does not otherwise qualify under clause (B) below provided the Owner Participant Guaranty shall remain in full force and effect, or (B) a Person which guarantees all of the Owner Participant's obligations under the Operative Documents pursuant to a guaranty substantially in the form of Exhibit Y hereto and meets the following criteria: (1) the tangible net worth of the Member Transferee is at least equal to $75 million calculated in accordance with GAAP; and (2) unless waived by Midwest and EME, and so long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing, such Member Transferee is not a Competitor (as defined in SECTION 12.1(b)) of, or in material litigation with, Midwest or any Affiliate of Midwest; 104 (ii) the total number of Unrelated Members, after giving effect to such transactions shall not exceed three; and (iii) the Member Transferee agrees in the guaranty or in another written instrument reasonably acceptable to Midwest and, for so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustees to be bound by this SECTION 18.18 and by provisions of SECTION 18.19 of this Agreement. (b) Neither the Facility Lessee nor EME shall not be responsible for any adverse tax consequence to the Owner Lessor, the Owner Participant or the Guarantor resulting from any transfer pursuant to this SECTION 18.18 and the Pricing Assumptions shall not be changed as a result of any such transfer. (c) The OP Member shall give the Owner Lessor, the Owner Trustee, the Lease Indenture Trustee, the Pass Through Trustees, Midwest and EME 30 days prior written notice of such transfer, or 10 days in the case of a transfer to an Affiliate of the Owner Participant, specifying the name and address of any proposed Member Transferee and such additional information as shall be necessary to determine whether the proposed transfer satisfies the requirements of this SECTION 18.18. If requested by the OP Member, the Owner Participant, the Lease Indenture Trustee or the Pass Through Trustees, Midwest or EME shall acknowledge qualifying transfers. All reasonable fees, expenses and charges of the Lease Indenture Trustee, the Pass Through Trustees, Midwest and EME (including reasonable attorneys' fees and expenses in connection with any such transfer or proposed transfer), including any of the foregoing relating to any amendments to the Operative Documents required in connection therewith, shall be paid by the OP Member, without any right of indemnification from Midwest, EME, the Lease Indenture Trustee, the Pass Through Trustees or any other Person; PROVIDED, HOWEVER, that the OP Member shall have no obligation to pay fees, expenses or charges of Midwest and EME as a result of any transfer while a Material Lease Default or a Lease Event of Default is continuing, in which case Midwest or EME shall be obligated to pay such costs. 105 (d) Upon any transfer to a Member Transferee specified in clause (a)(i)(B) of this SECTION 18.18 and compliance with all of the other provisions of this SECTION 18.18, (i) the Member Transferee shall, to the extent of the Membership Interest conveyed to the Member Transferee, be deemed an "OP Member" for purposes of this SECTION 18.18 and the Person executing the guaranty pursuant to such clause (a)(i)(B) shall be deemed a "OP Guarantor" for all purposes and each reference in this Agreement and each other Operative Document to the "OP Guarantor" shall thereafter be deemed to include such Member Transferee or the Person executing such guaranty, as the case may be, to the extent of the obligations expressly transferred to the Member Transferee and guaranteed by such Person, for all purposes and (ii) the existing OP Guarantor shall be released from all obligations under its Owner Participant Guaranty to the extent such obligations are expressly guaranteed by the Member Transferee or such Affiliate; PROVIDED, HOWEVER, that in no event shall any such transfer waive or release the existing OP Guarantor from any liability existing immediately prior to or occurring simultaneously with such transfer. Except as expressly provided in the immediately preceding sentence, no transfer of any Membership Interest shall effect the obligations of the existing OP Guarantor under the Owner Participant Guaranty or any other OP Guarantor under its Owner Participant Guaranty. (e) Notwithstanding anything herein to the contrary, any transfer of Membership Interest pursuant to this SECTION 18.18 shall be subject to Midwest's right of first offer and right of first refusal set forth in SECTION 16.1 and 16.2, respectfully, to the same extent as if such transfer were a transfer by the Owner Participant of its Beneficial Interest. SECTION 18.19 LIMITATION ON CLAIMS AGAINST MIDWEST; SUBORDINATION OF CLAIMS AGAINST MIDWEST. Notwithstanding any provision to the contrary contained in this Participation Agreement, the Facility Lease or any other Operative Document, except as expressly provided in the proviso to this sentence, claims against Midwest for Rent (including Termination Value) or any other amounts due and unpaid as at any date to the Lease Financing Parties under or arising out of any of the Operative Documents (such other amounts, "OTHER MIDWEST LIABILITIES") (to the extent not paid by EME under the EME Guarantee or the EME OP Guarantee) shall be limited to the aggregate Free Cashflow amount attributable to the Fiscal Quarters during which Rent and Other Midwest Liabilities became due and remain undischarged; PROVIDED that (a) as set forth in SECTION 17.2 of the Facility Lease, claims shall be permitted 106 against Midwest for any amounts of Rent (including Termination Value) and Other Midwest Liabilities due and unpaid to the Lease Financing Parties in excess of the aggregate Free Cashflow amount attributable to the Fiscal Quarters during which Rent and Other Midwest Liabilities became due and remain undischarged but such claims shall be subordinated to Specified Midwest Indebtedness on the terms and conditions set forth in the Subordination Agreement substantially in the form attached hereto as Exhibit AA, (b) the EME Note shall be subject to set-off as contemplated by, and in accordance with, SECTION 8 of the EME Note and (c) the Guarantor shall be entitled to rights of subrogation as contemplated by, and in accordance with SECTION 2.05 of the EME Guarantee. Notwithstanding anything contained in this Participation Agreement, the Facility Lease or any other Operative Document to the contrary, the Guarantor shall be liable under the EME Guarantees for any and all Rent (including Termination Value) or Other Midwest Liabilities due and unpaid and in accordance with the EME Guarantee and the EME OP Guarantee, subject to the limitation set forth in SECTION 2.03 of the EME Guarantee, notwithstanding the limitation on claims against Midwest contained in the preceding sentence. The Owner Participant, the Owner Trustee, the Equity Investor, the Lease Indenture Trustee, the Pass Through Trustees and the Guarantor (and by its acceptance of any Lessor Note, any holder of such Lessor Note and by its acceptance of any Certificate, any Certificateholder) each acknowledge notice of, and consent in all respects to the provisions of this SECTION 18.19, SECTION 17.2 of the Facility Lease and the Subordination Agreement. Notwithstanding the foregoing, no provision of this Agreement (including this SECTION 18.19) or the Subordination Agreement shall limit or impair, or be deemed to limit or impair, in any way the right of any party to this Agreement to take (or cause to be taken) any of the following actions: (i) the giving of any notice necessary to cause a default, breach, failure or misrepresentation to become a Lease Event of Default, (ii) the declaration of the Facility Lease to be in default; (iii) the election or exercise of any remedy arising out of or in connection with a Lease Event of Default (including making any demand for payment of Termination Value, terminating the Facility Lease, exercising the rights of the Owner Lessor as owner of the Undivided Interest or any other remedy under SECTION 17 of the Facility Lease); (iv) the making of demand for payment of any claim required to be subordinated pursuant to this SECTION 18.19; and (v) the exercise of any other right or remedy in the Operative Documents or at law with respect to any claim not constituting a claim required to be subordinated pursuant to this SECTION 18.19; PROVIDED, HOWEVER, that in 107 no event shall any party to this Agreement be entitled to seek to collect or enforce payment of any amount constituting a claim required to be subordinated pursuant to this SECTION 18.19. SECTION 18.20 GUARANTEED TV AMOUNT. Each party to this Agreement acknowledges notice of, and consents in all respects to, the terms of the EME Guarantee, including clause 2.03 of the EME Guarantee which limits obligations of EME under the EME Guarantee in certain specific instances to the Guaranteed TV Amount. 108 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized. JOLIET TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ James P. Lawler --------------------------------------------- Name: James P. Lawler Title: Vice President Date: August 24, 2000 WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee By: /s/ James P. Lawler --------------------------------------------- Name: James P. Lawler Title: Vice President Date: August 24, 2000 JOLIET GENERATION I, LLC By: /s/ Christopher P. Kelleher --------------------------------------------- Name: Christopher P. Kelleher Title: Vice President Date: August 24, 2000 EDISON MISSION ENERGY By: /s/ John P. Finneran, Jr. ------------------------------------ Name: John P. Finneran, Jr. Title: Vice President Date: August 24, 2000 MIDWEST GENERATION, LLC By: /s/ Gary Garcia ------------------------------------ Name: Gary Garcia Title: Treasurer & Vice President Date: August 24, 2000 UNITED STATES TRUST COMPANY OF NEW YORK, not in its individual capacity, except to the extent provided herein, but solely as Lease Indenture Trustee under the Lease Indenture By: /s/ Christopher J. Grell ------------------------------------ Name: Christopher J. Grell Title: Assistant Vice President Date: August 24, 2000 UNITED STATES TRUST COMPANY OF NEW YORK, not in its individual capacity, except to the extent provided herein, but as Pass Through Trustee under the Pass Through Trust Agreements By: /s/ Christopher J. Grell ------------------------------------ Name: Christopher J. Grell Title: Assistant Vice President Date: August 24, 2000 APPENDIX A TO PARTICIPATION AGREEMENT DEFINITIONS APPENDIX A - DEFINITIONS (T1) GENERAL PROVISIONS In this Appendix A and each Operative Document (as hereinafter defined), unless, otherwise provided herein or therein: (a) the terms set forth in this Appendix A or in any such Operative Document shall have the meanings herein provided for and any term used in an Operative Document and not defined therein or in this Appendix A but in another Operative Document shall have the meaning, herein or therein provided for in such other Operative Document; (b) any term defined in this Appendix A by reference to another document, instrument or agreement shall continue to have the meaning ascribed thereto whether or not such other document, instrument or agreement remains in effect; (c) words importing the singular include the plural and vice versa; (d) words importing a gender include any gender; (e) a reference to a part, clause, section, paragraph, article, party, annex, appendix, exhibit, schedule or other attachment to or in respect of an 1 Operative Document is a reference to a part, clause, section, paragraph, or article of, or a party, annex, appendix, exhibit, schedule or other attachment to, such Operative Document unless, in any such case, otherwise expressly provided in any such Operative Document; (f) a reference to any statute, regulation, proclamation, ordinance or law includes all statutes, regulations, proclamations, ordinances or laws varying, consolidating or replacing the same from time to time, and a reference to a statute includes all regulations, policies, protocols, codes, proclamations and ordinances issued or otherwise applicable under that statute unless, in any such case, otherwise expressly provided in any such statute or in such Operative Document; (g) a definition of or reference to any document, instrument or agreement includes an amendment or supplement to, or restatement, replacement, modification or novation of, any such document, instrument or agreement unless otherwise specified in such definition or in the context in which such reference is used; (h) a reference to a particular section, paragraph or other part of a particular statute shall be deemed to be a reference to any other section, paragraph or other part substituted therefor from time to time; (i) if a capitalized term describes, or shall be defined by reference to, a document, instrument or agreement that has not as of any particular date been executed and delivered and such document, instrument or agreement is attached as an exhibit to the Participation Agreement (as hereinafter defined), such reference shall be deemed to be to such form and, following such execution and delivery and subject to paragraph (vii) above, to the document, instrument or agreement as so executed and delivered; (j) a reference to any Person (as hereinafter defined) includes such Person's successors and permitted assigns; (k) any reference to "days" shall mean calendar days unless "Business Days" (as hereinafter defined) are expressly specified; 2 (l) if the date as of which any right, option or election is exercisable, or the date upon which any amount is due and payable, is stated to be on a day that is not a Business Day, such right, option or election may be exercised, and such amount shall be deemed due and payable, on the next succeeding Business Day with the same effect as if the same was exercised or made on such date or day and interest shall accrue and be payable with respect to such payment; (m) words such as "hereunder," "hereto," "hereof" and "herein" and other words of similar import shall, unless the context requires otherwise, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof; (n) a reference to "including" means including without limiting the generality of any description preceding such term, and for purposes hereof and of each Operative Document the rule of EJUSDEM GENERIS shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned; and (o) each term defined by reference to the Holdings Credit Agreement shall have the meaning assigned to such term therein and, following any amendment to, or restatement or replacement of the Holdings Credit Agreement, the meaning assigned to such term or the respective correlative term, as the case may be, in such amendment, restatement or replacement. 3 DEFINED TERMS "467 FIXED RENT" shall mean the amount specified as 467 Fixed Rent as set forth in Schedule 1-3 to the Facility Lease. "ACCESS ROUTES" shall have the meaning set forth in the recitals to the Facility Site Lease. "ADDITIONAL CERTIFICATES" shall mean any additional certificates issued by any Pass Through Trust in connection with the issuance of Additional Lessor Notes relating, thereto. "ADDITIONAL EQUITY INVESTMENT" shall mean the amount, if any, the Owner Participant shall provide (in its sole and absolute discretion) to finance all or a portion of the Owner Lessor's Percentage of the cost of any Required Improvement or Non-Severable Improvement financed pursuant to SECTION 16.1 of the Participation Agreement. "ADDITIONAL INSUREDS" shall have the meaning specified in SECTION 11.3 of the Facility Lease. "ADDITIONAL LESSOR NOTES" shall have the meaning specified in SECTION 2.13 of the Lease Indenture. "AFFILIATE" of any particular Person shall mean 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; PROVIDED, HOWEVER, that under no circumstances shall the Trust Company be considered to be an Affiliate of any of the Owner Lessor, the Owner Trustee, or the Owner Participant, nor shall any of the Owner Lessor, the Owner Trustee, or the Owner Participant be considered to be an Affiliate of the Trust Company and that neither Owner Lessor nor Owner Trustee shall be treated as an Affiliate of the Owner Participant except that the Owner Lessor will be treated as an Affiliate of the Owner Participant to the extent that the Owner Lessor acts on the 4 express written direction or with the express written consent of the Owner Participant. "AFTER-TAX BASIS" shall mean, in the context of determining the amount of a payment to be made on such basis, the payment of an amount which, after reduction by the net increase in Taxes of the recipient (actual or constructive) of such payment, which net increase shall be calculated by taking into account any reduction in such Taxes resulting from any tax benefits realized or to be realized by the recipient as a result of such payment, shall be equal to the amount required to be paid. In calculating the amount payable by reason of this provision in the case of any person that is a U.S. Person, all income taxes payable and tax benefits realized or to be realized shall be determined on the assumptions that (i) the recipient is subject to (a) U.S. Federal income taxes at the highest marginal rate then applicable to corporations for the relevant period or periods, and (b) state and local income taxes at the highest marginal rates then applicable to corporations for the relevant period or periods, and (ii) all related tax benefits are utilized (a) with regard to U.S. Federal income taxes, at the highest marginal rates then applicable to corporations for the relevant period or periods, and (b) with regard to state and local income taxes, at the highest marginal rate then applicable to corporations for the relevant period or periods. "APPLICABLE RATE" shall mean (i) in respect of any amount due under any Lessor Note or any amount of Basic Rent attributable to the principal and interest on any Lessor Note (including Make Whole Premium, if any), the per annum fixed rate of interest (including, without limitation, additional interest resulting from an Illiquidity Event or a Reporting Cessation (as each such term is defined in the Lessor Notes), if any) then borne by the relevant Lessor Note and (ii) in respect of any other amount due under the Operative Documents, 8.45% per annum (in each case, computed on the basis of a 360-day year of twelve 30-day months). "APPRAISAL PROCEDURE" shall mean (except with respect to the Closing Date Appraisal), an appraisal conducted by an appraiser or appraisers in accordance with the following procedures. The Owner Participant and the Facility Lessee will consult with the intent of selecting a mutually acceptable Independent Appraiser. If a mutually acceptable Independent Appraiser is selected, the Fair Market Sales Value, the Fair Market Rental Value, the remaining useful life or other determination that is the subject of the appraisal shall be determined by such Independent Appraiser. If 5 the Facility Lessee and the Owner Participant are unable to agree upon a single Independent Appraiser within a 15-day period, one shall be appointed by the Owner Participant, and one shall be appointed by the Facility Lessee (or its designee), which Independent Appraisers shall attempt to agree upon the value, period, amount or other determination that is the subject of the appraisal. If either the Owner Participant or the Facility Lessee or its designee does not appoint its Independent Appraiser, the determination of the other Independent Appraiser shall be conclusive and binding on the Owner Participant and the Facility Lessee. If the Independent Appraisers appointed by the Owner Participant and the Facility Lessee are unable to agree upon the value, period, amount or other determination that is the subject of the appraisal, such Independent Appraisers shall jointly appoint a third Independent Appraiser or, if such Independent Appraisers do not appoint a third Independent Appraiser, the Owner Participant and the Facility Lessee shall jointly appoint the third Independent Appraiser. In such case, the average of the determinations of the three Independent Appraisers shall be conclusive and binding on the Owner Participant and the Facility Lessee, unless the determination of one such Independent Appraiser is disparate from the middle determination by more than twice the amount by which the third determination is disparate from the middle determination, in which case the determination of the most disparate Independent Appraiser shall be excluded, and the average of the remaining two determinations shall be conclusive and binding on the Owner Participant and the Facility Lessee. "APPRAISER" shall mean Deloitte and Touche LLP Valuation Group. "ASA" shall mean the Asset Sale Agreement, dated as of March 22, 1999, by and between ComEd and EME. "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean an assignment and assumption agreement in form and substance substantially in the form of Exhibit LL to the Participation Agreement. "ASSOCIATES" shall mean Associates Capital Investments, L.L.C., a Delaware limited liability company. "AUTHORIZED OFFICER" shall mean, with respect to any Person, (i) its Chairman of the Board, its President, any Senior Vice President, the Chief Financial Officer, any Vice President, the Treasurer or any other person authorized by or pursuant to the 6 Organic Documents or any resolution of the board of directors or managers (or managing members) of such Person, and (ii) with respect to the Owner Trustee, an officer in its corporate trust department. "BANKRUPTCY CODE" shall mean the United States Bankruptcy Code of 1978, as amended from time to time, 11 U.S.C. Section 101 ET SEQ. "BASE FREE CASH FLOW" shall have the meaning set forth in the definition of "Free Cash Flow." "BASIC LEASE RENT" shall have the meaning specified in SECTION 3.2 of the Facility Lease. "BASIC LEASE TERM" shall have the meaning specified in SECTION 3.1 of the Facility Lease. "BENEFICIAL INTEREST" shall mean the interest of the Owner Participant in the Owner Lessor. "BILL OF SALE" shall mean the Bill of Sale (I), dated as of August 17, 2000, executed by Midwest in favor of the Owner Lessor, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "BURDENSOME BUYOUT EVENT" shall mean any event giving rise to the Facility Lessee's Burdensome Buyout Option under the Facility Lease. "BURDENSOME BUYOUT OPTION" shall have the meaning specified in SECTION 13.3 of the Facility Lease. "BURDENSOME BUYOUT PERIOD" shall have the meaning specified in SECTION 13.3 of the Facility Lease. "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday, or a day on which commercial banking institutions are authorized or required by law, regulation or executive order to be closed in New York, New York or the city and the state in 7 which the Corporate Trust Office of the Lease Indenture Trustee, the Owner Trustee or either Pass Through Trustee is located. "CAPEX CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of May 9, 2000, by and among Holdings, Societe Generale and Bayerische Landesbank Girozentrale. "CAPITAL LEASE" shall mean, with respect to any Person, a lease of (or other Indebtedness arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability set forth on the balance sheet of such Person or such Person's Subsidiaries in accordance with GAAP. "CAPITALIZED LEASE LIABILITIES" of any Person shall mean all monetary obligations of such Person under any Capital Lease, and, for purposes of each Operative Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "CASH EQUIVALENT INVESTMENTS" shall mean, at any time: (i) 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; (ii) 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 (iii) other securities as to which the Person incurring such Indebtedness has demonstrated adequate liquidity through secondary markets or deposit agreements. "CASHFLOW AVAILABLE FOR FIXED CHARGES" shall mean, in respect of any period, the excess, if any, of Revenues (excluding, without duplication, (i) proceeds of any permitted asset sale, (ii) amounts available in the Cashflow Recapture Fund and (iii) payments made by Edison Mission Energy under or in respect of the Synthetic Lease 8 Intercompany Note or the Combined Lease Note) during such period OVER Operating Expenses during such period. "CASHFLOW RECAPTURE FUND" shall have the meaning ascribed thereto in the Holdings Credit Agreement. "CERCLIS" shall mean the Comprehensive Environmental Response, Compensation and Liability Information System list. "CERTIFICATEHOLDERS" shall mean each of the holders of Certificates, and each of such holder's successors and permitted assigns. "CERTIFICATE PURCHASE AGREEMENT" shall mean the Purchase Agreement, dated as of August 17, 2000 between Midwest, EME and Credit Suisse First Boston Corporation and Lehman Brothers Inc., as representatives of the Initial Purchasers. "CERTIFICATES" shall mean the pass through certificates issued pursuant to the Pass Through Trust Agreements. "CLAIM" shall mean any liability (including, without limitation, in respect of negligence (whether passive or active or other torts), strict or absolute liability in tort or otherwise, warranty, latent or other defects (regardless of whether or not discoverable), statutory liability, property damage, bodily injury or death), obligation, loss, settlement, damage, penalty, claim, Environmental Claim, action, suit, proceeding (whether civil or criminal), judgment, penalty, fine and other legal or administrative sanction, judicial or administrative proceeding, cost, expense or disbursement, including reasonable legal, investigation and expert fees, expenses and related charges, of whatsoever kind and nature. "CLOSING" shall have the meaning specified in SECTION 2.2(a) of the Participation Agreement. "CLOSING DATE" shall mean the Scheduled Closing Date or such later date on which the Closing shall occur. 9 "CLOSING DATE APPRAISAL" shall mean the appraisal, dated the Closing Date, addressed to the Equity Investor prepared by the Appraiser with respect to the Facility. "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COLLINS HOLDINGS" shall mean Collins Holdings EME, LLC, a wholly-owned Subsidiary of MGE and a special purpose, bankruptcy-remote limited liability company organized under the laws of the State of Delaware. "COLLINS LEASE OBLIGATIONS" shall mean the obligations of Midwest to make payments of basic lease rent, renewal lease rent, supplemental lease rent and other payments under the Facility Leases (as defined in the Holdings Credit Agreement). "COMBINED LEASE NOTE" shall mean the EME Note, the comparable promissory note issued by EME to Midwest pursuant to the Other Joliet Lease Transaction and each comparable promissory note issued by EME to Midwest pursuant to the Powerton Lease Transactions. "COMBINED LEVERAGE LEASE LIABILITIES" shall mean Leveraged Lease Liabilities, Other Leveraged Lease Liabilities and Powerton Leveraged Lease Liabilities. "COMED" shall mean the Commonwealth Edison Company, an Illinois corporation or its successors or assigns. "COMED CONSENT" shall mean the Consent to the Sale of Assets, dated as of August 17, 2000 among ComEd, Midwest and the Owner Lessor. "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "COMPETITOR" shall have the meaning specified in SECTION 10.1(b) of the Participation Agreement. "COMPONENT" shall mean any appliance, part, instrument, appurtenance, accessory, furnishing, equipment or other property of whatever nature that may from time to time be incorporated in the Facility, except to the extent constituting Improvements. 10 "CONSOLIDATED SUBSIDIARY" shall mean, at any date, any Subsidiary or other entity the accounts of which would be consolidated with those of EME in its consolidated financial statements if its consolidated financial statements were prepared as of such date. "CONSOLIDATED TANGIBLE NET ASSETS" shall mean, with respect to any Person, as of the date of any determination thereof, the total amount of all assets of such Person and its Subsidiaries (determined on a consolidated basis in accordance with GAAP), less the sum of (a) the consolidated liabilities of such Person and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) and (b) assets properly classified as "intangible assets" in accordance with GAAP. "CONTINGENT LIABILITY" shall mean 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. "CONTRACTUAL OBLIGATION" shall mean, 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" shall mean all corporations which are members of a controlled group of corporations within the meaning of Section 1563(a) of the Code determined without regard to Sections 1563(a)(4) and 1563(e)(3)(C) and all trades or businesses 11 (whether or not incorporated) under common control which, together with EME and its Consolidated Subsidiaries, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "CORPORATE TRUST OFFICE" shall mean with respect to any Pass Through Trustee, the Owner Trustee and the Lease Indenture Trustee, the office of such trustee in the city in which at any particular time its corporate trust business shall be principally administered. "DEBT RATING" shall mean, as to any Person, a rating by each of Moody's and S&P of such Person=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 classification after the date of the Participation Agreement, a Person'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 COVERAGE RATIO" shall mean, for any period, the ratio of (a) Cashflow Available for Fixed Charges for such period to (b) Fixed Charges for such period. "DESIGNATED LEASE LIABILITIES" shall have the meaning ascribed thereto in the Holdings Credit Agreement. "DISCOUNT RATE" shall mean 9.0% per annum. "DOLLARS" and the sign "$" shall mean lawful money of the United States. "EDISON MISSION ENERGY" or "EME" shall mean Edison Mission Energy, a California corporation. "EME GUARANTEE" shall mean the guaranty agreement dated as of August 17, 2000 entered into between EME and the Owner Lessor. "EME GUARANTEES" shall mean the EME Guarantee, the Reimbursement Agreement and the EME OP Guarantee. 12 "EME INDEBTEDNESS" shall mean any indebtedness for borrowed money that is incurred, issued or guaranteed by EME. "EME JOLIET (T1) PLEDGE AGREEMENT" shall mean the EME Joliet (T1) Pledge Agreement, dated as of August 17, 2000, between Midwest and the Holdings Collateral Agent. "EME JOLIET (T2) PLEDGE AGREEMENT" shall mean the EME Joliet (T2) Pledge Agreement, dated as of August 17, 2000, between Midwest and the Holdings Collateral Agent. "EME NOTE" shall have the meaning set forth in the recitals to the Participation Agreement. "EME OP GUARANTEE" shall mean the guaranty agreement dated as of August 17, 2000 entered into between EME, the Owner Participant and the Equity Investor. "EME POWERTON (T1) PLEDGE AGREEMENT" shall mean the EME Powerton (T1) Pledge Agreement, dated as of August 17, 2000, between Midwest and the Holdings Collateral Agent. "EME POWERTON (T2) PLEDGE AGREEMENT" shall mean the EME Powerton (T2) Pledge Agreement, dated as of August 17, 2000, between Midwest and the Holdings Collateral Agent. "EMOC" shall mean Edison Mission Overseas Co., a Subsidiary of Holdings and a limited liability company organized under the laws of Delaware. "ENGINEERING CONSULTANT" shall mean Stone & Webster Management Consultants, Inc. "ENGINEERING REPORT" shall mean the report of the Engineering Consultant, dated August 17, 2000. "ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory or judicial action, fee, cause of action, obligation, suit, liability, loss, damage, proceeding, decree, judgment, penalty, fine, demand, demand letter, order, directive, claim 13 (including any claim involving liability in tort, strict, absolute or otherwise), lien, sanction, notice of noncompliance or violation, legal or consultant fee or expense, or cost of investigation or proceeding, relating in any way to any Environmental Law, or arising from the actual or alleged presence or Release of any Hazardous Material (hereinafter "LIABILITIES") including, without limitation, and regardless of the merit of such Liability, any and all Liabilities for (i) investigation, assessment, abatement, correction, enforcement, mitigation, cleanup, removal, response, remediation or other activities related to the actual or alleged presence or Release of Hazardous Materials, (ii) damages, contribution, indemnification, cost recovery, compensation or injunctive or declaratory relief related to violations of Environmental Law or the actual or alleged presence or Release of Hazardous Materials, or (iii) any alleged or actual injury or threat of injury to human health, safety, natural resources or the environment in connection with a violation of Environmental Law or the actual or alleged presence or Release of Hazardous Materials. "ENVIRONMENTAL CONDITION" shall mean the presence or Release of any Hazardous Material at, into, on or under any land, water, air or otherwise into the environment, which does or reasonably could (i) require assessment, investigation, abatement, correction, clean-up, mitigation, removal, remediation or any other response action, (ii) give rise to an Environmental Claim or any obligation or liability of any nature (whether civil or criminal, arising under a theory of negligence or strict liability, or otherwise) under any Environmental Law, (iii) create or constitute a public or private nuisance or trespass, (iv) constitute a violation of or non-compliance with any Environmental Law or (v) result in or contribute to the actual or threatened loss of or damage to any property, natural resource or environmental media, or the death of or injury to any Person. "ENVIRONMENTAL LAWS" shall mean all federal, state and local statutes, laws, ordinances, codes, rules, regulations, consent decrees, administrative orders, administrative directives, injunctions, deed restrictions, applicable judgments and any other legally enforceable requirements of any Governmental Authority relating to, regulating or imposing liability or standards of conduct concerning Hazardous Materials, public health, safety or the environment or natural resources, as have been, are now, or may at any time hereafter be in effect. "EQUITY COMMITMENT LETTER" shall mean the written commitment by the Equity Investor to participate in the lease financing. 14 "EQUITY INVESTMENT" shall mean $48,101,200. "EQUITY INVESTOR" shall mean PSEGR Midwest, LLC, a Delaware limited liability company. "EQUITY INVESTOR'S ADVISOR" shall mean Cornerstone Financial Advisors Limited Partnership. "EQUITY PORTION OF BASIC LEASE RENT" shall mean the amounts set forth as Component A of Basic Lease Rent (Column A) as set forth on SCHEDULE 1-1 to the Facility Lease. "EQUITY PORTION OF TERMINATION VALUE" shall mean the amounts under the column titled "Equity Portion of Termination Value" in SCHEDULE 2 to the Facility Lease. "ERISA" shall mean 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 LOSS" shall mean any of the following events: (i) the loss of the Facility or use thereof, due to destruction or damage to the Facility or the Facility Site that renders repair uneconomic or that renders the Facility permanently unfit for normal use; or (ii) any damage to the Facility that results in an insurance settlement with respect thereto on the basis of a total loss or an agreed constructive or a compromised total loss of the Facility; or (iii) seizure, condemnation, confiscation or taking of, or requisition of title to or use of, the Facility or the Facility Site by any Governmental Authority (a "REQUISITION") that shall have resulted in loss by the Owner Lessor of title to or use of the Undivided Interest or the Ground Interest following exhaustion of all permitted appeals or an election by the Facility Lessee not to pursue such appeals; PROVIDED, that (i) no such contest may be conducted if a Material Lease Default or a Lease Event of Default shall have occurred and be continuing and (ii) no such contest 15 shall extend beyond the earlier of (x) the date which is one year after the loss of such title, or (y) the date which is 36 months prior to the end of the Basic Lease Term or any Renewal Term then in effect or already elected by the Facility Lessee; PROVIDED, FURTHER, that in any case involving Requisition of use of the Facility or the Facility Site, but not of the Owner Lessor's title to the Undivided Interest or interest in the Facility Lease, such event shall be an Event of Loss only if such Requisition of use continues beyond the Basic Lease Term or any Renewal Lease Term then in effect or already elected by the Facility Lessee; or (iv) if elected by the Owner Participant, and only in circumstances where the termination of the Facility Lease and transfer of the Facility to the Facility Lessee (or its designee) shall remove the basis of the regulation described below, the Owner Participant's interest in the Facility, the Facility Lease or the Trust Estate shall become subject to any rate of return regulation by any Governmental Authority, or the Owner Participant or the Owner Lessor shall become subject to any public utility regulation of any Governmental Authority (other than Requirements of Law in effect on the Closing Date) or law which in the reasonable opinion of the Owner Participant is burdensome, in either case by reason of the participation of the Owner Lessor or the Owner Participant in the transactions contemplated by the Operative Documents but, in any event, not if the Owner Participant or the Owner Lessor shall have become subject thereto as a result of (a) investments, loans or other business activities of the Owner Participant or any of its Affiliates in respect of equipment or facilities similar in nature to the Facility or any part thereof or in any other electrical, steam, cogeneration or other energy or utility related equipment or facilities or the general business or other activities of the Owner Participant or any of its Affiliates or the nature of any of the properties or assets from time to time owned, leased, operated, managed or otherwise used or made available for use by the Owner Participant or any of its Affiliates or (b) a failure of the Owner Participant, the Owner Lessor or any of their respective Affiliates to perform routine, administrative or ministerial actions the performance of which would not subject the Owner Participant, the Owner Lessor or such Affiliate to any adverse consequence (in the reasonable opinion of the Owner Participant or the Owner Lessor, as the case may be, acting in good faith), PROVIDED THAT the Facility Lessee, the Owner Lessor and the Owner Participant agree to cooperate and to take reasonable measures to alleviate the source or consequence of any regulation constituting an Event of Loss under this paragraph (iv), at the cost and expense of the party requesting such cooperation and 16 so long as there shall be no adverse consequences to the Owner Lessor or Owner Participant as a result of such cooperation or the taking of such reasonable measures. "EVENT OF LOSS PAYMENT" shall have the meaning specified in SECTION 10.2(a) of the Facility Lease. "EXCEPTED PAYMENTS" shall mean and include (i)(A) any indemnity (whether or not constituting Supplemental Lease Rent and whether or not a Lease Event of Default exists) payable to either the Trust Company, the Owner Trustee or the Owner Participant or to their respective Indemnitees and successors and permitted assigns (other than the Lease Indenture Trustee) pursuant to SECTION 2.3, 12.1, 12.2, 14.1 OR 14.2 of the Participation Agreement or SECTION 5.03, 7.01 OR 7.05 of the Trust Agreement and any payments under the Tax Indemnity Agreement or (B) any amount payable to the Owner Lessor or the Owner Participant to reimburse any such Person for its costs and expenses in exercising its rights or complying with its obligations under the Operative Documents, (ii)(A) insurance proceeds, if any, payable to the Owner Lessor or the Owner Participant under insurance separately maintained by the Owner Lessor, the Equity Investor or the Owner Participant with respect to the Facility as permitted by SECTION 11.5 of the Facility Lease or (B) proceeds of personal injury, property damage liability or other liability insurance maintained under any Operative Document for the benefit of the Owner Lessor, the Equity Investor or the Owner Participant, (iii) any amount payable to the Owner Participant as the purchase price for the Beneficial Interest or to any OP Member as the purchase price for such OP Member's membership interest in the Owner Participant, (iv) any amounts payable to the Owner Participant upon exercise by the Facility Lessee (or its designee) of the rights pursuant to SECTION 16 OR 17 of the Participation Agreement, (v) all other fees expressly payable to the Owner Participant, the Owner Trustee or the Trust Company under the Operative Documents, (vi) any payments in respect of interest, or any payments made on an After-Tax Basis, to the extent attributable to payments referred to in clause (i) through (vi) above that constitute Excepted Payments, and (vii) any amount payable in respect of the foregoing by any Person on behalf of the Facility Lessee. "EXCESS AMOUNT" shall have the meaning specified in SECTION 18.3 of the Participation Agreement. 17 "FACILITY" shall mean the Joliet Station, a 1,044 megawatt coal fired electric generating plant located in Will County, Illinois and more fully described in Exhibit B to the Facility Lease. "FACILITY DEED" shall mean the Facility Deed, dated as of August 17, 2000, between Midwest and the Owner Lessor pursuant to which Midwest transferred the Undivided Interest to the Owner Lessor. "FACILITY LAND" shall have the meaning set forth in the recitals to the Facility Site Lease. "FACILITY LEASE" shall mean the Facility Lease Agreement (T1), dated as of August 17, 2000, between the Owner Lessor and the Facility Lessee. "FACILITY LEASE TERM" shall mean the term of the Facility Lease, including the Basic Lease Term and all Renewal Lease Terms. "FACILITY LESSEE" shall mean Midwest, as lessee of the Undivided Interest under the Facility Lease. "FACILITY LESSEE'S INTEREST" shall mean the Facility Lessee's right, title and interest in and to the Undivided Interest under the Facility Lease and the Ground Interest under the Facility Site Sublease. "FACILITY LESSOR" shall mean the Owner Lessor, as lessor of the Undivided Interest under the Facility Lease. "FACILITY SITE" shall have the meaning specified in the recitals to the Facility Site Lease. "FACILITY SITE LEASE" shall mean the Facility Site Lease Agreement (T1), dated as of August 17, 2000, between Midwest as Ground Lessor and the Owner Lessor as Ground Lessee. "FACILITY SITE SUBLEASE" shall mean the Facility Site Sublease Agreement (T1), dated as of August 17, 2000, between the Owner Lessor as Ground Sublessor and Midwest as Ground Sublessee. 18 "FACILITY SUBLESSEE" shall mean any Person which shall have become a sublessee of the Facility from the Facility Lessee in accordance with the Facility Lease. "FAIR MARKET RENTAL VALUE" or "FAIR MARKET SALES VALUE" shall mean with respect to any property or service as of any date, the cash rent or cash price obtainable in an arm's length lease, sale or supply, respectively, between an informed and willing lessee or purchaser under no compulsion to lease or purchase and an informed and willing lessor or seller or supplier under no compulsion to lease or sell or supply the property or service in question, and shall, in the case of the Undivided Interest or the Owner Lessor's Interest, be determined (except pursuant to SECTION 17 of the Facility Lease or as otherwise provided below or in the Operative Documents) on the basis that (i) the conditions contained in SECTIONS 7 and 8 of the Facility Lease shall have been complied with in all respects, (ii) the lessee or buyer shall have rights in, or an assignment of, the Operative Documents to which the Owner Lessor is a party and the obligations relating thereto, (iii) the Undivided Interest or the Owner Lessor's Interest, as the case may be, is free and clear of all Liens (other than Owner Lessor's Liens, Owner Participant's Liens and Indenture Trustee Liens), (iv) taking into account the remaining term of the Facility Site Lease, and (v) in the case the Fair Market Rental Value, taking into account the terms of the Facility Lease and the other Operative Documents. If the Fair Market Sales Value of the Owner Lessor's Interest is to be determined during the continuance of a Lease Event of Default or in connection with the exercise of remedies by the Owner Lessor pursuant to SECTION 17 of the Facility Lease, such value shall be determined by an appraiser appointed solely by the Owner Lessor on an "as-is," "where-is" and "with all faults" basis and shall take into account all Liens (other than Owner Lessor's Liens, Owner Participant's Liens and Indenture Trustee Liens); PROVIDED, HOWEVER, in any such case where the Owner Lessor shall be unable to obtain constructive possession sufficient to realize the economic benefit of the Owner Lessor's Interest, Fair Market Sales Value of the Owner Lessor's Interest shall be deemed equal to $0. If in any case other than in the preceding sentence the parties are unable to agree upon a Fair Market Sales Value of the Owner Lessor's Interest within 30 days after a request therefor has been made, the Fair Market Sales Value of the Owner Lessor's Interest shall be determined by appraisal pursuant to the Appraisal Procedure. Any fair market value determination of a Severable Improvement shall take into consideration any liens or encumbrances to which the Severable Improvement being appraised is subject and which are being assumed by the transferee. 19 "FAS 13" shall mean Statement of Financial Accounting Standards (SFAS) No. 13, as amended and interpreted from time to time. "FEDERAL POWER ACT" shall mean the Federal Power Act, 16 U.S.C. " 791a-825r (1994), as amended. "FERC" shall mean the Federal Energy Regulatory Commission of the United States or any successor or predecessor agency thereto. "FERC EWG ORDERS" shall mean (i) the order issued by the FERC on November 9, 1999, Docket No. EG99-224-000 granting to Midwest "exempt wholesale generator" status under the Holding Company Act, and (ii) each of the orders issued by the FERC on July 24, 2000, in Docket Nos. EG00-160-000 and EG00-161-000 granting to the Owner Lessor and the Other Owner Lessor "exempt wholesale generator" status under the Holding Company Act. "FERC ORDERS" shall mean, collectively, the FERC EWG Orders, the FERC Section 203 Order and the FERC Section 205 Orders. "FERC SECTION 203 ORDER" shall mean the order issued by the FERC on June 26, 2000, in Docket No. EC00-94-000, granting approval under Section 203 of the Federal Power Act for the transfer of the facilities for financing purposes to the Owner Lessor and the Other Owner Lessor and lease of the facilities by the Owner Lessor and the Other Owner Lessor to Midwest. "FERC SECTION 205 ORDERS" shall mean (i) the order issued by the FERC on September 15, 1999, in Docket No. ER99-3693-000, granting approval under Section 205 of the Federal Power Act for Midwest to sell power at market based rates and granting blanket preapproval under Section 204 of the Federal Power Act for all future issuances of securities and assumptions of liabilities by Midwest, and (ii) the order issued by the FERC on September 3, 1999, in Docket No. ER99-3691-000, accepting for filing three Facilities and Interconnection Agreements. "FINAL DETERMINATION" shall have the meaning specified in SECTION 1 of the Tax Indemnity Agreement. 20 "FIRST WINTERGREEN RENEWAL LEASE TERM" shall have the meaning specified in SECTION 15.1(a) of the Facility Lease. "FISCAL QUARTER" shall mean any quarter of a Fiscal Year. "FISCAL YEAR" shall mean 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") shall refer to the Fiscal Year ending on December 31 occurring during such calendar year. "FIXED CHARGES" shall mean, in respect of any period, an amount equal to the aggregate of, without duplication, (i) all interest due and payable on any Indebtedness of Holdings PLUS or MINUS any net amount due and payable in respect of Interest Rate Hedging Transactions during such period, including (A) all capitalized interest and (B) the interest portion of any deferred payment obligation, (ii) amounts due and payable in respect of fees on Indebtedness permitted to be incurred by Holdings during such period, (iii) amounts due and payable to any lenders of Holdings with respect to the deduction of withholding tax on such payments during such period, (iv) the interest portion of any deferred payment obligation due and payable during such period, (v) the aggregate amount of the Collins Lease Obligations due and payable during such period, (vi) all other amounts due and payable by the Holdings Loan Parties with respect to Indebtedness other than Designated Lease Liabilities, Synthetic Lease Liabilities and Combined Leveraged Lease Liabilities permitted to be incurred by the Holdings Loan Parties under the Lessee Financing Documents during such period, and (vii) all amounts due and payable by Holdings Loan Parties to unaffiliated third parties during such period in respect of any preferred stock or other similar obligations. "FMV RENEWAL LEASE TERM" shall have the meaning specified in SECTION 15.2 of the Facility Lease. "FREE CASHFLOW" shall mean, for any period, the sum of (a) payments made by EME under or in respect of the Synthetic Lease Intercompany Note and (to the extent permitted to be retained by Midwest under the Pledge Agreements) the Combined Lease Note during such period to the extent not distributed by Midwest directly or indirectly to EME during such period plus (b) the excess if any, of (i) Cashflow Available for Fixed Charges for such period OVER (ii) the sum of (x) Fixed Charges 21 for such period and (y) amounts required to be deposited into the Cashflow Recapture Fund (such excess "BASE FREE CASH FLOW") MINUS (c) Designated Lease Liabilities, Synthetic Lease Liabilities and Combined Leveraged Lease Liabilities paid by Midwest during such period; PROVIDED that Base Free Cashflow shall be zero in the event that any of the following conditions has not been satisfied: (i) Holdings has paid all amounts then due and payable in respect of (x) all monetary obligations of the Holdings Loan Parties arising under or in connection with the Holdings Credit Agreement and any agreements or instruments related thereto and (y) any Indebtedness of Holdings that is a Secured Obligation; (ii) no Default, Event of Default or Maturity Event (each as defined in the Holdings Credit Agreement) shall have occurred and be continuing or will occur after giving effect to the making of the payments referred to in clauses (i)(x) and (y); and (iii) (A) the Debt Service Coverage Ratio for the 12-month period ended on the last day of the immediately preceding Fiscal Quarter (or, in respect of any Quarterly Payment Date prior to January 1, 2001, the Debt Service Coverage Ratio for the period commencing on January 1, 2000 and ending 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 1.75 to 1.00. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time, consistently applied. "GOOD FAITH CONTEST" shall mean the contest of an item if (i) the item is diligently being contested in good faith by appropriate proceedings timely instituted, (ii) adequate reserves are established in accordance with GAAP with respect to the contested item, if the contested item individually or when taken together with all other contested items for which reserves are not at the time being held could reasonably be expected to result in liability of EME in excess of $1,000,000, (iii) during the period of such contest, the enforcement of any contested item is effectively stayed, unless such enforcement would not reasonably be expected to result in a Material Adverse Effect with respect to EME, (iv) any lien filed in connection therewith shall have been removed from the record by bonding arrangements by a reputable surety company, or title insurance or cash deposits or otherwise provided to assure the discharge of EME'S obligation in connection 22 therewith, provided that such cash deposits, in the aggregate, shall not exceed $2,000,000, (v) such payment shall have been made as is necessary to prevent the recordation of a tax deed or other similar instrument conveying the property of EME or any portion thereof, (vi) the failure to pay or comply with the contested item during the period of such Good Faith Contest would not reasonably be expected to result in a Material Adverse Effect with respect to EME and (vii) EME has no knowledge of any actual or proposed deficiency or additional assessment in connection therewith not otherwise satisfying the requirements of clauses (i) through (vi). "GOVERNMENTAL APPROVAL" shall mean any authorization, consent, approval, license, permit, order, certificate, waiver, variance, filing or registration with or issued by any Governmental Authority. "GOVERNMENTAL AUTHORITY" shall mean 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. "GROUND INTEREST" shall have the meaning specified in the recitals to the Facility Site Lease. "GROUND LESSEE" shall mean the Owner Lessor as lessee of the Ground Interest under the Facility Site Lease. "GROUND LESSOR" shall mean Midwest as lessor of the Ground Interest under the Facility Site Lease. "GROUND SUBLESSEE" shall mean Midwest as sublessee of the Ground Interest under the Facility Site Sublease. "GROUND SUBLESSOR" shall mean the Owner Lessor as sublessor of the Ground Interest under the Facility Site Sublease. 23 "GUARANTEED TV AMOUNT" shall mean for any Termination Date the Guaranteed TV Amount set forth on Schedule 1 to the EME Guarantee for such Termination Date. "GUARANTOR" shall mean Edison Mission Energy, as issuer of the EME Guarantees. "HAZARDOUS MATERIAL" shall mean: (i) any "hazardous substance," as defined by any Environmental Law: (ii) any "hazardous waste," as defined by any Environmental Law, (iii) any petroleum product (including crude oil or any fraction thereof); or (iv) 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, prohibited or restricted pursuant to any Environmental Laws or that could give rise to an Environmental Claim. "HOLDING COMPANY ACT" or "PUHCA" shall mean the Public Utility Holding Company Act of 1935, as amended. "HOLDINGS" shall mean Edison Mission Midwest Holdings Co., a Delaware corporation. "HOLDINGS COLLATERAL AGENT" shall mean Citibank, N.A. as the collateral agent under the Intercreditor Agreement. "HOLDINGS CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of December 15, 1999, by and among Holdings, the Holdings Lenders and The Chase Manhattan Bank, as the administrative agent. "HOLDINGS LENDERS" shall mean The Chase Manhattan Bank, Citicorp USA, Inc., Societe Generale and Westdeutsche Landesbank Girozentrale, New York Branch and 24 such other institutions that become lenders in accordance with the Holdings Credit Agreement. "HOLDINGS LOAN PARTIES" shall mean Holdings and each of Holdings' direct and indirect Subsidiaries. "HOLDINGS SECURED PARTIES" shall mean the Secured Parties as such term is defined in the Intercreditor Agreement. "IMPROVEMENT" shall mean a modification, alteration, addition or improvement to the Facility. "INDEBTEDNESS" of any Person shall mean, without duplication: (i) all indebtedness for borrowed money; (ii) 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; (iii) 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); (iv) 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; (v) 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); 25 (vi) all Capitalized Lease Liabilities and Operating Lease Liabilities; (vii) 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; (viii) all indebtedness referred to in clauses (i) through (vii) 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 (ix) all Contingent Liabilities. 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. "INDEMNITEE" shall have the meaning specified in SECTION 12.1(a) of the Participation Agreement. "INDENTURE ESTATE" shall have the meaning specified in the Granting Clause of the Lease Indenture. "INDENTURE TRUSTEE LIENS" shall mean any Lien on the Trust Estate or any part thereof arising as a result of (i) Taxes against or affecting the Lease Indenture Company or the Lease Indenture Trustee, or any Affiliate thereof that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby, (ii) Claims against or any act or omission of the Lease Indenture Company or the Lease Indenture Trustee, or Affiliate thereof that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of the Lease Indenture Company or the Lease Indenture Trustee specified therein, (iii) Taxes imposed upon the Lease Indenture Company or the Lease Indenture Trustee, or any Affiliate thereof that are not indemnified against by EME pursuant to any Operative Document or (iv) Claims against or affecting the Lease Indenture Company or the Lease Indenture Trustee, or any Affiliate thereof arising out of the voluntary or 26 involuntary transfer by the Lease Indenture Company or the Lease Indenture Trustee of any portion of the interest of the Lease Indenture Company or the Lease Indenture Trustee in the Trust Estate, other than pursuant to the Operative Documents. "INDEPENDENT APPRAISER" shall mean a disinterested, licensed professional appraiser of industrial property who (a) meets the personal property qualifications criteria established by the Appraisal Foundation; (b) is a member of the Appraisal Institute or holds the senior accreditation of the American Society of Appraisers; (c) is in the regular employ, or is a principal of, a nationally recognized appraisal firm; and (d) has substantial experience in the business of appraising facilities similar to the Facility. "INITIAL LESSOR NOTES" shall have the meaning specified in SECTION 2.2 of the Lease Indenture. "INITIAL PURCHASERS" shall mean Credit Suisse First Boston Corporation, Lehman Brothers Inc., Chase Securities Inc., Salomon Smith Barney Inc. and SG Cowen Securities Corp. "INSOLVENCY" shall mean, with respect to any Multiemployer Plan, the condition that such plan is insolvent within the meaning of Section 4245 of ERISA. "INSURANCE CONSULTANT" shall mean Marsh USA Risk & Insurance Services. "INTERCONNECTION AGREEMENT" shall mean the Facilities, Interconnection and Easement Agreement (Joliet #29 Generating Station) dated as of December 15, 1999 between Midwest and ComEd, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "INTERCREDITOR AGREEMENT" shall mean the Collateral Agency and Intercreditor Agreement dated as of December 15, 1999, among MGE, Holdings, EMOC, Midwest, Collins Holdings, Collins Trust I, Collins Trust II, Collins Trust III, Collins Trust IV, Midwest Funding LLC, the Administrative Agent (as defined therein), each Holder Representative (as defined therein), each Other Representative (as defined therein), the Depositary Bank (as defined therein), the Depositary Agent 27 (as defined therein), the Midwest LC Issuer (as defined therein) and the Holdings Collateral Agent. "INTEREST ON 467 FIXED RENT" shall mean the amount set forth on Schedule 1-3 to the Facility Lease. "INTEREST RATE HEDGING TRANSACTIONS" shall mean, as to any Loan Party, 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" shall mean, relative to any person: (i) 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); (ii) any Contingent Liability of such Person; and (iii) any ownership or similar interest held by such person in any other Person. "JOLIET STATION SITE" shall mean the Facility Site and the Retained Facilities Site, as more fully described on Exhibit A attached to the Facility Site Lease. "LEASE DEBT" shall mean the debt evidenced by the Lessor Notes and (without duplication) the Certificates. "LEASE EVENT OF DEFAULT" shall have the meaning set forth in the Facility Lease. "LEASE FINANCING DOCUMENTS" shall mean the Lease Indenture, the Lessor Notes, the EME Guarantees, the Pass Through Trust Agreements, the Certificates and the other agreements, documents and instruments delivered in connection with the Lease Indenture and the Lessor Notes. "LEASE FINANCING PARTY" shall mean, individually or collectively, as the context shall require, all or any of the parties to the Operative Documents, including the Trust Company and excluding ComEd and the Holdings Collateral Agent. 28 "LEASE INDENTURE" shall mean the Indenture of Trust, Mortgage and Security Agreement (T1) dated as of August 17, 2000, between the Owner Lessor and the Lease Indenture Trustee. "LEASE INDENTURE COMPANY" shall mean United States Trust Company of New York, in its individual capacity under the Operative Documents. "LEASE INDENTURE DEFAULT" shall mean any event or occurrence which, with the passage of time or the giving of notice or both, would become a Lease Indenture Event of Default. "LEASE INDENTURE EVENT OF DEFAULT" shall have the meaning specified in SECTION 4.2 of the Lease Indenture. "LEASE INDENTURE TRUSTEE" shall mean United States Trust Company of New York, not in its individual capacity, but solely as Lease Indenture Trustee under the Lease Indenture, and each other Person which may from time to time be acting as Lease Indenture Trustee in accordance with the provisions of the Lease Indenture. "LEASE INDENTURE TRUSTEE'S ACCOUNT" shall mean the account No. 049 66100 at the United States Trust Company of New York, for the account of Joliet Trust I, Attention: Christopher J. Grell, or such other account of the Lease Indenture Trustee, as the Lease Indenture Trustee may from time to time specify in a notice to the other parties to the Participation Agreement. "LEASE PERMITTED LIENS" shall mean (i) any Lien created by any Operative Document; (ii) the Owner Lessor's Liens and the Owner Participant's Liens; (iii) Liens for Taxes, water, sewage, license, permit or inspection fees either not yet due and payable or being contested in good faith by appropriate proceedings so long as such proceedings do not involve a material danger of the sale, forfeiture or loss of the Facility; (iv) construction materialmen's, mechanics', workers', repairmen's, employees' or other like Liens arising in the ordinary course of business for amounts either not overdue for a period of not more than 45 days or being contested in good faith by appropriate proceedings so long as such proceedings do not involve a material danger of the sale, forfeiture or loss of the Facility or are bonded for the amount required under Requirements of Law to release any such Lien; (v) Liens arising out of judgments or awards against the Facility Lessee which at the time are 29 being contested in good faith by appropriate proceedings so long as such proceedings do not involve a material danger of the sale, forfeiture or loss of the Facility but in any event not to exceed $1,000,000 in the aggregate at any one time unless the full amount in dispute is bonded in a manner reasonably acceptable to the Owner Lessor; (vi) applicable zoning and building regulations and ordinances from time to time in effect which do not affect the use or operation of the Facility (or the Undivided Interest therein) except to an insignificant extent; (vii) the interest of a sublessee in the Undivided Interest in the Facility under a permitted sublease; and (viii) Liens, easements, encumbrances, restrictions, defects or irregularity of title which in the aggregate are not substantial in amount, do not materially detract from the value of the Facility or the Facility Site (or the Undivided Interest therein) and do not materially impair the use of the Facility or the Facility Site (or the Undivided Interest therein) in the ordinary course of business. "LEASES" shall mean, collectively, the Facility Lease and the Other Facility Lease. "LESSEE FINANCING DOCUMENTS" shall mean the Holdings Credit Agreement, the CAPEX Credit Agreement and all other agreements and instruments evidencing Indebtedness of Holdings and Midwest. "LESSOR NOTES" shall mean any Initial Lessor Notes, Additional Lessor Notes or New Lessor Notes issued pursuant to the Lease Indenture. "LEVERAGED LEASE LIABILITIES" means the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that the Midwest is obligated to pay under the Facility Lease or the other Operative Documents. "LIEN" shall mean 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. "LIST OF COMPETITORS" shall mean the initial list attached to the Participation Agreement as EXHIBIT MM, as amended from time to time pursuant to SECTION 10.1(b) of the Participation Agreement, which list shall not exceed six unaffiliated entities at any one time. 30 "MAKE-WHOLE PREMIUM" shall have the meaning set forth in Annex A to the Lease Indenture. "MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person, 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 such Person and its Subsidiaries since the Closing Date, (ii) the ability of such Person to perform or comply with its obligations under any of the Operative Documents or (iii) the validity and enforceability of the Operative Documents, the liens granted thereunder or the rights and remedies thereto. "MATERIAL LEASE DEFAULT" shall mean any event which, with notice, lapse of time or both notice and lapse of time, would become a Lease Event of Default described in clause (a), (b), (f) or (g) of the definition thereof set forth in SECTION 16 of the Facility Lease. "MAXIMUM TRANSACTION COST" shall mean 1.3% of the Purchase Price. "MEMBERSHIP INTEREST" shall mean the membership interest in the Owner Participant. "MEMBER TRANSFEREE" shall have the meaning specified in SECTION 18.18(a) of the Participation Agreement. "MEMORANDUM OF THE FACILITY LEASE" shall mean the Memorandum of the Facility Lease (T1), dated as of August 17, 2000, between the Owner Lessor and the Facility Lessee and filed with the Registries of Deeds, Will County, Illinois. "MEMORANDUM OF THE FACILITY SITE LEASE" shall mean the Memorandum of the Facility Site Lease (T1), dated as of August 17, 2000, between the Ground Lessor and the Ground Lessee and filed with the Registries of Deeds, Will County, Illinois. "MEMORANDUM OF THE FACILITY SITE SUBLEASE" shall mean the Memorandum of the Facility Site Sublease (T1), dated as of August 17, 2000, between the Ground Sublessor and the Ground Sublessee and filed with the Registries of Deeds, Will County, Illinois. 31 "MGE" shall mean Midwest Generation EME LLC, a Subsidiary of Edison Mission Energy and a limited liability company organized under the laws of the State of Delaware. "MIDWEST" shall mean Midwest Generation LLC, a limited liability company organized under the laws of the State of Delaware. "MIDWEST ADVISOR" shall mean Babcock & Brown Inc. "MOODY'S" shall mean Moody's Investors Service, Inc., a division of Dun & Bradstreet Corporation, and its successors and assigns. "MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as such term is defined in Section 4001(a)(3) of ERISA. "NATIONAL PRIORITIES LIST" shall have the meaning set forth in 40 C.F.R. Section 300.5. "NET TANGIBLE ASSETS" shall mean, as of the date of any determination thereof, the total amount of all assets of EME and its Subsidiaries (determined on a consolidated basis in accordance with GAAP), less the sum of (i) the consolidated current liabilities of EME and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) and (ii) assets properly classified as "intangible assets" in accordance with GAAP. "NEW LESSOR NOTES" shall have the meaning specified in SECTION 2.13 of the Lease Indenture. "NON-RECOURSE DEBT" shall mean, with respect to any Person, Indebtedness which such Person is not directly or indirectly obligated to repay. "NON-SEVERABLE IMPROVEMENTS" shall mean any Improvement to the Facility that is not a Severable Improvement. "NOTEHOLDERS" shall mean each of the holders of the Lessor Notes, and each of such holder's successors and permitted assigns. 32 "OBSOLESCENCE TERMINATION DATE" shall have the meaning specified in SECTION 14.1 of the Facility Lease. "OFFERING CIRCULAR" shall mean the Offering Circular, dated August 17, 2000, with respect to the Certificates. "OFFICER'S CERTIFICATE" shall mean with respect to any Person, a certificate signed by any Authorized Officer of such Person. "OPERATING EXPENSES" shall mean, in respect of any period, all cash amounts paid by the Holdings 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, necessary capital expenditures and all other fees and expenses necessary for the continued operation and maintenance of the Generating Assets (as defined in the Holdings Credit Agreement) and the conduct of the business of the Holdings Loan Parties. Operating Expenses shall exclude (to the extent included) Collins Lease Obligations, Synthetic Lease Liabilities (other than payments of Synthetic Lease Environmental Indemnity Obligations) and Combined Leveraged Lease Liabilities and shall include (to the extent excluded) Designated Lease Liabilities (other than Collins Lease Obligations). "OPERATING LEASE" shall mean any lease other than a Capital Lease (and, solely by virtue of the intended classification under GAAP, shall include the Leases). "OPERATING LEASE LIABILITIES" of any Person shall mean all monetary obligations of such Person under any Operating Lease. "OPERATION AGREEMENT" shall mean the Operation Agreement, dated as of August 17, 2000, among Midwest, the Owner Lessor and the Other Owner Lessor. "OPERATIVE DOCUMENTS" shall mean the Participation Agreement, the Facility Deed, the Facility Lease, the Memorandum of the Facility Lease, the Facility Site Lease, the Memorandum of the Facility Site Lease, the Facility Site Sublease, the 33 Memorandum of the Facility Site Sublease, the Lease Indenture, the Lessor Notes, the Trust Agreement, the Pass Through Trust Agreements, the Certificates, the Certificate Purchase Agreement, EME Guarantee, the OP LLC Agreement, the Tax Indemnity Agreement, the Purchase Agreement, the Assignment and Assumption Agreement, the Owner Participant Guaranty, the ComEd Consent, the EME OP Guarantee, the Bill of Sale, the Shared Facilities Agreements, the Registration Rights Agreement, the Operation Agreement, the Reimbursement Agreement, the Subordination Agreement and, when executed and delivered, any agreement with respect to Support Arrangements contemplated by, and defined in, SECTION 5.2(e) of the Facility Lease. "OP GUARANTOR" shall mean PSEG Resources Inc. or any other Person that shall guarantee the obligations of the Owner Participant or a Member Transferee under the Operative Documents pursuant to the Owner Participant Guaranty. "OP LLC AGREEMENT" shall mean the Amended and Restated Limited Liability Company Agreement of Joliet Generation I, LLC, dated as of August 17, 2000. "OP MEMBER" shall mean any Person holding a membership interest in the Owner Participant pursuant to the OP LLC Agreement. "OPTIONAL IMPROVEMENT" shall have the meaning specified in SECTION 8.2 of the Facility Lease. "ORGANIC DOCUMENT" shall mean, 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; with respect to any Person that is a limited partnership, its certificate of limited partnership and partnership agreement; and with respect to any Person that is a limited liability company, its certificate of formation and its limited liability company agreement, in each case, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "OTHER FACILITY LEASE" shall mean the other Facility Lease Agreement, dated as of August 17, 2000, by and between Midwest and the Other Owner Lessor relating to the Other Joliet Lease Transaction, pursuant to which Midwest will lease the Other Undivided Interest from the Other Owner Lessor. 34 "OTHER FACILITY LESSEE" shall mean the Facility Lessee under the Other Facility Lease. "OTHER FACILITY SITE LEASE" shall mean the other Facility Site Lease, dated as of August 17, 2000, by and between Midwest and the Other Owner Lessor, pursuant to which Midwest will lease the Other Ground Interest to the Other Owner Lessor. "OTHER FACILITY SITE SUBLEASE" shall mean the other Facility Site Sublease, dated as of August 17, 2000, by and between the Other Owner Lessor and Midwest, pursuant to which the Other Owner Lessor will sublease the Other Ground Interest to Midwest. "OTHER GROUND INTEREST" shall mean the undivided leasehold interest in the Facility Site not conveyed to the Owner Lessor under the Facility Site Lease. "OTHER JOLIET LEASE TRANSACTION" shall mean the transaction involving the transfer of the Other Undivided Interest and the lease of the Other Ground Interest to the Other Owner Lessor, and the simultaneous lease of the Other Undivided Interest to Midwest and the simultaneous sublease of the Other Ground Interest to Midwest on substantially the same terms and conditions as under, and dated the same date as, the Overall Transaction. "OTHER LEVERAGED LEASE LIABILITIES" shall mean the basic rent, supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Other Facility Lease or the operative documents for the Other Joliet Lease Transaction. "OTHER MIDWEST LIABILITIES" shall have the meaning set forth in SECTION 18.19 of the Participation Agreement. "OTHER OWNER LESSOR" shall mean Joliet Trust II, a Delaware business trust. "OTHER OWNER PARTICIPANT" shall mean Joliet Generation II, LLC, a Delaware limited liability company. 35 "OTHER UNDIVIDED INTEREST" shall mean the undivided ownership interest in the Facility not conveyed to the Owner Lessor under the Facility Deed and the Land Deed. "OVERALL TRANSACTION" shall mean the transactions contemplated by the Operative Documents. "OVERDUE RATE" shall mean the Applicable Rate plus 2% per annum. "OWNER LESSOR" shall mean Joliet Trust I, a Delaware business trust created for the benefit of the Owner Participant. "OWNER LESSOR'S INTEREST" shall mean the Owner Lessor's right, title and interest in and to (i) the Undivided Interest and (ii) the Ground Interest under the Facility Site Lease. "OWNER LESSOR'S LEASEHOLD TITLE POLICY" shall mean that certain Leasehold Owner's policy, No. 1368456-1, issued by Chicago Title Insurance Company to the Owner Lessor dated August 24, 2000, to be redated the date of the recording of the Memorandum of the Facility Site Lease, insuring the Owner Lessor's (i) 63.6% undivided leasehold interest in the Facility Site as lessee under the Facility Site Lease, and (ii) 63.6% undivided fee interest in the Facility. "OWNER LESSOR'S LIEN" shall mean any Lien on the Trust Estate or any part thereof arising as a result of (i) Claims against or any act or omission of the Trust Company or the Owner Trustee, or Affiliate thereof that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of the Trust Company or the Owner Trustee specified therein, (ii) Taxes imposed upon the Trust Company or the Owner Trustee, or any Affiliate thereof that are not indemnified against by EME or the Facility Lessee pursuant to any Operative Document or are not related to, or that are in violation of any Operative Document or the transactions contemplated thereby, (iii) Claims against or affecting, the Trust Company or the Owner Trustee, or any Affiliate thereof arising out of the voluntary or involuntary transfer by the Trust Company or the Owner Trustee of any portion of the interest of the Trust Company or the Owner Trustee in the Owner Lessor's Interest, other than as contemplated or permitted by the Operative Documents. 36 "OWNER LESSOR'S PERCENTAGE" shall mean 63.6%. "OWNER PARTICIPANT" shall mean Joliet Generation I, LLC, a Delaware limited liability company. "OWNER PARTICIPANT GUARANTY" shall mean the guaranty provided by the OP Guarantor pursuant to SECTION 4.20 of the Participation Agreement. "OWNER PARTICIPANT'S BENEFICIAL INTEREST" shall mean the Owner Participant's interest in the Owner Lessor. "OWNER PARTICIPANT'S COMMITMENT" shall mean the Owner Participant's investment in the Owner Lessor contemplated by SECTION 2.1 of the Participation Agreement. "OWNER PARTICIPANT'S EXPECTED RETURN" with respect to the Owner Participant's Commitment shall mean the Owner Participant's anticipated (i) net after-tax yield, calculated according to the multiple investment sinking fund method of analysis (as described in FAS 13) and (ii) aggregate GAAP income, general pattern of after-tax earnings and after-tax cash flow. "OWNER PARTICIPANT'S LIEN" shall mean any Lien on the Trust Estate or any part thereof arising as a result of (i) Claims against or any act or omission of the Owner Participant that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of the Owner Participant set forth therein, (ii) Taxes against the Owner Participant that are not indemnified against by EME pursuant to the Operative Documents or (iii) Claims against or affecting the Owner Participant arising out of the voluntary or involuntary transfer by the Owner Participant (except as contemplated or permitted by the Operative Documents) of any portion of the interest of the Owner Participant in the Beneficial Interest. "OWNER TRUST" shall mean the Owner Lessor. "OWNER TRUSTEE" shall mean Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity, but solely as Owner Trustee under the 37 Trust Agreement and each other Person which may from time to time be acting as Owner Trustee in accordance with the provisions of the Trust Agreement. "PARENT" shall mean any Person, any corporation, partnership, limited liability company or other entity which, directly or indirectly, owns 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 any 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 controls the management of any partnership, limited liability company or other entity. "PARTICIPATION AGREEMENT" shall mean the Participation Agreement (T1), dated as of August 17, 2000, among the Owner Lessor, the Owner Trustee, the Owner Participant, EME, Midwest, United States Trust Company of New York, as Lease Indenture Trustee and United States Trust Company of New York, as Pass Through Trustees. "PASS THROUGH COMPANY" shall mean United States Trust Company of New York, in its individual capacity. "PASS THROUGH TRUST AGREEMENTS" shall mean one or more, as the context may require, of (i) the Pass Through Trust Agreement A, dated as of August 17, 2000, and (ii) the Pass Through Trust Agreement B, dated as of August 17, 2000, in each case between Midwest and a Pass Through Trustee. "PASS THROUGH TRUSTEES" shall mean United States Trust Company of New York, not in its individual capacity, but solely as Pass Through Trustee under each of the Pass Through Trust Agreements, and each other Person which may from time to time be acting as a Pass Through Trustee in accordance with the provisions of a Pass Through Trust Agreement. "PASS THROUGH TRUSTS" shall mean each of the pass through trusts created pursuant to the Pass Through Trust Agreements. "PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. 38 "PENSION PLAN" shall mean a "pension plan," as such term is defined in Section 3(2) of ERISA (other than a Multiemployer Plan), and to which 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 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. "PERMITTED ENCUMBRANCES" shall mean all matters shown as exceptions on Schedule B to the Owner Lessor's Leasehold Title Policy as in effect on the Closing Date. "PERMITTED INVESTMENTS" shall mean: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; and (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above. 39 "PERMITTED LIENS" shall mean the Liens permitted under SECTION 4.02 of the EME OP Guarantee. "PERMITTED SECURED INDEBTEDNESS" shall mean Indebtedness permitted by each of SECTION 8.2.1(b),(f),(g) or (j) of the Holdings Credit Agreement, SECTION 8.1(c), (g), (h) or (k) of each Applicable Participation Agreement (as defined in the Intercreditor Agreement), and the correlative provisions of any other Financing Document (as defined in the Intercreditor Agreement). "PERSON" shall mean 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. "PHASE I ENVIRONMENTAL SURVEY" shall mean a study, conducted in accordance with standards promulgated by the American Society for Testing and Materials or an equivalent environmental site assessment conducted pursuant to current good customary and commercial practice, that (i) evaluates the potential for Environmental Conditions to exist at the property that is the subject of the study as a result of historical or current operations or activities at said property and (ii) evaluates whether the subject property is in substantial compliance with applicable Environmental Laws. "PHASE II ENVIRONMENTAL SURVEY" shall mean a study, conducted pursuant to current good customary and commercial practice, to evaluate potential Environmental Conditions identified as a result of a Phase I Environmental Survey through the collection and analysis of samples of environmental media (including, in the reasonable judgment of the consultant performing the study, samples of soils, subsurface soils, groundwater, surface water, sediments, air or other environmental media) at the site which is the subject of the study. Such study shall be designed to confirm the existence (or nonexistence) of Environmental Conditions at the subject property that may require further investigation, abatement, removal, monitoring, clean-up, remediation or other response actions in accordance with applicable Environmental Laws and, consistent with customary and commercial practice, determine the nature, scope and extent of such Environmental Conditions. "PLAN" shall mean any "employee benefit plan" (as defined in Section 3(3) of ERISA) that is subject to ERISA, any "plan" (as defined in Section 4975(e)(1) of the 40 Code) that is subject to Section 4975 of the Code, any trust created under any such plan or any "governmental plan" (as defined in Section 3(32) of ERISA or Section 414(d) of the Code) that is organized in a jurisdiction having prohibitions on transactions with government plans similar to those contained in Section 406 of ERISA or Section 4975 of the Code. "PLEDGE AGREEMENTS" shall mean the EME Powerton (T1) Pledge Agreement, the EME Powerton (T2) Pledge Agreement, the EME Joliet (T1) Pledge Agreement and the EME Joliet (T2) Pledge Agreement. "POWERTON FACILITY LEASES" shall mean the Facility Lease Agreement (T1), dated as of August 17, 2000, between Midwest and Powerton Trust I and the Facility Lease Agreement (T2), dated as of August 17, 2000, between Midwest and Powerton Trust II. "POWERTON LEASE OPERATIVE DOCUMENTS (T1)" shall mean, collectively, the Operative Documents as defined in the Powerton Lease Participation Agreement (T1). "POWERTON LEASE OPERATIVE DOCUMENTS (T2)" shall mean, collectively, the Operative Documents as defined in the Powerton Lease Participation Agreement (T2). "POWERTON LEASE PARTICIPATION AGREEMENT (T1)" shall mean the Participation Agreement (T1), dated as of August 17, 2000 by and among Midwest, EME, Powerton Trust I, Wilmington Trust Company, Powerton Generation I, LLC, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. "POWERTON LEASE PARTICIPATION AGREEMENT (T2)" shall mean the Participation Agreement (T2), dated as of August 17, 2000 by and among Midwest, EME, Powerton Trust II, Wilmington Trust Company, Powerton Generation II, LLC, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. "POWERTON LEASE TRANSACTION (T1)" shall mean the transactions consummated pursuant to the Powerton Lease Participation Agreement (T1) and the Powerton Lease Operative Documents (T1). 41 "POWERTON LEASE TRANSACTION (T2)" shall mean the transactions consummated pursuant to the Powerton Lease Participation Agreement (T2) and the Powerton Lease Operative Documents (T2). "POWERTON LEASE TRANSACTIONS" shall mean, collectively, the Powerton Lease Transaction (T1) and the Powerton Lease Transaction (T2). "POWERTON LEVERAGED LEASE LIABILITIES" shall mean the basic rent, supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Powerton Facility Leases or the operative documents for the Powerton Lease Transactions. "POWER PURCHASE AGREEMENT" shall mean the Power Purchase Agreement (Coal Fired Stations) dated as of December 15, 1999 between Midwest and ComEd, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "PRICING ASSUMPTIONS" shall mean the "Pricing Assumptions" attached as Schedule 10.1(c) to the Participation Agreement. "PROCEEDS" shall mean the proceeds from the sale of the Certificates by the Pass Through Trusts to the Certificateholders on the Closing Date. "PRUDENT INDUSTRY PRACTICE" shall mean, at a particular time, (i) any of the practices, methods and acts engaged in or approved by a significant portion of the competitive electric generating industry operating in the United States at such time, or (ii) with respect to any matter to which clause (i) 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. "PSEGR" shall mean PSEG Resources, Inc., a New Jersey corporation. 42 "PUHCA" -- see "Holding Company Act." "PURCHASE AGREEMENT" shall mean the Purchase and Sale Agreement (T1), dated as of August 17, 2000 between Midwest and the Equity Investor. "PURCHASE PRICE" shall mean the Owner Lessor's Percentage of $581,700,000.00. "RATING AGENCIES" shall mean S&P and Moody's. "REASONABLE BASIS" for a position shall exist if tax counsel may properly advise reporting such position on a tax return in accordance with Formal Opinion 85-352 issued by the Standing Committee on Ethics and Professional Responsibility of the American Bar Association (or any successor to such opinion). "REBUILDING CLOSING DATE" shall have the meaning specified in of SECTION 10.4(f) of the Facility Lease. "REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights Agreement, dated as of August 17, 2000 among EME, Midwest and Credit Suisse First Boston Corporation and Lehman Brothers Inc., as representatives of the Initial Purchasers. "REGULATIONS T, U AND X" shall mean Regulations T, U and X of the Federal Reserve System of the United States (or any successors thereto). "REGULATORY EVENT OF LOSS" shall mean an Event of Loss specified in clause (iv) of the definition of "Event of Loss." "REGULATORY VIOLATION" shall mean (i) Midwest (A) becoming subject to regulation as a "holding company" or a "subsidiary company" or an "affiliate" of a "holding company" required to register under PUHCA or (B) becoming subject to public utility regulation under the laws of the State of Illinois or (ii) the failure of Midwest to (A) be an "exempt wholesale generator" under PUHCA, (B) be interconnected with the high voltage network or to have access to transmission services and ancillary services to sell wholesale electric power or (C) have the authority to sell wholesale electric power at market-based rates and, in the case of clause (i) or (ii), such circumstance could reasonably be expected to result in a Material Adverse Effect on Midwest. 43 "REIMBURSEMENT AGREEMENT" shall mean the reimbursement agreement, dated as of August 17, 2000, between EME and Midwest. "RELATED PARTY" shall mean, with respect to any Person or its successors and assigns, an Affiliate of such Person or its successors and assigns and any director, officer, servant, employee or agent of that Person or any such Affiliate or their respective successors and assigns; PROVIDED, THAT the Trust Company shall not be treated as a Related Party to any other party, the Owner Trustee and the Owner Lessor shall not be treated as Related Parties to each other and neither Owner Lessor nor Owner Trustee shall be treated as a Related Party to any Owner Participant except that, for purposes of SECTION 14.1 of the Participation Agreement, the Owner Lessor will be treated as a Related Party to an Owner Participant to the extent that the Owner Lessor acts on the express written direction or with the express written consent of an Owner Participant. "RELEASE" shall mean the actual or threatened release, deposit, disposal or leakage of any Hazardous Material at, into, upon or under any land, water or air, or otherwise into the environment, including, without limitation, by means of burial, disposal, discharge, emission, injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring, escaping, emptying and placement, except as expressly authorized by a Governmental Approval. "RENEWAL LEASE RENT" shall mean the scheduled Rent payable on each Rent Payment Date during any First Wintergreen Renewal Lease Term, Second Wintergreen Renewal Lease Term or FMV Renewal Lease Term, in each case as determined in accordance with SECTION 15.3 of the Facility Lease. "RENEWAL LEASE TERM" shall mean the First Wintergreen Renewal Lease Term, the Second Wintergreen Renewal Lease Term or any FMV Renewal Lease Term. "RENT" shall mean Basic Lease Rent, Renewal Lease Rent, if any, and Supplemental Lease Rent. "RENT PAYMENT DATE" shall mean the January 2 and July 2 of each year during the Facility Lease Term. 44 "REPLACEMENT COMPONENT" shall have the meaning specified in SECTION 7.2 of the Facility Lease. "REPORTABLE EVENT" shall mean 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 IMPROVEMENT' shall have the meaning specified in SECTION 8.1 of the Facility Lease. "REQUIREMENT OF LAW" shall mean, as to any person, the Organic Documents of such Person, and any law (including any Environmental 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. "REQUISITION" shall have the meaning specified in clause (iii) of the definition of "Event of Loss." "RETAINED FACILITIES SITE" shall mean all the land comprising the Joliet Station Site, excluding the Facility Site. "RETURN ACCEPTANCE TESTS" shall mean the testing procedures (Part IV - Testing Procedures to Demonstrate Capability) set forth in Appendix D to the Power Purchase Agreement. "REVENUES" shall mean in respect of any period, all cash amounts (other than any payment under any intercompany note) received by the Holdings 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 Cashflow Recapture Fund. "S&P" shall mean Standard & Poor's Ratings Services (a division of McGraw-Hill Companies, Inc.) and its successors and assigns. "SASM&F" shall mean Skadden, Arps, Slate, Meagher & Flom LLP. 45 "SCHEDULED CLOSING DATE" shall mean August 24, 2000 and any date set for Closing in a notice of postponement pursuant to SECTION 2.2(c) of the Participation Agreement. "SECOND WINTERGREEN RENEWAL LEASE TERM" shall have the meaning specified in SECTION 15.1(b) of the Facility Lease. "SECURED OBLIGATIONS" shall mean all obligations of Holdings, the Facility Lessee, MGE or EMOC, under, with respect to or arising out of, without duplication, (i) the principal of, premium (if any) and interest on, the Loans (as defined in the Holdings Credit Agreement), (ii) the obligations of Holdings under each Lease Obligations Guarantee (as defined in the Holdings Credit Agreement) with respect to the Collins Lease Obligations, (iii) the obligations of Holdings under the Letter of Credit Guarantee (as defined in the Holdings Credit Agreement) and (iv) the principal of, premium (if any) and interest on, Permitted Secured Indebtedness subject of a Designation Letter (as defined in the Intercreditor Agreement). "SECURITIES ACT" shall mean the Securities Act of 1933, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "SEVERABLE IMPROVEMENT" shall mean any Improvement that is removable without, other than in an immaterial respect, causing irreparable damage to the Facility. "SHARED FACILITIES AGREEMENT NO. 1 (JOLIET TRUST I)" shall mean that shared facilities agreement No. 1 dated as of August 17, 2000 between Midwest and the Owner Lessor. "SHARED FACILITIES AGREEMENT NO. 1 (JOLIET TRUST II)" shall mean that shared facilities agreement No. 1 dated as of August 17, 2000 between Midwest and Joliet Trust II. "SHARED FACILITIES AGREEMENT NO. 2 (JOLIET TRUST I)" shall mean that shared facilities agreement No. 2 dated as of August 17, 2000 between Midwest and the Owner Lessor. 46 "SHARED FACILITIES AGREEMENT NO. 2 (JOLIET TRUST II)" shall mean that shared facilities agreement No. 2 dated as of August 17, 2000 between Midwest and Joliet Trust II. "SHARED FACILITIES AGREEMENTS" shall mean Shared Facilities Agreement No. 1 (Joliet Trust I), Shared Facilities Agreement No. 1 (Joliet Trust II), Shared Facilities Agreement No. 2 (Joliet Trust I) and Shared Facilities Agreement No. 2 (Joliet Trust II). "SPECIAL LESSEE TRANSFER AMOUNT" shall mean for any date the Equity Portion of Termination Value on such date; PLUS (i) any unpaid Basic Lease Rent or Renewal Lease Rent, as the case may be, due on or before the date of such determination, PLUS (ii) if the determination date is a Rent Payment Date or an Additional Rent Payment Date, the Basic Lease Rent or Renewal Lease Rent due on such Rent Payment Date, PLUS (iii) any other Rent payment under the Facility Lease or the Other Operative Documents due and unpaid on such date. "SPECIFIED MIDWEST INDEBTEDNESS" shall mean Indebtedness of the Holdings Loan Parties held by or for the benefit of the Holdings Secured Parties, any other Indebtedness permitted under the Lessee Financing Documents and any preferred stock or other similar obligation of Holdings or Midwest held by unaffiliated third parties. "SUBLEASE GROUND INTEREST" shall mean Ground Interest as such term is incorporated by reference into the Facility Site Sublease pursuant to SECTION 3 of the Facility Site Sublease. "SUBORDINATION AGREEMENT" shall mean the Subordination Agreement, dated as of August 17, 2000, among the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Holdings Collateral Agent. "SUBSIDIARY" shall mean, 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 47 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. "SUPPLEMENTAL FINANCING" shall have the meaning specified in SECTION 14.1 of the Participation Agreement. "SUPPLEMENTAL LEASE RENT" shall mean any and all amounts, liabilities, indemnities and obligations (other than Basic Lease Rent) of Midwest which arise out of, or which Midwest assumes or agrees to pay under, the Operative Documents (whether or not identified as "Supplemental Lease Rent") to the Owner Lessor or any other Person, including, but not limited to, Termination Value, Make-Whole Premium, and Transaction Costs (other than costs, fees and expenses associated with or resulting from a Lease Indenture Event of Default which is not a Lease Event of Default). "SUPPORT SERVICES" shall mean all services and rights necessary for the Facility Lessor (or any of its successors or permitted assigns) to own, operate, use and maintain (and to transmit the power generated from) the Facility during and after expiration or termination of the Facility Lease in addition to and together with those services or rights provided pursuant to the conveyance of the Ground Interest by the Ground Lessor to the Ground Lessee under the Facility Site Lease. "SURVEY" shall mean the survey No. 98156MG.02 prepared by SDI Consultants Ltd. for Edison Mission Energy, dated as of August 7, 2000 including revisions thereto. "SYNTHETIC LEASE" means the Lease Agreement dated as of June 23, 2000 between Midwest and Synthetic Lease Trust. "SYNTHETIC LEASE BASIC DOCUMENTS" means the Basic Documents as defined in the Synthetic Lease Participation Agreement. "SYNTHETIC LEASE ENVIRONMENTAL INDEMNITY OBLIGATIONS" has the meaning set forth in the Synthetic Lease Participation Agreement. 48 "SYNTHETIC LEASE INTERCOMPANY NOTE" means the Intercompany Note dated June 23, 2000 issued by Edison Mission Energy to Midwest. "SYNTHETIC LEASE LIABILITIES" means the basic rent, the supplemental rent or any other amount, liability or obligation that Midwest is obligated to pay under the Synthetic Lease or the other Synthetic Lease Basic Documents. "SYNTHETIC LEASE PARTICIPATION AGREEMENT" means the Participation Agreement dated as of June 23, 2000 by and among Midwest, Edison Mission Energy, EME/CDL Trust, investors party thereto, noteholders party thereto, Wilmington Trust Company, and Citicorp North America, Inc. "SYNTHETIC LEASE TRUST" means EME/CDL Trust, a Delaware statutory business trust. "TANGIBLE NET WORTH" shall mean the net worth of EME and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) after subtracting therefrom the aggregate amount of any intangible assets of EME 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. "TAX" or "TAXES" shall mean all fees (including, without limitation, license, documentation and registration fees), taxes (including, without limitation, income, gross receipt, franchise, rental, turn over, excise, sales taxes, use taxes, stamp taxes, value-added taxes, ad valorem taxes and property taxes (personal and real, tangible and intangible), license, levies, exports, duties, recording charges or fees, assessments, withholdings and other charges and impositions of any nature, plus all related interest, penalties, fines and additions to tax, now or hereafter imposed by any federal, state, local or foreign government or other taxing authority. "TAX INDEMNITY AGREEMENT" shall mean the Tax Indemnity Agreement (T1), dated as of August 17, 2000 between EME and the Owner Participant. "TAX LAW CHANGE" shall have the meaning specified in SECTION 15 of the Participation Agreement. 49 "TERMINATION DATE" shall mean each of the monthly dates during the Facility Lease Term identified as a "Termination Date" on Schedule 2 of the Facility Lease, which dates shall be the same days on which Basic Lease Rent and Renewal Lease Rent, if any, are payable under the Facility Lease. "TERMINATION VALUE" shall mean for any Termination Date shall mean the Termination Values set forth in Column D on Schedule 2 of the Facility Lease for such Termination Date. "TITLE POLICIES" shall mean the following title policies, issued by Chicago Title Insurance Company: (a) that certain Leasehold Owner's policy, No. 1368456-1, issued to the Owner Lessor dated August 24, 2000, to be redated the date of the recording of the Memorandum of the Facility Site Lease insuring the Owner Lessor's (i) 63.6% undivided leasehold interest in the Facility Site as lessee under the Facility Site Lease, and (ii) 63.6% undivided fee interest in the Facility and (b) that certain Leasehold Loan policy No. 1368456-1, issued to United States Trust Company of New York, as Lease Indenture Trustee, dated August 24, 2000, to be redated the date of the recording of the Memorandum of the Facility Site Lease, insuring the Lease Indenture Trustee's security interest in the Owner Lessor's (i) leasehold interests in the Facility Site Lease and (ii) fee interest in the Facility. "TRANSACTION COSTS" shall mean the following costs and expenses incurred in connection with the negotiation, due diligence and consummation of the Overall Transaction: (a) the cost of the Closing Date Appraisal, the cost of title insurance, if obtained, filing and recording fees, the fees and expenses of the Engineering Consultant, the environmental consultant, R.W. Beck, special engineering consultant, the Insurance Consultant, and any other consultants retained by the Owner Participant (excluding any fees or compensation to its advisors) and approved by EME, which approval may not be unreasonably withheld; (b) the reasonable legal fees, expenses and disbursements of the Equity Investor, the Owner Participant, the Owner Lessor and the Owner Trustee and out-of-pocket expenses of the Equity Investor's Advisor; 50 (c) the reasonable legal fees, expenses and disbursements of the other Lease Financing Parties associated with the Lessor Notes and the Certificates; (d) the Midwest Advisor's fee and its reasonable out-of-pocket costs and expenses; (e) at EME's option, all or a portion of EME's and Midwest's legal fees and reasonable out-of-pocket cost and expenses related thereto; (f) other reasonable, documented out-of-pocket expenses of the Lease Financing Parties; (g) ongoing fees and expenses of any independent director of the Owner Participant required to give any non-consolidation opinion, but only in the event that such opinion is requested with respect to both (i) the Owner Participant owned, directly or indirectly, by PSEGR and (ii) the Owner Participant owned, directly or indirectly, by Associates; and (h) the fees and expenses of the Rating Agencies. "TRANSFEREE" shall have the meaning specified in SECTION 10.1(a) of the Participation Agreement. "TREASURY REGULATIONS" shall mean regulations, including temporary regulations, promulgated under the Code. "TRUST AGREEMENT" shall mean the Amended and Restated Trust Agreement (T1), dated as of August 17, 2000, between the Owner Participant and the Trust Company relating to Joliet Trust I. "TRUST COMPANY" shall mean the Wilmington Trust Company. "TRUST ESTATE" shall have the meaning specified in SECTION 2.03 of the Trust Agreement. "UNDIVIDED INTEREST" shall have the meaning specified in the Recitals to the Facility Lease. 51 "UNDIVIDED INTEREST PERCENTAGE" shall mean 63.6%. "UNIFORM COMMERCIAL CODE" or "UCC" shall mean the Uniform Commercial Code as in effect in the applicable jurisdiction. "UNITED STATES" or "U.S." shall mean the United States of America. "UNRELATED MEMBERS" shall mean any members of the Owner Participant or the Other Owner Participant which are not Affiliates of the other members of either the Owner Participant or the Other Owner Participant; PROVIDED, HOWEVER, that for purposes of this definition, if any two or more members are Affiliates, such members, together, shall be considered as one Unrelated Member. "VERIFIER" shall mean Warren & Selbert, Inc. or a nationally recognized firm of accountants or lease advisors chosen by the Owner Participant and reasonably acceptable to the Facility Lessee. "WELFARE PLAN" shall mean a "welfare plan," as such term is defined in Section 3(1) of ERISA. "WILMINGTON TRUST COMPANY" shall mean Wilmington Trust Company, a Delaware banking corporation. 52 EX-4.13-1 23 a2031364zex-4_131.txt EXHIBIT 4.13.1 Exhibit 4.13.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 4.13 - -------------------------------------------------------------------------- Participation Agreement (T2), dated as of August 17, 2000, by and among Midwest Generation, LLC, Joliet Trust II, Wilmington Trust Company, as Owner Trustee, Joliet Generation II, LLC, Edison Mission Energy, United States Trust Company of New York, as Lease Indenture Trustee, and United States Trust Company of New York, as Pass Through Trustees. This Participation Agreement differs from Exhibit 4.13 in the follow ing respects: In the Appendix A, in the definition of "Equity Investment," "$48,101,200" is replaced by "$29,058,800." In the definition of "Equity Investor," "PSEGR Midwest, LLC, a Delaware limited liability company" is replaced by Associates Capital Investment, L.L.C., a Delaware limited liability company. In the definitions of "Facility Lease," "Facility Site Lease," "Facility Site Sublease," "Lease Indenture," "Memorandum of the Facility Lease," "Memorandum of the Facility Site Lease," "Memorandum of the Facility Site Sub lease," "Trust Agreement," "Tax Indemnity Agreement" and "Participation Agreement," "(T1)" is replaced by "(T2)" In the definition of "Lease Indenture Trustee's Account," "account No. 049 66100" is replaced by "account No. 049 66200" and "I" is replaced by "II" In the definition of "OP Guarantor," "PSEG Resources Inc." is replaced by "Associates Corporation of North America." In the definitions of "OP LLC Agreement," "Trust Agreement," "Owner Participant" and "Owner Lessor," "I" is replaced by "II." In the definitions of "Other Owner Lessor" and "Other Owner Participants," "II" is replaced by "I." In the definitions of "Shared Facilities Agreement No. 1 (Joliet Trust I)" and "Shared Facilities Agreement No. 2 (Joliet Trust I)," "Owner Lessor" is replaced by "Joliet Trust I." In the definitions of "Shared Facilities Agreement No. 1 (Joliet Trust II)" and "Shared Facilities Agreement No. 2 (Joliet Trust II)," "Joliet Trust II" is replaced by "Owner Lessor." In the definitions of "Owner Lessor's Leasehold Title Policy" and "Title Policies," "No. 1368456-1" is replaced by "No. 1368456-2" and "63.6%" is replaced by "36.4%." In the definitions of "Owner Lessor's Percentage" and "Undivided Interest Percentage," "63.6%" is replaced by "36.4%." "And (iii) monthly weighted average return on assets" has been added to the definition of "Owner Participant's Expected Return." The following definitions have been added: "'Revenue Procedure' shall mean any revenue procedure issued by the Depart ment of Treasury." "'Revenue Rulings' shall mean any revenue ruling issued by the Department of Treasury." 2 EX-4.20 24 a2031364zex-4_20.txt EXHIBIT 4.20 ================================================================================ Exhibit 4.20 INDENTURE DATED AS OF APRIL 5, 2001, between EDISON MISSION ENERGY and UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee ================================================================================
TABLE OF CONTENTS PAGE ---- ARTICLE 1 DEFINITIONS.............................................................................................1 Section 1.1 Certain Terms Defined..................................................................1 ARTICLE 2 THE NOTES...............................................................................................8 Section 2.1 Form and Dating........................................................................8 Section 2.2 Execution and Authentication...........................................................9 Section 2.3 Registrar and Paying Agent............................................................10 Section 2.4 Paying Agent to Hold Money in Trust...................................................10 Section 2.5 Holder Lists..........................................................................11 Section 2.6 Transfer and Exchange.................................................................11 Section 2.7 Replacement Notes.....................................................................23 Section 2.8 Outstanding Notes.....................................................................23 Section 2.9 Temporary Notes.......................................................................23 Section 2.10 Cancellation..........................................................................24 Section 2.11 Defaulted Interest....................................................................24 ARTICLE 3 COVENANTS OF THE COMPANY AND THE TRUSTEE...............................................................24 Section 3.1 Payment of Principal and Interest.....................................................24 Section 3.2 Appointment to Fill Vacancy in Office of Trustee......................................25 Section 3.3 Certificate to Trustee, Notices of Defaults...........................................25 Section 3.4 Reports by the Company................................................................25 Section 3.5 Restrictions on Liens.................................................................26 Section 3.6 Maintenance of Corporate Existence....................................................27 Section 3.7 Taxes.................................................................................28 ARTICLE 4 EVENTS OF DEFAULT AND REMEDIES OF THE TRUSTEE AND NOTEHOLDERS..........................................28 Section 4.1 Event of Default Defined; Acceleration of Maturity; Waiver of Default.................28 Section 4.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt.........................30 Section 4.3 Application of Proceeds...............................................................32 Section 4.4 Suits for Enforcement.................................................................33 Section 4.5 Restoration of Rights on Abandonment of Proceedings...................................33 Section 4.6 Limitations of Suits by Noteholders...................................................33 Section 4.7 Powers and Remedies Cumulative, Delay or Omission Not Waiver of Default...............34 Section 4.8 Control by Noteholders................................................................34 Section 4.9 Waiver of Past Defaults...............................................................35 Section 4.10 Rights of Holders to Receive Payment..................................................35 i
ARTICLE 5 CONCERNING THE TRUSTEE.................................................................................35 Section 5.1 Duties and Responsibilities of the Trustee During Default and Prior to Default...............................................................................35 Section 5.2 Certain Rights of the Trustee.........................................................36 Section 5.3 Trustee Not Responsible for Recitals, Disposition of Notes or Application of Proceeds Thereof.......................................................38 Section 5.4 Trustee and Agents May Hold Notes; Collections, Etc...................................38 Section 5.5 Moneys Held by Trustee................................................................38 Section 5.6 Compensation and Indemnification of Trustee and Its Prior Claim.......................39 Section 5.7 Right of Trustee to Rely on Officers' Certificate, Etc................................39 Section 5.8 Persons Eligible for Appointment as Trustee...........................................39 Section 5.9 Resignation and Removal, Appointment of Successor Trustee.............................40 Section 5.10 Acceptance of Appointment by Successor Trustee........................................41 Section 5.11 Merger, Conversion, Consolidation or Succession to Business of Trustee................41 Section 5.12 Reports by Trustee....................................................................42 ARTICLE 6 CONCERNING THE NOTEHOLDERS.............................................................................42 Section 6.1 Evidence of Action Taken by Noteholders...............................................42 Section 6.2 Proof of Execution of Instruments and of Holding of Notes Record Date.................42 Section 6.3 Holders to Be Treated as Owners.......................................................43 Section 6.4 Notes Owned by Company Deemed Not Outstanding.........................................43 Section 6.5 Right of Revocation of Action Taken...................................................44 ARTICLE 7 SUPPLEMENTAL INDENTURES................................................................................44 Section 7.1 Supplemental Indentures Without Consent of Noteholders................................44 Section 7.2 Supplemental Indentures With Consent of Noteholders...................................45 Section 7.3 Effect of Supplemental Indenture......................................................46 Section 7.4 Documents to Be Given to Trustee......................................................46 Section 7.5 Notation of Notes in Respect of Supplemental Indentures...............................46 ARTICLE 8 MERGER, CONSOLIDATION, SALE, LEASE OR CONVEYANCE.......................................................47 Section 8.1 Covenant Not to Merge, Consolidate, Sell, Lease or Transfer Assets Except Under Certain Conditions.......................................................47 Section 8.2 Successor Corporation Substituted.....................................................48 Section 8.3 Opinion of Counsel to Trustee; Officers' Certificate..................................48 ARTICLE 9 SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS..............................................48 Section 9.1 Satisfaction and Discharge of Indenture...............................................48 Section 9.2 Application by Trustee of Funds Deposited for Payment of Notes........................49 Section 9.3 Repayment of Moneys Held by Paying Agent..............................................50 Section 9.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years.................................................................................50 Section 9.5 Defeasance and Discharge of Indenture.................................................50 Section 9.6 Defeasance of Certain Obligations.....................................................51
ii ARTICLE 10 REDEMPTION OF NOTES...................................................................................53 Section 10.2 Notes Redeemed in Part................................................................53 Section 10.3 Notice of Redemption..................................................................53 Section 10.4 Payment of Notes Called for Redemption................................................54 ARTICLE 11 MISCELLANEOUS PROVISIONS..............................................................................54 Section 11.1 Incorporators, Shareholders, Officers and Directors of Company Exempt from Individual Liability.............................................................54 Section 11.2 Provisions of the Indenture for the Sole Benefit of Parties and Noteholders...........................................................................54 Section 11.3 Successors and Assigns of Company Bound by Indenture..................................55 Section 11.4 Notices and Demands on Company, Trustee and Noteholders...............................55 Section 11.5 Statements to Be Contained in Officers' Certificates and Opinions of Counsel...............................................................................55 Section 11.6 Payments Due on Saturdays, Sundays and Holidays.......................................56 Section 11.7 New York Law to Govern................................................................57 Section 11.8 Counterparts..........................................................................57 Section 11.9 Effect of Headings....................................................................57 Section 11.10 Trust Indenture Act...................................................................57 iii
INDENTURE, dated as of April 5, 2001, between EDISON MISSION ENERGY, a California corporation (the "COMPANY"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation, as trustee (the "TRUSTEE"). W I T N E S S E T H: WHEREAS, the Company has duly authorized the issue of its senior notes (the "NOTES"), and to provide, among other things, for the authentication, delivery and administration thereof, the Company has duly authorized the execution and delivery of this Indenture; and WHEREAS, all things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee as in this Indenture provided, the valid, binding and legal obligations of the Company, and to constitute these presents a valid Indenture and agreement according to its terms, have been done; NOW, THEREFORE: In consideration of the premises and the purchases of the Notes by the Holders (as defined herein) thereof, the Company and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective Holders from time to time of the Notes as follows: ARTICLE 1 DEFINITIONS SECTION 1.1 CERTAIN TERMS DEFINED. The following terms (except as otherwise expressly provided) for all purposes of this Indenture shall have the respective meanings specified in this Section. All accounting terms used herein and not expressly defined shall have the meanings given to them in accordance with GAAP (as defined herein). The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article include the plural as well as the singular. "AFFILIATE" has the meaning set forth in the Registration Rights Agreement. "AGENT" means any Registrar, Paying Agent or co-registrar. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "AUTHENTICATION ORDER" has the meaning set forth in SECTION 2.2 hereof. "BANKRUPTCY LAW" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. "BOARD OF DIRECTORS" means either the board of directors of the Company or any committee of such board duly authorized to act on behalf of such board. "BROKER-DEALER" means any broker or dealer registered under the Exchange Act. "BUSINESS DAY" means a day which is neither a legal holiday nor a day on which banking institutions (including, without limitation, the Federal Reserve System) are authorized or required by law or regulation to close in The City of New York. "CAPITAL STOCK" means, with respect to any Person, any and all outstanding shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of, or interests in (however designated), the equity of such Person, including without limitation all Common Stock and Preferred Stock and partnership and joint venture interests of such Person. "CLEARSTREAM" means Clearstream Banking SA. "COMMISSION" means the Securities and Exchange Commission, as from time to constituted, created under the Exchange Act, or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the TIA, then the body (if any) performing such duties at such time. "COMMON STOCK" means, with respect to any Person, Capital Stock of such Person that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of any other class of Capital Stock of such Person. "COMPANY" means Edison Mission Energy, a California corporation, and, subject to ARTICLE 8 hereof, its successors and assigns. "COMPARABLE TREASURY ISSUE" means the United States Treasury security selected by Credit Suisse First Boston Corporation or an affiliate as having a maturity comparable to the remaining term of the Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes. "COMPARABLE TREASURY PRICE" means the average of three Reference Treasury Dealer Quotations obtained by the Trustee in respect of the Notes to be redeemed on the applicable redemption date. "CONSOLIDATED NET TANGIBLE ASSETS" means, as of the date of determination thereof, the total amount of all of the Company's assets, determined on a consolidated basis in accordance with GAAP as of such date, less the sum of (a) the Company's consolidated current liabilities determined in accordance with GAAP, and (b) the Company's assets properly classified as intangible assets in accordance with GAAP, except for any intangible assets that are distribution or related contracts with an assignable value. "CORPORATE TRUST OFFICE" means the principal office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date as of which this Indenture is dated, located at 114 West 47th Street, 25th Floor, New York, New York 10036. 2 "CUSTODIAN" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "DEFAULT" means any occurrence, circumstance or event, or any combination thereof, which, with the lapse of time and/or the giving of notice, would constitute an Event of Default. "DEFINITIVE NOTE" means a certificated Note registered in the name of the Holder thereof and issued in accordance with SECTION 2.6 hereof, substantially in the form of EXHIBIT A hereto, except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "DEPOSITARY" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in SECTION 2.3 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "DTC" has the meaning set forth in SECTION 2.3 hereof. "EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "EVENT OF DEFAULT" means any event or condition specified as such in SECTION 4.1 hereof that shall have continued for the period of time, if any, therein designated. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" means the Notes issued in the Exchange Offer pursuant to SECTION 2.6(F) hereof. "EXCHANGE OFFER" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "GAAP" means generally accepted accounting principles in the United States applied on a basis consistent with the principles, methods, procedures and practices employed in the preparation of the Company's audited financial statements, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. "GLOBAL NOTES" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of EXHIBIT A hereto issued in accordance with SECTION 2.1, 2.6(B)(IV), 2.6(D)(II) or 2.6(F) hereof. "GLOBAL NOTE LEGEND" means the legend set forth in SECTION 2.6(G)(II), which is required to be placed on all Global Notes issued under this Indenture. 3 "GOOD FAITH CONTEST" means the contest of an item if (i) the item is diligently being contested in good faith by appropriate proceedings timely instituted, (ii) adequate reserves are established in accordance with GAAP with respect to the contested item, if the contested item individually or when taken together with all other contested items for which reserves are not at the time being held could reasonably be expected to result in liability of the Company in excess of $1,000,000, (iii) during the period of such contest, the enforcement of any contested item is effectively stayed, unless such enforcement would not reasonably be expected to result in a Material Adverse Effect, (iv) any Lien filed in connection therewith shall have been removed from the record by bonding arrangements by a reputable surety company, or title insurance or cash deposits are otherwise provided to assure the discharge of the Company's obligation in connection therewith, provided that such cash deposits, in the aggregate, shall not exceed $2,000,000, (v) such payment shall have been made as is necessary to prevent the recordation of a tax deed or other similar instrument conveying the property of the Company or any portion thereof, (vi) the failure to pay or comply with the contested item during the period of such Good Faith Contest would not reasonably be expected to result in a Material Adverse Effect and (vii) the Company has no knowledge of any actual or proposed deficiency or additional assessment in connection therewith not otherwise satisfying the requirements of clauses (i) through (vi). "HOLDER," "HOLDER OF NOTES," "NOTEHOLDER" and other similar terms mean the registered holder of any Note as reflected in the registration records of the Registrar. "INDEBTEDNESS" has the meaning set forth in SECTION 3.5. "INDENTURE" means this instrument as originally executed and delivered or, if amended or supplemented as herein provided, as so amended or supplemented. "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Note through a Participant. "INSTITUTIONAL ACCREDITED INVESTOR" or "IAI" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who is not also a QIB. "INTEREST PAYMENT DATE" means, with respect to any Note, the Stated Maturity of an installment of interest on such Note. "LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries, taken as a whole, or on the ability of the Company to perform its obligations under this Indenture, any indenture supplemental hereto, the Notes, the Registration Rights Agreement or any purchase or underwriting agreement in respect of the Notes. "NON-U.S. PERSON" means a Person who is not a U.S. Person. "NOTE" or "NOTES" has the meaning set forth in the recitals above. 4 "NOTES REGISTER" has the meaning set forth in SECTION 2.3 hereof. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by (a) the Chairman of the Board of Directors, the President or any Vice President and (b) by the Chief Financial Officer, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company and delivered to the Trustee. Each such certificate shall include the statements provided for in SECTION 11.5 hereof, if and to the extent required thereby. "OPINION OF COUNSEL" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company. Each such opinion shall include the statements provided for in SECTION 11.5 hereof, if and to the extent required thereby. "ORIGINAL ISSUE DATE" of any Note (or portion thereof) means the earlier of (a) the date of such Note or (b) the date of any Note (or portion thereof) in exchange for which such Note was issued (directly or indirectly) on registration of transfer, exchange or substitution. "OUTSTANDING," when used with reference to Notes, means, subject to the provisions of SECTIONS 2.8 and 6.4 hereof, as of any particular time, all Notes authenticated and delivered by the Trustee under this Indenture, except: (i) Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation, or which shall have been paid pursuant to SECTION 2.7 hereof (other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands the Notes are valid obligations of the Company); and (ii) Notes, or portions thereof, for the payment or redemption of which moneys or direct obligations of the United States of America backed by its full faith and credit in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside, segregated and held in trust by the Company (if the Company shall act as its own paying agent), provided that if such Notes are to be redeemed prior to the maturity thereof, written notice of such redemption shall have been herein provided, or provision satisfactory to the Trustee shall have been given as herein provided, or provision satisfactory to the Trustee shall have been made for giving such notice. "PARTICIPANT" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "PAYING AGENT" has the meaning set forth in SECTION 2.3 hereof. 5 "PERSON" means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "PREFERRED STOCK" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of preferred or preference Capital Stock of such Person that is outstanding or issued on or after the date of this Indenture. "PRIVATE PLACEMENT LEGEND" means the legend set forth in SECTION 2.6(G)(I) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "REFERENCE TREASURY DEALER QUOTATION" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by a Reference Treasury Dealer at 3:30 p.m., New York City time, on the third Business day preceding the redemption date. "REFERENCE TREASURY DEALERS" means Credit Suisse First Boston Corporation (so long as it continues to be a primary U.S. Government securities dealer) and any two other primary U.S. Government securities dealers chosen by the Company. If Credit Suisse First Boston Corporation ceases to be a primary U.S. Government securities dealer, the Company will appoint in its place another nationally recognized investment banking firm that is a primary U.S. Government securities dealer. "REGISTRAR" has the meaning set forth in SECTION 2.3 hereof. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of April 2, 2001, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time. "REGULATION S" means Regulation S promulgated under the Securities Act. "REMAINING SCHEDULED PAYMENTS" means, with respect to each Note that the Company is redeeming, the remaining scheduled payments of the principal and interest that would be due after the related redemption date if such Note were not redeemed. However, if the redemption date is not a scheduled interest payment date with respect to that Note, the amount of the next succeeding scheduled interest payment on that Note will be reduced by the amount of interest accrued on such Note to the redemption date. "REPORTING CESSATION" has the meaning set forth in SECTION 3.4 hereof. "RESPONSIBLE OFFICER," when used with respect to the Trustee, means any officer of the Trustee assigned by the Trustee to administer its corporate trust matters. 6 "RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Private Placement Legend. "RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee. "RULE 144" means Rule 144 promulgated under the Securities Act. "RULE 144A" means Rule 144A promulgated under the Securities Act. "RULE 903" means Rule 903 promulgated under the Securities Act. "RULE 904" means Rule 904 promulgated under the Securities Act. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "STATED MATURITY" means, with respect to any debt security or any installment of interest thereon, the date specified in such debt security as the fixed date on which any principal of such debt security or any such installment of interest is due and payable. "SUBSIDIARY" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. "TIA" means the Trust Indenture Act of 1939, as amended. "TREASURY RATE" means, with respect to any redemption date, an annual rate equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasure Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the redemption date. The semiannual equivalent yield to maturity will be computed as of the third business day immediately preceding the redemption date. "TRUSTEE" means the entity identified as "Trustee" in the first paragraph hereof until the appointment of a successor trustee pursuant to ARTICLE 5, after which "Trustee" shall mean such successor trustee. "UNRESTRICTED GLOBAL NOTE" means a permanent Global Note substantially in the form of EXHIBIT A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. 7 "UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct and unconditional obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by, and acting as an agency or instrumentality of, the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company subject to federal or state supervision or examination with a combined capital and surplus of at least $100,000,000, as custodian with respect to any such U.S. Government Obligations or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. "U.S. PERSON" means a U.S. person as defined in Rule 902(o) under the Securities Act. ARTICLE 2 THE NOTES SECTION 2.1 FORM AND DATING. (a) GENERAL. The Notes and the Trustee's certificate of authentication shall be substantially in the form of EXHIBIT A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $100,000 and any integral multiple of $1,000 in excess thereof. Interest on the Notes shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) GLOBAL NOTES AND DEFINITIVE NOTES. Notes issued in global form shall be substantially in the form of EXHIBIT A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of EXHIBIT A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount 8 of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by SECTION 2.6 hereof. (c) INSTITUTIONAL ACCREDITED INVESTORS. Notwithstanding anything to the contrary herein, Institutional Accredited Investors may not hold beneficial interests in any Restricted Global Note, but may be Holders of Restricted Definitive Notes. (d) EUROCLEAR AND CLEARSTREAM PROCEDURES APPLICABLE. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in Global Notes sold pursuant to the exemption to the registration requirements of the Securities Act afforded by Regulation S and that are held by Participants through Euroclear or Clearstream. SECTION 2.2 EXECUTION AND AUTHENTICATION. Two Officers shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers (an "AUTHENTICATION ORDER"), authenticate the Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of the Notes outstanding at any time may not exceed such amount except as provided in SECTION 2.7 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.3 REGISTRAR AND PAYING AGENT. The Company shall maintain, in the Borough of Manhattan in the City of New York, an office or agency where Notes may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Notes may be presented for payment ("PAYING AGENT") and an office or agency where notices and demands to or upon the Company in respect of the Notes or this Indenture may be served. The Registrar shall keep a register ("NOTES REGISTER") of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company 9 may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such and shall accept presentations, notices and demands hereunder at the Corporate Trust Office. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes and designates the Trustee's New York office as the office or agency referred to in the first sentence of this Section. SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest on the Notes, and will notify the Trustee in writing of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. The Company shall, prior to each due date, or not later than 11 AM New York City time on each due date, of the principal of, and premium, if any, or interest on the Notes, deposit with the Paying Agent a sum sufficient to pay such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of any failure to take such action. Anything in this SECTION 2.4 to the contrary notwithstanding, the Company may at any time, for the purpose of obtaining satisfaction and discharge of this Indenture or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by any Paying Agent hereunder, as required by this SECTION 2.4, such sums to be held by the Trustee upon the trusts herein contained. Anything in this Section to the contrary notwithstanding, the agreement to hold sums in trust as provided in this SECTION 2.4 is subject to the provisions of SECTION 9.1 and SECTION 9.3 hereof. 10 SECTION 2.5 HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes, and the Company shall otherwise comply with TIA ss. 312(a). SECTION 2.6 TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary for any of the Global Notes or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary, (ii) there shall have occurred and be continuing an Event of Default with respect to the applicable Notes and beneficial owners holding interests representing an aggregate principal amount of at least 51% of such Notes represented by Global Notes advise the Trustee in writing that the continuation of a book-entry system through the Depositary is no longer in such owner's best interests or (iii) the Company executes and delivers to the Trustee an order that the Global Notes will be so exchangeable. Upon the occurrence of any of the preceding events in clauses (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee in writing. Global Notes also may be exchanged or replaced, in whole or in part, as provided in SECTIONS 2.7 and 2.9 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this SECTION 2.6 or SECTION 2.7 or 2.10 hereof shall be authenticated and delivered in the form of, and shall be, a Global Note, except as otherwise provided herein. A Global Note may not be exchanged for another Note other than as provided in this SECTION 2.6(A); however, beneficial interests in a Global Note may be transferred and exchanged as provided in SECTION 2.6(B), (C) or (F) hereof. (b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL NOTE. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in 11 accordance with the transfer restrictions set forth in the Private Placement Legend. Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in the second sentence of this SECTION 2.6(B)(I). (ii) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN GLOBAL NOTES. In connection with all transfers and exchanges of beneficial interests that are not subject to SECTION 2.6(B)(I), the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in clause (B)(1) above. Upon consummation of an Exchange Offer by the Company in accordance with SECTION 2.6(F) hereof, the requirements of this SECTION 2.6(B)(II) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Note. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to SECTION 2.6(H) hereof. (iii) TRANSFER OF BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in such Restricted Global Note if the transfer complies with the requirements of SECTION 2.6(B)(I) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in a Global Note by virtue of the exemption from the registration requirements of the Securities Act afforded by Rule 144A, then the transferor must deliver a certificate in the form of EXHIBIT B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in a Global Note by virtue of the exemption from the registration requirements of the Securities Act afforded by Regulation S, then the transferor must deliver a certificate in the form of EXHIBIT B hereto, including the certifications in item (2) thereof. 12 (iv) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE RESTRICTED GLOBAL NOTE FOR BENEFICIAL INTERESTS IN THE UNRESTRICTED GLOBAL NOTE. A beneficial interest in the Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in the Unrestricted Global Note, or transferred to a Person who takes delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, if the exchange or transfer complies with the requirements of SECTION 2.6(B)(II) and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be exchanged, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in the Unrestricted Global Note, a certificate from such holder in the form of EXHIBIT C hereto, including the certifications in item (l)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such holder in the form of EXHIBIT B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (v) If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with SECTION 2.2 hereof, the Trustee shall authenticate, one or more Unrestricted Global Notes in an aggregate 13 principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. (vi) Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS IN GLOBAL NOTES FOR DEFINITIVE NOTES. (i) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO RESTRICTED DEFINITIVE NOTES. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of EXHIBIT C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (3)(a) thereof; or (E) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (3)(b) thereof; the Trustee shall cause the aggregate principal amount of the Global Note to be reduced accordingly pursuant to SECTION 2.6(H) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this SECTION 2.6(C) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial 14 interest in a Restricted Global Note pursuant to this SECTION 2.6(C)(I) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of EXHIBIT C hereto, including the certifications in item (l)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of EXHIBIT B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, 15 then, upon satisfaction of the conditions set forth in SECTION 2.6(B)(II) hereof, the Trustee shall cause the aggregate principal amount of the Unrestricted Global Note to be reduced accordingly pursuant to SECTION 2.6(H) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this SECTION 2.6(C)(III) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this SECTION 2.6(C)(III) shall not bear the Private Placement Legend. (d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS IN GLOBAL NOTES. (i) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of EXHIBIT C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (3)(a) thereof; or (E) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (3)(b) thereof, the Trustee shall cancel the Restricted Definitive Note and increase or cause to be increased the aggregate principal amount of the Restricted Global Note. 16 (ii) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Note proposes to exchange such Note for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of EXHIBIT C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Note proposes to transfer such Note to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of EXHIBIT B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this SECTION 2.6(D)(II), the Trustee shall cancel the Definitive Note and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted 17 Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with SECTION 2.2 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this SECTION 2.6(E), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this SECTION 2.6(E). (i) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE NOTES. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of EXHIBIT B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of EXHIBIT B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of EXHIBIT B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person 18 participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Note proposes to exchange such Note for an Unrestricted Definitive Note, a certificate from such Holder in the form of EXHIBIT C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Note proposes to transfer such Note to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of EXHIBIT B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Company so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with SECTION 2.2, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not Broker-Dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall 19 authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) LEGENDS. The following legends shall, as indicated below, appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) PRIVATE PLACEMENT LEGEND. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following form: "THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF EDISON MISSION ENERGY THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO EDISON MISSION ENERGY, (II) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (II) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this SECTION 2.6 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) GLOBAL NOTE LEGEND. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE 20 BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.7 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.10 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF EDISON MISSION ENERGY." (iii) IAI NOTE LEGEND. Each Definitive Note held by an Institutional Accredited Investor shall bear a legend in substantially the following form: "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS." (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with SECTION 2.10 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's written order or at the Registrar's written request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to SECTIONS 2.9, 7.5 and 11.1 hereof). 21 (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under ARTICLE 10 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of SECTION 2.2 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this SECTION 2.6 to effect a registration of transfer or exchange may be submitted by facsimile but originals of such opinions shall follow by mail. SECTION 2.7 REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee or the Company or the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.8 OUTSTANDING NOTES. 22 The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in SECTION 6.4 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to SECTION 2.7 hereof it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under SECTION 3.1 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.9 TEMPORARY NOTES. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate permanent Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.10 CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of the canceled Notes pursuant to its customary practices and procedures in effect from time to time (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation, except as otherwise provided for herein. SECTION 2.11 DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in SECTION 3.1 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the 23 proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, PROVIDED that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3 COVENANTS OF THE COMPANY AND THE TRUSTEE SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST. The Company shall duly and punctually pay or cause to be paid the principal of, and premium, if any, and interest on, each of the Notes at the place or places, at the respective times and in the manner provided in this Indenture and the Notes. Payment of principal of, and premium and interest on the Notes shall be paid by mailing a check to or upon the written order of the registered Holders of Notes entitled thereto at their last address as it appears on the Notes Register or, upon written application to the Trustee (which shall be received by the Trustee prior to the record date) by a Holder of $1,000,000 or more in aggregate principal amount of Notes, by wire transfer of immediately available funds to an account maintained by such Holder with a bank or other financial institution; PROVIDED, HOWEVER that (subject to the provisions of SECTION 2.7 hereof) payment of principal of, and premium, if any, on any Note may be conditioned upon presentation for payment of the certificate representing such Note. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful, and it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. If a Reporting Cessation occurs, the interest rate applicable to the Notes shall be increased by 0.50% per annum from the date such Reporting Cessation occurs until such time as the Reporting Cessation has ended. SECTION 3.2 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, shall appoint, in the manner provided in SECTION 5.9 hereof, a Trustee, so that there shall at all times be a Trustee hereunder. SECTION 3.3 CERTIFICATE TO TRUSTEE, NOTICES OF DEFAULTS. The Company shall furnish to the Trustee (i) on or before March 31 in each year (beginning with March 31, 2002) a brief certificate from the principal executive, financial or accounting officer of this Company as to his or her knowledge of the Company's compliance with all covenants under this Indenture (such compliance to be determined without regard to any period of grace or requirement of notice provided under this Indenture) and (ii) upon becoming 24 aware of any Default or Event of Default, a statement specifying such Default or Event of Default. Within 30 days of its becoming aware of any Default or Event of Default, the Trustee shall provide the Holders with a notice specifying such Default or Event of Default. SECTION 3.4 REPORTS BY THE COMPANY. The Company shall deliver to the Trustee and provide Noteholders, within 15 days after it files them with the Commission, copies of its annual reports and of the information, documents and other reports that the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, and shall deliver to the Trustee copies of any other report that the Company files with the Commission. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein, including the Company's compliance with any of its covenants contained hereunder. Following the effectiveness of any registration statement pursuant to the Registration Rights Agreement, whether or not required by the rules and regulations of the Commission, the Company shall maintain its status as a reporting company under the Exchange Act, and file copies of all such information and reports with the Commission for public availability (unless the Commission will not accept such filings) within the time periods specified in the Commission's rules and regulations and make such information available to securities analysts and prospective investors upon request; and if at any time the Company fails to maintain its status as a reporting company under the Exchange Act (a "REPORTING CESSATION"), the interest rate on the Notes will be increased by 0.50% on an annual basis, provided that no Reporting Cessation shall be deemed to occur if the Commission does not accept the information and reports of the Company to be filed pursuant to the Exchange Act. SECTION 3.5 RESTRICTIONS ON LIENS. The Company shall not: (i) pledge, mortgage, hypothecate or permit to exist any mortgage, pledge or other lien upon any property at any time directly owned by the Company to secure any guarantee of the Company or any indebtedness for money borrowed which is incurred, issued or assumed by the Company (such guarantees and other indebtedness being collectively referred to as "INDEBTEDNESS"), or (ii) cause or permit any of its subsidiaries to pledge, mortgage, hypothecate or permit to exist any mortgage, pledge or other lien upon any property at any time directly owned by such subsidiary to secure any Indebtedness of the Company, without, in each such case, providing for the Notes to be equally and ratably secured with any and all such Indebtedness and with any other Indebtedness similarly entitled to be equally and ratably secured; PROVIDED, HOWEVER, that the restrictions set forth in clauses (i) and (ii) above shall not apply to, or prevent the creation or existence of: (1) liens existing at the Original Issue Date of the Notes; 25 (2) purchase money liens which do not exceed the cost or value of the purchased property; (3) other liens not to exceed 10% of the Company's Consolidated Net Tangible Assets, PROVIDED that: (A) neither the Company nor its subsidiaries shall be permitted to create or to permit to exist any liens to secure the Company's Indebtedness in reliance upon this item (3) until the earlier to occur of: (x) the first date on or after the second anniversary of April 5, 2001 on which the Notes are rated at least BBB- by Standard & Poor's and Baa3 by Moody's, and (y) the date on which Standard & Poor's rates the notes BBB or higher and Moody's rates the notes Baa2 or higher; and (B) notwithstanding the restriction in clause (A) above, the Company and its subsidiaries shall be permitted to create and permit to exist liens in reliance upon this item (3) to secure Indebtedness not to exceed $100 million in the aggregate; (4) liens granted in connection with extending, renewing, replacing or refinancing in whole or in part the Indebtedness (including, without limitation, increasing the principal amount of such Indebtedness, other than the Indebtedness referred to in item (3)(B)) secured by liens described in clauses (1) through (3) above; and (5) liens granted by any of the Company's subsidiaries on the capital stock or assets of any project subsidiary in order to secure any of Indebtedness that the Company incurs (other than Indebtedness the proceeds of which are used to finance the equity contributed by the Company, or loans made by the Company, to a project) in order to finance or refinance any acquisition, development, construction, expansion, operation or maintenance of such project subsidiary. If the Company proposes to pledge, mortgage or hypothecate any property at any time directly owned by the Company to secure any Indebtedness, other than as permitted by clauses (1) through (5) of the previous paragraph, the Company shall give prior written notice thereof to the Trustee, who shall give notice to the Holders, and the Company shall, prior to or simultaneously with such pledge, mortgage or hypothecation, effectively secure all the Notes equally and ratably with such Indebtedness. Except as set forth above, this section will not restrict the ability of the Company's subsidiaries and affiliates to pledge, mortgage, hypothecate or permit to exist any mortgage, pledge or lien upon their assets, in connection with project financings, sale leasebacks or otherwise. SECTION 3.6 MAINTENANCE OF CORPORATE EXISTENCE. Subject to the provisions of ARTICLE 8 hereof, the Company shall at all times preserve and maintain in full force and effect (i) its corporate existence and good standing under the laws of 26 the State of California and (ii) its qualification to do business in each other jurisdiction in which the character of its properties or the nature of its activities make such qualification necessary, except where the failure to be so qualified would not reasonably be expected to result in a Material Adverse Effect. SECTION 3.7 TAXES. The Company shall, prior to the time penalties attach thereto, (i) file, or cause to be filed, all tax and information returns that are required to be, or are required to have been, filed by it in any jurisdiction, and (ii) pay or cause to be paid all taxes shown to be, or to have been, due and payable on such returns and all other taxes lawfully imposed and payable by it, except to the extent there is a Good Faith Contest thereof by the Company. ARTICLE 4 EVENTS OF DEFAULT AND REMEDIES OF THE TRUSTEE AND NOTEHOLDERS SECTION 4.1 EVENT OF DEFAULT DEFINED; ACCELERATION OF MATURITY; WAIVER OF DEFAULT. If one or more of the following Events of Default (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body or otherwise) shall have occurred and be continuing: (a) default in the payment of all or any part of the principal of, or premium, if any, on, any of the Notes as and when the same shall become due and payable either at maturity, upon any redemption or required repurchase, by declaration of acceleration or otherwise; or (b) default in the payment of any installment of interest upon any of the Notes as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or (c) an event of default, as defined in any instrument of the Company under which there may be issued, or by which there may be secured or evidenced, any Indebtedness of the Company that has resulted in the acceleration of such Indebtedness, or any default occurring in payment of any such Indebtedness at final maturity (and after the expiration of any applicable grace periods), other than such Indebtedness (i) which is payable solely out of the property or assets of a partnership, joint venture or similar entity of which the Company or any of its Subsidiaries or Affiliates is a participant, or which is secured by a lien on the property or assets owned or held by such entity, without further recourse to or liability of the Company, or (ii) the principal of, and interest on which, when added to the principal of and interest on all other such Indebtedness (exclusive of Indebtedness under clause (i) above), does not exceed $20,000,000; or (d) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in the Notes or in this Indenture and such failure continues for a period of 90 days after the date on which written notice specifying such failure, stating that such notice is a "Notice of Default" hereunder and demanding that the Company remedy the same, shall have been given to the Company by the Trustee, or to the 27 Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes at the time Outstanding; or (e) one or more final, nonappealable judgments, decrees or orders of any court, tribunal, arbitrator, administrative or other governmental body or similar entity for the payment of money shall be rendered against the Company or any of its properties in an aggregate amount in excess of $20,000,000 (excluding the amount thereof covered by insurance) and such judgment, decree or order shall remain unvacated, undischarged and unstayed for more than 90 days, except while being contested in good faith by appropriate proceedings; or (f) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment, or composition of or in respect of the Company under any applicable federal or state law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or for any substantial part of its property or ordering the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (g) the Company shall commence a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or consent to the entry of a decree or order for relief in an involuntary case or proceeding under any such law, or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any such applicable federal or state law, or the consent by the Company to the filing of such petition or to the appointment of or the taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by the Company of an assignment for the benefit of creditors, or the taking of action by the Company in furtherance of any such action; then and in each and every such case (other than an Event of Default with respect to the Company specified in SECTION 4.1(F) or 4.1(G) hereof), unless the principal amount of all of the Notes shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Notes then Outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Noteholders), may declare the entire principal amount of all the Notes and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. This provision, however, is subject to the condition that if, at any time after the principal of the Notes shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Notes and the principal and premium, if any, of any and all Notes that shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and, to the extent that payment of such interest is enforceable 28 under applicable law, on overdue installments of interest, at the rate of interest specified in the Notes, to the date of such payment or deposit) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other reasonable expenses and liabilities incurred and all reasonable advances made by the Trustee and each predecessor Trustee except as a result of gross negligence or bad faith, and if any and all Events of Default under this Indenture, other than the non-payment of the principal that shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein, then and in every such case the Holders of a majority in aggregate principal amount of the Notes then Outstanding, by written notice to the Company and to the Trustee, may waive all defaults (except, unless theretofore cured, a default in payment of principal of, or premium, if any, or interest on, the Notes) and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. If an Event of Default specified in SECTION 4.1(F) or 4.1(G) hereof occurs with respect to the Company, the principal of and accrued interest on the Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Noteholder. SECTION 4.2 COLLECTION OF INDEBTEDNESS BY TRUSTEE; TRUSTEE MAY PROVE DEBT. The Company covenants that (a) in case default shall be made in the payment of any installment of interest on any of the Notes when such interest shall have become due and payable, and such default shall have continued for a period of 30 days or (b) in case default shall be made in the payment of all or any part of the principal of, or premium, if any, on, any of the Notes when the same shall have become due and payable, whether upon maturity or upon any redemption or by declaration or acceleration or otherwise, then upon demand of the Trustee, the Company shall pay to the Trustee for the benefit of the Holders of the Notes the whole amount that then shall have become due and payable on all such Notes of principal, premium and interest, as the case may be (with interest to the date of such payment upon the overdue principal or premium and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest at the rate of interest specified in the Notes), and in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and any reasonable expenses and liabilities incurred, and all reasonable advances made, by the Trustee and each predecessor Trustee, except as a result of its gross negligence or bad faith. Until such demand is made by the Trustee, the Company may pay the principal of and premium and interest on the Notes to the registered Holders, whether or not the Notes are overdue. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceeding at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may 29 enforce any such judgment or final decree against the Company or other obligor upon the Notes and collect in the manner provided by law out of the property of the Company or other obligor upon the Notes, wherever situated, the moneys adjudged or decreed to be payable. In case there shall be pending proceedings relative to the Company or any other obligor upon the Notes under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, custodian, sequestrator or similar official shall have been appointed for or taken possession of the Company or its property or such other obligor, or in case of any other comparable judicial proceedings relative to the Company or other obligor upon the Notes, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective or whether the Trustee shall have made any demand pursuant to the provisions of this SECTION 4.2, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal, premium and interest owing and unpaid in respect of the Notes, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all reasonable expenses and liabilities incurred, and all reasonable advances made, by the Trustee and each predecessor Trustee, except as a result of gross negligence or bad faith) and of the Noteholders, allowed in any judicial proceedings relative to the Company or other obligor upon the Notes, or to the creditors or property of the Company or such other obligor; (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of the Notes in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings; and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Noteholders and of the Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other reasonable expenses and liabilities incurred, and all reasonable advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholders any plan or reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. 30 All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes or the production thereof at any trial or other proceeding relative thereto, and any such action or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Notes. In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Holders of the Notes parties to any such proceedings. SECTION 4.3 APPLICATION OF PROCEEDS. Any moneys collected by the Trustee pursuant to this Article shall be applied in the following order at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal or interest, upon presentation of the several Notes and stamping (or otherwise noting) thereon the payment, or issuing Notes in reduced principal amounts in exchange for the presented Notes if only partially paid, or upon surrender thereof if fully paid: FIRST: To the payment of costs and expenses, including reasonable compensation to the Trustee and each predecessor Trustee and their respective agents and attorneys and of all reasonable expenses and liabilities incurred, and all reasonable advances made, by the Trustee and each predecessor Trustee, except as a result of gross negligence or bad faith, and all other amounts due under SECTION 5.6 hereof; SECOND: In case the principal and premium, if any, of the Notes shall not have become and be then due and payable, to the payment of interest in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest payable at the rate of interest specified in the Notes, such payments to be made ratably to the persons entitled thereto, without discrimination or preference; THIRD: In case the principal of the Notes shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon all the Notes for principal, premium and interest, with interest upon the overdue principal and premium, if any, and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest payable at the rate of interest specified in the Notes, and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Notes, then to the payment of such principal, premium and interest, without preference or priority of principal or premium over interest, or of interest over principal or premium, or of any installment of interest over any other installment of interest, or of any Note over any other Note, ratably to the aggregate of such principal, premium and accrued and unpaid interest; and FOURTH: To the payment of the remainder, if any, to the Company or any other Person lawfully entitled thereto. 31 The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this SECTION 4.3. SECTION 4.4 SUITS FOR ENFORCEMENT. In case an Event of Default has occurred, has not been waived and is continuing, the Trustee may proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. SECTION 4.5 RESTORATION OF RIGHTS ON ABANDONMENT OF PROCEEDINGS. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the Company and the Trustee shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Noteholders shall continue as though no such proceedings had been taken. SECTION 4.6 LIMITATIONS OF SUITS BY NOTEHOLDERS. Subject to SECTION 4.10, no Holder of any Note shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless (i) such Holder previously has given to a Responsible Officer of the Trustee written notice of default and of the continuance hereof, as hereinbefore provided, (ii) the Holders of not less than 25% in aggregate principal amount of the Notes then Outstanding have made written request upon the Trustee to institute such action or proceeding in its own name as Trustee hereunder and have offered to the Trustee such reasonable security and indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, (iii) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such action or proceeding and (iv) no direction inconsistent with such written request has been given to the Trustee pursuant to SECTION 4.8 hereof; it being understood and intended, and being expressly covenanted by the taker and Holder of every Note with every other taker and Holder and the Trustee, that no one or more Holders of Notes shall have any right in any manner whatever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other Holder of Notes, or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Notes. For the protection and enforcement of the provisions of this SECTION 4.6, each and every Noteholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. 32 SECTION 4.7 POWERS AND REMEDIES CUMULATIVE, DELAY OR OMISSION NOT WAIVER OF DEFAULT. No right or remedy herein conferred upon or reserved to the Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Trustee or of any Holder of any of the Notes to exercise as aforesaid any such right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and, subject to SECTION 4.6 hereof, every power and remedy given by this Indenture or by law to the Trustee or to the Noteholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Noteholders. SECTION 4.8 CONTROL BY NOTEHOLDERS. The Holders of a majority in aggregate principal amount of the Notes at the time Outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee by this Indenture; PROVIDED that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture; and PROVIDED FURTHER that (subject to the provisions of SECTION 5.1 hereof) the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability, or if the Trustee in good faith shall so determine that the actions or forbearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders of the Notes not joining in the giving of said direction, it being understood that (subject to SECTION 5.1 hereof) the Trustee shall have no duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Trustee in its discretion to take any action deemed proper by the Trustee and which is not inconsistent with such direction by Noteholders. SECTION 4.9 WAIVER OF PAST DEFAULTS. Prior to the declaration of the maturity of the Notes as provided in SECTION 4.1 hereof, the Holders of a majority in aggregate principal amount of the Notes at the time Outstanding may on behalf of the Holders of all the Notes waive any past Default or Event of Default hereunder and its consequences, except a Default (a) in the payment of principal of, premium, if any, or interest on any of the Notes or (b) in respect of a covenant or provision hereof that cannot be modified or amended without the consent of the Holder of each Note affected. In the case of any such 33 waiver, the Company, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Upon any such waiver, such default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured, and not to have occurred for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 4.10 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture (including, without limitation, SECTION 4.6 hereof), the right of any Holder to receive, and to institute suit to enforce, payment of the principal of, and premium, if any, and interest on the Notes on or after the respective due dates expressed in such Notes (including upon redemption and acceleration of the maturity of the principal of and premium, if any, and interest on the Notes), shall not be affected or impaired, and shall be absolute and unconditional. ARTICLE 5 CONCERNING THE TRUSTEE SECTION 5.1 DUTIES AND RESPONSIBILITIES OF THE TRUSTEE DURING DEFAULT AND PRIOR TO DEFAULT. The Trustee, prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default that may have occurred, undertakes to perform only such duties as are specifically set forth in this Indenture. In case an Event of Default has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that (a) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (i) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such 34 statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in principal amount of the Notes at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there shall be reasonable ground for believing that the repayment of such funds or indemnity reasonably satisfactory to it against such liability is not reasonably assured to it. SECTION 5.2 CERTAIN RIGHTS OF THE TRUSTEE. Subject to SECTION 5.1 hereof: (a) the Trustee may rely conclusively and shall be fully protected in acting or refraining from acting upon any resolution, Officers' Certificate or any other certificate (including, without limitation, any certificate provided to the Trustee pursuant to SECTION 3.3 hereof), statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other paper document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed) and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company; (c) the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Noteholders pursuant to the provisions of this Indenture, unless such Noteholders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities that might be incurred therein or thereby; 35 (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Holders of not less than a majority in aggregate principal amount of the Notes then Outstanding; PROVIDED that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured by the security afforded to it by the terms of this Indenture, the Trustee may require indemnity reasonably satisfactory to it against such expenses or liabilities as a condition to proceeding, and the reasonable expenses of every such examination shall be paid by the Company, or by the Trustee or any predecessor Trustee and repaid by the Company upon demand; (g) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (h) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee which conform to the requirements of this Indenture; (i) the Trustee shall not be liable for any error of judgment made in good faith by an officer or officers of the Trustee, unless it shall be conclusively determined by a court of competent jurisdiction that the Trustee was grossly negligent in ascertaining the pertinent facts; (j) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees appointed with due care, and shall not be responsible for any willful misconduct or gross negligence on the part of any agent, attorney, custodian or nominee so appointed; and (k) the Trustee shall not be deemed to have notice of an Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or written notice of any Event of Default is received by the Trustee at its Corporate Trust Office. SECTION 5.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITION OF NOTES OR APPLICATION OF PROCEEDS THEREOF. The recitals contained herein and in the Notes, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the 36 validity or sufficiency of this Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Company of any of the Notes or of the proceeds thereof. SECTION 5.4 TRUSTEE AND AGENTS MAY HOLD NOTES; COLLECTIONS, ETC. The Trustee or any agent of the Company or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes with the same rights it would have if it were not the Trustee or such agent and may otherwise deal with the Company and receive, collect, hold and retain collections from the Company with the same rights it would have if it were not the Trustee or such agent. SECTION 5.5 MONEYS HELD BY TRUSTEE. Subject to the provisions of SECTION 9.4 hereof, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Trustee nor any agent of the Company or the Trustee shall be under any liability for interest on any moneys received by it hereunder, except as the Company and the Trustee otherwise may agree. SECTION 5.6 COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND ITS PRIOR CLAIM. The Company covenants and agrees to pay to the Trustee from time to time as shall be agreed upon between the Company and the Trustee in writing from time to time, and the Trustee shall be entitled to reasonable compensation (which shall not be limited by any provision of law relating to the compensation of a trustee of an express trust), and the Company covenants and agrees to pay or reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ), except to the extent any such expense, disbursement or advance may arise from the Trustee's gross negligence or bad faith. The Company also covenants to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any and all loss, liability, damage, claims or expenses arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder and the performance of its duties hereunder, including the costs and expenses of defending and investigating any claim of liability in the premises, except to the extent any such loss, liability or expense is due to its own gross negligence or bad faith. The obligations of the Company under this SECTION 5.6 to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. SECTION 5.7 RIGHT OF TRUSTEE TO RELY ON OFFICERS' CERTIFICATE, ETC. Subject to SECTION 5.1 and SECTION 5.2 hereof, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless 37 other evidence in respect thereof be herein specifically prescribed) may, in the absence of gross negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee. SECTION 5.8 PERSONS ELIGIBLE FOR APPOINTMENT AS TRUSTEE. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States or of a state thereof having a combined capital and surplus of at least $50,000,000, and which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of a federal, state or District of Columbia supervising or examining authority, then for the purposes of this SECTION 5.8, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. No obligor on the Notes or Person directly or indirectly controlling, controlled by or under common control with such obligor shall serve as Trustee. SECTION 5.9 RESIGNATION AND REMOVAL, APPOINTMENT OF SUCCESSOR TRUSTEE. (a) The Trustee may at any time resign by giving written notice of resignation to the Company and by mailing notice thereof by first-class mail to Holders of Notes at their last addresses as they shall appear on the Notes Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument in duplicate, executed by authority of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no such successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction, at the expense of the Company, for the appointment of a successor trustee, or any Noteholder who has been a bona fide Holder of a Note or Notes for at least six months may, on behalf of itself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any of the following shall occur: (i) the Trustee shall fail to comply with the provisions of TIA ss. 310(b), after written request thereafter by the Company or by any Noteholder who has been a bona fide Holder of a Note or Notes for at least six months; (ii) the Trustee shall cease to be eligible in accordance with the provisions of SECTION 5.8 hereof and shall fail to resign after written request therefor by the Company or by any such Noteholder; or (iii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; 38 then, in any such case, the Company may remove the Trustee and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors of the Company, one copy of which instrument shall be delivered to the Trustee so removed and one copy of which shall be delivered to the successor trustee, or any Noteholder who has been a bona fide Holder of a Note or Notes for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The Holders of a majority in aggregate principal amount of the Notes at the time Outstanding may at any time remove the Trustee and appoint a successor trustee by delivering to the Trustee so removed, to the successor trustee so appointed and to the Company the evidence provided for in SECTION 6.1 hereof of the action in that regard taken by the Noteholders. (d) Any resignation or removal of the Trustee and any appointment of a successor trustee pursuant to any of the provisions of this SECTION 5.9 shall become effective only upon acceptance of appointment by the successor trustee as provided in SECTION 5.10 hereof. SECTION 5.10 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE. Any successor trustee appointed as provided in SECTION 5.9 hereof shall execute and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Company or of the successor trustee, upon payment of its charges then unpaid, the Trustee ceasing to act shall, subject to SECTION 9.4 hereof, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Company shall execute appropriate instruments in writing for more fully and certainly vesting in and confirming to such successor such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of SECTION 5.6 hereof. Upon acceptance of appointment by a successor trustee as provided in this SECTION 5.10, the Company shall mail notice thereof by first-class mail to the Holders of Notes at their last addresses as they shall appear in the Notes Register. If the acceptance of appointment is substantially contemporaneous with a resignation, then the notice called for by the preceding sentence may be combined with the notice called for by SECTION 5.9 hereof. If the Company fails to mail such notice within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Company. Notwithstanding replacement of the Trustee pursuant to this SECTION 5.10, the Company's obligations under SECTION 5.6 hereof shall continue for the benefit of the retiring Trustee. 39 SECTION 5.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF TRUSTEE. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, as long as such corporation shall be eligible under the provisions of SECTION 5.8 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case any of the Notes shall have been authenticated but not delivered at the time such successor to the Trustee shall succeed to the trusts created by this Indenture, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Notes so authenticated and, in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor trustee, and in such cases such certificate shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have; PROVIDED that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 5.12 REPORTS BY TRUSTEE. The Trustee shall provide to the Holders the reports required to be provided by the Trustee pursuant to Section 313 of the TIA. ARTICLE 6 CONCERNING THE NOTEHOLDERS SECTION 6.1 EVIDENCE OF ACTION TAKEN BY NOTEHOLDERS. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders, in person or by agent duly appointed in writing, and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are received by the Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to SECTION 5.1 and SECTION 5.2 hereof) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Article. SECTION 6.2 PROOF OF EXECUTION OF INSTRUMENTS AND OF HOLDING OF NOTES RECORD DATE. Subject to SECTION 5.1 and SECTION 5.2 hereof, the execution of any instrument by a Noteholder or his agent or proxy may be provided in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The holding of Notes shall be as provided by the Notes Register or by a certificate of 40 the Registrar thereof. The Company may set a record date for purposes of determining the identity of Holders of Notes entitled to vote or consent to any action referred to in SECTION 6.1 hereof, which record date may be set at any time or from time to time by written notice to the Trustee for any date or dates (in the case of any adjournment or resolicitation) not more than 60 days nor less than five days prior to the proposed date of such vote or consent, and, thereafter, notwithstanding any other provisions hereof, only Holders of Notes of record on such record date shall be entitled to so vote or give such consent or to withdraw such vote or consent. SECTION 6.3 HOLDERS TO BE TREATED AS OWNERS. The Company, the Trustee and any agent of the Company or the Trustee may deem and treat the Person in whose name any Note shall be registered upon the Notes Register as the absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of, and premium, if any, on and, subject to the provisions of this Indenture, interest on such Note and for all other purposes, and neither the Company nor the Trustee nor any agent of the Company or the Trustee shall be affected by any notice to the contrary. All such payments so made to any such Person, or upon his order, shall be valid and to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Note. SECTION 6.4 NOTES OWNED BY COMPANY DEEMED NOT OUTSTANDING. In determining whether the Holders of the requisite aggregate principal amount of Notes have concurred in any direction, consent or waiver under this Indenture, Notes that are owned by the Company or any other obligor on the Notes or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the obligor on the Notes shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether a Responsible Officer of the Trustee shall be protected in relying on any such direction, consent or waiver, only Notes that the Trustee actually knows are so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company or any other obligor upon the Notes or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Notes. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Trustee in accordance with such advice. Upon request of the Trustee, the Company shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Notes, if any, known by the Company to be owned or held by or for the account of any of the above-described Persons, and, subject to SECTION 5.1 and SECTION 5.2 hereof, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Notes not listed therein are Outstanding for the purpose of any such determination. SECTION 6.5 RIGHT OF REVOCATION OF ACTION TAKEN. 41 At any time prior to (but not after) the evidencing to the Trustee, as provided in SECTION 6.1 hereof, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Notes specified in this Indenture in connection with such action, any Holder of a Note the serial number of which is shown by the evidence to be included among the serial numbers of the Notes the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article, revoke such action so far as concerns such Note. Except as aforesaid any such action taken by the Holder of any Note shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Note and of any Notes issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Note. Any action taken by the Holders of the percentage in aggregate principal amount of the Notes specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the Holders of all such Notes. ARTICLE 7 SUPPLEMENTAL INDENTURES SECTION 7.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS. The Company, when authorized by a resolution of its Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Notes any property or assets; (b) to evidence the succession of another corporation to the Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Company pursuant to ARTICLE 8 hereof; (c) to add to the covenants of the Company such further covenants, restrictions, conditions or provisions as the Board of Directors shall consider to be for the protection of the Holders of Notes, and to make the occurrence, or the occurrence and continuance of a Default in any such additional covenants, restrictions, conditions or provisions an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; PROVIDED that in respect of any such additional covenant, restriction, condition or provision, such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other Defaults) or may provide for immediate enforcement upon such an Event of Default or may limit the remedies available to the Trustee due solely to such an Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Notes to waive such an Event of Default; (d) to cure any ambiguity or to cure, correct or supplement any defective provision contained herein or in the Notes, or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Board of Directors may deem necessary or desirable, and in any case which the Trustee and the Company 42 shall determine (i) are not inconsistent with this Indenture and the Notes and (ii) shall not adversely affect the interests of the Holders of the Notes; (e) to modify or supplement this Indenture or any indenture supplemental hereto in such manner as to permit the qualification thereof under the TIA or any other similar federal statute hereafter in effect; and (f) to permit or facilitate the issuance of Notes pursuant to the provisions hereof. The Trustee is hereby authorized to join in the execution of any such supplemental Indenture, to make any further appropriate agreements and stipulations that may be therein continued and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture that affects the Trustee's own rights, duties, indemnities or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this SECTION 7.1 may be executed without the consent of the Holders of any of the Notes at the time Outstanding, notwithstanding any of the provisions of SECTION 7.2 hereof. SECTION 7.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. With the consent (evidenced as provided in ARTICLE 6 hereof) of the Holders of not less than a majority in aggregate principal amount of the Notes at the time Outstanding, the Company, when authorized by a resolution of its Board of Directors, and the Trustee may, from time to time and at any time, modify this Indenture, any indentures supplemental hereto, the Notes or the rights of the Holders of the Notes, PROVIDED that no such supplemental indenture shall (a) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Note, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or impair or affect the right of any Noteholder to institute suit for the payment thereof or change the place or currency of payment of principal of, or interest on, any Note, in each case without the consent of the Holder of each Note so affected, or (b) without the consent of the Holders of all Notes then Outstanding, (i) reduce the aforesaid percentage of Notes the consent of the Holders of which is required for any such modification, or the percentage of Notes the consent of the Holders of which is required for any waiver provided for in this Indenture, (ii) change any obligation of the Company to maintain an office or agency in the places and for the purposes specified in SECTION 2.3 or (iii) make any change in SECTION 4.9 or this SECTION 7.2, except to increase any percentages or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holders of each Outstanding Note affected thereby. Upon the request of the Company, accompanied by a copy of a resolution of the Board of Directors certified by the Secretary or an Assistant Secretary of the Company authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Noteholders and other documents, if any, required by SECTION 6.1 hereof, the Trustee shall join with the Company in the execution of such supplemental indenture unless such 43 supplemental indenture affects the Trustee's own rights, duties, indemnities or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Noteholders under this SECTION 7.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this SECTION 7.2, the Company shall mail a notice thereof by first class mail to the Holders of Notes at their addresses as they shall appear on the Notes Register, setting forth in general terms the substance of such supplemental indenture. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 7.3 EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders of Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 7.4 DOCUMENTS TO BE GIVEN TO TRUSTEE. The Trustee, subject to the provisions of SECTION 5.1 and SECTION 5.2 hereof, shall receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture and that all conditions precedent to the execution of such supplemental indenture have been met. SECTION 7.5 NOTATION OF NOTES IN RESPECT OF SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this ARTICLE 7 may bear a notation in form approved by the Trustee as to any matters provided for by such supplemental indenture or as to any action taken at any such meeting as the Company shall so determine, and new Notes so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Company, authenticated by the Trustee and delivered in exchange for the Notes then Outstanding, which Notes so exchanged shall be canceled by the Trustee. ARTICLE 8 MERGER, CONSOLIDATION, SALE, LEASE OR CONVEYANCE SECTION 8.1 COVENANT NOT TO MERGE, CONSOLIDATE, SELL, LEASE OR TRANSFER ASSETS EXCEPT UNDER CERTAIN CONDITIONS. 44 (a) The Company shall not merge or consolidate with or into any other person and the Company shall not sell, lease or convey all or substantially all of its assets to any person, unless (1) the Company is the continuing corporation, or the successor corporation or the person that acquires all or substantially all of the Company's assets is a corporation organized and existing under the laws of the United States or a State thereof or the District of Columbia and expressly assumes all the Company's obligations under the Notes and this Indenture, (2) immediately after such merger, consolidation, sale, lease or conveyance, there is no Default or Event of Default hereunder, (3) if, as a result of the merger, consolidation, sale, lease or conveyance, any or all of the Company's property would become the subject of a lien that would not be permitted by this Indenture, the Company secures the Notes equally and ratably with the obligations secured by that lien and (4) the Company delivers or causes to be delivered to the Trustee an Officers' Certificate and Opinion of Counsel each stating that the merger, consolidation, sale, lease or conveyance comply with this Indenture. (b) Except for the sale of all or substantially all assets of the Company pursuant to subsection (a) above, and other than assets required to be sold to conform with governmental regulations, the Company shall not sell or otherwise dispose of any assets (other than short-term, readily marketable investments purchased for cash management purposes with funds not representing the proceeds of other asset sales) if, on a pro forma basis, the aggregate net book value of all such sales during the most recent 12-month period would exceed 10 percent of Consolidated 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 this 10 percent limitation if the proceeds are invested in assets in similar or related lines of business of the Company and, provided further, that the Company may sell or otherwise dispose of assets in excess of such 10 percent limitation if the proceeds from such sales or dispositions, which are not reinvested as provided above, are retained by the Company as cash or cash equivalents or are used by the Company to purchase Notes, which are then delivered to the Trustee for cancellation, or to reduce or retire Indebtedness ranking pari passu in right of payment to the Notes or indebtedness of the Company's Subsidiaries. SECTION 8.2 SUCCESSOR CORPORATION SUBSTITUTED. In case of any such merger, consolidation, sale, lease, or transfer, and following such an assumption by the successor corporation of the Company's obligations under the Notes and this Indenture, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named herein. Such successor corporation may cause to be signed, and may issue either in its own name or in the name of the Company prior to such succession, any or all of the Notes issuable hereunder that theretofore shall not have been signed by the Company and delivered to the Trustee, and, upon the order of such successor corporation, instead of the Company, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Notes that previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication and any Notes that such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Notes so issued shall in all respects have the same legal rank and benefit under this 45 Indenture as the Notes theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Notes had been issued at the date of the execution hereof. In case of any such merger, consolidation, sale, lease or transfer such changes in phraseology and form (but not in substance) may be made in the Notes thereafter to be issued as may be appropriate. In the event of any such sale or transfer (other than a transfer by way of lease) the Company or any successor corporation, which shall theretofore have become such in the manner described in this ARTICLE 8, shall be discharged from all obligations and covenants under this Indenture and the Notes and may be liquidated and dissolved. SECTION 8.3 OPINION OF COUNSEL TO TRUSTEE; OFFICERS' CERTIFICATE. The Trustee, subject to the provisions of SECTION 5.1 and SECTION 5.2 hereof, shall receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any such merger, consolidation, sale, lease or transfer, and any such assumption of obligations described in this ARTICLE 8, and any such liquidation or dissolution described in this ARTICLE 8, complies with the applicable provisions of this Indenture. ARTICLE 9 SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTION 9.1 SATISFACTION AND DISCHARGE OF INDENTURE. If at any time (a) the Company shall have paid or caused to be paid the principal of and premium, if any, and interest on all the Notes Outstanding hereunder, as and when the same shall have become due and payable, or (b) the Company shall have delivered to the Trustee for cancellation all Notes theretofore authenticated (other than any Notes which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in SECTION 2.7 hereof) or (c)(i) all such Notes not theretofore delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption under arrangements satisfactory to the Trustee for the giving of notice of redemption, and (ii) the Company shall have irrevocably deposited or caused to be deposited with the Trustee as trust funds the entire amount in cash (other than moneys repaid by the Trustee or any paying agent to the Company in accordance with SECTION 9.4 hereof) or U.S. Government Obligations, maturing as to principal, premium, if any, and interest in such amounts and at such times as will insure (without reinvestment) the availability of cash sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay at maturity all such Notes not theretofore delivered to the Trustee for cancellation, including principal, premium, if any, and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect (except as to (i) rights of registration of transfer and exchange, and the Company's right to optional redemption, (ii) substitution of apparently mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Holders to receive payments of 46 principal of and premium, if any, and interest on, the Notes upon the original stated due dates therefor (but not upon acceleration), (iv) the rights and obligations and immunities of the Trustee hereunder, (v) the rights of the Noteholders as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them and (vi) the maintenance by the Company of its existence), and the Trustee, upon written demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture; PROVIDED that the rights of Holders of the Notes to receive amounts in respect of principal of and premium, if any, and interest on the Notes held by them shall not be delayed longer than required by then applicable mandatory rules or policies of any securities exchange upon which the Notes are listed. The Company shall reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred and shall compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Notes. SECTION 9.2 APPLICATION BY TRUSTEE OF FUNDS DEPOSITED FOR PAYMENT OF NOTES. Subject to SECTION 9.4 hereof, all moneys deposited with the Trustee pursuant to SECTION 9.1 hereof shall be held in trust and applied by it to the payment, either directly or through any paying agent (including the Company acting as its own Paying Agent), to the Holders of the particular Notes for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. SECTION 9.3 REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with the satisfaction and discharge of this Indenture, all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Company, be repaid to it or paid to the Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 9.4 RETURN OF MONEYS HELD BY TRUSTEE AND PAYING AGENT UNCLAIMED FOR TWO YEARS. Any moneys deposited with or paid to the Trustee or any Paying Agent for the payment of the principal of or premium or interest on any Note and not applied but remaining unclaimed for two years after the date upon which such principal, premium or interest shall have become due and payable shall, upon the written request of the Company, be repaid to the Company by the Trustee or such Paying Agent, and the Holder of such Note shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Company for any payment which such Holder may be entitled to collect, and all liability of the Trustee or any Paying Agent with respect to such moneys shall thereupon cease. SECTION 9.5 DEFEASANCE AND DISCHARGE OF INDENTURE. 47 The Company will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes on the 123rd day after the deposit referred to in subparagraph (A) below has been made, and the provisions of this Indenture will no longer be in effect with respect to the Notes (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except as to (a) rights of registration of transfer and exchange, and the Company's right of optional redemption, (b) substitution of apparently mutilated, defaced, destroyed, lost or stolen securities, (c) rights of Holders to receive payments of principal thereof and premium, if any, and interest thereon, (d) the rights, obligations and immunities of the Trustee hereunder, (e) the rights of the Noteholders as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them, (f) the obligations of the Company to maintain a place of payment for the Notes under SECTION 3.1 hereof and (g) the maintenance by the Company of its existence; PROVIDED that the following conditions shall have been satisfied: (A) with reference to this SECTION 9.5, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of SECTION 5.8 hereof) as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Notes, (i) money in an amount, (ii) U.S. Government Obligations, which through the payment of interest and principal in respect thereof in accordance with their terms (without reinvestment), will provide not later than one day before the due date of any payment referred to in clause (x) or (y) of this subparagraph (A) money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, after payment of all federal, state and local taxes or other charges and assessments in respect thereof, (x) the principal of, premium, if any, and each installment of principal and interest on the Outstanding Notes at the maturity date of such principal or installment of principal or interest and (y) any mandatory sinking fund payments or analogous payments applicable to the Notes on the day on which such payments are due and payable in accordance with the terms of this Indenture and the Notes; (B) the Company has delivered to the Trustee (i) an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for federal income tax purposes as a result of the Company's exercise of its option under this SECTION 9.5 and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, which Opinion of Counsel must be based on (x) a change in applicable federal income tax law or related Treasury Regulations after the date of this Indenture or (y) a ruling of the Internal Revenue Service to the same effect and (ii) an Opinion of Counsel to the effect that the defeasance trust does not constitute an "investment company" under the Investment Company Act of 1940, as amended, and after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the U.S. Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law; 48 (C) immediately after giving effect to such deposit, no Default or Event of Default shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after the date of such deposit, and such deposit shall not result in a breach or violation of, or constitute a default under, any other agreement or to which the Company is a party or by which the Company is bound; and (D) if at such time the Notes are listed on a national securities exchange, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Notes will not be delisted as a result of such deposit, defeasance and discharge. SECTION 9.6 DEFEASANCE OF CERTAIN OBLIGATIONS. The Company may omit to comply with any term, provision, or condition set forth in SECTIONS 3.4, 3.5 and 8.1(B), and SECTION 4.1(D) (with respect to SECTIONS 3.4, 3.5 and 8.1(B)) and SECTIONS 4.1(C) and (E) shall be deemed not to be Events of Default on the 123rd day after the deposit referred to in subparagraph (A) below if: (A) with reference to this SECTION 9.6, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of SECTION 5.6 hereof) as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Notes, (i) money in an amount, (ii) U.S. Government Obligations, which through the payment of interest and principal in respect thereof in accordance with their terms (without reinvestment), will provide not later than one day before the due date of any payment referred to in clauses (x) or (y) of this SECTION 9.6, money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a certification thereof delivered to the Trustee, to pay and discharge, after payment of all federal, state and local taxes or other charges and assessments in respect thereof, (x) the principal of, premium, if any, and each installment of principal and interest on the Outstanding Notes at the maturity date of such principal or installment of principal or interest and (y) any mandatory sinking fund payments or analogous payments applicable to the Notes on the day on which such payments are due and payable in accordance with the terms of this Indenture and the Notes; (B) the Company has delivered to the Trustee (i) an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for federal income tax purposes as a result of the Company's exercise of its option under this SECTION 9.6 and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, and (ii) an Opinion of Counsel to the effect that the defeasance trust does not constitute an "investment company" under the Investment Company Act of 1940, as amended, and after the passage of 123 days following the deposit, the trust fund will not be 49 subject to the effect of Section 547 of the U.S. Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law; (C) immediately after giving effect to such deposit, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after the date of such deposit, and such deposit shall not result in a breach or violation of or constitute a default under any other agreement or instrument to which the Company is a party or by which the Company is bound; and (D) if at such time the Notes are listed on a national securities exchange, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Notes will not be delisted as a result of such deposit, defeasance and discharge. ARTICLE 10 REDEMPTION OF NOTES SECTION 10.1 OPTIONAL REDEMPTION. The Company at its option may, at any time, redeem the Notes, in whole or in part, upon payment of a redemption price equal to (A) the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of present values of the Remaining Scheduled Payments on the Notes being redeemed discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a rate equal to the Treasury Rate plus 75 basis points, plus, in either case, (B) accrued and unpaid interest, if any, on the principal amount of Notes being redeemed to the redemption date. SECTION 10.2 NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 10.3 NOTICE OF REDEMPTION. Notice of redemption to the Holders of Notes to be redeemed shall be given by the Company by mailing notice of such redemption by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to such Holders of Notes at their last addresses as they shall appear in the Notes Register. Failure to give notice by mail, or any defect in the notice to the Holder of any Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. The notice of redemption to each Holder shall specify that the Notes are being redeemed pursuant to this ARTICLE 10, the date fixed for redemption, the place or places of payment, the CUSIP and ISIN numbers (as applicable) of the Notes being redeemed, that payment will be made upon presentation and surrender of the Notes, that interest accrued to the date fixed for 50 redemption will be paid as specified in this Article and that, on and after said date, interest thereon or on the portions thereof redeemed will cease to accrue. Any notice of redemption of Notes to be redeemed at the option of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. At least one Business Day prior to the redemption date specified in the notice of redemption given as provided in this SECTION 10.3, the Company shall deposit with the Trustee or with one or more paying agents (or, if the Company is acting as its own paying agent, set aside, segregate and hold in trust as provided in SECTION 2.4 hereof) an amount of money sufficient to redeem on the redemption date all the Notes so called for redemption. SECTION 10.4 PAYMENT OF NOTES CALLED FOR REDEMPTION. If notice of redemption has been given as above provided, the Notes shall become due and payable on the date and at the place stated in such notice at the redemption price, and on and after said date (unless the Company shall default in the payment of such Notes at the redemption price) interest on the Notes or portions of Notes so called for redemption shall cease to accrue and, except as provided in SECTION 5.5 and SECTION 9.4 hereof, such Notes shall cease from and after the date fixed for redemption to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Notes except the right to receive the redemption price thereof. On presentation and surrender of such Notes at a place of payment specified in said notice, said Notes shall be paid and redeemed by the Company at the redemption price, PROVIDED that any semiannual payment of interest becoming due on the date fixed for redemption shall be payable to the Holders of such Notes registered as such on the relevant record date subject to the terms and provisions of SECTION 2.6(I) hereof. If the Company defaults in the payment of the redemption price with respect to any Note called for redemption, upon surrender thereof for redemption, the principal shall, until paid or duly provided for, bear interest from the date fixed for redemption at the rate borne by the Note. ARTICLE 11 MISCELLANEOUS PROVISIONS SECTION 11.1 INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS OF COMPANY EXEMPT FROM INDIVIDUAL LIABILITY. No recourse under or upon any obligation, covenant or agreement contained in this Indenture, or in any Note, or because of any indebtedness evidenced thereby, shall be had against any incorporator, as such, or against any past, present or future shareholder, officer or director, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Notes by the Holders thereof and as part of the consideration for the issue of the Notes. SECTION 11.2 PROVISIONS OF THE INDENTURE FOR THE SOLE BENEFIT OF PARTIES AND NOTEHOLDERS. 51 Nothing in this Indenture or in the Notes, expressed or implied, shall give or be construed to give to any Person, other than the parties hereto and their successors and the Holders (and, where expressly set forth herein, owners of interests in any Global Note), any legal or equitable right, remedy or claim under this Indenture or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their successors and the Holders (and, where expressly set forth herein, owners of interests in any Global Note). SECTION 11.3 SUCCESSORS AND ASSIGNS OF COMPANY BOUND BY INDENTURE. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Company shall bind its successors and assigns, whether so expressed or not. SECTION 11.4 NOTICES AND DEMANDS ON COMPANY, TRUSTEE AND NOTEHOLDERS. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders to or on the Company may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Company is filed by the Company with the Trustee) to Edison Mission Energy, 18101 Von Karman Avenue, Suite 1700, Irvine, California 92612, Attention: Chief Financial Officer. Any notice, direction, request or demand by the Company or any Noteholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made at the Corporate Trust Office. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at his last address as it appears in the Notes Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Company and Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. SECTION 11.5 STATEMENTS TO BE CONTAINED IN OFFICERS' CERTIFICATES AND OPINIONS OF COUNSEL. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically 52 required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the Person making such certificate or opinion has read such covenant or condition, (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based, (c) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. Any certificate, statement or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or Opinion of Counsel may be based, insofar as it relates to factual matters (information with respect to which is in the possession of the Company) upon the certificate, statement or opinion of or representations by an officer or officers of the Company, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Company or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants in the employ of the Company, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Trustee shall contain a statement that such firm is independent. SECTION 11.6 PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS. If the date of maturity of interest on or principal, or premium, if any, of the Notes or the date fixed for redemption of any Note shall not be a Business Day, then payment of interest, principal, or premium need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. SECTION 11.7 EW YORK LAW TO GOVERN. THIS INDENTURE SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS 53 THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). SECTION 11.8 COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same agreement. SECTION 11.9 EFFECT OF HEADINGS. The Article and Section Headings herein and the Table of Contents are for convenience of reference only and shall not affect the construction hereof. SECTION 11.10 TRUST INDENTURE ACT. When this Indenture is qualified under the TIA, the mandatory provisions thereof shall be deemed to be incorporated by reference herein. 54 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized as of the date first written above. EDISON MISSION ENERGY, as Company By: /s/ Gary Garcia ----------------------------------------- Name: Gary Garcia Title: Treasurer Attest: By: /s/ Maria P. Litos --------------------- Name: Maria P. Litos Title: Loan Administrator UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: /s/ Christopher J. Grell ----------------------------------------- Name: Christopher Grell Title: Assistant Vice President Attest: By: /s/ David J. Fernandez ---------------------- Name: David J. Fernandez Title: 55 [Face of Note] - ------------------------------------------------------------------------------- CUSIP/CINS ------------- ISIN ------------- 9.875% Senior Notes due April 15, 2011 No. $ EDISON MISSION ENERGY promises to pay to or registered assigns, ------------- the principal sum of ------------------------------ on April 15, 2011. Interest Payment Dates: April 15, 2001 and October 15, 2001 Record Dates: April 1 and October 1 Dated: April 5, 2001 EDISON MISSION ENERGY By: -------------------------------------------- Name: Title: By: -------------------------------------------- Name: Title: (SEAL) This is one of the Notes referred to in the within-mentioned Indenture: UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: --------------------------------------- Authorized Signatory A-1 [Back of Note] 9.875% Senior Notes due April 15, 2011 [INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] [INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] [INSERT THE IAI NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Edison Mission Energy, a California corporation (the "Company"), promises to pay interest on the principal amount of this Note at 9.875% per annum from April 5, 2001 until maturity. The Company will pay interest semi-annually in arrears on April 15 and October 15 of each year (each an "Interest Payment Date"); PROVIDED that if any such day is not a Business Day, then such payment will be made on the next succeeding Business Day. Interest on this Note will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from April 5, 2001; PROVIDED that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that the first Interest Payment Date in respect of this Note shall be October 15, 2001. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time at a rate that is equal to the rate set forth on the face of this Note; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. If a Reporting Cessation occurs, the interest rate applicable to the Notes shall be increased by 0.50% per annum from the date such Reporting Cessation occurs until such time as the Reporting Cessation has ended. 2. METHOD OF PAYMENT. The Company will pay interest on this Note (except defaulted interest) to the Person who is the registered Holder of this Note at the close of business on the April 1 or October 1 next preceding the Interest Payment Date, even if this Note is canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. This Note will be payable as to principal, premium, if any, and interest by mailing a check for such to or upon the written order of the registered Holder of this Note entitled thereto at its last address as it appears on the Notes Register or, upon written application to the Trustee by a Holder of $1,000,000 or more in aggregate principal amount of Notes, by wire transfer of immediately available funds to an account maintained by such Holder with a bank or other financial institution. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, United States Trust Company of New York, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company A-2 may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued this Note under an Indenture, dated as of April 5, 2001, between the Company and the Trustee (as the same may be amended, modified and supplemented, the "Indenture"). The terms of this Note include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbB). This Note is subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are unsecured obligations of the Company limited to $600,000,000 million in aggregate principal amount. 5. REDEMPTION. The Company at its option may, at any time, redeem the Notes, in whole or in part, upon payment of a redemption price equal to (A) the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of present values of the Remaining Scheduled Payments on the Notes being redeemed discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a rate equal to the Treasury Rate plus 75 basis points, plus, in either case, (B) accrued and unpaid interest, if any, on the principal amount of Notes being redeemed to the redemption date. 6. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its last registered address. Subject to payment by the Company of a sum sufficient to pay the amount due on redemption, interest on the Notes ceases to accrue upon the date duly fixed for redemption of the Notes. 7. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are issuable only in registered form without coupons in denominations of $100,000 and any integral multiple of $1,000 in excess thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 8. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 9. AMENDMENT, SUPPLEMENT. With the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time Outstanding, evidenced as in the Indenture provided, the Indenture or any supplemental indentures or the rights of the Holders of the Notes may be modified; PROVIDED that no such modification shall (a) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Note, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on the redemption thereof or impair or affect the rights of any Noteholder to institute suit for the payment thereof or change the place or currency of payment A-3 of principal of, or interest on, any Note, in each case without the consent of the Holder of each Note so affected, or (b) without the consent of the Holders of all Notes then outstanding, (i) reduce the aforesaid percentage of Notes the consent of the Holders of which is required for any such modification, or the percentage of Notes the consent of Holders of which is required for any waiver provided for in the Indenture, (ii) change any obligation of the Company to maintain an office or agency for payment of and transfer and exchange of the Notes or (iii) make certain changes to provisions relating to the waiver of past defaults or to the provisions for supplementing the Indenture with the consent of the Holders. 10. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption or otherwise, (iii) failure by the Company for 90 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding voting as a single class to comply with certain other agreements in the Indenture or the Notes; (iv) default under certain other agreements relating to Indebtedness of the Company which default results in the acceleration of such Indebtedness prior to its express maturity; (v) certain final judgments for the payment of money that remain undischarged for a period of 90 days; and (vi) certain events of bankruptcy or insolvency with respect to the Company. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare the principal of all the Notes and the interest accrued thereon to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any past Default or Event of Default except a Default in the payment of principal of, premium, if any, or interest on, any of the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 11. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 12. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder of the Company, as such, shall not have any liability for any obligations of the Company under the Notes, the Indenture or any indenture supplemental thereto or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 13. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 14. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), A-4 JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 15. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE Notes. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement. 16. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, California 92612 Attention: Chief Financial Officer A-5 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: ---------------------------------- (Insert assignee's legal name) - ------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint ------------------------------------------------------- to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: -------------------------- Your Signature: --------------------------- (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: ------------------------------------ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-6 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE* The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount Signature of Amount of decrease in Amount of increase in of this Global Note authorized officer of Principal Amount Principal Amount following such decrease Trustee or Note DATE OF EXCHANGE OF THIS GLOBAL NOTE OF THIS GLOBAL NOTE (OR INCREASE) CUSTODIAN ---------------- ---------------------- ------------------- ------------------------- ----------------------
* THIS SCHEDULE SHOULD BE INCLUDED ONLY IF THE NOTE IS ISSUED IN GLOBAL FORM. A-7 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, California 92612 United States Trust Company of New York 114 West 47th Street, 25th Floor New York, New York 10036 Re: 9.875% SENIOR NOTES DUE APRIL 15, 2011 -------------------------------------- Reference is hereby made to the Indenture, dated as of April 5, 2001 (the "INDENTURE"), between Edison Mission Energy, as issuer (the "COMPANY"), and United States Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "TRANSFEROR") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "TRANSFER"), to ___________________________ (the "TRANSFEREE"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. |_| CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE RESTRICTED GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. |_| CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE RESTRICTED GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was B-1 outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act and (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Restricted Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. |_| CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE RESTRICTED GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) |_| such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) |_| such Transfer is being effected to the Company or a subsidiary thereof. 4. |_| CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) |_| CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) |_| CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be B-2 subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) |_| CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit. ---------------------------------------- [Insert Name of Transferor] By: ------------------------------------- Name: Title: Dated: ----------------------------- B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE] (a) |_| a beneficial interest in the Restricted Global Note (CUSIP ); ----------- or (b) |_| a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) |_| a beneficial interest in the: (i) |_| Restricted Global Note (CUSIP ); or --------- (ii) |_| Unrestricted Global Note (CUSIP ); or --------- (b) |_| a Restricted Definitive Note; or (c) |_| an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT B FORM OF CERTIFICATE OF EXCHANGE Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, California 92612 United States Trust Company of New York 114 West 47th Street, 25th Floor New York, New York 10036 Re: 9.875% SENIOR NOTES DUE APRIL 15, 2011 -------------------------------------- (CUSIP ____________) Reference is hereby made to the Indenture, dated as of April 5, 2001 (the "INDENTURE"), between Edison Mission Energy, as issuer (the "COMPANY"), and United States Trust Company of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________, (the "OWNER") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "EXCHANGE"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's B-1 own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the Restricted Global Note 2 with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. [Insert Name of Transferor] ----------------------------------------- By: ------------------------------------- Name: Title: Dated: ----------------------------- EX-5.1 25 a2031364zex-5_1.txt EXHIBIT 5.1 Exhibit 5.1 SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP FOUR TIMES SQUARE NEW YORK, NY 10036 (212) 735-3000 April 20, 2001 Edison Mission Energy 18101 Von Karman Avenue Irvine, California 92612 Midwest Generation, LLC One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, Illinois 60605 Re: Edison Mission Energy and Midwest Generation, LLC Registration Statement on Form S-4 Ladies and Gentlemen: We are acting as special counsel to Edison Mission Energy, a California corporation ("EME"), and Midwest Generation, LLC, a Delaware limited liability company ("MIDWEST"), in connection with (i) the registration with the Securities and Exchange Commission (the "COMMISSION") and public offering of $333,500,000 aggregate principal amount of 8.30% Pass-Through Certificates, Series A due 2009 (the "SERIES A EXCHANGE CERTIFICATES") and $813,500,000 aggregate principal amount of 8.56% Pass-Through Certificates, Series B due 2016 (the "SERIES B EXCHANGE CERTIFICATES" and, together with the Series A Exchange Certificates, the "EXCHANGE CERTIFICATES") and (ii) the registration with the Commission of four separate Guaranty Agreements, each dated as of August 17, 2000 (the "GUARANTEES"), entered into between EME and each of Powerton Trust I, Powerton Trust II, Joliet Trust I and Joliet Trust II. The Exchange Certificates and the Guarantees are referred to herein as the "SECURITIES." The Exchange Certificates are to be issued pursuant to an exchange offer (the "EXCHANGE OFFER") in exchange for a like principal amount of the issued and out- Edison Mission Energy Midwest Generation, LLC April 20, 2001 Page 2 standing 8.30% Pass-Through Certificates, Series A due 2009 and 8.56% Pass-Through Certificates, Series B due 2016 (collectively, the "ORIGINAL CERTIFICATES") under the Pass-Through Trust Agreement A, dated as of August 17, 2000 (the "PASS-THROUGH TRUST AGREEMENT A"), between Midwest and United States Trust Company of New York, as Pass-Through Trustee (the "TRUSTEE"), made with respect to the formation of the Midwest Generation Series A Pass-Through Trust (the "SERIES A TRUST") and the issuance of 8.30% Pass-Through Certificates, Series A and the Pass-Through Trust Agreement B, dated as of August 17, 2000 (the "PASS-THROUGH TRUST AGREEMENT B" and, together with Pass-Through Trust Agreement A, the "PASS-THROUGH TRUST AGREEMENTS"), between Midwest and the Trustee, made with respect to the formation of the Midwest Generation Series B Pass-Through Trust (the "SERIES B TRUST") and the issuance of 8.56% Pass-Through Certificates, Series B, as contemplated by the Registration Rights Agreement, dated as of August 17, 2000 (the "REGISTRATION RIGHTS AGREEMENT"), by and among Midwest, EME and Credit Suisse First Boston Corporation and Lehman Brothers Inc., as representatives of the Initial Purchasers (as defined therein). This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the "Act"). In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of a. the Registration Statement on Form S-4 (File No. ) relating to the Securities filed with the Commission on April 20, 2001 under the Act (the "REGISTRATION STATEMENT"); b. an executed copy of the Registration Rights Agreement; c. executed copies of each of the Pass-Through Trust Agreements; d. executed copies of each of the Guarantees; Edison Mission Energy Midwest Generation, LLC April 20, 2001 Page 3 e. the Amended and Restated Articles of Incorporation of EME, as amended to date; f. the By-Laws of EME, as amended to date; g. the Limited Liability Company Agreement of Midwest, as amended to date; h. the certain Consent to Action of the Board of Managers of Midwest adopted by the Board of Managers of Midwest relating to, among other things, the Exchange Offer, the issuance of the Original Certificates and the Exchange Certificates, the Pass-Through Trust Agreements and related matters; i. certain resolutions adopted by the Board of Directors of EME relating to, among other things, the issuance of the Guarantees by EME and related matters; j. the Form T-1 of the Trustee filed as an exhibit to the Registration Statement; k. executed copies of the Original Certificates; and l. the forms of the Exchange Certificates. We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of Midwest and EME and such agreements, certificates of public officials, certificates of officers or other representatives of Midwest, EME and others, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinions set forth herein. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as Edison Mission Energy Midwest Generation, LLC April 20, 2001 Page 4 certified, conformed or photostatic copies and the authenticity of the originals of such latter documents. In making our examination of executed documents or documents to be executed, we have assumed that the parties thereto, other than Midwest and EME, had or will have the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and execution and delivery by such parties of such documents and the validity and binding effect thereof on such parties. As to any facts material to the opinions expressed herein which we have not independently established or verified, we have relied upon statements and representations of officers and other representatives of Midwest, EME and others. Our opinion set forth herein is limited to California corporate law, Delaware corporate law and the laws of the State of New York which are normally applicable to transactions of the type contemplated by the Exchange Offer and, to the extent that judicial or regulatory orders or decrees or consents, approvals, licenses, authorizations, validations, filings, recordings or registrations with governmental authorities are relevant, to those required under such laws (all of the foregoing being referred to as "OPINED-ON LAW"). We do not express any opinion with respect to the law of any jurisdiction other than Opined-on Law or as to the effect of any such non opined-on law on the opinions herein stated. Based upon and subject to the foregoing and the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that: 1. When the Exchange Certificates (in the form examined by us) have been duly executed and authenticated in accordance with the terms of the applicable Pass-Through Trust Agreement and have been delivered upon consummation of the Exchange Offer against receipt of Original Certificates surrendered in exchange therefor in accordance with the terms of the Exchange Offer, (i) the Series A Exchange Certificates will constitute valid and binding obligations of the Series A Trust and (ii) the Series B Exchange Certificates will constitute valid and binding obligations of the Series B Trust (together with the Series A Trust, the "TRUSTS"), enforceable against each applicable Trust in accordance with their terms, except to the extent that enforcement thereof may be limited by (A) Edison Mission Energy Midwest Generation, LLC April 20, 2001 Page 5 bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). 2. When the Exchange Certificates (in the form examined by us) have been duly executed and authenticated in accordance with the terms of the Pass-Through Trust Agreements and have been delivered upon consummation of the Exchange Offer against receipt of Original Certificates surrendered in exchange therefor in accordance with the terms of the Exchange Offer, the Guarantees will constitute valid and binding obligations of EME, enforceable against EME in accordance with their terms, except to the extent that enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). In rendering the opinions set forth above, we have assumed that (i) the execution and delivery by Midwest of each of the Pass-Through Trust Agreements and the performance by Midwest of its obligations thereunder; (ii) the execution and delivery by each Trust of the applicable Exchange Certificates and the performance by each Trust of its obligations thereunder; and (iii) the execution and delivery by EME of the Guarantees and the performance by EME of its obligations thereunder, do not and will not violate, conflict with or constitute a default under any agreement or instrument to which Midwest, the Trusts or EME or their respective properties is subject, except that we do not make this assumption for those agreements and instruments which have been identified to us by Midwest, EME or the Trusts as being material to them and which are listed as exhibits to the Registration Statement. We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement. We also consent to the reference to our firm under the caption "Legal Matters" in the prospectus included in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of Edison Mission Energy Midwest Generation, LLC April 20, 2001 Page 6 persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission. Very truly yours, /s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP EX-10.60-2 26 a2031364zex-10_602.txt EXHIBIT 10.60.2 Exhibit 10.60.2 EXECUTION COPY AMENDMENT NO. 2, dated as of March 18, 2001 (this "AMENDMENT"), to the Debt Service Reserve Guarantee, dated as of March 18, 1999 (the "GUARANTEE"), made by EDISON MISSION ENERGY, a California corporation (the "GUARANTOR"), in favor of UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent (in such capacity, the "COLLATERA1 AGENT") for certain senior secured creditors of Edison Mission Holdings Co., a California corporation (the "BORROWER"). 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"; the loans made thereunder, the "LOANS"), with certain financial institutions (collectively, the "LENDERS") and Citicorp USA, Inc., as administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT"). 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, a guarantee by the Guarantor or a combination thereof. D. In connection with the issuance by the Borrower of $300 million in aggregate principal amount of Senior Secured Bonds due 2019 and $530 million in aggregate principal amount of Senior Secured Bonds due 2026 (collectively, the "BONDS"; the trustee to the holders thereof, the "TRUSTEE"), the parties thereto have entered into Amendment No. 1, dated as May 27, 1999, pursuant to which the Guarantee Amount has been reduced to U.S. $3,000,000). E. The Guarantor has requested, and, upon this Amendment becoming effective, the Collateral Agent has agreed, that the amount of the guarantee provided for in the Guarantee be amended in the manner provided for in this Amendment. NOW, THEREFORE, the parties hereto hereby agree as follows: 1. AMENDMENTS. 1.1 AMENDMENT OF DEFINITIONS. The definition of the term "Guarantee Cap" contained in Section 1(b) of the Guarantee is hereby amended by deleting the current definition in its entirety and substituting in lieu thereof the following: "GUARANTEE AMOUNT" means nine million U.S. Dollars (U.S.$9,000,000). 1.2 AMENDMENT OF SECTION 2. Section 2(a) of the Guarantee is hereby amended by deleting the phrase "during any Fiscal Quarter shall in no event exceed the Guarantee Amount for such Fiscal Quarter" at the end of the second sentence of Section 2(a) of the Guarantee and replacing it with the following: "shall in no event exceed the Guarantee Amount". 2. COUNTERPARTS. This Amendment may be executed by the parties hereto in any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this letter by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment. 3. LIMITED EFFECT. Except as expressly provided herein, all of the terms and provisions of the Guarantee are and shall remain in full force and effect. 4. SEVERABILITY. Any provision of this Amendment 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. 5. CONDITIONS TO EFFECTIVENESS. The amendment provided for herein shall become effective on the date the Collateral Agent shall have received 2 counterparts of this Amendment duly executed and delivered by the Guarantor and consented to by the Administrative Agent and the Trustee. 6. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. EDISON MISSION ENERGY By: /s/ Steven D. Eisenberg ----------------------------------------- Name: Steven D. Eisenberg Title: Vice President UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent By: /s/ Christopher J. Grell ----------------------------------------- Name: Christopher J. Grell Title: Assistant Vice President Acknowledged and Consented to by: CITICORP USA, INC., as Administrative Agent By: /s/ Roderick Guerin ---------------------------------------------- Name: Roderick Guerin Title: Vice President UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: /s/ Christopher J. Grell -------------------------------------------------- Name: Christopher J. Grell Title: Assistant Vice President 4 EX-10.60-4 27 a2031364zex-10_604.txt EXHIBIT 10.60.4 - -------------------------------------------------------------------------------- Exhibit 10.60.4 EXECUTION COPY DEBT SERVICE RESERVE LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT among EDISON MISSION HOLDINGS CO., as Borrower and WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH as Issuing Bank and as Agent and THE BANKS NAMED HEREIN dated as of March 30, 2001 - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS; CONSTRUCTION..........................................1 Section 1.1 Definitions.............................................1 Section 1.2 Construction............................................5 ARTICLE II DEBT SERVICE RESERVE LETTER OF CREDIT.............................6 Section 2.1 Commitments.............................................6 Section 2.2 Amount and Term of Debt Service Reserve Letter of Credit........................................6 Section 2.3 Participations in Debt Service Reserve Letter of Credit........................................7 Section 2.4 Drawing and Reimbursement...............................7 Section 2.5 Fees....................................................8 Section 2.6 Interest................................................8 Section 2.7 Repayment...............................................9 Section 2.8 Prepayments.............................................9 Section 2.9 Security...............................................10 Section 2.10 Payments...............................................10 Section 2.11 Computation of Interest and Fees.......................10 Section 2.12 Payments on Non-Business Days..........................10 Section 2.13 Sharing of Payments, Etc...............................11 Section 2.14 Evidence of Debt.......................................11 Section 2.15 Increased Debt Service Reserve Letter of Credit Costs...........................................11 Section 2.16 Capital Adequacy.......................................12 Section 2.17 Taxes..................................................12 Section 2.18 Change of Law..........................................14 Section 2.19 Non-Availability.......................................14 Section 2.20 Assignments by Banks...................................15 Section 2.21 Reduction in Commitments/DSR Loans.....................16 Section 2.22 Right of Set-off.......................................16 Section 2.23 Minimum Amounts........................................16 ARTICLE III CONDITIONS PRECEDENT............................................16 Section 3.1 Conditions Precedent to Issuance of Debt Service Reserve Letter of Credit.......................16 ARTICLE IV REPRESENTATIONS AND WARRANTIES...................................17 ARTICLE V COVENANTS.........................................................18 ARTICLE VI DEFAULTS AND REMEDIES............................................18 Section 6.1 Events of Default......................................18 i Section 6.2 Remedies...............................................19 ARTICLE VII CHARACTER OF OBLIGATIONS........................................20 Section 7.1 Obligations Absolute...................................20 Section 7.2 Limited Liability of Agent and Banks...................21 ARTICLE VIII THE AGENT......................................................21 Section 8.1 Authorization and Action...............................21 Section 8.2 Agent's Reliance, Etc..................................22 Section 8.3 Issuing Bank and Affiliates............................22 Section 8.4 Bank Credit Decision...................................22 Section 8.5 Indemnification........................................22 Section 8.6 Successor Agent........................................23 Section 8.7 Collateral.............................................23 ARTICLE IX MISCELLANEOUS....................................................24 Section 9.1 Amendments, Etc........................................24 Section 9.2 Notices, Etc...........................................24 Section 9.3 No Waiver; Remedies....................................24 Section 9.4 Costs and Expenses.....................................25 Section 9.5 Application of Moneys..................................25 Section 9.6 Severability...........................................25 Section 9.7 Limitation of Liability................................25 Section 9.8 Binding Effect.........................................26 Section 9.9 Assignments and Participations.........................26 Section 9.10 Indemnification........................................27 Section 9.11 Further Assurances.....................................28 Section 9.12 Governing Law..........................................28 Section 9.13 Consent to Jurisdiction and Venue......................28 Section 9.14 Headings...............................................29 Section 9.15 Execution in Counterparts..............................29 Section 9.16 Waiver of Jury Trial...................................29 Exhibit A Form of Debt Service Reserve Letter of Credit Exhibit B Debt Service Reserve Letter of Credit Promissory Note Exhibit C Form of Commitment Transfer Supplement Schedule I Filings with the Securities and Exchange Commission ii DEBT SERVICE RESERVE LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT This Debt Service Reserve Letter of Credit and Reimbursement Agreement (this "AGREEMENT"), dated as of March 30, 2001, is entered into by and among (1) EDISON MISSION HOLDINGS CO., a California corporation (the "BORROWER"), (2) WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, as the issuer of the Debt Service Reserve Letter of Credit referred to herein, (in such capacity, the "ISSUING BANK") and as a Bank (as defined below), (3) CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as a Bank (as defined below), (4) each bank or other entity that is, or becomes pursuant to SECTION 9.9, a party hereto (collectively, the "BANKS") and (5) WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, as agent (in such capacity, together with its successors in such capacity, the "AGENT") for the Banks. RECITALS A. Pursuant to an Indenture, dated as of May 27, 1999 (the "INDENTURE"), between the Borrower and the United States Trust Company of New York, as trustee (in such capacity, together with its successors in such capacity, the "TRUSTEE"), the Borrower issued two series of senior secured bonds and two series of exchange bonds in respect thereof (collectively, the "BONDS"). B. The Borrower has requested that the Issuing Bank issue and the Banks participate in, and the Issuing Bank is willing to issue and the Banks are willing to participate in, the Debt Service Reserve Letter of Credit (as defined below) upon the terms and conditions hereinafter set forth. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, hereby agree as follows: ARTICLE I DEFINITIONS; CONSTRUCTION Section 1.1 DEFINITIONS. (a) Terms defined in the Indenture (in the form of such terms as they exist on the date of this Agreement and as they may hereafter be amended from time to time, but only to the extent that the incorporation of any such amendments into this Agreement has been consented to by the Required Banks in writing) have, unless the same are defined herein or the context otherwise requires, the same meaning when used herein (with appropriate substitutions). (b) The following terms are used in this Agreement with the following respective meanings: "ADJUSTED BASE RATE" means the higher of (i) the Federal Funds Rate plus .50% and (ii) the Prime Rate. "ADJUSTED BASE RATE LOAN" means a DSR Loan bearing interest at the Adjusted Base Rate. "APPLICABLE LAW" shall mean, with respect to any Person, property or matter, any of the following applicable thereto: any statute, law, regulation, ordinance, rule, judgment, rule of common law, order, decree, arbitral decision, governmental approval, approval, concession, grant, franchise, license, agreement or other governmental restriction, or any voluntary restraint, policy or guideline with which such Person has formally agreed to comply, whether in effect as of the date of this Agreement or thereafter and in each case as amended. "BONDS" has the meaning set forth in RECITAL A. "BUSINESS DAY" means a day (other than a Saturday or Sunday) on which banks are open for business in New York, New York, and, in matters relating to the determination of a LIBOR Rate or Interest Period, a day on which the London interbank market deals in U.S. Dollar deposits. "CLOSING DATE" means the date on which the conditions precedent set forth in SECTION 3.1 have been fulfilled and the Debt Service Reserve Letter of Credit is issued. "COLLATERAL" has the meaning set forth in the Indenture. "COLLATERAL AGENT" means the United States Trust Company of New York, as collateral agent under the Security Deposit Agreement, or any successor thereto pursuant to the terms thereof. "COMMITMENT" has the meaning set forth in SECTION 2.1. "COMMITMENT TRANSFER SUPPLEMENT" means a Commitment Transfer Supplement entered into by a Bank and another Person substantially in the form of EXHIBIT C. "CREDIT AGREEMENT" has the meaning set forth in the Indenture. "DEBT SERVICE RESERVE LETTER OF CREDIT" means a letter of credit substantially in the form of EXHIBIT A, issued or to be issued by the Issuing Bank, or any letter of credit issued by the Issuing Bank in replacement thereof. "DEFAULT" means an event that with the giving of any required notice and/or the lapse of any required time would constitute an Event of Default. "DRAWING" means a drawing under the Debt Service Reserve Letter of Credit. "DSR LOAN" has the meaning set forth in SECTION 2.4. "DSR NOTE" has the meaning set forth in SECTION 2.14(a). 2 "EVENT OF DEFAULT" has the meaning set forth in SECTION 6.1. "EXCLUDED TAXES" has the meaning set forth in SECTION 2.17(a). "EXPIRATION DATE" means the earliest to occur of (a) three hundred sixty-four (364) days from the Closing Date and (b) the date on which the Debt Service Reserve Letter of Credit is terminated in accordance with the provisions hereof. "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate PER ANNUM equal for each day during such period to 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, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three federal funds brokers of recognized standing selected by it. "FINANCING DOCUMENTS" has the meaning given such term in the Security Deposit Agreement. "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "INDEMNIFIED PARTY" has the meaning set forth in SECTION 9.10. "INDENTURE" has the meaning set forth in RECITAL A. "INTERCREDITOR AGREEMENT" has the meaning set forth in the Indenture. "INTEREST PAYMENT DATE" means, with respect to (i) any Adjusted Base Rate Loan, the first Business Day of each April and October, and (ii) any LIBOR Rate Loan, the last day of each Interest Payment with respect thereto, in each case, commencing on the first such date after the applicable Drawing giving rise to such DSR Loan, and any date on which interest on such DSR Loan becomes due and payable upon the prepayment thereof, the final maturity date thereof, the declaration of acceleration with respect thereto, or otherwise. "INTEREST PERIOD" means, with respect to any LIBOR Rate Loan, an interest period of one (1), two (2), three (3) or six (6) months (or, such other period as may be mutually agreed to among the Borrower and the Banks); PROVIDED, HOWEVER, that such Interest Period shall, in all events, end no later than the next Principal Payment Date to occur. "LETTER OF CREDIT DOCUMENTS" means this Agreement, the DSR Notes and the Debt Service Reserve Letter of Credit. "LIBOR RATE" means, for any DSR Loan bearing interest at the LIBOR Rate, a rate PER ANNUM equal to the offered rate for deposits in United States dollars (in the approximate amount and having approximately the same maturity as the LIBOR Rate Loan to be made) which appears on the Telerate LIBOR screen as of 11:00 a.m. (London time), two (2) Business Days 3 prior to the first day of the Interest Period for such LIBOR Rate Loan, and in case of variations in rates, the arithmetic average thereof rounded upwards, if necessary, to the nearest 1/100 of 1%, calculated by the Agent. "LIBOR RATE LOAN" means a DSR Loan bearing interest at the LIBOR Rate. "MONTHLY TRANSFER DATE" has the meaning given such term in the Security Deposit Agreement. "OBLIGATIONS" means all of the obligations of the Borrower to the Banks and the Agent under this Agreement and the DSR Notes, whether for principal (including reimbursement of amounts drawn under the Debt Service Reserve Letter of Credit), interest, fees, expenses, indemnification or otherwise. "OUTSTANDING AMOUNT" means an amount not in excess of $35,350,600 at any time as the same may be reduced, increased or reinstated from time to time in accordance with the terms and provisions hereof and of the Debt Service Reserve Letter of Credit. "PARTICIPANT" has the meaning set forth in SECTION 9.9(B). "PRIME RATE" means the variable rate of interest PER ANNUM officially announced or published by the Agent from time to time as its "prime rate," such rate being set by the Agent as a general reference rate of interest, taking into account such factors as the Agent may deem appropriate, it being understood that many of the Agent's commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that the Agent may make various commercial or other loans at rates of interest having no relationship to such rate. For purposes of this Agreement, each change in the Prime Rate shall be effective as of the opening of business on the date announced as the effective date of the change in such "prime rate." "PRINCIPAL PAYMENT DATE" means, with respect to any DSR Loan, the first Business Day of each April and October, commencing on the first such date after the applicable Drawing giving rise to such DSR Loan, and any date on which all or a portion of the principal of any DSR Loan becomes due and payable upon the prepayment thereof, the final maturity date thereof, the declaration of acceleration with respect thereto, or otherwise. "PURCHASING BANK" has the meaning set forth in SECTION 9.9(A). "REGULATORY CHANGE" means, subsequent to the date of this Agreement, any adoption or change in United States Federal, state or municipal or foreign law or regulations (including without limitation Regulation D) or the adoption or change or making of any application, interpretation, directive, request or guideline of or under any United States federal, state or municipal or foreign law or regulations by any court, central bank or Governmental Authority. "REQUIRED BANKS" means, at any time, Banks (one of which shall be the Agent) owed at least 66 2/3% of the sum of the Obligations then outstanding and/or the Commitments; 4 PROVIDED, HOWEVER, that, if and so long as there are only two Banks, then "Required Banks" shall mean both of such Banks. "RESERVE REQUIREMENT" means, for DSR Loans bearing interest at the LIBOR Rate, the rate (expressed as a percentage) at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during the Interest Period therefor under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion U.S. dollars against "Eurocurrency liabilities" (as such term is used in Regulation D). "SECURED PARTIES" has the meaning set forth in the Intercreditor Agreement. "SECURITY DEPOSIT AGREEMENT" means the Security Deposit Agreement, dated as of March 18, 1999, among the Borrower, the other Loan Parties as defined and named therein and the Collateral Agent, as amended by Amendment No. 1, dated as of May 27, 1999, among the Borrower, such other Loan Parties and the Collateral Agent. "SECURITY DOCUMENTS" has the meaning set forth in the Security Deposit Agreement. "TAXES" has the meaning set forth in SECTION 2.17(A). "TERMINATION NOTICE" has the meaning set forth in SECTION 2.2(D). "TRUSTEE" has the meaning set forth in RECITAL A. Section 1.2 CONSTRUCTION. In this Agreement, unless expressly specified to the contrary: the singular includes the plural and the plural the singular; words importing any gender include the other gender; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; references to "writing" include printing, typing, lithography and other means of reproducing words in a tangible, visible form; the words "including," "includes" and "include" shall be deemed to be followed by the words "without limitation"; references to articles, sections (or subdivisions of sections), recitals, appendices, exhibits, annexes or schedules are to those of this Agreement; references to agreements and other instruments shall be deemed to include all amendments and other modifications to such agreements and instruments, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement; references to Persons include their respective permitted successors and assigns and, in the case of Governmental Authorities, Persons succeeding to their respective functions and capacities; and all accounting terms used in this Agreement shall be interpreted, all accounting determinations under this Agreement shall be made and all financial statements required to be delivered under this Agreement shall be prepared in accordance with generally accepted accounting principles as in effect from time to time. 5 ARTICLE II DEBT SERVICE RESERVE LETTER OF CREDIT Section 2.1 COMMITMENTS. Each Bank irrevocably agrees severally, on the terms and conditions contained in this Agreement, to participate in the Debt Service Reserve Letter of Credit in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Bank's name on the signature pages hereof or, if such Bank has entered into one or more Commitment Transfer Supplements, set forth for such Bank in the register maintained by the Agent (such agreement by such Bank, as the same may be reduced from time to time pursuant to the terms of this Agreement, herein called such Bank's "COMMITMENT"). Section 2.2 AMOUNT AND TERM OF DEBT SERVICE RESERVE LETTER OF CREDIT. (a) Subject to the terms and conditions contained in this Agreement, the Issuing Bank irrevocably agrees to issue the Debt Service Reserve Letter of Credit on the Closing Date for the account of the Borrower in favor of the Collateral Agent, for the benefit of the holders of the Bonds, in the face amount of $35,350,600, subject to reduction, increase and reinstatement as provided hereinafter and in the Debt Service Reserve Letter of Credit. The Debt Service Reserve Letter of Credit shall expire and all obligations of the Issuing Bank and any Bank in respect thereof shall terminate on the Expiration Date. (b) If the Bond Debt Service Reserve Requirement shall reduce or increase in accordance with the Indenture and the Security Deposit Agreement, the Outstanding Amount of the Debt Service Reserve Letter of Credit shall be reduced or increased, as the case may be, by an amount equal to the amount of such reduction or increase in the Bond Debt Service Reserve Requirement; PROVIDED, HOWEVER, that in no event shall the Outstanding Amount exceed $35,350,600 at any time. Subject to SECTION -------- 2.2(D) and ARTICLE VI, the Outstanding Amount of the ------ ----------- Debt Service Reserve Letter of Credit, as so reduced or increased, shall be reduced to the extent that Drawings are made and shall be reinstated to the extent that DSR Loans are repaid, PROVIDED that any such reinstatement shall not cause the Outstanding Amount (when added to the balance in the Bond Debt Service Reserve Account) to exceed the Bond Debt Service Reserve Requirement. (c) The Borrower shall deliver, or cause to be delivered, (i) to each of the Agent and the Collateral Agent prompt notice of the occurrence of any event resulting in an adjustment to the Bond Debt Service Reserve Requirement and (ii) to each of the Agent and the Collateral Agent the calculation of the Outstanding Amount resulting from the adjustment referred to in clause (i), together with all information reasonably necessary to make such calculation. The Issuing Bank shall deliver to the Collateral Agent a notice in the form of ANNEX 5 to the Debt Service Reserve Letter of Credit to effect a change in the Outstanding Amount of the Debt Service Reserve Letter of Credit. (d) The Issuing Bank shall have the right, upon the occurrence and during the continuation of an Event of Default, to deliver a notice in the form of ANNEX 2 to 6 the Debt Service Reserve Letter of Credit (a "TERMINATION NOTICE"), whereupon the Expiration Date shall occur. The Outstanding Amount shall not be reinstated upon repayment of any DSR Loans after the delivery by the Issuing Bank of a Termination Notice. (e) The Agent shall, solely for informational purposes, deliver to the Borrower a copy of any termination notice given to the beneficiary under the Debt Service Reserve Letter of Credit, PROVIDED, HOWEVER, that the Banks' ability to terminate the Debt Service Reserve Letter of Credit shall not be contingent upon the Agent's delivery to the Borrower of such notice and that neither the Agent nor the Banks shall incur any liability whatsoever as a result of the Agent's failure to deliver such notice to the Borrower. Section 2.3 PARTICIPATIONS IN DEBT SERVICE RESERVE LETTER OF CREDIT. Immediately upon the issuance of the Debt Service Reserve Letter of Credit, the Issuing Bank shall be deemed to have sold and transferred to each Bank, and each Bank shall be deemed to have purchased and received from the Issuing Bank, in each case irrevocably and without any further action by any party, an undivided interest and participation in the Debt Service Reserve Letter of Credit, each Drawing and the other Obligations in respect thereof in an amount equal to the product of (a) a fraction the numerator of which is the amount of the Commitment of such Bank and the denominator of which is the aggregate amount of all of the Commitments (the "RATABLE SHARE") and (b) the maximum amount available to be drawn under the Debt Service Reserve Letter of Credit plus the amount of all outstanding DSR Loans. The Agent shall promptly advise each Bank of any change in the Outstanding Amount or the Expiration Date in respect of the Debt Service Reserve Letter of Credit, the cancellation or other termination of the Debt Service Reserve Letter of Credit and any Drawing, PROVIDED, HOWEVER, that failure to provide such notice shall not limit or impair the rights of the Agent hereunder or under the Financing Documents. Section 2.4 DRAWING AND REIMBURSEMENT. The payment by the Issuing Bank of a Drawing shall constitute the making by the Issuing Bank of a loan in the amount of such payment. In the event that a Drawing is not repaid by the Borrower by 12:00 noon, New York City time, on the day of such Drawing, the Agent shall promptly notify each other Bank. Each such Bank shall deliver to the Agent for the Issuing Bank's account, on the day of such notification and in immediately available funds, an amount equal to such Bank's Ratable Share of the payment made by the Issuing Bank and not reimbursed or paid by the Borrower pursuant to this SECTION 2.4. In the event that any Bank fails to make available to the Agent for the account of the Issuing Bank the amount of such loan, the Issuing Bank shall be entitled to recover such amount on demand from such Bank together with interest thereon at (i) for the first three (3) days of nonpayment, the Federal Funds Rate and (ii) thereafter, the Federal Funds Rate plus 2.50%. Each payment by a Bank pursuant to this SECTION 2.4 shall constitute a "DSR Loan" under this Agreement. 7 Section 2.5 FEES. The Borrower shall pay the following fees to the Agent for the respective accounts of the Persons specified below: (a) if there is more than one (1) Bank, for the account of the Agent, an annual administration fee of $50,000, payable on the Monthly Transfer Date next succeeding the first date on which there is more than one Bank; (b) to the Agent for the respective accounts of the Banks, (i) a structuring fee equal to .75% of the aggregate Commitments and (ii) a letter of credit fee equal to .50% of the aggregate Commitments, in each case, payable on the Closing Date; and (c) for the account of the Issuing Bank, such additional administrative fees and charges (including cable charges) as are generally associated with letters of credit, in accordance with the Issuing Bank's standard internal charge guidelines, payable on the next Monthly Transfer Date. Section 2.6 INTEREST. (a) The Borrower shall pay interest on the unpaid principal amount of each DSR Loan resulting from a Drawing on each applicable Interest Payment Date, from the date of such DSR Loan until such principal amount has been repaid in full. Such interest shall be paid at a rate PER ANNUM equal to (i) so long as no Event of Default has occurred and is continuing, either (x) with respect to Adjusted Base Rate Loans, the sum of the Adjusted Base Rate in effect from time to time plus 1.50% PER ANNUM or (y) with respect to LIBOR Rate Loans, the sum of the LIBOR Rate in effect from time to time plus 2.50% PER ANNUM, and (ii) so long as an Event of Default has occurred and is continuing, the Adjusted Base Rate plus 4.00% PER ANNUM. (b) Each Drawing and each DSR Loan made pursuant to SECTION 2.4 shall initially bear interest based on the Adjusted Base Rate as in effect from time to time plus 1.50% PER ANNUM; PROVIDED, HOWEVER, that prior to the making of any DSR Loan, the Borrower may give the Agent written notice of the Borrower's election that such DSR Loan shall bear interest based on the LIBOR Rate. Such notice shall be irrevocable and shall be effective only if received by the Agent not later than 12:00 noon, (New York City time) three (3) Business Days prior to the occurrence of the Drawing giving rise to such DSR Loan. The Agent shall promptly notify the Banks of the contents of each such notice. Subject to SECTIONS 2.6(D), 2.19 and 2.23, such DSR Loan shall then bear interest based on the LIBOR Rate from the date of such DSR Loan. (c) Subject to SECTIONS 2.6(D), 2.19 and 2.23, unless an Event of Default shall have occurred, the Borrower may at any time, upon three Business Days' irrevocable written notice to the Agent, (x) convert (i) any Adjusted Base Rate Loan to a LIBOR Rate Loan or (ii) any LIBOR Rate Loan to an Adjusted Base Rate Loan, PROVIDED that a LIBOR Rate Loan may be converted only on the last day of 8 the applicable Interest Period or (y) continue any LIBOR Rate Loan as a LIBOR Rate Loan with the same or a different Interest Period on the last day of the applicable Interest Period. The Agent shall promptly notify the Banks of the contents of each such notice. In the event the Borrower fails to select the applicable interest rate, within the time period and otherwise as provided in this SECTION 2.6(C), such DSR Loan (if outstanding as a LIBOR Rate Loan) will be automatically converted into an Adjusted Base Rate Loan on the last day of the then current Interest Period for such DSR Loan or (if outstanding as an Adjusted Base Rate Loan) will remain as, or (if not then outstanding) will be made as, an Adjusted Base Rate Loan. (d) The Borrower shall pay to the Agent for the account of each Bank, upon the request of such Bank through the Agent, such amount or amounts as shall be sufficient (in the reasonable opinion of such Bank) to compensate it for any loss, cost or expense which such Bank determines is attributable to any failure for any reason (i) of any LIBOR Rate Loan, pursuant to a notice given under SECTION 2.6(B), to occur or (ii) of the Borrower to convert an Adjusted Base Rate Loan from such Bank to a LIBOR Rate Loan, or to continue a LIBOR Rate Loan, as and when specified in the relevant notice given pursuant to SECTION 2.6(B) or 2.6(C). Section 2.7 REPAYMENT. (a) The Borrower shall repay the principal amount of the DSR Loans in full on the Expiration Date. (b) Subject to SECTION 2.7(C), the Issuing Bank shall reduce the Outstanding Amount by the outstanding principal amount of each DSR Loan. (c) Subject to SECTIONS 2.2 and 6.1, the Issuing Bank shall, upon receipt of written notice from the Borrower, reinstate the Outstanding Amount to the extent of any repayment or prepayment of the principal amount of any DSR Loan. Section 2.8 PREPAYMENTS. (a) The Borrower may, at any time and from time to time on any Business Day, irrevocably notify the Agent in writing that the Borrower intends to prepay all or any portion (and so stating the aggregate principal amount to be prepaid) of the DSR Loans then outstanding on a day which is at least three (3) Business Days after the date of such notice. If the Borrower delivers any such notice, the Borrower shall, not later than 12:00 noon, New York City time, on the prepayment date set forth in such notice, prepay without premium or penalty the outstanding principal amount of the DSR Loans so indicated in such notice, together with accrued interest to the date of such prepayment on the principal amount so prepaid. (b) The Borrower agrees to indemnify each Bank and hold each Bank harmless from any direct loss (but excluding any indirect, consequential or incidental loss or damage), cost or reasonable out-of-pocket expense which such Bank incurs as a result of a prepayment of any DSR Loan bearing interest at the LIBOR Rate on a date which is not the last day of an Interest Period applicable thereto. 9 (c) All prepayments made hereunder shall be applied by the Agent and the Banks against the principal amount of outstanding DSR Loans (i) as long as no Event of Default has occurred and is continuing, in the order as specified by Borrower or, in the absence of such specification, in the order such DSR Loans were made, and (ii) if an Event of Default has occurred and is continuing, in the order as specified by the Agent or, in the absence of such specification, in the order such DSR Loans were made. Section 2.9 SECURITY. The Obligations shall be secured by the Security Documents, the rights and remedies in respect of which shall be exercised pursuant to the Intercreditor Agreement. Section 2.10 PAYMENTS. (a) The Borrower shall make each payment hereunder and under the DSR Notes not later than 12:00 noon, New York City time, on the day when due in United States dollars to the Agent at its address set forth in SECTION 9.2, in immediately available funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal (including reimbursement of Drawings), interest or fees ratably (other than amounts payable for the account of the Agent or the Issuing Bank pursuant to SECTION 2.5(A), (C) or (D) or payable pursuant to SECTION 9.4) to the Banks and like funds relating to the payment of any other amount payable to any Bank to such Bank, in each case to be applied in accordance with the terms of this Agreement. (b) Unless the Agent receives notice from the Borrower before the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date, and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due to such Bank. If and to the extent that the Borrower has not so made such payment in full to the Agent, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date on which such Bank repays such amount to the Agent (i) for the first three (3) days of non-repayment, at the Federal Funds Rate and (ii) thereafter, at the Federal Funds Rate plus 2.50%. Section 2.11 COMPUTATION OF INTEREST AND FEES. All computations of interest and fees hereunder shall be made on the basis of a year of three hundred sixty (360) days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each calculation and each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. Section 2.12 PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment hereunder or under any DSR Note is stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be. If no due date is specified for the payment of any amount payable by the Borrower hereunder, such amount shall be due and payable not later than ten (10) Business Days after receipt by the Borrower of written 10 demand from the Agent for the payment thereof. In connection with a LIBOR Rate Loan, if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day. Section 2.13 SHARING OF PAYMENTS, ETC. If any Bank obtains any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of its Commitment or the DSR Loans made by it (other than pursuant to SECTION 9.4) in excess of its ratable share of such payments obtained by all of the Banks, then such Bank shall be deemed to have received such payment as agent for and on behalf of all the Banks and shall immediately advise the Agent of the receipt of such funds and promptly transmit the amount thereof to the Agent for prompt distribution among the Banks as provided for in this Agreement and such funds transmitted to the Agent shall be credited as a payment by the Borrower under this Agreement; PROVIDED that such Bank so transmitting funds to the Agent shall not be deemed to have received, and the Borrower shall be deemed not to have made to such Bank (to the extent funds are transmitted to the Agent) any payment transmitted to the Agent by such Bank pursuant to this SECTION 2.13. Section 2.14 EVIDENCE OF DEBT. (a) The indebtedness of the Borrower resulting from all DSR Loans made by each Bank from time to time shall be evidenced by an appropriate notation on the schedule, or a continuation thereof, to the Debt Service Reserve Letter of Credit Promissory Note substantially in the form of EXHIBIT B (each a "DSR NOTE"), delivered by the Borrower to such Bank. (b) The books and accounts of the Agent shall be conclusive evidence, absent manifest error, of the amounts of all Drawings, DSR Loans, fees, interest and other amounts advanced, due, outstanding, payable or paid pursuant to this Agreement or any DSR Note. Section 2.15 INCREASED DEBT SERVICE RESERVE LETTER OF CREDIT COSTS. If, after the date hereof, any introduction of or change in any Applicable Law (including for purposes hereof, any directive, guideline or requirement of any Governmental Authority (whether or not having the force of law)) or in the interpretation thereof by any Governmental Authority charged with the administration thereof either (a) imposes, modifies or makes applicable any reserve, special deposit or similar requirement against letters of credit issued by, or assets held by, or deposits or other liabilities in or for the account of, the Agent or any Bank or (b) imposes on the Agent or any Bank any other condition regarding this Agreement, the Agent, such Bank, the Debt Service Reserve Letter of Credit or the DSR Loans, and the result of any event referred to in the preceding clause (a) or (b) is to increase the cost to the Agent or such Bank of issuing or maintaining the Debt Service Reserve Letter of Credit or the DSR Loans, reduce the amount of any payment receivable by the Agent or such Bank hereunder or reduce the rate of return on any Bank's capital as a consequence of its obligations hereunder below that which such Bank would have achieved but for such circumstance, then, in each such case, upon demand by the Agent or such Bank, the Borrower shall pay to the Agent or such Bank, from time to time as specified thereby, on the Monthly Transfer Dates under the Security Deposit Agreement, additional 11 amounts sufficient to compensate the Agent or such Bank for such increased costs, reduction in payments receivable or reduction in rate of return. A certificate as to any such additional amount or amounts submitted by a Bank, through the Agent, to the Borrower and the other Banks shall certify that similar demands have been made to other customers of such Bank which are subject to similar provisions and shall, in the absence of manifest error, be final and conclusive. In determining such amount, a Bank may use any reasonable averaging and attribution methods. Notwithstanding the foregoing, the Borrower shall only be obligated to compensate any Bank or Agent for any amount described in this SECTION 2.15 arising or occurring during (i) any time period commencing not more than 90 days prior to the date on which such Bank notifies the Agent and the Borrower that such Bank or the Agent proposes to demand such compensation and (ii) any time period during which, because of the unannounced retroactive application of such statute, regulation or other basis, such Bank could not have known that such amount might arise or accrue. Section 2.16 CAPITAL ADEQUACY. If the Agent or any Bank reasonably determines that compliance with any Applicable Law (including for purposes hereof, any directive, guideline or requirement of any Governmental Authority (whether or not having the force of law)) affects or would affect the amount of capital required or expected to be maintained by the Agent or such Bank or any Person controlling the Agent or such Bank and that the amount of such capital is increased by or based upon the existence of such Bank's Commitment or the issuance of the Debt Service Reserve Letter of Credit or outstanding DSR Loans, then, upon demand by the Agent or such Bank, the Borrower shall pay to the Agent or such Bank, from time to time as specified thereby, additional amounts sufficient to compensate the Agent or such Bank in light of such circumstances, to the extent that the Agent or such Bank reasonably determines such increase in capital to be allocable to the existence of such Bank's Commitment or the issuance of the Debt Service Reserve Letter of Credit or such DSR Loans. A certificate as to any such additional amount or amounts submitted by a Bank, through the Agent, to the Borrower and the other Banks shall certify that similar demands have been made to other customers of such Bank which are subject to similar provisions and shall, in the absence of manifest error, be final and conclusive. In determining such amount, a Bank may use any reasonable averaging and attribution methods. Notwithstanding the foregoing, the Borrower shall only be obligated to compensate any Bank or the Agent for any amount described in this SECTION 2.16 arising or occurring during (i) any time period commencing not more than 90 days prior to the date on which such Bank notifies the Agent and the Borrower that such Bank or the Agent proposes to demand such compensation and (ii) any time period during which, because of the unannounced retroactive application of such statute, regulation or other basis, such Bank could not have known that such amount might arise or accrue. Section 2.17 TAXES(a) (a) All payments, except as otherwise provided in SECTION 2.17(c), by the Borrower of principal of, and interest on, the DSR Notes 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 Bank's net income, in each case, imposed as a result of a connection between the Bank and the jurisdiction imposing the tax (other than a connection arising solely from the Bank having executed, delivered or performed its 12 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 Agent an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authority; and (iii) pay to the Agent for the account of the Banks such additional amount or amounts as is necessary to ensure that the net amount actually received by each Bank will equal the full amount such Bank would have received had no such withholding or deduction been required. Moreover, if any Taxes are directly asserted again the Agent or any Bank with respect to any payment received by the Agent or such Bank hereunder, the Agent or such Bank may pay such Taxes and, upon receipt of notice from such Bank 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 Agent, for the account of the respective Banks, the required receipts or other required documentary evidence, the Borrower shall indemnify the Banks for any incremental Taxes, interest or penalties that may become payable by any Bank as a result of any such failure. (c) Each Bank that is not a United States person as defined in Section 7701(a)(3) of the Code (a "NON-U.S. BANK") shall deliver to the Borrower and the Agent two copies of either U.S. Internal Revenue Service Form W-8 BEN or Form W-8 ECI, or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Bank 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 DSR Notes. Such forms shall be delivered by each Non-U.S. Bank on or before the date it becomes a party to this Agreement. In addition, each Non-U.S. Bank shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Bank. Each Non-U.S. Bank 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. Bank with respect to any 13 Taxes (i) that are attributable to such Non-U.S. Bank's failure to comply with the requirements of this Section 2.17(c) or (ii) that are United States withholding taxes imposed on amounts payable to such Bank at the time the Bank becomes a party to this Agreement, except to the extent that such Bank's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Taxes pursuant to Section 2.17(a). Notwithstanding any other provision of this Section 2.17(c), a Non-U.S. Bank shall not be required to deliver any form pursuant to this Section 2.17(c) that such Non-U.S. Bank is not legally able to deliver. Section 2.18 CHANGE OF LAW. (a) Notwithstanding any other provision of this Agreement, if any Regulatory Change, or compliance by any Bank with any Regulatory Change, makes it unlawful or impossible for any Bank to make, maintain or continue its proportionate interest in any Debt Service Reserve Letter of Credit or DSR Loan (or commitments therefor), then such Bank shall promptly give notice together with evidence thereof to the Borrower and the Agent, and the Borrower shall pay forthwith all amounts outstanding, accrued or payable under this Agreement to such Bank and cause such Bank to be released from all obligations of such Bank under this Agreement. (b) A Bank shall (consistent with legal and regulatory restrictions) designate a different lending office for the DSR Loans (or commitments therefor) or its participation in the Debt Service Reserve Letter of Credit affected pursuant to this SECTION 2.18 before giving any notice to the Borrower and the Agent pursuant to this SECTION 2.18 if such designation will avoid the need for giving such notice and will not, in the sole opinion of such Bank, be disadvantageous to such Bank, except that such Bank shall have no obligation to designate a lending office located in the United States of America. If Borrower so requests within ten (10) days of receipt of the notice referred to above (which notice is based on circumstances not generally applicable to United States or foreign lenders making loans of the types contemplated hereunder), such Bank shall (consistent with legal and regulatory restrictions) comply with SECTION 2.20 hereof. Section 2.19 NON-AVAILABILITY. (a) If at any time dollar deposits in the principal amount of any Bank's proportionate interest in, or obligation under, any DSR Loan bearing interest at the LIBOR Rate are not available to such Bank in the London interbank market for the next Interest Period, such Bank shall so notify the Agent, who shall so notify the Borrower, and the obligation of such affected Bank to make or continue or to convert DSR Loans into DSR Loans bearing interest based on the LIBOR Rate shall be immediately suspended and during such suspension be converted into an obligation to do the same with respect to DSR Loans bearing interest at the Adjusted Base Rate; PROVIDED, HOWEVER, that outstanding DSR Loans bearing interest at the LIBOR Rate shall be converted into DSR Loans bearing interest at the Adjusted Base Rate on the last day of the then current Interest Period applicable to such DSR Loans. 14 (b) If at any time the Interest Rate then in effect based on the LIBOR Rate does not adequately and fairly reflect, in the reasonable judgment of any Bank, the cost for such Bank of advancing or maintaining its respective proportionate interest in any DSR Loan bearing interest at the LIBOR Rate during any Interest Period, then such Bank shall notify the Agent, who shall so notify the Borrower, and interest on such Bank's proportionate share of the DSR Loans shall for any subsequent Interest Period accrue at the Adjusted Base Rate. (c) If the Borrower so requests after the suspension of a Bank's obligation to make DSR Loans bearing interest at the LIBOR Rate under this SECTION 2.19 for at least ten (10) consecutive Business Days based on circumstances not generally applicable to United States or foreign lenders making loans of the types contemplated hereunder, such Bank shall (consistent with legal and regulatory restrictions) comply with SECTION 2.20 hereof. Section 2.20 ASSIGNMENTS BY BANKS. (a) If (i) a Bank is required to comply with this SECTION 2.20 after a request from the Borrower pursuant to SECTION 2.17, 2.18 or 2.19 or (ii) the Borrower requests that the provisions of this SECTION 2.20 apply to a Bank within ten (10) days after it receives a notice from the Agent that (A) such Bank has failed to make available to the Agent its portion of any DSR Loan on the date required to be made available to the Agent pursuant to this Agreement after the Agent has made written demand upon such Bank for such payment or (B) such Bank has provided the Agent with notice that such Bank shall not make available to the Agent such portion of any DSR Loan required to be made available to the Agent pursuant to this Agreement or (C) such Bank has failed to reimburse the Agent pursuant to the terms of this Agreement, such Bank shall assign all or a part of its proportionate share of the DSR Loans and its commitment to make DSR Loans to a replacement Bank (which may be, but is not required to be, one of the other Banks) designated by the Borrower; PROVIDED that any assignment or transfer made by a Bank to a replacement Bank shall satisfy the following conditions: (i) the Borrower shall promptly pay when due all reasonable fees and expenses which such Bank incurs in connection with such transfer or assignment and (ii) any assignment of all or part of the DSR Loans or obligations shall be made without recourse, representation or warranty, and the Borrower shall cause the replacement Bank to pay to the Agent for the account of the assigning Bank in immediately available funds all amounts outstanding or payable under this Agreement to each Bank assigning its interest in the DSR Loans. (b) Each Bank agrees that as promptly as practicable after it has made a determination to make a claim for amounts under SECTION 2.8(B), 2.15, 2.16 or 2.17 with respect to events or conditions arising after the date hereof, it shall notify the Borrower of the same and use commercially reasonable efforts (consistent with legal and regulatory restrictions and such Bank's internal policies) to mitigate the effect of such provisions on the Borrower, including (i) in the case of SECTION 2.15, 2.16 or 2.17, efforts to make, fund, issue or maintain its DSR Loans or the Debt Service Reserve Letter of Credit, as relevant, through another office of such Bank and (ii) in the case of SECTION 2.8(B), efforts to reemploy amounts held by such Bank, (x) if as a result thereof the additional moneys which would otherwise be required to be paid to such Bank pursuant to any of such provisions of this Agreement would be reduced, or the illegality or other adverse circumstances which would otherwise require a prepayment of such DSR Loans or the suspension of the issuance of, or of drawings under, the Debt Service Reserve Letter of 15 Credit pursuant to any of such provisions would cease to exist, and (y) if, as determined by such Bank in good faith, the making, funding, issuing or maintaining of such DSR Loan or the Debt Service Reserve Letter of Credit, or the making of drawings under the Debt Service Reserve Letter of Credit through such other office would not otherwise adversely affect such Bank. Section 2.21 REDUCTION IN COMMITMENTS/DSR LOANS. The Borrower shall have the right to refinance all Commitments and all of the outstanding DSR Loans, if any, in whole but not in part, without premium or penalty upon at least ten (10) days' prior written notice to the Agent; PROVIDED, HOWEVER, that the Borrower agrees to indemnify each Bank and hold each Bank harmless from any direct loss (but excluding any indirect, consequential or incidental loss or damage), cost or reasonable out-of-pocket expense which such Bank incurs as a result of a refinancing pursuant to this SECTION 2.21 of any DSR Loan bearing interest at the LIBOR Rate on a date which is not the last day of an Interest Period applicable thereto. In any refinancing of such Commitments, the Borrower shall cause the Debt Service Reserve Letter of Credit to be released and returned to the Issuing Bank. Section 2.22 RIGHT OF SET-OFF. The Borrower hereby authorizes each Bank, upon the occurrence and during the continuance of any Event of Default, at any time and from time to time, without notice to the Borrower or any Person other than the Collateral Agent (any such notice being hereby expressly waived by the Borrower to the extent it may legally do so) to set off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final) at any time held, and other indebtedness at any time owing, by such Bank in any of its offices, wherever located (whether such deposits or indebtedness be in dollars or in any other currency), to or for the credit or the account of the Borrower against any and all of the Obligations and liabilities of the Borrower now or hereafter existing under this Agreement, irrespective of whether or not the Agent shall have made any demand hereunder or thereunder and although such Obligations may be contingent or unmatured. The Banks agree to promptly notify the Borrower of such set-off and application. Section 2.23 MINIMUM AMOUNTS. (a) Anything in this Agreement to the contrary notwithstanding, the aggregate principal amount of DSR Loans bearing interest based on the LIBOR Rate shall be in an amount at least equal to $1,000,000 or in multiples of $1,000,000 in excess thereof and, if any DSR Loans bearing interest based on the LIBOR Rate would otherwise be in a lesser principal amount for any period, such DSR Loans shall bear interest based on the Adjusted Base Rate during such period. (b) Not more than six (6) DSR Loans bearing interest at the LIBOR Rate may be outstanding at one time. ARTICLE III CONDITIONS PRECEDENT Section 3.1 CONDITIONS PRECEDENT TO ISSUANCE OF DEBT SERVICE RESERVE LETTER OF CREDIT. The obligation of the Issuing Bank to issue the Debt Service Reserve Letter of Credit is subject to the follow conditions precedent: 16 (a) the Agent shall have received the following, each dated on or before the Closing Date unless otherwise specified below, in form and substance satisfactory to the Agent and in the number of originals or photostatic copies reasonably required by the Agent: (i) this Agreement and the DSR Notes duly executed by the Borrower; and (ii) a certificate of the Collateral Agent as to the incumbency and specimen signatures of the officers of the Collateral Agent authorized to make drawings, to execute and present certificates under the Debt Service Reserve Letter of Credit, and otherwise to communicate with the Agent with respect thereto; (b) the Indenture, the Intercreditor Agreement and the Security Documents shall be in full force and effect; (c) the Borrower shall have paid all accrued fees and expenses (as provided in SECTIONS 2.5 and 9.4) of the Agent and the Banks (including the reasonable accrued fees and disbursements of counsel to the Agent and the Banks), to the extent that one or more statements for such fees and expenses have been presented for payment; (d) the Agent shall have received such other approvals, opinions, evidence and documents as it may reasonably request and which are customary for transactions of the type contemplated by this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower hereby makes for the benefit of the Agent and the Banks all of the representations and warranties of the Borrower made in the Credit Agreement (unless stated to be given as of an earlier date, in which case such representation and warranty shall be true and correct only as of such earlier date), in the form of such representations and warranties as they exist on the date of this Agreement and as they may hereafter be amended from time to time, but only to the extent that the incorporation of any such amendments into this Agreement has been consented to in accordance with SECTION 9.1, provided that the representations and warranties set forth in SECTIONS 7.1(B), 7.4, 7.5, 7.6(B), 7.8, 7.10 and 7.14 of the Credit Agreement shall be qualified by the information contained in the reports and filings made by the Borrower with the Securities and Exchange Commission as set forth on SCHEDULE I hereto. Such representations and warranties are incorporated herein by reference as if set forth at length in this Agreement; PROVIDED that any reference to the term "Obligations" shall be deemed to include the Obligations hereunder; each reference to the term "Loan Document" shall be deemed to be a reference to this Agreement; and with any other appropriate substitutions designed to bestow upon the Agent and the Banks the benefit of such representations and warranties in the same manner and to the same extent bestowed upon the Lenders under the Credit Agreement. 17 ARTICLE V COVENANTS So long as any Commitment is in effect, the Debt Service Reserve Letter of Credit is outstanding or the Obligations remain unpaid, unless compliance has been waived in accordance with SECTION 9.1: (a) all of the covenants of the Borrower contained in ARTICLE IV of the Indenture (other than those in SECTIONS 4.1 and 4.2 thereof) and ARTICLE V of the Indenture, in the form of such covenants as they exist as of the date of this Agreement and as they may hereafter be amended from time to time, but only to the extent that the incorporation of any such amendments into this Agreement has been consented to in accordance with SECTION 9.1, are hereby incorporated and made applicable by reference as if set forth at length in this Agreement; PROVIDED that each reference to the term "Indenture" shall be deemed to be a reference to this Agreement; each reference to the Trustee shall be deemed to be a reference to the Agent and the Banks; and with any other appropriate substitutions designed to bestow upon the Agent and the Banks the benefit of such covenants in the same manner and to the same extent bestowed upon the Trustee and the Holders of the Bonds in the Indenture, and the Borrower shall observe and perform all of such incorporated covenants; and (b) the Borrower will not, without the prior written approval of the Required Banks, terminate, amend or otherwise modify any provision of any Financing Document if such termination, amendment or other modification would affect the priority of payments from the Revenue Account under the Security Deposit Agreement in a manner adverse to the Agent or any Bank, increase any Accrued Interest Amount (as defined in the Security Deposit Agreement), amend the principal payment dates of any Senior Debt in a manner adverse to the Agent or any Bank, or change the voting requirements under the Intercreditor Agreement in a manner adverse to the Agent or any Bank. ARTICLE VI DEFAULTS AND REMEDIES Section 6.1 EVENTS OF DEFAULT. Each of the following shall constitute an "Event of Default" hereunder: (a) any amount in respect of fees, costs or expenses due by the Borrower under this Agreement shall not be paid in full within ten (10) days following delivery of notice thereof to the Borrower; or (b) any amount due by the Borrower in respect of interest on any DSR Loan shall not be paid in full within five (5) days after its due date; or 18 (c) any amount due by the Borrower in respect of principal of any DSR Loan shall not be paid to the Agent in full within three (3) days after its due date; or (d) any representation or warranty made by or on behalf of the Borrower in this Agreement (including by incorporation by reference), or in any certificate furnished to the Agent or the Banks, shall prove to have been false or misleading in any respect as of the time made, confirmed or furnished and the inaccuracy has had or is reasonably expected to have a Material Adverse Effect and such misrepresentation shall continue uncured for thirty (30) or more days from the date an Authorized Officer of the Borrower obtains actual knowledge thereof; or (e) the Borrower shall fail to perform or observe any covenant or agreement contained in (i) SECTION 4.7, 4.9, 4.10, 4.11, 4.13, 4.14, 4.15, or 5.1 of the Indenture (as incorporated into paragraph (a) of ARTICLE V of this Agreement) or (ii) paragraph (b) of ARTICLE V of this Agreement, and, in each such case, such failure shall continue uncured for thirty (30) or more days after an Authorized Officer of the Borrower has actual knowledge of such failure; or (f) the Borrower shall fail to perform or observe any of its covenants contained (including by incorporation by reference) in any other provision of this Agreement (other than those referred to in paragraphs (a), (b), (c) and (e), above) and such failure shall continue uncured for sixty (60) or more days after an Authorized Officer of the Borrower has actual knowledge of such failure; PROVIDED that if the Borrower commences and diligently pursues efforts to cure such default within such sixty (60) day period, the Borrower may continue to effect such cure of the default (and such default shall not be deemed as "Event of Default" hereunder) for an additional thirty (30) days so long as the Borrower is diligently pursuing such cure; or (g) an "Event of Default" under any of paragraphs (a), (c), (d), (e), (f) or (g) of SECTION 6.1 of the Indenture shall occur and be continuing; or (h) an "Event of Default" under any of paragraphs (h) or (i) of SECTION 6.1 of the Indenture shall occur and be continuing. Section 6.2 REMEDIES. If any Event of Default (other than an Event of Default specified in SECTION 6.1(H)) hereof shall have occurred and be continuing, then the Agent shall at the request of the Required Banks take one or more of the following actions: (i) by notice to the Borrower and the Collateral Agent, declare the Commitments to be terminated, whereupon the same shall forthwith terminate, and, after giving thirty (30) days' written notice to the beneficiary of the outstanding Debt Service Reserve Letter of Credit, terminate the Debt Service Reserve Letter of Credit; or (ii) declare the Obligations and all other amounts payable under this Agreement and the DSR Notes to be immediately due and payable, whereupon the Obligations, all such interest and all such amounts shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; or (iii) terminate the ability of the Borrower to cause reinstatement of the Outstanding 19 Amount through the reimbursement of Drawings, as contemplated by the terms hereof. If any Event of Default specified in SECTION 6.1(H) hereof shall have occurred and be continuing, the Commitments shall terminate automatically, the full unpaid amount of any outstanding Obligations and any other amounts payable under this Agreement and the DSR Notes shall be immediately due and payable, and the ability of the Borrower to cause reinstatement of the Outstanding Amount through reimbursement of Drawings shall terminate automatically, in each case without any further action, notice, demand or presentment. ARTICLE VII CHARACTER OF OBLIGATIONS Section 7.1 OBLIGATIONS ABSOLUTE. The Obligations shall be absolute, unconditional and irrevocable and shall not be affected or impaired under any circumstances whatsoever, including the following circumstances: (a) any lack of validity or enforceability of any provision of any Financing Document; (b) any amendment or waiver of, or any consent to departure from, any provision of any Financing Document; (c) the existence of any claim, setoff, defense or other right that the Borrower may have at any time against the Collateral Agent, any other beneficiary of the Debt Service Reserve Letter of Credit (or any Person for whom the Collateral Agent or any such beneficiary may be acting), any Bank, the Agent or any other Person, whether in connection with any Financing Document, the transactions contemplated thereby or any unrelated transaction; (d) any statement or signature in any certificate or other document presented under the Debt Service Reserve Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect, or any such statement being untrue or inaccurate in any respect whatsoever; (e) any exchange, release or nonperfection of any Collateral or other collateral, or any release, amendment or waiver of or consent to departure from any Financing Document or any guaranty for any of the Obligations; (f) payment by a Bank under the Debt Service Reserve Letter of Credit against presentation of a draft or certificate that does not comply with the terms of the Debt Service Reserve Letter of Credit; (g) any issuance of additional Permitted Indebtedness; and (h) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. 20 Section 7.2 LIMITED LIABILITY OF AGENT AND BANKS. As among the Borrower, the Agent and the Banks, the Borrower assumes all risks of the acts or omissions of the beneficiaries of the Debt Service Reserve Letter of Credit with respect to the use of the Debt Service Reserve Letter of Credit. Neither the Agent nor any Bank nor any of their respective officers, directors, employees or agents shall be liable or responsible for: (a) the use that may be made of the Debt Service Reserve Letter of Credit or any acts or omissions of any beneficiaries of the Debt Service Reserve Letter of Credit in connection with the Debt Service Reserve Letter of Credit; (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted in connection with the Debt Service Reserve Letter of Credit or of any endorsement thereon, even if such document or endorsement should prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (c) payment by the Issuing Bank against presentation of any document that does not comply with the terms of the Debt Service Reserve Letter of Credit, including failure of any document to bear any reference or adequate reference to the Debt Service Reserve Letter of Credit; or (d) any other circumstance whatsoever in making, delaying to make or failing to make payment under the Debt Service Reserve Letter of Credit; PROVIDED, HOWEVER, that the Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall be liable to the Borrower, to the extent of any direct, as opposed to consequential, damages suffered by the Borrower that the Borrower proves were the result of the Issuing Bank's willful misconduct or gross negligence in paying under the Debt Service Reserve Letter of Credit or the Issuing Bank's willful or grossly negligent failure to pay under the Debt Service Reserve Letter of Credit after the presentation to it by the beneficiary of a draft and certificate strictly complying with the terms and conditions of the Debt Service Reserve Letter of Credit (unless the Issuing Bank in good faith believed itself (based upon an opinion of counsel) to be prohibited by law or legal authority from making such payment). In furtherance and not in limitation of the foregoing, the Issuing Bank may accept any document that appears on its face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. ARTICLE VIII THE AGENT Section 8.1 AUTHORIZATION AND ACTION. Each Bank hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by the Letter of Credit Documents (including enforcement of and collection under any Letter of Credit Document), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Banks, and such instructions shall be binding upon all Banks and all holders of DSR Notes; PROVIDED, HOWEVER, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to any Letter of Credit Document or applicable law. In performing its function and duties hereunder, Agent shall act solely as the agent of the Banks and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower or any other party to any Financing Document. 21 Section 8.2 AGENT'S RELIANCE, ETC. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with any Letter of Credit Document, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent (a) may treat any Bank that has signed a Commitment Transfer Supplement as the holder of the applicable portion of the Obligations; (b) may consult with legal counsel (including counsel for the Borrower or any Affiliate thereof), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties or representations made in or in connection with any Financing Document; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Financing Document on the part of the Borrower or any Affiliate or to inspect the property (including the books and records) of the Borrower or any Affiliate thereof; (e) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Financing Document or any other instrument or document furnished pursuant hereto or thereto; and (f) shall incur no liability under or in respect of any Financing Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier or otherwise) believed by it to be genuine and signed or sent by the proper party or parties. Section 8.3 ISSUING BANK AND AFFILIATES. With respect to its Commitment and participation in the Debt Service Reserve Letter of Credit, the Issuing Bank shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Issuing Bank or the Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include the Issuing Bank in its individual capacity. The Issuing Bank and the Agent and their Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, any Affiliate thereof and any Person that may do business with or own securities of the Borrower or any Affiliate thereof, all as if the Issuing Bank and the Agent were not the Issuing Bank and the Agent and without any duty to account therefor to the Banks. Section 8.4 BANK CREDIT DECISION. Each Bank acknowledges that it has, independently and without reliance on the Agent or any other Bank or the Issuing Bank and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance on the Agent or any other Bank or the Issuing Bank and based on such documents and information as it deems appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. Section 8.5 INDEMNIFICATION. The Banks agree to indemnify the Agent (to the extent not promptly reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to the respective principal amounts of the Obligations then held by each of them and/or the respective amounts of their Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever that may at any time (including without limitation at any time following the payment of any Obligations or termination of this 22 Agreement) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of any Financing Document or any action taken or omitted by the Agent under any Financing Document; PROVIDED, HOWEVER, that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank agrees to reimburse the Agent promptly upon demand for its ratable share of any costs and expenses payable by the Borrower under SECTION 9.4, to the extent that the Agent is not reimbursed for such costs and expenses by the Borrower. Section 8.6 SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof to the Banks and the Borrower and may be removed at any time with or without cause with the written approval of the Required Banks. Upon any such resignation or removal, the Required Banks shall have the right to appoint a successor Agent with the consent of the Borrower, which shall not be unreasonably withheld. If no successor Agent has been so appointed by the Required Banks, and has accepted such appointment, within thirty (30) days after the retiring Agent's giving of notice of resignation or the Required Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent with the consent of the Borrower (which shall not be unreasonably withheld), which successor Agent shall be a commercial bank organized under the laws of the United States of America or of any state thereof and having a combined capital and surplus of at least five hundred million dollars ($500,000,000). Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Financing Documents. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this ARTICLE VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. Section 8.7 COLLATERAL. (a) Except as expressly provided herein, the Agent shall have no duty to take any affirmative steps with respect to the collection of amounts payable in respect of the Collateral. The Agent shall incur no liability as a result of any private sale of the Collateral. (b) The Banks hereby consent, and agree upon written request by the Agent to execute and deliver such instruments and other documents as the Agent may deem desirable to confirm such consent, to the release of the Liens on the Collateral, including any release in connection with any sale, transfer or other disposition of the Collateral or any part thereof, in accordance with the Financing Documents. 23 ARTICLE IX MISCELLANEOUS Section 9.1 AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or any DSR Note, or consent to any departure by the Borrower therefrom, shall be effective unless in writing and signed or consented to (in writing) by the Required Banks (and, in the case of amendments, the Borrower), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; PROVIDED, HOWEVER, that no amendment, waiver or consent shall, unless in writing and signed or consented to (in writing) by all of the Banks, do any of the following: (a) waive any of the conditions specified in ARTICLE III; (b) increase the Commitments of the Banks or subject the Banks to any additional obligations; (c) reduce the principal of, or interest on, the DSR Loans or any fees or other amounts payable hereunder; (d) postpone any date fixed for (i) payment of principal of, or interest on, the DSR Loans, (ii) reimbursement of Drawings under the Debt Service Reserve Letter of Credit or (iii) payment of fees or other amounts payable hereunder; (e) change the percentage of the Commitments or of the DSR Loans outstanding, or the number of Banks, required for the Banks or any of them to take any action hereunder or (f) amend this SECTION 9.1; and PROVIDED FURTHER, HOWEVER, that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Persons required above to take such action, affect the rights or duties of the Agent under this Agreement or any other Letter of Credit Document. Section 9.2 NOTICES, ETC. All notices and other communications provided for hereunder shall be in writing (including by telecopier) and shall be mailed, telecopied or delivered, if to the Borrower, to it at 18101 Von Karman Avenue, Suite 1700, Irvine, California 92612-1046, Attention: Chief Financial Officer, telephone (949) 752-5588, telecopy (949) 798-7883; if to Westdeutsche Landesbank Girozentrale, New York Branch, in its capacity as the Agent, the Issuing Bank or a Bank, to it at 1211 Avenue of the Americas, New York, New York 10036, telephone (212) 852-6331, telecopy (212) 597-8388, Attention: Structural Finance/Energy; if to Credit Suisse First Boston, New York Branch, in its capacity as a Bank, to it at Eleven Madison Avenue, New York, New York 10010, telephone (212) 325-9126, telecopy (212) 325-8321, Attention: Peter Ryan; if to any other Bank, to it at the address or telecopy number set forth below its name in the Commitment Transfer Supplement by which it became a party hereto; or, as to each party, to it at such other address or telecopy number as designated by such party in a written notice to the other parties. All such notices and communications shall be deemed received, (a) if personally delivered, upon delivery, (b) if sent by first-class mail, on the third Business Day following deposit into the mails and (c) if sent by telecopier, upon acknowledgment of receipt thereof by the recipient, except that notices and communications to the Agent pursuant to ARTICLE II or VIII shall not be effective until received by the Agent. Section 9.3 NO WAIVER; REMEDIES. No failure on the part of any Bank or the Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, and no single or partial exercise of any such right shall preclude any other or further exercise thereof or the exercise of any other right. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. 24 Section 9.4 COSTS AND EXPENSES. The Borrower agrees to pay on demand on the Monthly Transfer Date immediately following such demand (a) all reasonable costs and expenses of the Agent and the Banks in connection with the preparation, execution, delivery, syndication, administration, modification and amendment of this Agreement, the DSR Notes and the other documents to be delivered hereunder, including (i) the reasonable fees and out-of-pocket expenses of one counsel for the Banks with respect thereto and with respect to advising the Agent and the Banks as to their rights and responsibilities, or the perfection, protection or reservation of rights or interests, under this Agreement, the other Financing Documents and the other documents to be delivered hereunder and (ii) the reasonable fees and expenses of any consultants, auditors or accountants engaged by the Agent with the written consent (which shall not be unreasonably withheld) of the Borrower pursuant hereto and (b) all reasonable costs and expenses of the Agent and the Banks (including reasonable counsel fees and expenses of the Agent and the Banks) in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the other Financing Documents and the other documents to be delivered hereunder, whether in any action, suit or litigation, any bankruptcy, insolvency or similar proceeding or otherwise. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of the aforementioned documents, and the Borrower agrees to indemnify and hold the Agent and the Banks harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay any of the foregoing to the extent the Borrower had notice thereof. Section 9.5 APPLICATION OF MONEYS. If any sum paid or recovered in respect of the Obligations is less than the amount then due, the Agent may apply that sum to principal, interest, fees or any other amount due under this Agreement in such proportions and order and generally in such manner as the Agent shall reasonably determine. Section 9.6 SEVERABILITY. Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions of this Agreement or affecting the validity, enforceability or authorization of such provision in any other jurisdiction. Section 9.7 LIMITATION OF LIABILITY. Notwithstanding anything to the contrary contained in this Agreement and the Financing Documents, the liability and obligation of the Borrower to perform and observe and make good the obligations contained in this Agreement and the Security Documents shall not be enforced by any action or proceeding wherein damages or any money judgment or any deficiency judgment or any judgment establishing any personal obligation or liability shall be so sought, collected or otherwise obtained, in each such case, against any officer, director or shareholder or related Person of the Borrower or any Secured Party, and the Agent, for itself and its successors and assigns, and on behalf of the Banks, irrevocably waives any and all right to sue for, seek or demand any such damages, money judgment, deficiency judgment or personal judgment against any officer, director or shareholder or related Person of the Borrower under or by reason of or in connection with this Agreement and agrees to look solely to the Borrower and the security and Collateral held under or in connection with the Security Documents for the enforcement of such liability and obligation of the Borrower. 25 Section 9.8 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agent and the Banks and their respective successors and assigns, except that the Borrower shall not have the right to assign any of its rights and obligations hereunder without the prior written consent of the Required Banks, and, except as provided in SECTION 9.9, no Bank other than the Issuing Bank shall have the right to assign any of its rights and obligations hereunder. Section 9.9 ASSIGNMENTS AND PARTICIPATIONS. (a) Any Bank may at any time (with the consent of the Agent, such consent not to be unreasonably withheld or delayed, and the consent of the Issuing Bank, such consent not to be unreasonably withheld or delayed) sell to one or more banks or other entities (a "PURCHASING BANK") all or any part of its rights and obligations under this Agreement and the DSR Notes (which, except in the case of an assignment to a Person that, immediately before such assignment, was a Bank, shall be equal to at least $1,000,000) pursuant to a Commitment Transfer Supplement executed by such Purchasing Bank, such transferor Bank, the Agent and the Issuing Bank. Upon (x) such execution of such Commitment Transfer Supplement, and (y) delivery of a copy thereof to the Borrower and payment of the amount of its participation to the Agent or such transferor Bank, such Purchasing Bank shall for all purposes be a Bank party to this Agreement and shall have all the rights and obligations of a Bank under this Agreement, to the same extent as if it were an original party hereto with the commitment percentage as set forth in such Commitment Transfer Supplement, which shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Bank and the resulting adjustment of commitment percentages arising from the purchase by such Purchasing Bank of all or a portion of the rights and obligations of such transferor Bank under this Agreement and the DSR Notes. Upon the consummation of any transfer pursuant to this SECTION 9.9, the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, replacement DSR Notes are issued to such transferor Bank and new DSR Notes or, as appropriate, replacement DSR Notes, are issued to such Purchasing Bank, in each case, in principal amounts reflecting their Commitments. (b) Any Bank may, from time to time, sell or offer to sell participating interests in any DSR Loans owing to such Bank, any DSR Notes held by such Bank, any Commitment of such Bank or any other interests and obligations of such Bank hereunder, to one or more banks or other entities (each, a "PARTICIPANT"), on such terms and conditions as may be determined by the selling Bank, without the consent of or notice to the Borrower, and the grant of such participation shall not relieve any Bank of its obligations, or impair the rights of any Bank, hereunder. In the event of any such sale by a Bank of a participating interest to a Participant, such Bank shall remain solely responsible for the performance of such Bank's obligations under this Agreement, such Bank shall remain the holder of any such DSR Notes for all purposes under this Agreement, the Borrower, the Agent and the Issuing Bank will continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement and such Bank shall retain the sole right and responsibility 26 to exercise the rights of such Bank, and enforce the obligations of the Borrower, including, without limitation, the right to approve any amendment, modification, supplement or waiver of any provision of any Letter of Credit Document and the right to take action under ARTICLE VI hereof, and such Bank shall not grant any such Participant any voting rights or veto power over any such action by such Bank under this Agreement (PROVIDED that such Bank may agree not to consent to any modification, amendment or waiver of this Agreement, without the consent of the Participant, that would alter the principal of or interest on the DSR Loans, postpone the date fixed for any payment of principal of or interest thereon or extend the term of any Commitment; PROVIDED FURTHER that if any Participant refuses to consent to any such modification, amendment or waiver of this Agreement, such Bank may purchase the participating interests from such non-consenting Participant). No Participant shall have any rights under this Agreement to receive payment of principal of or interest on any DSR Loan except through a Bank and as provided in this SECTION 9.9. The Borrower agrees that, upon the occurrence and during the continuance of any Event of Default, each Participant shall have the right of set-off in respect of its participating interest in amounts owing under this Agreement and any DSR Notes as set forth in SECTION 2.22 hereof to the same extent as if the amount of its participating interest was owing directly to it as a Bank under this Agreement or any DSR Notes. The Borrower also agrees that each Participant shall be entitled to the benefits of SECTIONS 2.15, 2.16 and 2.17 hereof with respect to its participation granted hereunder; PROVIDED that no Participant shall be entitled to receive any greater amount pursuant to such Sections than the Bank transferring such participation would have been entitled to receive in respect of the amount of the participation transferred to such Participant had no such transfer occurred. (c) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this SECTION 9.9, disclose to the Purchasing Bank or Participant or proposed Purchasing Bank or Participant any information relating to the Borrower furnished to such Bank by or on behalf of the Borrower; PROVIDED, HOWEVER, that prior to any such disclosure, the Person receiving such disclosure shall sign such confidentiality agreements as is customary for financings of this kind. Section 9.10 INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Agent and each Bank and, in their capacity as such, each of their respective officers, directors, shareholders, controlling persons, employees, agents and servants (each an "INDEMNIFIED PARTY") from and against any and all claims, damages, losses, liabilities, obligations, penalties, actions, causes of action, judgments, suits, costs, expenses or disbursements (including, without limitation, reasonable attorneys' and consultants' fees and expenses) (collectively, "DAMAGES") whatsoever that such Indemnified Party may incur (or that may be claimed against such Indemnified Party by any Person) by reason of (a) any untrue statement or alleged untrue statement of any material fact concerning the Borrower or the Collateral, or the omission or alleged omission to state any fact concerning the Borrower or the Collateral necessary to make any such statement, in light of the circumstances under which it was made, not misleading; (b) the issuance and delivery of the DSR Notes; (c) the use of the proceeds of any Drawing; (d) any 27 reasonable action taken by such Indemnified Party in protecting and enforcing the rights and remedies of the Agent and the Banks under the Financing Documents; (e) subject to SECTION 7.2, the execution, delivery or transfer of, or payment or failure to pay under, the Debt Service Reserve Letter of Credit; (f) any claim of any Person with respect to any finder's fee, brokerage commission or other similar sum due in connection with any Financing Document; or (g) any failure by the Borrower to comply with any environmental laws except for any liabilities resulting from actions as set forth in clauses (A) and (B) in Section 11.4 of the Credit Agreement; PROVIDED, HOWEVER, that the Borrower shall not be required to indemnify an Indemnified Party for any Damages to the extent caused by such Indemnified Party's willful misconduct or gross negligence or breach of such Indemnified Party's obligations under any of the Letter of Credit Documents. If any action, suit or proceeding arising from any of the foregoing is brought against any Indemnified Party, such Indemnified Party shall promptly notify the Borrower in writing, enclosing a copy of all papers served, but the omission so to notify the Borrower of any such action shall not relieve the Borrower of any liability that it may have to any Indemnified Party otherwise than under this SECTION 9.10; PROVIDED, HOWEVER, that the Borrower shall not be liable for any settlement of any such action effected without the Borrower's prior written consent. In case any such action shall be brought against any Indemnified Party and it shall notify the Borrower of the commencement thereof, the Borrower shall be entitled to participate in and, to the extent that it shall wish, to assume the defense thereof with counsel reasonably satisfactory to such Indemnified Party, and after notice from the Borrower to such Indemnified Party of the Borrower's election so to assume the defense thereof, the Borrower shall not be liable to such Indemnified Party for any subsequent legal or other expenses attributable to such defense, except as provided below, other than reasonable costs of investigation subsequently incurred by such Indemnified Party in connection with the defense thereof. The Indemnified Party shall have the right to employ its own counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the employment of counsel by such Indemnified Party has been authorized by the Borrower, (ii) the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Borrower and the Indemnified Party in the conduct of the defense of such action (in which case the Borrower shall not have the right to direct the defense of such action on behalf of the Indemnified Party) or (iii) the Borrower shall not in fact have employed counsel reasonably satisfactory to the Indemnified Party to assume the defense of such action. Section 9.11 FURTHER ASSURANCES. The Borrower agrees to take all actions as the Banks shall request in order to enable the Banks to become Secured Parties to the Security Documents and entitled to all of the benefits as Secured Parties thereunder. Section 9.12 GOVERNING LAW. THIS AGREEMENT AND THE DSR NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. Section 9.13 CONSENT TO JURISDICTION AND VENUE. Each of the parties hereto irrevocably (i) agrees that any suit, action or other legal proceeding arising out of or relating to this Agreement may be brought in any court of the State of New York or any court of the United States of America located in the State of New York, (ii) consents, for itself and in respect of its property, to the jurisdiction of each such court in any such suit, action or proceeding and 28 (iii) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Each of the parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this SECTION 9.12 shall affect the right of any party hereto to serve legal process in any other manner permitted by law. Section 9.14 HEADINGS. The section and subsection headings used herein have been inserted for convenience of reference only and do not constitute matters to be considered in interpreting this Agreement. Section 9.15 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 9.16 WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, THE ISSUING BANK AND THE BANKS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. 29 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written. EDISON MISSION HOLDINGS CO. By: /s/ G. Gary Garcia --------------------- Name: G. Gary Garcia Title: Vice President COMMITMENT WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH $17,675,300 as Agent, Issuing Bank and as a Bank By: /s/ Jasjeet S. Sood ---------------------- Name: Jasjeet S. Sood Title: Managing Director and Head of Energy Group By: /s/ Jonathan Berman ---------------------- Name: Jonathan Berman Title: Managing Director $17,675,300 CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as a Bank By: /s/ Peter A. Ryan -------------------- Name: Peter A. Ryan Title: Vice President By: /s/ Brian T. Caldwell ------------------------ Name: Brian T. Caldwell Title: Vice President EXHIBIT A FORM OF DEBT SERVICE RESERVE LETTER OF CREDIT Westdeutsche Landesbank Letter of Credit No. 22703100832WLB Girozentrale, New York Branch Irrevocable Standby Credit 1211 Avenue of the Americas New York, New York 10036 Date and Place of Issue: Date and Place of Expiry: New York, New York Westdeutsche Landesbank April 2, 2001 Girozentrale, New York Branch New York, New York April 1, 2002 Applicant: Edison Mission Holdings Co. 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612 Beneficiary: Amount: Up to an aggregate of United States Trust Company of Thirty-Five Million Three New York, as Collateral Hundred Fifty Thousand six Agent Hundred United States Dollars 114 West 47th Street (US$35,350,600) New York, New York 10036 Attn: Christopher J. Gell Credit Available With: Westdeutsche Landesbank Girozentrale, New York Branch By: Against Presentation of the Documents Detailed Herein Drawn on Westdeutsche Landesbank Girozentrale, New York Branch A-1 Ladies and Gentlemen: We irrevocably authorize you to draw on us for the account of the Applicant in any amount up to an aggregate amount not to exceed THIRTY-FIVE MILLION THREE HUNDRED FIFTY THOUSAND SIX HUNDRED UNITED STATES DOLLARS (US$35,350,600) (as reduced or reinstated from time to time as set forth in this Letter of Credit, the "OUTSTANDING AMOUNT") available against presentation of a dated drawing request drawn on Westdeutsche Landesbank Girozentrale, New York Branch, manually signed by an authorized officer of the Beneficiary (who is identified or purported to be as such) appropriately completed in the form of ANNEX I hereto and sent by such authorized officer. The above drawing request and all communications with respect to this Letter of Credit shall be in writing, addressed to us at 1211 Avenue of Americas, New York, New York 10036, telephone (212) 852-6331, telecopy (212) 597-8388, Attention: Structured Finance/Energy, referencing this Letter of Credit No. 22703100832WLB and presented to us by tested telex, delivery in person or facsimile transmission at such address, PROVIDED that the original of the above drawing request or such communications, as the case may be, shall be sent to us at such address by overnight courier for receipt by us within three (3) Business Days of the date of any such facsimile transmission. If the drawing request is presented in compliance with the terms of this Letter of Credit to us at such address by 12:00 noon New York City time on any Business Day, payment will be made not later than 3:00 p.m. New York City time on such day, and if such drawing request is so presented to us after 12:00 noon New York City time on any Business Day, payment will be made on the following Business Day not later than 1:00 p.m. New York City time. Payment under this Letter of Credit shall be made in immediately available funds by wire transfer to such account as may be designated by the Beneficiary in the applicable drawing request. As used in this Letter of Credit, "Business Day" means any day on which commercial banks located in New York, New York are not required or authorized to remain closed. This Letter of Credit shall expire on the date of expiry set forth above (the "STATED EXPIRATION DATE"). Notwithstanding the foregoing, we may at any time, subject to the provisions of the Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of March 30, 2001, among the Applicant, the Banks party thereto and Westdeutsche Landesbank Girozentrale, New York Branch, as the Agent and the Issuing Bank (the "REIMBURSEMENT AGREEMENT"), terminate this Letter of Credit by giving the Beneficiary and the United States Trust Company of New York, as Collateral Agent (in such capacity, the "COLLATERAL Agent") under the Intercreditor Agreement referred to in the Reimbursement Agreement, written notice thereof in the form of ANNEX 2 hereto by delivery in person or facsimile transmission (with written confirmation by overnight courier for receipt by the Beneficiary within two (2) Business Days) addressed to the United States Trust Company of New York, at 114 West 47th Street, New York, New York 10036, Attn: Corporate Trust Department, telephone (212) 852-1034, telecopy (212) 852-1625, at least thirty (30) days prior to termination, whereupon the Beneficiary is authorized to draw on us prior to such termination the Outstanding Amount of this Letter of Credit by presentation to us, in the manner and at the address specified in the fourth preceding paragraph, of a drawing request appropriately completed in the form of ANNEX I hereto and sent and signed by the Beneficiary's authorized officer. A-2 This Letter of Credit is effective immediately. In the event that a drawing request fails to comply with the terms of this Letter of Credit, we shall provide the Beneficiary prompt notice of same stating the reasons therefor and shall upon your instructions hold any non-conforming drawing request and other documents at your disposal or return any non-conforming drawing request and other documents to the Beneficiary at the address set forth above. Upon being notified that the drawing was not effected in compliance with this Letter of Credit, the Beneficiary may attempt to correct such non-complying drawing request in accordance with the terms of this Letter of Credit. This Letter of Credit sets forth in full the terms of our undertaking and this undertaking shall not in any way be modified, amended, limited or amplified by reference to any document, instrument or agreement referred to herein, except for the drawing requests and certificates referred to herein. This Letter of Credit may be transferred upon presentation to us of a signed transfer certificate in the form of ANNEX 3 accompanied by this Letter of Credit, in which the Beneficiary irrevocably transfers to such transferee all of its rights hereunder, whereupon we agree to either issue a substitute letter of credit to such successor or endorse the reverse of this Letter of Credit. Partial drawings under this Letter of Credit are allowed and each such partial drawing shall reduce the amount thereafter available hereunder for drawings under this Letter of Credit. This Letter of Credit shall be reinstated as provided in SECTIONS 2.2(B) and 2.7(B) of the Reimbursement Agreement and we shall so advise the Beneficiary in a certificate in the form of ANNEX 4 hereto. The Outstanding Amount shall be reduced or increased as provided in SECTIONS 2.7(B) and 2.7(C) of the Reimbursement Agreement, subject to reinstatement as provided in the Reimbursement Agreement. In addition, the Outstanding Amount shall be reduced/increased as provided in SECTIONS 2.2(B) and 2.2(C) of the Reimbursement Agreement to the extent that we so advise the Beneficiary pursuant to a certificate in the form of ANNEX 5 hereto. All banking charges, including any advising and negotiating bank charges, are for the account of the Applicant. All drawing requests under this Letter of Credit must bear the clause: "Drawn under Westdeutsche Landesbank Girozentrale, New York Branch, Letter of Credit Number 22703100832WLB dated April 2, 2001." This Letter of Credit shall not be amended except with the written concurrence of Westdeutsche Landesbank Girozentrale, New York Branch, the Applicant and the Beneficiary. A-3 We hereby engage with you that a drawing request drawn strictly in compliance with the terms of this Letter of Credit and amendments thereto shall meet with due honor upon presentation. This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication Number 500 (the "UNIFORM Customs"). This Letter of Credit shall be deemed to be a contract made under the laws of the State of New York and shall, as to matters not governed by the Uniform Customs, be governed by and construed in accordance with the laws of such State. We irrevocably agree with you that any legal action or proceeding with respect to this Letter of Credit shall be brought in the courts of the State of New York in the County of New York or of the United States of America in the Southern District of New York. By signing this Letter of Credit, we irrevocably submit to the jurisdiction of such courts solely for the purposes of this Letter of Credit. We hereby waive, to the fullest extent permitted by law, any objection we may now or hereafter have to the laying of venue in any such action or proceeding in any such court. A-4 [SIGNATURE PAGE TO LETTER OF CREDIT] WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH ______________________________ Authorized signature ______________________________ Authorized signature A-5 ANNEX I Drawn under Westdeutsche Landesbank Girozentrale, New York Branch Letter of Credit Number 22703100832WLB dated April 2, 2001 DRAWING REQUEST [Date] Westdeutsche Landesbank Girozentrale, New York Branch 1211 Avenue of the Americas New York, New York 10036 Attention: ___________ Ladies and Gentlemen: The undersigned hereby draws on Westdeutsche Landesbank Girozentrale, New York Branch, Letter of Credit No. 22703100832WLB Irrevocable Standby Letter of Credit (the "LETTER OF CREDIT") dated April 2, 2001, issued by you in favor of us in connection with that certain Indenture, dated as of May 27, 1999 (as amended, supplemented or modified from time to time, the "INDENTURE"), among Edison Mission Holdings Co. and United States Trust Company of New York, as the Trustee. Any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit or the Indenture, as applicable. In connection with this drawing, we hereby certify that: A) This drawing in the amount of US$__________ is being made pursuant to Westdeutsche Landesbank Girozentrale, New York Branch, Letter of Credit No. ___________ Irrevocable Standby Letter of Credit issued to the Collateral Agent pursuant to the Reimbursement Agreement; [Use at least one or more of the following forms of paragraph B, as applicable] B) After the transfer of monies on deposit in the Debt Service Reserve Account in respect of the Bonds, there are insufficient monies in the [Accrued Interest Account in respect of the Bonds] [and] [the Principal Account in respect of the Bonds] on the Monthly Transfer Date occurring ______, _____ to pay the [interest] [and] [principal] due on the Bonds pursuant to the Indenture on such date (each capitalized word being used as defined in the Indenture or the Security Deposit Agreement) (whether due on a Monthly Payment Date, at stated maturity, at acceleration or otherwise); A-6 or B) The long-term debt rating of Westdeutsche Landesbank Girozentrale, New York Branch, has fallen below "A" as determined by Standard & Poor's Ratings Group or "A2" as determined by Moody's Investor Services, Inc. and Edison Mission Holdings Co. has failed to provide us with a substitute letter of credit from another Acceptable Credit Provider or other Acceptable Credit Support within thirty (30) days of such downgrade. or B) We have received a Default Notice or an Acceleration Notice and a Default Period exists and is continuing (as each such term is defined in the Intercreditor Agreement), and such notice remains in effect on the date of this drawing and we have been directed by the Required Secured Parties to draw on this Letter of Credit; or B) The Stated Expiration Date will occur within thirty (30) days of the date hereof and Edison Mission Holdings Co. has failed to deliver a replacement or renewal letter of credit letter of from another Acceptable Credit Provider or other Acceptable Credit Support and security is still required under the terms of the Security Deposit Agreement and the Indenture. or B) You have delivered to us a Notice of Termination of Letter of Credit in the form of Annex 2 to the Letter of Credit stating that the Letter of Credit will terminate prior to the Stated Expiration Date and Edison Mission Holdings Co. has failed to deliver a replacement or renewal letter of credit from another Acceptable Credit Provider or other Acceptable Credit Support prior to such termination date and security is still required under the terms of the Security Deposit Agreement and the Indenture. C) The amount requested to be drawn does not exceed the Outstanding Amount; and D) You are directed to make payment of the requested drawing to account no. ________________ at ______________________ [insert bank name, address and account number]. A-7 IN WITNESS WHEREOF, the undersigned has executed and delivered this request on this _____ day of _________________________, ____. UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent By: --------------------------------------- Name: Title: By: --------------------------------------- Name: Title: ANNEX 2 NOTICE OF TERMINATION OF LETTER OF CREDIT [Date] United States Trust Company of New York, as Collateral Agent 114 West 47th Street New York, New York 10036 Attn: Corporate Trust Department Ladies and Gentlemen: Reference is made to Westdeutsche Landesbank Girozentrale, New York Branch, Letter of Credit No. 22703100832WLB Irrevocable Standby Letter of Credit (the "LETTER OF CREDIT") dated April 2, 2001, issued by us in your favor. This constitutes our notice to you pursuant to the Letter of Credit that the Letter of Credit shall terminate on ___________, ____ [insert a date which is 30 or more days after the date of this notice of termination] (the "TERMINATION DATE"). Pursuant to the terms of the Letter of Credit, you are authorized to draw (pursuant to one or more drawings), prior to the Termination Date, on the Letter of Credit in an aggregate amount that does not exceed the Outstanding Amount (as defined in the Letter of Credit). Very truly yours, Westdeutsche Landesbank Girozentrale, NEW YORK BRANCH By: --------------------------------- By: --------------------------------- A-8 ANNEX 3 TRANSFER OF LETTER OF CREDIT [Date] Westdeutsche Landesbank Girozentrale, New York Branch 1211 Avenue of the Americas New York, New York 10036 Attention: _____________ Ladies and Gentlemen: Reference is made to Westdeutsche Landesbank Girozentrale, New York Branch, Letter of Credit No. 22703100832WLB Irrevocable Standby Letter of Credit dated April 2, 2001 originally issued by you in favor of the United States Trust Company of New York, as Collateral Agent (the "LETTER OF CREDIT") in connection with that certain Indenture, dated as of May 27, 1999 (as amended, supplemented or modified from time to time, the "INDENTURE"), among Edison Mission Holdings Co. and United States Trust Company of New York, as Trustee. Any capitalized term used herein and not defined shall have its respective meaning as set forth in the Letter of Credit or in the Indenture, as applicable. For value received, the undersigned, as beneficiary under the Letter of Credit, hereby irrevocably transfers to __________ (the "TRANSFEREE") all rights of the undersigned to draw under the Letter of Credit in their entirety. The Transferee is the successor to the Beneficiary, as Collateral Agent under the Intercreditor Agreement, dated as of March 18, 1999, among the Loan Parties named therein, Citicorp USA, Inc., as Administrative Agent, and the United States Trust Company of New York, as Collateral Agent, and all conditions to appointment of such successor set forth in the Intercreditor Agreement have been satisfied. By this transfer, all rights of the undersigned, as beneficiary under the Letter of Credit, are transferred to the Transferee, and the Transferee shall have the sole rights with respect to the Letter of Credit relating to any amendments thereof and any notices thereunder. All amendments to the Letter of Credit are to be consented to by the Transferee without necessity of any consent of or notice to the undersigned. Simultaneously with the delivery of this notice to you, copies of this notice are being transmitted to the Transferee. A-9 The Letter of Credit is returned herewith, and we ask you to either issue a substitute letter of credit for the benefit of the Transferee or endorse the transfer on the reverse thereof, and forward it directly to the Transferee with your customary notice of transfer. Very truly yours, UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent By: --------------------------------------- Name: Title: By: --------------------------------------- Name: Title: CONSENTED AND ACKNOWLEDGED BY: [TRANSFEREE] By: --------------------------------------- Name: Title: A-10 ANNEX 4 CERTIFICATE OF REINSTATEMENT OF OUTSTANDING AMOUNT [Date] United States Trust Company of New York, as Collateral Agent 114 West 47th Street New York, New York 10036 Attn: Corporate Trust Department Ladies and Gentlemen: Reference is made to Westdeutsche Landesbank Girozentrale, New York Branch, Letter of Credit No. 22703100832WLB Irrevocable Standby Letter of Credit (the "LETTER OF CREDIT") dated April 2, 2001, issued by us in your favor. Any capitalized term used herein and not defined shall have its respective meaning as set forth in the Letter of Credit. This constitutes our notice to you pursuant to the Letter of Credit that: We have received repayment of a DSR Loan in accordance with the provisions of the Reimbursement Agreement in the amount of $_______, and, pursuant to SECTION 2.7(C) of the Reimbursement Agreement, the Outstanding Amount is therefore increased by such amount to $_______. A-11 Very truly yours, Westdeutsche Landesbank Girozentrale, NEW YORK BRANCH By: --------------------------------- By: --------------------------------- A-12 ANNEX 5 CERTIFICATE OF CHANGE OF OUTSTANDING AMOUNT [Date] United States Trust Company of New York, as Collateral Agent 114 West 47th Street New York, New York 10036 Attn: Corporate Trust Department Ladies and Gentlemen: Reference is made to Westdeutsche Landesbank Girozentrale, New York Branch, Letter of Credit No. 22703100832WLB Irrevocable Standby Letter of Credit (the "LETTER OF CREDIT") dated April 2, 2001 issued by us in your favor in connection with that certain Indenture, dated as of May 27, 1999 (as amended, supplemented or modified from time to time, the "INDENTURE"), among Edison Mission Holdings Co. and United States Trust Company of New York, as the Trustee. Any capitalized term used herein and not defined shall have its respective meaning as set forth in the Letter of Credit or the Indenture, as applicable. This constitutes our notice to you pursuant to the Letter of Credit that we have been advised by the Applicant that: The Bond Debt Service Reserve Requirement has been [reduced/increased] by the amount of $________. Accordingly, pursuant to SECTION 2.2(B) of the Reimbursement Agreement, the Outstanding Amount is [reduced/increased] by $___________ to $___________ . Very truly yours, Westdeutsche Landesbank Girozentrale, NEW YORK BRANCH By: --------------------------------- By: --------------------------------- A-13 EXHIBIT B DEBT SERVICE RESERVE LETTER OF CREDIT PROMISSORY NOTE $17,675,300 New York, New York April 2, 2001 FOR VALUE RECEIVED, the undersigned, EDISON MISSION HOLDINGS CO., a California corporation (the "BORROWER"), hereby unconditionally promises to pay to the order of [_______________] (the "BANK") the lesser of (i) the principal sum of SEVENTEEN MILLION SIX HUNDRED SEVENTY FIVE THOUSAND THREE HUNDRED DOLLARS ($17,675,300) and (ii) the aggregate unpaid principal amount of the DSR Loans made by the Bank to the Borrower under the Reimbursement Agreement referred to below, on the dates and in the amounts specified therein. The Borrower further promises to pay interest on the unpaid principal amount hereof from time to time outstanding on the dates and at the rates specified in the Reimbursement Agreement (as herein defined). This DSR Note is hereby expressly limited so that in no contingency or event, whether by reason of acceleration of the maturity of any indebtedness evidenced hereby or otherwise, shall the interest contracted for or charged or received by the Bank exceed the maximum amount permissible under applicable law. If, due to any circumstance whatsoever, interest would otherwise be payable to the Bank in excess of the maximum lawful amount, the interest payable to the Bank shall be reduced to the maximum amount permitted under applicable law, and the amount of interest for any subsequent period, to the extent less than that permitted by applicable law, shall to that extent be increased by the amount of such reduction. Each holder hereof is irrevocably authorized to endorse on the schedule attached hereto, or on a continuation thereof, the date each such interest payment is due and the amount of each such interest payment determined in accordance with the Reimbursement Agreement. All such notations shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded and be enforceable against the Borrower with the same force and effect as if such amounts were each set forth in a separate note executed by the Borrower. All payments due hereunder shall be made without setoff, counterclaim or deduction of any nature to Westdeutsche Landesbank Girozentrale, New York Branch, as the Agent, at 1211 Avenue of the Americas, New York, New York 10036, in lawful money of the United States of America and in immediately available funds, or at such other place and in such other manner as may be specified by the Agent pursuant to the Reimbursement Agreement. Each holder hereof is irrevocably authorized to endorse on the schedule attached hereto, or on a continuation thereof, the date and amount of each DSR Loan made to the Borrower and each payment or prepayment of principal thereof, PROVIDED that the failure of such holder to make, or any error in making, any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Reimbursement Agreement. All such notations shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded and B-1 be enforceable against the Borrower with the same force and effect as if such amounts were each set forth in a separate note executed by the Borrower. This DSR Note is one of the "DSR Notes" of the Borrower to the Bank referred to in, evidences each DSR Loan made by the Bank to the Borrower under, is subject to the provisions of, and entities its holder to the benefits of, the Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of March 30, 2001 (the "REIMBURSEMENT AGREEMENT"), among the Borrower, the Bank and the other banks party thereto, and Westdeutsche Landesbank Girozentrale, New York Branch, as the Issuing Bank and as the Agent for the Bank and such other banks, as the same may be amended, supplemented or otherwise modified from time to time and to which reference is hereby made for a more complete statement of the terms and conditions under which each DSR Loan evidenced hereby is to be made and repaid. Capitalized terms in this DSR Note that are not specifically defined herein shall have the meanings ascribed to them in the Reimbursement Agreement. The Reimbursement Agreement provides for, among other things, the acceleration of the maturity of the unpaid principal amount hereof upon the occurrence of certain stated events and for voluntary prepayments in certain circumstances and upon certain terms and conditions. The obligations of the Borrower under the Reimbursement Agreement and this DSR Note are secured by, and the holder hereof is entitled to the benefit of, the Collateral as provided in the Security Documents. In addition to any and all costs, fees and expenses for which the Borrower is liable under the Reimbursement Agreement, the Borrower promises to pay all reasonable costs and expenses, including reasonable attorneys' fees and disbursements, incurred in the collection and enforcement hereof or any appeal of any judgment rendered hereon. The Borrower hereby expressly waives presentment, protest, demand and dishonor to the fullest extent permitted by applicable law. No failure or delay by any holder of this DSR Note to exercise any right or remedy under this DSR Note or any other document or instrument entered into pursuant to the Reimbursement Agreement shall operate or be construed as a waiver or modification hereof or thereof. This DSR Note shall be binding upon the successors and assigns of the Borrower and shall inure to the Bank and its successors, endorsees and assigns. If any term or provision of this DSR Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. The Borrower hereby expressly and irrevocably agrees and consents that any suit, action or proceeding arising out of or related to this DSR Note may be instituted in any state or federal court (at the Bank's option) sitting in the County of New York, State of New York, and, by the execution and delivery of this DSR Note, the Borrower expressly waives any objection which it may have now or hereafter to the venue or to the jurisdiction of any such suit, action or B-2 proceeding, and irrevocably submits generally and unconditionally to the jurisdiction of any such court in any such suit, action or proceeding. EDISON MISSION HOLDINGS CO. By: --------------------------------------- Name: Title: B-3 SCHEDULE Amount Total and Date Principal Principal of Date Amount Amount Amount Principal Unpaid Interest of of DSR of DSR Paid or Principal Payment Interest Loans Notation Date Loan Prepaid Balance is Due Due Outstanding Made By - -------------------------------------------------------------------------------- EXHIBIT C FORM OF COMMITMENT TRANSFER SUPPLEMENT COMMITMENT TRANSFER SUPPLEMENT, dated as of the date set forth in ITEM I of SCHEDULE I hereto, among each Transferor Bank set forth in ITEM 2 of SCHEDULE I hereto (each, a "TRANSFEROR BANK"), each Purchasing Bank set forth in ITEM 3 of SCHEDULE I hereto (each, a "PURCHASING BANK"), and Westdeutsche Landesbank Girozentrale, New York Branch, as the Issuing Bank and as the Agent under the Reimbursement Agreement described below. WITNESSETH WHEREAS, this Commitment Transfer Supplement is being executed and delivered in accordance with SECTION 9.9 of the Reimbursement Agreement, dated as of March 30, 2001, by and among (i) Edison Mission Holdings Co., a California corporation (the "BORROWER"), (ii) Westdeutsche Landesbank Girozentrale, New York Branch, in its capacity as Issuing Bank (the "ISSUING BANK") and as a Bank (as defined below), (iii) Credit Suisse First Boston, New York Branch, as a Bank (as defined below), (iv) each bank or other entity that is, or becomes pursuant to SECTION 9.9 of the Reimbursement Agreement, a party thereto (collectively, the "Banks") and (v) Westdeutsche Landesbank Girozentrale, New York Branch, as agent (in such capacity, together with its successors in such capacity, the "AGENT") (as amended, supplemented or otherwise modified in accordance with the terms thereof from time to time, the "REIMBURSEMENT AGREEMENT"; terms defined therein being used herein as therein defined); and WHEREAS, each Purchasing Bank (if it is not already a Bank party to the Reimbursement Agreement) desires to become a Bank party to the Reimbursement Agreement; and WHEREAS, each Transferor Bank is selling and assigning to its respective Purchasing Bank, certain rights, obligations and commitments under the Reimbursement Agreement; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Upon receipt by the Agent of [ ] ([ ]) fully executed originals of this Commitment Transfer Supplement, to each of which is attached a fully completed SCHEDULE I, SCHEDULE II and SCHEDULE III, and each of which has been executed by each Transferor Bank, each Purchasing Bank and any other Person required by the Reimbursement Agreement to execute this Commitment Transfer Supplement, the Agent will transmit to the Borrower, each Transferor Bank and each Purchasing Bank a Transfer Effective Notice, substantially in the form of SCHEDULE IV hereto (a "TRANSFER EFFECTIVE NOTICE"). Such Transfer Effective Notice shall set forth, INTER ALIA, the date on which the transfer effected by this Commitment Transfer Supplement shall become effective (the "TRANSFER EFFECTIVE DATE"), which date shall be the date hereof. From and after the Transfer Effective Date, each Purchasing Bank shall be a Bank party to the Reimbursement Agreement for all purposes thereof. C-1 2. Each Purchasing Bank shall pay to each of its respective Transferor Banks an amount equal to the purchase price, as agreed between such Transferor Bank and each such Purchasing Bank and as set forth on SCHEDULE II hereto (the "PURCHASE PRICE"), of the portion being purchased (such Purchasing Bank's "PURCHASED PERCENTAGE") by such Purchasing Bank of the outstanding DSR Loans and other amounts owing to the respective Transferor Bank under the Reimbursement Agreement and the DSR Notes (the "OUTSTANDING OBLIGATIONS"). Each Purchasing Bank shall pay the appropriate Purchase Price to each of its respective Transferor Banks, in immediately available funds, at or before 12:00 noon, local time of the appropriate Transferor Bank, on the first Business Day of the month in which the Transfer Effective Date occurs. Effective upon the Transfer Effective Date, each Transferor Bank hereby irrevocably sells, assigns and transfers to each of its respective Purchasing Banks, without recourse, representation or warranty other than as set forth in SECTION 8 hereof, and each such Purchasing Bank hereby irrevocably purchases, takes and assumes from each of its respective Transferor Banks, such Purchasing Bank's Purchased Percentage of the Commitment, presently outstanding DSR Loans and other amounts owing to each such Transferor Bank under the Reimbursement Agreement and the DSR Notes, together with all instruments, documents and collateral security pertaining thereto. 3. Each Transferor Bank has made arrangements with each of its respective Purchasing Banks with respect to (a) the portion, if any, to be paid, and the date or dates for payment, by such Transferor Bank to each of its respective Purchasing Banks of any fees heretofore received by such Transferor Bank pursuant to the Reimbursement Agreement prior to the Transfer Effective Date and (b) the portion, if any, to be paid, and the date or dates for payment, by each such Purchasing Bank to each Transferor Bank, or by each such Transferor Bank to each Purchasing Bank, of fees or interest received by each such Purchasing Bank or each such Transferor Bank, as the case may be, pursuant to the Reimbursement Agreement from and after the Transfer Effective Date. Any interest, accrued from and after the Transfer Effective Date, with respect to principal of the DSR Loans for which the Purchase Price has yet to be paid under SECTION 2 above, shall accrue for the benefit of the appropriate Transferor Bank to the extent of the Adjusted Base Rate and shall accrue for the benefit of the appropriate Purchasing Bank to the extent of the applicable interest rate less the Adjusted Base Rate. 4. (a) All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of any Transferor Bank pursuant to the Reimbursement Agreement and the DSR Notes shall, instead, be payable to or for the account of the appropriate Transferor Banks and the appropriate Purchasing Banks, as the case may be, in accordance with their respective interests as reflected in this Commitment Transfer Supplement. (b) Except as otherwise agreed as set forth in SECTION 3 hereof, all interest, fees and other amounts that would otherwise accrue for the account of any Transferor Bank from and after the Transfer Effective Date pursuant to the Reimbursement Agreement and the DSR Notes shall, instead, accrue for the account of, and be payable to, the appropriate Transferor Banks and the appropriate Purchasing Banks, as the case may be, in accordance with their respective interests as reflected in this Commitment Transfer Supplement. In the event that any amount of interest, fees, or other amounts accruing prior to the Transfer Effective Date was included in the Purchase Price paid by any Purchasing Bank, the appropriate Transferor Bank C-2 and such Purchasing Bank will make appropriate arrangements for payment by such Transferor Bank to such Purchasing Bank of such amount upon receipt thereof from the Borrower. 5. On or prior to the Transfer Effective Date, each Transferor Bank will deliver to the Agent its DSR Note[s]. On or prior to the Transfer Effective Date, the Borrower will deliver to the Agent new DSR Notes for each Purchasing Bank and each Transferor Bank, in each case in principal amounts reflecting, in accordance with the Reimbursement Agreement, their respective "Revised Commitment Percentage" or "New Commitment Percentage," as the case may be and as set forth in SCHEDULE III hereto, of the Commitment or, as appropriate, their then outstanding shares of the Outstanding Obligations (as adjusted pursuant to this Commitment Transfer Supplement). Promptly after the Transfer Effective Date, the Agent will send to each Transferor Bank and Purchasing Bank its new DSR Notes[s] with the superseded DSR Note[s] of each Transferor Bank attached to the new DSR Note[s] (or if more than one new DSR Note, the superseded DSR Note[s] attached to one of such new DSR Note(s) and copies thereof attached to all other new DSR Note). 6. Concurrently with the execution and delivery hereof, the Transferor Banks will provide to each Purchasing Bank (if it is not already a Bank party to the Reimbursement Agreement) copies of all documents delivered to the Transferor Banks evidencing satisfaction of the conditions precedent set forth in the Reimbursement Agreement. 7. Each of the parties to this Commitment Transfer Supplement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Commitment Transfer Supplement. 8. By executing and delivering this Commitment Transfer Supplement, each Transferor Bank and each of its respective Purchasing Banks confirm to and agree with each other, the Agent, the Issuing Bank and the Banks as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, each such Transferor Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Reimbursement Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Reimbursement Agreement, the DSR Notes or any other instrument or document furnished pursuant thereto, (b) each such Transferor Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Reimbursement Agreement, the DSR Notes or any other instrument or document furnished pursuant hereto, (c) each such Purchasing Bank confirms that it has received a copy of the Reimbursement Agreement, together with copies of such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Commitment Transfer Supplement, (d) each such Purchasing Bank will, independently and without reliance upon the Agent, its respective Transferor Banks or any other Bank or the Issuing Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Reimbursement Agreement, (e) each such Purchasing Bank appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Reimbursement C-3 Agreement as are delegated to the Agent by the terms thereof together with such powers as are reasonably incidental thereto and (f) each such Purchasing Bank agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Reimbursement Agreement are required to be performed by it as a Bank. 9. SCHEDULE III hereto sets forth for each Transferor Bank and each Purchasing Bank the revised Commitment, and/or Commitment Percentage, as the case may be, of each Transferor Bank and each Purchasing Bank, as well as certain administrative information with respect to each Purchasing Bank. 10. Notwithstanding anything to the contrary in this Commitment Transfer Supplement, if the long-term debt rating of any Purchasing Bank shall, at any time, be less than a rating of A or the equivalent thereof by S&P or A2 or the equivalent thereof by Moody's, then the Issuing Bank may, in its sole and absolute discretion, purchase all or any part (as designated by the Issuing Bank) of such Purchasing Bank's participating interest hereunder (the "PURCHASED INTERESTS") (which, if in part, may be limited to the Purchasing Bank's participating interest in the rights and obligations of the Issuing Bank under, and in connection with, one or more Debt Service Reserve Letters of Credit, including, without limitation, the obligations to pay the Issuing Bank if it is not reimbursed by the Borrower in immediately available funds for any drawings under such Debt Service Reserve Letter of Credit and to make certain loans, if any, provided to be made under the Reimbursement Agreement in the event of certain drawings under such Debt Service Reserve Letter of Credit, all in accordance with the Reimbursement Agreement) by providing such Purchasing Bank with at least two Banking Days' prior notice of such purchase and making a payment to such Purchasing Bank for all outstanding amounts owing to it hereunder or pursuant to the Reimbursement Agreement in respect of the Purchased Interests on the date of such purchase as set forth in such notice. Upon any such purchase of all of a Purchasing Bank's participating interest hereunder, such Purchasing Bank shall no longer have any rights or obligations as a Purchasing Bank hereunder or as a Bank under the Reimbursement Agreement or under any other instruments or documents furnished pursuant thereto. The Issuing Bank may, in its sole and absolute discretion, retain for its own account and/or sell its interest in all or any portion of the Purchased Interests. 11. THIS COMMITMENT TRANSFER SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. 12. This Commitment Transfer Supplement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same document. 13. Execution of this Commitment Transfer Supplement by the Agent as set forth below shall constitute the consent of such Person required pursuant to SECTION 9.9 of the Reimbursement Agreement. C-4 IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer Supplement to be executed by their respective duly authorized officers on SCHEDULE I hereto as of the date set forth in ITEM I of SCHEDULE I hereto. SCHEDULE I TO COMMITMENT TRANSFER SUPPLEMENT COMPLETION OF INFORMATION AND SIGNATURES FOR COMMITMENT TRANSFER SUPPLEMENT Re: Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of March 30, 2001, with EDISON MISSION HOLDINGS CO., as the Borrower. Item 1 Date of Commitment Transfer [Insert date of Supplement: Commitment Transfer Supplement] Item 2 Transferor: [Insert names of Transferor Banks] Item 3 Purchasing Banks: [Insert names of Purchasing Banks] Item 4 Signatures of Parties to Commitment Transfer Supplement: __________________________________________ as a Transferor Bank By: --------------------------------------- Name: Title: __________________________________________ as a Purchasing Bank By: --------------------------------------- Name: Title: Westdeutsche Landesbank Girozentrale, New York Branch, as the Issuing Bank and the Agent By: --------------------------------------- Name: Title: C-6 SCHEDULE I (CONTINUED) By: --------------------------------------- Name: Title: C-7 SCHEDULE II TO COMMITMENT TRANSFER SUPPLEMENT PURCHASE PRICES Names of Transfer Banks
=========================================================================================================== Names of [Insert name of [Insert name of [Insert name of Purchasing Banks Transferor Bank] Transferor Bank] Transferor Bank] - ---------------- ---------------- ---------------- ---------------- - ----------------------------------------------------------------------------------------------------------- [Insert name of $[Insert Purchase Price] $[Insert Purchase Price] $[Insert Purchase Price] Purchasing Bank] - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- ===========================================================================================================
C-8 SCHEDULE III TO COMMITMENT TRANSFER SUPPLEMENT LIST OF LENDING OFFICES, ADDRESSES FOR NOTICES, COMMITMENT AMOUNTS, AND PROPORTIONATE SHARES
=================================================================== NAMES OF TRANSFEROR BANKS REVISED MAXIMUM COMMITMENT ------------------------------------------------------------------- [ ] $ ------------------------------------------------------------------- [ ] $ ------------------------------------------------------------------- ------------------------------------------------------------------- NAMES OF TRANSFEROR BANKS REVISED COMMITMENT PERCENTAGE ------------------------------------------------------------------- [ ] % ------------------------------------------------------------------- [ ] % ------------------------------------------------------------------- ------------------------------------------------------------------- NAMES OF PURCHASING BANKS NEW MAXIMUM COMMITMENT ------------------------------------------------------------------- [ ] % ------------------------------------------------------------------- ------------------------------------------------------------------- NAMES OF PURCHASING BANKS COMMITMENT PERCENTAGE ------------------------------------------------------------------- [ ] % ===================================================================
C-9 SCHEDULE III (CONTINUED) --------- [NAME OF PURCHASING BANK(S)] Address for Notices: Attention: Telex: Answerback: Telephone: Telecopier: CLEARING ACCOUNT: [Insert Acct. #] EURODOLLAR LENDING OFFICE: [Insert Address] DOMESTIC LENDING OFFICE: [Insert Address] C-10 SCHEDULE IV TO COMMITMENT TRANSFER SUPPLEMENT TRANSFER EFFECTIVE NOTICE _______________________,___ Transferor Banks: [ ] Purchasing Banks: [ ] Borrower: EDISON MISSION HOLDINGS CO. The undersigned, as the Agent under the Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of March 30, 2001 by and among (i) Edison Mission Holdings Co., a Delaware limited liability company (the "BORROWER"), (ii) Westdeutsche Landesbank Girozentrale, New York Branch, as Issuing Bank (the "ISSUING BANK"), and the other Banks named therein (collectively, the "BANKS"), and (iii) Westdeutsche Landesbank Girozentrale, New York Branch, as agent for the Banks (the "AGENT") (as amended, supplemented or otherwise modified in accordance with the terms thereof from time to time, the "REIMBURSEMENT AGREEMENT") acknowledge receipt of [ ] ([ ]) copies of the Commitment Transfer Supplement as described in ANNEX I hereto, each fully executed. Terms defined in such Commitment Transfer Supplement are used herein as therein defined. 1. Pursuant to such Commitment Transfer Supplement, you are advised that the Transfer Effective Date will be the date hereof. 2. Pursuant to such Commitment Transfer Supplement, each Transferor Bank is required to deliver to the Agent on or before the Transfer Effective Date its DSR Note[s]. 3. Pursuant to such Commitment Transfer Supplement, the Borrower is required to deliver to the Agent on or before the Transfer Effective Date the following DSR Notes: [Describe each new DSR Note for Transferor Bank and Purchasing Bank as to principal amount and payee.] D-1 4. Pursuant to such Commitment Transfer Supplement, each Purchasing Bank is required to pay its Purchase Price, in immediately available funds, to the appropriate Transferor Bank at or before 12:00 noon, local time of the appropriate Transferor Bank, on [the first Business Day of the month in which the Transfer Effective Date occurs]. Very truly yours, Westdeutsche Landesbank Girozentrale, New York Branch as the Agent By: --------------------------------- Name: Title: By: --------------------------------- Name: Title: D-2 ANNEX I INFORMATION FOR COMMITMENT TRANSFER SUPPLEMENT Re: Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of March 30, 2001, with Edison Mission Holdings Co., as the Borrower Item 1 Date of Commitment Transfer __________________, ____ Supplement: Item 2 Transferor Banks: [ ] Item 3 Purchasing Banks: [ ] SCHEDULE III (CONTINUED) Schedule I Edison Mission Holdings Co. Filings with the Securities and Exchange COMMISSION 1. Form: 10-Q Filing Date: November 14, 2000 2. Form: 10-Q Filing Date: August 11, 2000 3. Form: S-4/A Filing Date: June 26, 2000 4. Form: S-4/A Filing Date: June 12, 2000 5. Form: S-4/A Filing Date: April 3, 2000 6. Form: S-4/A Filing Date: March 21, 2000 7. Form: S-4/A Filing Date: February 29, 2000 8. Form: S-4/A Filing Date: February 8, 2000 9. Form: S-4 Filing Date: December 3, 1999 D-1 EX-10.91 28 a2031364zex-10_91.txt EXHIBIT 10.91 Exhibit 10.91 INSTRUMENT OF ASSUMPTION INSTRUMENT OF ASSUMPTION dated as of December 15, 1999, by MIDWEST GENERATION, LLC, a Delaware limited liability company ("Purchaser"), in favor of COMMONWEALTH EDISON COMPANY, an Illinois corporation ("ComEd"), and UNICOM INVESTMENT INC., an Illinois corporation ("UII"). W I T N E SS E T H : WHEREAS, pursuant to the Asset Sale Agreement dated as of March 22, 1999 (as amended and/or assigned, the "Agreement") between Edison Mission Energy, a California corporation, and ComEd and that certain Asset Sale Agreement dated as of May 11, 1999 between ComEd and UII, ComEd and UII are concurrently herewith selling, assigning, transferring, conveying and delivering to Purchaser certain assets and properties defined in the Agreement as the Assets; and WHEREAS, in partial consideration for such sale, assignment, transfer, conveyance and delivery of the Assets, the Agreement requires Purchaser to perform, pay or discharge certain obligations of ComEd, which are defined in the Agreement as the Purchaser's Liabilities, by the execution and delivery to ComEd and UII of this Instrument of Assumption; NOW, THEREFORE, pursuant to the terms of the Agreement and for good and valuable consideration, Purchaser hereby assumes and undertakes and agrees to perform, pay or discharge in accordance with the terms and conditions thereof, all of the Purchaser's Liabilities (as defined in the Agreement). AND, for the consideration aforesaid, Purchaser for itself and its successors and assigns has covenanted and by this instrument does covenant with ComEd, UII and their respective successors and assigns that Purchaser and its successors and assigns will do, execute and deliver, or will cause to be done, executed and delivered, all such further acts, transfers, assignments and conveyances, powers of attorney and assurances for the better assuming from ComEd, UII and their respective successors and assigns all of the Purchaser's Liabilities as ComEd, UII and their respective successors or assigns shall reasonably require. Capitalized terms used herein without definition shall have the respective meanings ascribed to such terms in the Agreement. This Instrument of Assumption shall inure to the benefit of and be binding upon the successors and assigns of ComEd and UII and the successors and assigns of Purchaser. MIDWEST GENERATION, LLC By: /s/ Georgia Nelson ------------------------ EX-10.92 29 a2031364zex-10_92.txt EXHIBIT 10.92 Exhibit 10.92 Exhibit E-1 to Intercreditor Agreement EXECUTION COPY ================================================================================ SUBORDINATION AGREEMENT dated as of December 15, 1999 by and among CITIBANK, N.A., as Holdings Collateral Agent EDISON MISSION OVERSEAS CO. and MIDWEST GENERATION, LLC ================================================================================ SUBORDINATION AGREEMENT This SUBORDINATION AGREEMENT, dated as of December 15, 1999 (this "AGREEMENT"), is by and between CITIBANK, N.A., as Holdings Collateral Agent (as defined in the Intercreditor Agreement referred to below), EDISON MISSION OVERSEAS CO., a Delaware corporation ("OVERSEAS"), and MIDWEST GENERATION, LLC, a Delaware limited liability company ("MIDWEST"). RECITALS WHEREAS, Edison Mission Midwest Holdings Co. ("HOLDINGS") has entered into the Credit Agreement, dated as of December 15, 1999 (the "HOLDINGS CREDIT AGREEMENT"), with certain commercial lending institutions party thereto (the "HOLDINGS LENDERS") and The Chase Manhattan Bank, as Administrative Agent for the Holdings Lenders, pursuant to which the Holdings Lenders have agreed to make loans (the "HOLDINGS LOANS") to Holdings from time to time on the terms and subject to the conditions contained in the Holdings Credit Agreement; WHEREAS, Holdings has entered into Collateral Agency and Intercreditor Agreement, dated as of December 15, 1999 (the "INTERCREDITOR AGREEMENT"), among Midwest Generation EME, LLC, Holdings, Overseas, Midwest, Collins Holdings EME, LLC, the Owner Lessors (as such term is defined therein), Midwest Funding LLC, the Holdings Administrative Agent (as such term is defined therein), each Holder Representative (as such term is defined therein) each Other Representative (as such term is defined therein), the Midwest LC Issuer (as such term defined therein), the Depositary Agent (as such term is defined therein), the Depositary Bank (as such term is defined therein) and the Holdings Collateral Agent (as such term is defined therein); WHEREAS, Overseas is a wholly-owned subsidiary of Holdings and Holdings has agreed to make an equity contribution (the "HOLDINGS EQUITY CONTRIBUTION") to Overseas; WHEREAS, Midwest has entered into the Subordinated Loan Agreement, dated as of December 15, 1999 (the "FINANCE LOAN AGREEMENT"), with Overseas, pursuant to which Overseas has agreed to make a loan (the "FINANCE LOAN") to Midwest on the terms and subject to the conditions contained in the Finance Loan Agreement; 2 WHEREAS, Midwest has entered into the Subordinated Revolving Loan Agreement, dated as of December 15, 1999 (the "REVOLVING LOAN AGREE MENT"), with Overseas, pursuant to which Overseas has agreed to make loans (the "REVOLVING LOANS") to Midwest to from time to time on the terms and subject to the conditions contained in the Revolving Loan Agreement; WHEREAS, the parties hereto would like to subordinate the Finance Loan and the Revolving Loans, and all other obligations of Midwest under the Finance Loan Agreement and the Revolving Loan Agreement, respectively, to the guarantee by Midwest of the Obligations of Holdings under the Holdings Credit Agreement and the Holdings Credit Documentation; and WHEREAS, the execution and delivery of this Agreement is a condition precedent to the effectiveness of the Holdings Credit Agreement and the making by the Holdings Lenders of Holdings Loans to Holdings thereunder. AGREEMENT NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS; PRINCIPLES OF CONSTRUCTION Section 1.1 DEFINITIONS. (a) HOLDINGS CREDIT AGREEMENT. Unless otherwise expressly provided herein, capitalized terms used but not defined in this Agreement shall have the meanings given to such terms in the Holdings Credit Agreement. (b) OTHER DEFINED TERMS. The following terms, when used herein, shall have the following meanings: "BORROWER" shall mean Midwest. "PROCEEDING" shall have the meaning given to such term in SECTION 3.2. 3 "SENIOR CLAIMS" shall have the meaning given to such term in SECTION 2.1(a). "SUBORDINATED CLAIMS" shall have the meaning given to such term in SECTION 2.1(a). "SUBORDINATED NOTES" shall have the meaning given to such term in SECTION 2.1(c). "SUBORDINATED PARTY" shall mean Overseas in its capacity as lender under the Finance Loan Agreement and as lender under the Revolving Loan Agreement. Section 1.2 PRINCIPLES OF CONSTRUCTION. Unless otherwise expressly provided herein, the principles of construction set forth in the Holdings Credit Agreement shall apply to this Agreement. ARTICLE II SUBORDINATION PROVISIONS Section 2.1 SUBORDINATION OF FINANCE LOAN AND REVOLVING LOANS. Until all Obligations shall have been indefeasibly paid in full and all Commitments shall have been terminated: (a) all principal of, premium, if any, and interest owing on the Finance Loan or any Revolving Loan made by Overseas, and any and all other indebtedness and obligations of Borrower to Overseas, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred or created (collectively, the "SUBORDINATED CLAIMS") shall be subordinate, to the extent and in the manner hereinafter set forth, to the prior payment of, and junior in right of payment of any and all obligations whether now existing or hereafter incurred or created of Borrower to the Secured Parties (collectively, the "SENIOR CLAIMS"); (b) Borrower shall not, directly or indirectly, make any regularly scheduled payment of principal or interest on account of, or transfer any collateral for any part of, any Subordinated Claims; PROVIDED, HOWEVER, that Borrower may make regularly scheduled payments of interest and principal on account of Subordinated Claims if no Event of Default exists in respect of the Holdings Credit Agreement; 4 (c) the Subordinated Party shall not demand, sue for or accept from Borrower or any other Person any payment or collateral in respect of any Subordinated Claims, or take any other action to enforce their rights or exercise any remedies in respect of any Subordinated Claims (whether upon the occurrence or during the continuation of an event of default under the Finance Loan Agreement or the Revolving Loan Agreement, as applicable, or an event of default under any promissory notes evidencing Subordinated Claims (collectively, "SUBORDINATED NOTES") or otherwise), or cancel, set off or otherwise discharge any part of any Subordinated Claims; and (d) neither Borrower nor the Subordinated Party shall otherwise take any action prejudicial to or inconsistent with the priority position of the Secured Parties over the Subordinated Party created by this SECTION 2.1. Section 2.2 RELIANCE. All Senior Claims shall conclusively be deemed to have been created, contracted or incurred in reliance on the subordination provisions contained in this Agreement and all dealings between Borrower and each of the holders of Senior Claims shall be deemed to have been consummated in reliance upon the subordination provisions contained herein. Section 2.3 OTHER HOLDERS. The subordination provisions set forth in this Agreement shall be binding upon transferees or assignees of the Subordinated Party and upon each other holder of Subordinated Claims and shall inure to the benefit of transferees or assignees of the Secured Parties and every other holder of Senior Claims. ARTICLE III WRONGFUL COLLECTIONS Section 3.1 TURNOVER. Should any payment on account of, or any collateral for any part of, any Subordinated Claims be received by the Subordinated Party in violation of this Agreement, such payment or collateral shall be delivered forthwith to the Holdings Collateral Agent for application in accordance with the Holdings Credit Agreement and the Loan Documents. The Holdings Collateral Agent is irrevocably authorized to supply any required endorsement or assignment which may have been omitted. Until so delivered, any such payment or collateral shall be held by the Subordinated Party in trust for the Secured Parties and shall not be commingled with other funds or property of the Subordinated Party. 5 Section 3.2 SURVIVAL OF OBLIGATION. The obligation of the Subordinated Party to deliver to the Holdings Collateral Agent any payment or collateral received in connection with any Subordinated Claims, as set forth in SECTION 3.1, shall survive and shall not be in any way affected by the result of any (a) insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceeding relating to Borrower, its property or its creditors as such, (b) proceeding for any liquidation, dissolution or other winding-up of Borrower, voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings, (c) assignment for the benefit of creditors, (d) other marshalling of the assets of Borrower or (e) general meeting of creditors of Borrower, in each case, under the laws of the United States or any other jurisdiction (any such event, a "PROCEEDING"). ARTICLE IV PROCEEDINGS Section 4.1 COMMENCEMENT OF PROCEEDINGS. The Subordinated Party shall not commence, or join with any other creditor or creditors of Borrower in commencing, any Proceeding against Borrower. Section 4.2 PAYMENTS AND DISTRIBUTIONS. In the event of any Proceeding, until all Obligations shall have been indefeasibly paid in full and all Commit ments shall have been terminated, any payment or distribution of any kind or charac ter, whether in cash, property or securities, which, but for the subordination provi sions of this Agreement would otherwise be payable or deliverable upon or in respect of Subordinated Claims, shall instead be paid over or delivered to the Holdings Collateral Agent in accordance with ARTICLE III and no holder of Subordinated Claims shall receive any such payment or distribution or any benefit therefrom. Section 4.3 ENFORCEMENT OF SUBORDINATED CLAIMS. (a) ENFORCEMENT BY THE SECURED PARTIES. At any Proceeding, until all Obligations shall have been indefeasibly paid in full and all Commitments shall have been terminated, the Secured Parties are hereby irrevocably authorized (but not required) to: 6 (i) enforce claims comprising Subordinated Claims in the name of the Subordinated Party by proof of debt, proof of claim, suit or otherwise; (ii) collect any assets of Borrower distributed, divided or applied by way of dividend or payment, and any securities issued, in each case, on account of Subordinated Claims and apply the same, or the proceeds of any realization upon the same that the Secured Parties in their discretion elect to effect, to Senior Claims until all Obligations shall have been indefeasibly paid in full and all Commitments shall have been terminated; PROVIDED, HOWEVER, that the Secured Parties shall render any surplus to the Subordinated Party or its Affiliates, as their interests appear, or interplead such surplus with a court of competent jurisdiction; (iii) vote claims comprising Subordinated Claims to accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition or extension; and (iv) take generally any action in connection with any such Proceeding which the Subordinated Party might otherwise take. (b) COOPERATION. The Subordinated Party shall cooperate fully with the Secured Parties and perform all acts requested by the Secured Parties to enable the Secured Parties to enforce any Subordinated Claims pursuant to clause (a) above, including, without limitation, filing appropriate proofs of claim and executing and delivering all necessary powers of attorney, assignments or other instruments. (c) ENFORCEMENT BY THE SUBORDINATED PARTY. After the commencement of any Proceeding, the Subordinated Party may inquire in writing of the Secured Parties whether the Secured Parties intend to exercise their rights set forth in clause (a) above with respect to any Subordinated Claims. Should the Secured Parties fail, within a reasonable time after receipt of such inquiry, either to file a proof of claim with respect to any Subordinated Claims and to furnish a copy thereof to the Subordinated Party, or to inform the Subordinated Party in writing that the Secured Parties intend to exercise their rights to assert such Subordinated Claims in the manner provided in clause (a) above, the Subordinated Party may (but shall not be required to) proceed to file a proof of claim with respect to such Subordinated 7 Claims and take such further steps with respect thereto, not inconsistent with this Agreement, as the Subordinated Party may deem proper. (d) SUBROGATION. The Subordinated Party shall not have any subrogation or other rights as a holder of Senior Claims, and the Subordinated Party hereby irrevocably waives all such rights of subrogation and all rights of reimbursement or indemnity whatsoever and all rights of recourse to any security for any Senior Claims, until such time as all Obligations shall have been indefeasibly paid in full and all Commitments shall have been terminated. Subject to and from and after the payment in full of all Obligations and the termination of all Commitments, the Subordinated Party shall be subrogated to any rights of the Secured Parties to receive payments or distributions of cash, property or securities of Borrower applicable to any Subordinated Claims until all amounts owing on such Subordinated Claims shall be paid in full. ARTICLE V LIMITATION ON ACTIONS Section 5.1 ACTIONS PROHIBITED. Until all Obligations shall have been indefeasibly paid in full and all Commitments shall have been terminated, the Subordinated Party shall not, without the prior written consent of the Secured Parties: (a) take, obtain or hold (or permit anyone acting on its behalf to take, obtain or hold) any assets of Borrower, whether as a result of any admin istrative, legal or equitable action, or otherwise, in violation of the subordination provisions contained in this Agreement; (b) accelerate payment of any Subordinated Claims or otherwise require such Subordinated Claims to be paid prior to their stated or scheduled maturity date; (c) commence, prosecute or participate in (i) any administra tive, legal or equitable action against or involving Borrower relating to any Subordi nated Claims, including, without limitation, any Proceeding, or (ii) any administra tive, legal or equitable action to (a) enforce or collect any judgment obtained in re spect of any Subordinated Claims, (b) enforce or exercise remedies arising under or pursuant to any Subordinated Claims, (c) enforce or exercise remedies under or pursuant to any lien or other security interest securing any Subordinated 8 Claims or (d) enforce or exercise remedies with respect to any covenant, agreement, representation or other undertaking contained in any Subordinated Notes; or (d) exercise any other rights or remedies to enforce any Subordinated Claims, any collateral security provided with respect to such Subordinated Claims or any covenant, agreement, representation or other undertaking contained in any Subordinated Notes. Section 5.2 DEFENSE IN ACTION. If the Subordinated Party, in violation of the provisions herein set forth, shall commence, prosecute or participate in any suit, action, case or Proceeding referred to in SECTION 5.1, Borrower may interpose as a defense or plea the provisions set forth herein, and any holder of any Senior Claims may intervene and interpose such defense or plea in its own name or in the name of Borrower, and shall, in any event, be entitled to restrain the enforcement of the provisions of any Subordinated Claims in its own name or in the name of Borrower, as the case may be, in the same suit, action, case or Proceeding or in any independent suit, action, case or Proceeding. ARTICLE VI SUBORDINATION ABSOLUTE Section 6.1 SURVIVAL OF RIGHTS. The rights under this Agreement of the holders of Senior Claims as against the Subordinated Party shall remain in full force and effect without regard to, and shall not be impaired or affected by: (a) any act or failure to act on the part of Borrower; (b) any extension or indulgence in respect of any payment or prepayment of any Senior Claims or any part thereof or in respect of any other amount payable to any holder of any Senior Claims; (c) any amendment, modification or waiver of, or addition or supplement to, or deletion from, or compromise, release, consent or other action in respect of, any of the terms of any Senior Claims or the Loan Documents; (d) (i) any exercise or non-exercise by the holder of any Senior Claims of any right, power, privilege or remedy under or in respect of such Senior Claims, the Loan Documents or the subordination provisions contained herein, (ii) any waiver by the holder of any Senior Claims of any right, power, privilege 9 or remedy or of any default in respect of such Senior Claims, the Loan Documents or the subordination provisions contained herein or (iii) any receipt by the holder of any Senior Claims or any failure by such holder to perfect a security interest in, or any release by such holder of, any security for the payment of such Senior Claims; (e) any merger or consolidation of Borrower or any of its subsidiaries into or with other Person, or any sale, lease or transfer of any or all of the assets of Borrower or any of its subsidiaries to any other Person; (f) any payment or other distribution to any holder of any Senior Claims in any Proceeding; (g) absence of any notice to, or knowledge by, the Subordi nated Party of the existence or occurrence of any of the matters or events set forth in the foregoing clauses (a) through (f); or (h) any other circumstance. Section 6.2 WAIVERS. (a) WAIVER OF DEFENSES. The Subordinated Party hereby irrevocably waives, in any proceeding by the Secured Parties to enforce their rights under this Agreement, (i) any defense based on the adequacy of a remedy at law which might be asserted as a bar to the remedy of specific performance of this Agreement and (ii) the defense that claims asserted by the Secured Parties pursuant to this Agreement are RES JUDICATA as a result of any decision rendered in any prior Proceeding. (b) OTHER WAIVERS. The Subordinated Party hereby irrevoca bly waives (i) notice of any of the matters referred to in SECTION 6.1, (ii) all notices which may be required, whether by statute, rule of law or otherwise, to preserve intact any rights of any holder of any Senior Claims against Borrower, including, without limitation, any demand, presentment and protest, or any proof of notice of nonpayment under any document evidencing such Senior Claims or under the Loan Documents, (iii) notice of the acceptance of or reliance on this Agreement by the Secured Parties, (iv) notice of any renewal, extension or accrual of any Senior Claims, or any loans made or other action taken in reliance on this Agreement, (v) any right to the enforcement, assertion or exercise by any holder of any Senior 10 Claims of any right, power, privilege or remedy conferred in any document evidencing such Senior Claims or in the Loan Documents, or otherwise, (vi) any requirement of diligence on the part of any holder of any Senior Claims, (vii) any requirement on the part of any holder of any Senior Claims to mitigate damages resulting from any default under any documents evidencing such Senior Claims or under the Loan Documents and (viii) any notice of any sale, transfer or other disposition of any Senior Claims by any holder thereof. Section 6.3 ASSENT. The Subordinated Party hereby irrevocably assents to (a) any renewal, extension or postponement of the time of payment of any Senior Claims or any other indulgence with respect thereto, (b) any increase in the amount of any Senior Claims, (c) any substitution, exchange or release of collateral for any Senior Claims, (d) the addition or release of any Person primarily or secondarily liable for any Senior Claims and (e) the provisions of any instrument, security or other writing evidencing any Senior Claims. ARTICLE VII BORROWER OBLIGATIONS The provisions of this Agreement are intended solely for the purpose of defining the relative rights and obligations of the Subordinated Party and the Secured Parties. Nothing contained herein (a) is intended to or shall impair, as among Borrower, its creditors and the Subordinated Party, the obligation of Borrower, which is absolute and unconditional, to pay to the Subordinated Party, as and when the same shall become due and payable in accordance with its terms, all amounts payable in respect of any Subordinated Claims, or (b) is intended to affect the relative rights of the Subordinated Party and creditors of Borrower other than the Secured Parties. ARTICLE VIII MISCELLANEOUS PROVISIONS Section 8.1 WAIVERS, AMENDMENTS. (a) The provisions of this Agreement may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by each of the parties hereto. 11 (b) No failure or delay in exercising any power or right under this Agreement 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 any party in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval under this Agreement 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 8.2 NOTICES. All notices and other communications provided to any party hereto under this Agreement shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth below or at such other address or facsimile number as may be designated by such party in a written notice to the other parties: Holdings Collateral Agent: Citibank, N.A. 111 Wall Street 5th Floor, Zone 2 New York, NY 10005 Facsimile: (212) 657-3866 Attention: Global Trust & Agency Services Overseas: Edison Mission Overseas Co. 1209 Orange Street Wilmington, DE 19890 Facsimile: (302) 674-8340 Attention: General Counsel COPY TO: Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612-1046 Facsimile: (949) 476-2378 Attention: General Counsel Midwest: Midwest Generation, LLC 12 One Financial Place 440 South LaSalle Street Suite 3500 Chicago, IL 60605 Facsimile: (312) 583-6111 Attention: Georgia Nelson COPY TO: Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612-1046 Facsimile: (949) 476-2378 Attention: General Counsel Any notice, if mailed and properly addressed with postage prepaid shall be effective five (5) 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 8.3 SEVERABILITY. Any provision of this Agreement 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 this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Section 8.4 HEADINGS. The various headings of this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provisions hereof or thereof. Section 8.5 EXECUTION IN COUNTERPARTS, EFFECTIVENESS. This Agree ment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Section 8.6 GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. This Agreement constitutes the entire understanding among the parties hereto with respect to 13 the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. Section 8.7 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. Section 8.8 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. EACH PARTY HERETO HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. EACH PARTY HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PARTY HERETO HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT. 14 Section 8.9 WAIVER OF JURY TRIAL. EACH PARTY HEREBY KNOW INGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. EACH PARTY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCE MENT FOR THE OTHER PARTIES ENTERING INTO THIS AGREEMENT. 15 IN WITNESS WHEREOF, the parties hereto have caused this Subordination Agreement to be executed by their respective officers as of the days and year first above written. CITIBANK, N.A., as Holdings Collateral Agent, By: /s/ Jenny Cheng --------------------------- Name: Jenny Cheng Title: Vice President EDISON MISSION OVERSEAS CO. By: /s/ John P. Finneran, Jr. ----------------------------- Name: John P. Finneran, Jr. Title: Vice President MIDWEST GENERATION, LLC By: /s/ John P. Finneran, Jr. ------------------------------ Name: John P. Finneran, Jr. Title: Vice President EX-10.93 30 a2031364zex-10_93.txt EXHIBIT 10.93 Exhibit 10.93 Exhibit E-2 to Intercreditor Agreement EXECUTION COPY ================================================================================ SUBORDINATED LOAN AGREEMENT dated as of December 15, 1999 by and between MIDWEST GENERATION, LLC, as Borrower and EDISON MISSION OVERSEAS CO., as Lender ================================================================================ SUBORDINATED LOAN AGREEMENT This SUBORDINATED LOAN AGREEMENT, dated as of December 15, 1999 (this "AGREEMENT"), is by and between MIDWEST GENERATION, LLC, a Delaware limited liability company, as borrower ("BORROWER"), and EDISON MISSION OVERSEAS CO., a Delaware corporation, as lender ("LENDER"). RECITALS WHEREAS, Edison Mission Midwest Holdings Co. ("HOLDINGS") has entered into the Credit Agreement, dated as of December 15, 1999 (the "HOLDINGS CREDIT AGREEMENT"), with certain commercial lending institutions party thereto (the "HOLDINGS LENDERS") and The Chase Manhattan Bank, as Administrative Agent for the Holdings Lenders, pursuant to which the Holdings Lenders have agreed to make loans (the "HOLDINGS LOANS") to Holdings from time to time on the terms and subject to the conditions contained in the Holdings Credit Agreement; WHEREAS, Lender is a wholly-owned subsidiary of Holdings, and Holdings has agreed to make an equity contribution (the "HOLDINGS EQUITY CONTRIBUTION") to Lender; WHEREAS, Borrower has requested that Lender make a loan to Borrower; and WHEREAS, Lender is willing to make such loans to Borrower on the terms and subject to the conditions contained herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS; PRINCIPLES OF CONSTRUCTION Section 1.1 DEFINITIONS. 2 (a) HOLDINGS CREDIT AGREEMENT. Unless otherwise expressly provided herein, capitalized terms used but not defined in this Agreement shall have the meanings given to such terms in the Holdings Credit Agreement. (b) OTHER DEFINED TERMS. The following terms, when used herein, shall have the following meanings: "EVENT OF DEFAULT" shall have the meaning given to such term in SECTION 3.1. "FINANCE LOANS" shall have the meaning given to such term in SECTION 2.1. "SUBORDINATION AGREEMENT" shall mean the Subordination Agreement, dated as of December 15, 1999, by and among the Holdings Collateral Agent, Lender and Borrower. Section 1.2 PRINCIPLES OF CONSTRUCTION. Unless otherwise expressly provided herein, the principles of construction set forth in the Holdings Credit Agreement shall apply to this Agreement. ARTICLE II SUBORDINATED LOANS; PAYMENTS Section 2.1 SUBORDINATED LOANS. Lender agrees to make three loans (the "FINANCE LOANS") upon written request therefor by the Borrower to Borrower in the aggregate principal amount not to exceed the amount of the Holdings Equity Contribution. The Finance Loans shall consist of (i) a loan in an amount up to $840 million (the "TRANCHE A FINANCE LOAN"), (ii) a loan in an amount up to $839 million (the "TRANCHE B FINANCE LOAN"), and (iii) a loan in an amount up to $150 million (the "TRANCHE C FINANCE LOAN"). Borrower may from time to time prepay, in whole or in part, and reborrow the Finance Loans; PROVIDED that the aggregate principal amount of the Finance Loans outstanding shall not at any time exceed $1.829 billion (the "FINANCE LOAN COMMITMENT"). The obligation of Lender to make the Finance Loans to Borrower shall terminate automatically on the Tranche A Loan Commitment Termination Date (as defined in the Holdings Credit Agreement) for the Tranche A Finance Loan, the Tranche B Loan Commitment Termination Date (as defined in the 3 Holdings Credit Agreement) for the Tranche B Finance Loan, and the Tranche C Loan Commitment Termination Date (as defined in the Holdings Credit Agreement) for the Tranche C Finance Loan. Borrower shall execute a promissory note for each Finance Loan in form and substance substantially similar to EXHIBIT A hereto and otherwise in form and substance as is agreed by the parties hereto. Section 2.2 PRINCIPAL PAYMENTS. (a) REGULAR REPAYMENTS. (i) The Tranche A Finance Loan shall mature, and Borrower unconditionally promises to pay in full the unpaid principal of the Tranche A Finance Loan to Lender, on the Tranche A Loan Commitment Termination Date (as defined in the Holdings Credit Agreement). (ii) The Tranche B Finance Loan shall mature, and Borrower unconditionally promises to pay in full the unpaid principal of the Tranche B Finance Loan to Lender, on the Tranche B Loan Commitment Termination Date (as defined in the Holdings Credit Agreement). (iii) The Tranche C Finance Loan shall mature, and Borrower unconditionally promises to pay in full the unpaid principal of the Tranche C Finance Loan to Lender, on the Tranche C Loan Commitment Termination Date (as defined in the Holdings Credit Agreement). (b) OPTIONAL PREPAYMENTS. Borrower may make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any Finance Loan; PROVIDED that such prepayment may only be made pursuant to the provisions of SECTION 3.1.1 of the Holdings Credit Agreement. Each prepayment made pursu ant to this clause (b) shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid but shall be without premium or penalty. (c) MANDATORY PREPAYMENTS. Borrower shall, immediately upon any acceleration of the Loans (as defined in the Holdings Credit Agreement) pursuant to SECTIONS 9.2 and 9.3 of the Holdings Credit Agreement, repay the Finance Loans, together with accrued interest thereon, unless, pursuant to SECTION 9.3 of the Holdings Credit Agreement, only a portion of the Holdings Loans is so accelerated, in which event Borrower shall repay an equivalent portion of the Finance Loans, together with accrued interest thereon. 4 Section 2.3 INTEREST PAYMENTS. (i) Borrower shall pay interest on the outstanding principal amount of the Tranche A Finance Loan on the dates, at the times, at the rates and in the amounts Holdings is required to pay interest on the Tranche A Loans pursuant to SECTION 3.2 of the Holdings Credit Agreement. (ii) Borrower shall pay interest on the outstanding principal amount of the Tranche B Finance Loan on the dates, at the times, at the rates and in the amounts Holdings is required to pay interest on the Tranche B Loans pursuant to SECTION 3.2 of the Holdings Credit Agreement. (iii) Borrower shall pay interest on the outstanding principal amount of the Tranche C Finance Loan on the dates, at the times, at the rates and in the amounts Holdings is required to pay interest on the Tranche C Loans pursuant to SECTION 3.2 of the Holdings Credit Agreement. Section 2.4 FEES. In consideration of the making of the Finance Loans by Lender, Borrower agrees to pay fees to Lender on the dates, at the times, at the rates and in the amounts Holdings is required to pay fees to the Lenders (as defined in the Holdings Credit Agreement) of the Holdings Loans under SECTION 3.3 of the Holdings Credit Agreement. Section 2.5 LEGEND. Each subordinated note in favor of Lender and any other agreement or instrument evidencing Subordinated Claims (as defined in the Subordination Agreement) shall contain the following legend conspicuously noted on the face thereof: "THIS [NAME OF INSTRUMENT] IS SUBJECT TO THE SUBORDINATION PROVISIONS SET FORTH IN THE SUBORDINATION AGREEMENT, DATED AS OF DECEMBER 15, 1999 BY AND AMONG EDISON MISSION OVERSEAS CO., MIDWEST GENERATION, LLC AND CITIBANK, N.A. AS HOLDINGS COLLATERAL AGENT FOR THE SECURED PARTIES," and a copy of this Agreement shall be attached to each such agreement or instrument. ARTICLE III EVENTS OF DEFAULT; REMEDIES 5 Section 3.1 EVENTS OF DEFAULT DEFINED. Each of the following events or occurrences described in this SECTION 3.1 shall constitute an "EVENT OF DEFAULT" hereunder: (a) NON-PAYMENT OF OBLIGATIONS. Borrower shall default in (i) the payment or prepayment when due of any principal of any Finance Loan or (ii) the payment of interest on any Finance Loan or any other obligation of Borrower hereunder within five (5) Business Days after any such interest or other obligation becomes due in accordance with the terms hereof. (b) BREACH OF WARRANTY. Any representation or warranty of Borrower made or deemed to be restated or remade hereunder, under any Loan Documents or in any other writing or certificate furnished by or on behalf of Borrower to Lender for the purposes of or in connection with this Agreement or any Loan Documents is or shall be incorrect when made or deemed made in any material respect. (c) NON-PERFORMANCE OF COVENANTS. Borrower shall default in the due performance of any covenant or agreement contained (i) herein and such default shall continue unremedied for a period of thirty (30) days after written notice thereof shall have been given to Borrower by Lender or (ii) in any Loan Document and such default shall become an Event of Default (as defined in such Loan Docu ment) pursuant to the provisions of such Loan Document. (d) DEFAULT ON OTHER INDEBTEDNESS. A default shall occur in the payment when due (subject to any applicable grace period), whether by accelera- tion or otherwise, of any Indebtedness (other than Indebtedness described in clause (a) above) of Borrower having a principal amount, individually or in the aggregate, of at least $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. (e) BANKRUPTCY, INSOLVENCY. Borrower shall: 6 (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 Borrower 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, sequestrator or other custodian for Borrower or for a substantial part of its property, and such trustee, receiver, sequestrator or other custodian shall not be discharged within sixty (60) days; (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 Borrower, and, if any such case or proceeding is not commenced by Borrower, such case or proceeding shall be consented to or acquiesced in by Borrower or shall result in the entry of an order for relief or shall remain for sixty (60) days undismissed; or (v) take any corporate action authorizing, or in furtherance of, any of the foregoing. (f) 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 Borrower and such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within sixty (60) days from the entry thereof. Section 3.2 REMEDIES. (a) REMEDIES UPON A BANKRUPTCY. If an Event of Default described in clause (e) of SECTION 3.1 shall occur, the obligation of Lender to make the Finance Loans hereunder shall automatically terminate and the aggregate outstanding principal amount of the Finance Loans and other obligations of Bor- 7 rower hereunder shall automatically be and become immediately due and payable, without notice, demand or presentment, all of which are hereby waived by Borrower. (b) REMEDIES UPON OTHER EVENTS OF DEFAULT. If any Event of Default (other than an Event of Default described in clause (e) of SECTION 3.1) shall occur for any reason, whether voluntary or involuntary, and be continuing, Lender, by written notice to Borrower, may declare (i) the obligation of Lender to make the Finance Loans to Borrower hereunder to be terminated (if not theretofore terminated) and/or (ii) all or any portion of the aggregate outstanding principal amount of the Finance Loans and other obligations of Borrower hereunder to be due and payable, whereupon the obligation of Lender to make the Finance Loans to Borrower shall terminate and/or the aggregate outstanding principal amount of the Finance Loans and other obligations of Borrower hereunder which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, all of which are hereby waived by Borrower. (c) RECISSION OF DECLARATION. Any declaration made pursuant to clause (b) above may, should Lender in its absolute discretion so elect, be re scinded by written notice to Borrower at any time after the principal of the Finance Loans 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 Borrower shall have paid all arrears of interest upon the Finance Loans and all other amounts then owed to Lender including all costs, expenses and liabilities incurred by Lender in respect of such declaration and all consequences thereof (except principal of the Finance Loans which by such declaration shall have become payable) and every other Event of Default shall have been made good, waived or cured; and PROVIDED, FURTHER, that no such rescission or annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon. ARTICLE IV SUBORDINATION The Finance Loans and all other obligations of Borrower to Lender hereunder shall be subject to, and subordinated in accordance with, the terms of the Subordination Agreement. ARTICLE V MISCELLANEOUS PROVISIONS 8 Section 5.1 WAIVERS, AMENDMENTS. (a) The provisions of this Agreement may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by Borrower and Lender. (b) No failure or delay on the part of Lender in exercising any power or right under this Agreement 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 Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by Lender under this Agreement 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 5.2 NOTICES. All notices and other communications provided to any party hereto under this Agreement shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth below or at such other address or facsimile number as may be designated by such party in a written notice to the other party: To Borrower: Midwest Generation, LLC One Financial Place 440 South LaSalle Street Suite 3500 Chicago, IL 60605 Facsimile: (312) 583-6111 Attention: Georgia Nelson COPY TO: Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612-1046 Facsimile: (949) 476-2378 Attention: General Counsel To Lender: Edison Mission Overseas Co. 9 1209 Orange Street Wilmington, DE 19890 Facsimile: (302) 674-8340 Attention: General Counsel COPY TO: Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612-1046 Facsimile: (949) 476-2378 Attention: General Counsel Any notice, if mailed and properly addressed with postage prepaid shall be effective five (5) 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 5.3 SEVERABILITY. Any provision of this Agreement 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 this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Section 5.4 HEADINGS. The various headings of this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provisions hereof. Section 5.5 EXECUTION IN COUNTERPARTS, EFFECTIVENESS. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Section 5.6 GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREE MENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. This Agreement constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. 10 Section 5.7 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 Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of Lender. Section 5.8 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF LENDER OR BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR OUTSIDE THE STATE OF NEW YORK. BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT. Section 5.9 WAIVER OF JURY TRIAL. LENDER AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF 11 ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF LENDER OR BORROWER. BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS AGREEMENT. 12 IN WITNESS WHEREOF, the parties hereto have caused this Subordinated Loan Agreement to be executed by their respective officers as of the days and year first above written. MIDWEST GENERATION, LLC, as Borrower By: /s/ John P. Finneran, Jr. ------------------------------ Name: John P. Finneran, Jr. Title: Vice President EDISON MISSION OVERSEAS CO., as Lender By: /s/ John P. Finneran, Jr. ------------------------------ Name: John P. Finneran, Jr. Title: Vice President EXHIBIT A to SUBORDINATED LOAN AGREEMENT [FORM OF] [ ](1) NOTE $[Loan Commitment] ____________ __, ____ FOR VALUE RECEIVED, the undersigned, MIDWEST GENERATION, LLC, a Delaware limited liability company ("BORROWER"), HEREBY PROMISES TO PAY to the order of EDISON MISSION OVERSEAS CO., a corporation organized under the laws of Delaware ("LENDER"), without setoff, counterclaim or deduction of any nature, in lawful money of the United States of America in immediately available funds, at the office of [ ] located at [ ] on the [ ](2) Loan Commitment Termination Date (as defined in the Finance Loan Agreement referred to below), the principal sum of _____________________ DOLLARS ($_____________) or, if less, the unpaid principal amount of the [ Loan](3) (as defined in the Finance Loan Agreement referred to below) made by Lender pursuant to the Subordinated Loan Agreement, dated as of December 15, 1999 (the "FINANCE LOAN AGREEMENT"), by and between Borrower and Lender. All capitalized terms not otherwise defined herein are used herein as defined in the Finance Loan Agreement. Borrower also promises to pay interest on the unpaid principal amount hereof from time to time outstanding from the date hereof until maturity (whether by acceleration or otherwise) and, after maturity, until paid, at the rates per annum and on the dates specified in the Finance Loan Agreement. Payments of both principal and interest are to be made in Dollars in same day or immediately available funds to the account designated in a writing delivered by Lender to Borrower. - -------- (1) Tranche A/ Tranche B/ Tranche C (2) Tranche A/ Tranche B/ Tranche C (3) Tranche A/ Tranche B/ Tranche C This [ ](4) Note evidences Indebtedness incurred under the Finance Loan Agreement to which reference is made for a statement of the terms and conditions on which Borrower is permitted and required to make prepayments and repayments of principal of the Indebtedness evidenced by this [ ](5) Note and on which such Indebtedness may be declared to be immediately due and payable. All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment for payment, demand, protest and notice of dishonor. If any payment on this [ ](6) Note becomes due and payable on a date which is not a Business Day, such payment shall be made on the next succeeding Business Day. THIS [ ](7) NOTE HAS BEEN DELIVERED IN NEW YORK AND SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. - -------- (4) Tranche A/ Tranche B/ Tranche C (5) Tranche A/ Tranche B/ Tranche C (6) Tranche A/ Tranche B/ Tranche C (7) Tranche A/ Tranche B/ Tranche C THIS [ ](8) NOTE IS SUBJECT TO THE SUBORDINATION PROVISIONS SET FORTH IN THE SUBORDINATION AGREEMENT, DATED AS OF DECEMBER 15, 1999 BY AND AMONG EDISON MISSION OVERSEAS CO., MIDWEST GENERATION, LLC AND CITIBANK, N.A. AS HOLDINGS COLLATERAL AGENT FOR THE SECURED PARTIES. MIDWEST GENERATION, LLC By: __________________________ Name: Title: - -------- (8) Tranche A/ Tranche B/ Tranche C EX-10.94 31 a2031364zex-10_94.txt EXHIBIT 10.94 Exhibit 10.94 Exhibit E-3 to Intercreditor Agreement EXECUTION COPY ================================================================================ SUBORDINATED REVOLVING LOAN AGREEMENT dated as of December 15, 1999 by and between MIDWEST GENERATION, LLC, as Borrower and EDISON MISSION OVERSEAS CO., as Lender ================================================================================ SUBORDINATED REVOLVING LOAN AGREEMENT This SUBORDINATED REVOLVING LOAN AGREEMENT, dated as of December 15, 1999 (this "AGREEMENT"), is by and between MIDWEST GENERATION, LLC, a Delaware limited liability company, as borrower ("BORROWER"), and EDISON MISSION OVERSEAS CO., a Delaware corporation, as lender ("LENDER"). RECITALS WHEREAS, Borrower has requested that Lender make revolving loans to Borrower from time to time in an aggregate amount not to exceed $2,000,000,000; and WHEREAS, Lender is willing to make such loans to Borrower on the terms and subject to the conditions contained herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS; PRINCIPLES OF CONSTRUCTION Section 1.1 DEFINITIONS. (a) CREDIT AGREEMENT. Unless otherwise expressly provided herein, capitalized terms used but not defined in this Agreement shall have the meanings given to such terms in the Credit Agreement, dated as of December 15, 1999 between Edison Mission Midwest Holdings Co. and certain commercial lending institutions party thereto and The Chase Manhattan Bank, as Administrative Agent (the "HOLDINGS CREDIT AGREEMENT"). 2 (b) OTHER DEFINED TERMS. The following terms, when used herein, shall have the following meanings: "EVENT OF DEFAULT" shall have the meaning given to such term in SECTION 3.1. "REVOLVING LOAN" shall have the meaning given to such term in SECTION 2.1. "REVOLVING LOAN COMMITMENT" shall have the meaning given to such term in SECTION 2.1. "SUBORDINATION AGREEMENT" shall mean the Subordination Agreement, dated as of December 15, 1999, by and among the Holdings Collateral Agent, Lender and Borrower. "TERM" shall mean thirty-five (35) years commencing on the date of this Agreement. Section 1.2 PRINCIPLES OF CONSTRUCTION. Unless otherwise expressly provided herein, the principles of construction set forth in the Holdings Credit Agreement shall apply to this Agreement. ARTICLE II REVOLVING LOANS; PAYMENTS Section 2.1 REVOLVING LOANS. Subject to and upon the terms and conditions herein set forth, from time to time on any day occurring prior to the end of the Term, Lender agrees to make revolving loans (each a "REVOLVING LOAN") to Borrower in the amounts requested in writing by Borrower; PROVIDED that the aggregate principal amount of Revolving Loans outstanding shall not at any time exceed $2,000,000,000 (the "REVOLVING LOAN COMMITMENT"). Borrower may from time to time borrow, prepay, in whole or in part, and reborrow the Revolving Loans. The obligation of Lender to make Revolving Loans to Borrower shall terminate automatically on the date at the end of the Term. The Borrower's obligation to pay the principal of, and interest on the Revolving Loans shall be evidenced by a Revolving Loan Note in the form of Exhibit A attached hereto, dated as of the date hereof, duly executed and delivered by Borrower in favor of Lender in the principal 3 amount of $2,000,000,000. Lender is hereby authorized to endorse on the schedule attached to the Revolving Loan Note (or on a continuation of such schedule attached to such Revolving Loan Note and made a part thereof) an appropriate notation evidencing the date and amount of each Revolving Loan evidenced thereby and the date and amount of each principal and interest payment in respect thereof. Such schedule shall constitute PRIMA FACIE evidence of the accuracy of the information contained therein. Section 2.2 PRINCIPAL PAYMENTS. (a) REGULAR REPAYMENTS. The Revolving Loans shall mature, and Borrower unconditionally promises to pay in full the unpaid principal of each Revolving Loan to Lender, on the date at the end of the Term. (b) OPTIONAL PREPAYMENTS. At any time and from time to time Borrower may make a voluntary prepayment, in whole or in part, of the outstanding principal amount of the Revolving Loans. Each prepayment of Revolving Loans made pursuant to this clause (b) shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid but shall be without premium or penalty. No voluntary prepayment of Revolving Loans shall cause a reduction in the Revolv ing Loan Commitment. (c) MANDATORY PREPAYMENTS. Borrower shall, immediately upon any acceleration of Revolving Loans pursuant to SECTION 3.2, repay all Revolv ing Loans, unless, pursuant to SECTION 3.2(b), only a portion of all Revolving Loans is so accelerated, in which event Borrower shall repay such portion. Section 2.3 INTEREST PAYMENTS. Borrower shall pay interest on each Revolving Loan, at a rate per annum equal to 8.0%, without duplication, (a) on the date at the end of the Term, (b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Revolving Loan, (c) on the last Business Day of each January, April, July and October occurring after the date of the initial borrowing of Revolving Loans hereunder, or such payment dates as otherwise agreed to by the parties, and (d) on that portion of such Revolving Loan which is accelerated pursuant to SECTION 3.2, immediately upon such acceleration. Upon the occurrence and during the continuance of any Event of Default, Borrower shall pay, but only to the extent permitted by law, in addition to the interest then payable on the Revolving Loans, interest (after as well as before judgment) on the Revolving Loans at 2.0% per annum until such Event of Default is cured. 4 Section 2.4 LEGEND. Each subordinated note in favor of Lender and any other agreement or instrument evidencing Subordinated Claims shall contain the following legend conspicuously noted on the face thereof: "THIS [NAME OF INSTRUMENT] IS SUBJECT TO THE SUBOR DINATION PROVISIONS SET FORTH IN THE SUBORDINATION AGREEMENT, DATED AS OF DECEMBER 15, 1999 BY AND AMONG EDISON MISSION OVERSEAS CO., MIDWEST GENERATION, LLC AND CITIBANK, N.A., AS HOLDINGS COLLATERAL AGENT FOR THE SECURED PARTIES," and a copy of this Agreement shall be attached to each such agreement or instrument. ARTICLE III EVENTS OF DEFAULT; REMEDIES Section 3.1 EVENTS OF DEFAULT DEFINED. Each of the following events or occurrences described in this SECTION 3.1 shall constitute an "EVENT OF DEFAULT" hereunder: (a) NON-PAYMENT OF OBLIGATIONS. Borrower shall default in (i) the payment or prepayment when due of any principal of any Revolving Loan or (ii) the payment of interest on any Revolving Loan or any other obligation of Borrower hereunder within twenty (20) Business Days after any such interest or other obliga tion becomes due in accordance with the terms hereof. (b) BREACH OF WARRANTY. Any representation or warranty of Borrower made or deemed to be restated or remade hereunder, under any Loan Documents or in any other writing or certificate furnished by or on behalf of Bor rower to Lender for the purposes of or in connection with this Agreement or any Loan Documents is or shall be incorrect when made or deemed made in any material respect. (c) NON-PERFORMANCE OF COVENANTS. Borrower shall default in the due performance of any covenant or agreement contained (i) herein and such default shall continue unremedied for a period of thirty (30) days after written notice thereof shall have been given to Borrower by Lender or (ii) in any Loan 5 Document and such default shall become an Event of Default (as defined in such Loan Docu ment) pursuant to the provisions of such Loan Document. (d) 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 clause (a) above) of Borrower having a principal amount, individually or in the aggregate, of at least $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. (e) BANKRUPTCY, INSOLVENCY. Borrower 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 Borrower 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 acquies cence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for Borrower or for a substantial part of its property, and such trustee, receiver, sequestrator or other custodian shall not be discharged within sixty (60) days; (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 Borrower, and, if any such case or proceeding is not commenced by Borrower, such case or proceeding shall be consented to or acquiesced in by Borrower or shall result in the entry of an order for relief or shall remain for sixty (60) days undismissed; or 6 (v) take any corporate action authorizing, or in furtherance of, any of the foregoing. (f) 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 Borrower and such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within sixty (60) days from the entry thereof. Section 3.2 REMEDIES. (a) REMEDIES UPON A BANKRUPTCY. If an Event of Default described in clause (e) of SECTION 3.1 shall occur, the obligation of Lender to make Revolving Loans hereunder shall automatically terminate and the outstanding principal amount of all Revolving Loans and other obligations of Borrower hereun der shall automatically be and become immediately due and payable, without notice, demand or presentment, all of which are hereby waived by Borrower. (b) REMEDIES UPON OTHER EVENTS OF DEFAULT. If any Event of Default (other than an Event of Default described in clause (e) of SECTION 3.1) shall occur for any reason, whether voluntary or involuntary, and be continuing, Lender, by written notice to Borrower, may declare (i) the obligation of Lender to make Revolving Loans to Borrower hereunder to be terminated (if not theretofore termi nated) and/or (ii) all or any portion of the outstanding principal amount of Revolving Loans and other obligations of Borrower hereunder to be due and payable, where upon the obligation of Lender to make Revolving Loans to Borrower shall terminate and/or the outstanding principal amount of Revolving Loans and other obligations of Borrower hereunder which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, all of which are hereby waived by Borrower. (c) RECISSION OF DECLARATION. Any declaration made pursuant to clause (b) above may, should Lender in its absolute discretion so elect, be re scinded by written notice to Borrower at any time after the principal of the Revolving Loans 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 Borrower shall have paid all arrears of interest upon the Revolving Loans and all other amounts then owed to Lender including all costs, 7 expenses and liabilities incurred by Lender in respect of such declaration and all consequences thereof (except principal of the Revolving Loans which by such declaration shall have become payable) and every other Event of Default shall have been made good, waived or cured; and PROVIDED, FURTHER, that no such rescission or annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon. ARTICLE IV SUBORDINATION The Revolving Loans and all other obligations of Borrower to Lender hereunder shall be subject to, and subordinated in accordance with, the terms of the Subordination Agreement. ARTICLE V MISCELLANEOUS PROVISIONS Section 5.1 WAIVERS, AMENDMENTS. (a) The provisions of this Agreement may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by Borrower and Lender. (b) No failure or delay on the part of Lender in exercising any power or right under this Agreement 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 Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by Lender under this Agreement 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 5.2 NOTICES. All notices and other communications provided to any party hereto under this Agreement shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth below or at such other address or facsimile number as may be designated by such party in a written notice to the other party: 8 To Borrower: Midwest Generation, LLC One Financial Place 440 South LaSalle Street Suite 3500 Chicago, IL 60605 Facsimile: (312) 583-6111 Attention: Georgia Nelson COPY TO: Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612-1046 Facsimile: (949) 476-2378 Attention: General Counsel To Lender: Edison Mission Overseas Co. 1209 Orange Street Wilmington, DE 19890 Facsimile: (302) 674-8340 Attention: General Counsel COPY TO: Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612-1046 Facsimile: (949) 476-2378 Attention: General Counsel Any notice, if mailed and properly addressed with postage prepaid shall be effective five (5) 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 5.3 SEVERABILITY. Any provision of this Agreement 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 9 without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Section 5.4 HEADINGS. The various headings of this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provisions hereof. Section 5.5 EXECUTION IN COUNTERPARTS, EFFECTIVENESS. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Section 5.6 GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. This Agreement constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. Section 5.7 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 Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of Lender. Section 5.8 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF LENDER OR BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, 10 POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR OUTSIDE THE STATE OF NEW YORK. BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT. Section 5.9 WAIVER OF JURY TRIAL. LENDER AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF LENDER OR BORROWER. BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS AGREEMENT. 11 IN WITNESS WHEREOF, the parties hereto have caused this Subordinated Revolving Loan Agreement to be executed by their respective officers as of the days and year first above written. MIDWEST GENERATION, LLC as Borrower By: /s/ John P. Finneran, Jr. -------------------------------- Name: John P. Finneran, Jr Title: Vice President EDISON MISSION OVERSEAS CO., as Lender By: /s/ John P. Finneran, Jr. -------------------------------- Name: John P. Finneran, Jr Title: Vice President EXHIBIT A to SUBORDINATED REVOLVING LOAN AGREEMENT [FORM OF] REVOLVING LOAN NOTE $[Revolving Loan Commitment] --------------------, --------------- FOR VALUE RECEIVED, the undersigned, MIDWEST GENERATION, LLC, a Delaware limited liability company ("BORROWER"), HEREBY PROMISES TO PAY to the order of EDISON MISSION OVERSEAS CO., a Delaware corporation ("LENDER"), without setoff, counterclaim or deduction of any nature, in lawful money of the United States of America and in immediately available funds, at the office of [ ] located at [ ], on the date at the end of the Term (as defined in the Revolving Loan Agreement referred to below), the principal sum of _____________________ DOLLARS ($_____________) or, if less, the aggregate unpaid principal amount of all Revolving Loans (as defined in the Revolving Loan Agreement referred to below) made by Lender pursuant to the Subordinated Revolving Loan Agreement, dated as of December 15, 1999 (the "REVOLVING LOAN AGREEMENT"), by and between Borrower and Lender. All capitalized terms not otherwise defined herein are used herein as defined in the Revolving Loan Agreement. Borrower also promises to pay interest on the unpaid principal amount hereof from time to time outstanding from the date hereof until maturity (whether by acceleration or otherwise) and, after maturity, until paid, at the rates per annum and on the dates specified in the Revolving Loan Agreement. Payments of both principal and interest are to be made in Dollars in same day or immediately available funds to the account designated in a writing delivered by Lender to Borrower. This Revolving Loan Note evidences Indebtedness incurred under the Revolving Loan Agreement to which reference is made for a statement of the terms and conditions on which Borrower is permitted and required to make prepayments and repayments of principal of the Indebtedness evidenced by this Revolving Loan Note and on which such Indebtedness may be declared to be immediately due and payable. All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment for payment, demand, protest and notice of dishonor. If any payment on this Revolving Loan Note becomes due and payable on a date which is not a Business Day, such payment shall be made on the next succeeding Business Day. THIS NOTE HAS BEEN DELIVERED IN NEW YORK AND SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS NOTE IS SUBJECT TO THE SUBORDINATION PROVISIONS SET FORTH IN THE SUBORDINATION AGREEMENT, DATED AS OF DECEMBER 15, 1999 BY AND AMONG EDISON MISSION OVERSEAS CO., MIDWEST GENERATION, LLC AND CITIBANK, N.A. AS HOLDINGS COLLATERAL AGENT FOR THE SECURED PARTIES. MIDWEST GENERATION, LLC By: __________________________ Name: Title: Schedule to Revolving Loan Note
Principal Principal Amount of Amount of Revolving Revolving Amount of Loan Loan Interest Notation DATE Borrowed Repaid Paid Balance Made by - --------- --------- --------- --------- ------- ---------
EX-10.95 32 a2031364zex-10_95.txt EXHIBIT 10.95 Exhibit 10.95 ================================================================================ FACILITY LEASE AGREEMENT (T1) Dated as of December 15, 1999 between COLLINS TRUST I, as Owner Lessor and COLLINS HOLDINGS EME, LLC, as Facility Lessee COLLINS STATION FOSSIL-FUEL-FIRED ELECTRIC GENERATING FACILITY ================================================================================ CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE OWNER LESSOR IN AND TO THIS LEASE AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF CITIBANK, N.A. NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS HOLDER REPRESENTATIVE UNDER A LESSOR LOAN AGREEMENT, DATED AS OF DECEMBER FACILITY LEASE (T1) 15,1999 BETWEEN SAID HOLDER REPRESENTATIVE, AS SECURED PARTY, FOR THE BENEFIT OF THE HOLDERS THEREUNDER, MIDWEST FUNDING LLC, AS INITIAL HOLDER AND THE OWNER LESSOR, AS DEBTOR. SEE SECTION 21 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF. 2 TABLE OF CONTENTS
PAGE SECTION 1. DEFINITIONS.............................................................................2 SECTION 2. LEASE OF THE UNDIVIDED INTEREST.........................................................2 SECTION 3. FACILITY LEASE TERM AND RENT............................................................2 SECTION 3.1. BASIC LEASE TERM..............................................................2 SECTION 3.2. RENT..........................................................................3 SECTION 3.3. SUPPLEMENTAL LEASE RENT.......................................................3 SECTION 3.4. ADJUSTMENT OF BASIC LEASE RENT AND TERMINATION VALUE..........................3 SECTION 3.5. MANNER OF PAYMENTS............................................................5 SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOY- MENT................................................................................................6 SECTION 4.1. DISCLAIMER OF WARRANTIES......................................................6 SECTION 4.2. QUIET ENJOYMENT...............................................................7 SECTION 5. RETURN OF UNDIVIDED INTEREST............................................................8 SECTION 5.1. RETURN........................................................................8 SECTION 5.2. CONDITION UPON RETURN.........................................................8 SECTION 5.3. EXPENSES.....................................................................10 SECTION 5.4. FREIGHT AND CRATE............................................................10 SECTION 6. LIENS..................................................................................10 SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS................................................10 SECTION 7.1. MAINTENANCE..................................................................10 SECTION 7.2. REPLACEMENT OF COMPONENTS....................................................10 SECTION 7.3. ENVIRONMENTAL MATTERS........................................................11 SECTION 8. IMPROVEMENTS...........................................................................12 SECTION 8.1. REQUIRED IMPROVEMENTS........................................................12 SECTION 8.2. OPTIONAL IMPROVEMENTS........................................................12 SECTION 8.3. TITLE TO IMPROVEMENTS........................................................13 SECTION 8.4. FINANCING OF IMPROVEMENTS....................................................13 i TABLE OF CONTENTS (CONTINUED) PAGE SECTION 9. NET LEASE..............................................................................13 SECTION 10. EVENTS OF LOSS........................................................................15 SECTION 10.1. OCCURRENCE OF EVENTS OF LOSS............................................15 SECTION 10.2. PAYMENT UPON TERMINATION; SPECIAL LESSEE TRANSFER.......................15 SECTION 10.3. APPLICATION OF PROCEEDS.................................................17 SECTION 10.4. REBUILD.................................................................18 SECTION 10.5. APPLICATION OF PAYMENTS NOT RELATING TO AN EVENT OF LOSS................20 SECTION 11. INSURANCE.............................................................................20 SECTION 11.1. PROPERTY INSURANCE......................................................20 SECTION 11.2. LIABILITY INSURANCE.....................................................20 SECTION 11.3. PROVISIONS WITH RESPECT TO INSURANCE....................................21 SECTION 11.4. REPORTS.................................................................21 SECTION 11.5. ADDITIONAL INSURANCE....................................................22 SECTION 11.6. AMENDMENT OF INSURANCE REQUIREMENTS.....................................22 SECTION 11.7. APPLICATION OF INSURANCE PROCEEDS.......................................23 SECTION 12. INSPECTION............................................................................24 SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS..............................................24 SECTION 13.1. TERMINATION FOR ILLEGALITY..............................................24 SECTION 13.2. TERMINATION FOR BURDENSOME INDEMNITY....................................25 SECTION 13.3. PROCEDURE FOR EXERCISE OF TERMINATION OPTION............................25 SECTION 13.4. ASSUMPTION OF THE LESSOR NOTES; SPECIAL LESSEE TRANSFERS................26 SECTION 14. TERMINATION FOR OBSOLESCENCE..........................................................27 SECTION 14.1. TERMINATION.............................................................27 SECTION 14.2. SOLICITATION OF OFFERS..................................................28 SECTION 14.3. RIGHT OF OWNER LESSOR TO RETAIN THE UNDIVIDED INTEREST..................28 SECTION 14.4. PROCEDURE FOR EXERCISE OF TERMINATION OPTION............................29 SECTION 15. LEASE RENEWAL.........................................................................30 ii TABLE OF CONTENTS (CONTINUED) PAGE SECTION 15.1. WINTERGREEN RENEWAL LEASE TERMS.........................................30 SECTION 15.2. FAIR MARKET VALUE RENEWAL LEASE TERMS...................................32 SECTION 15.3. BASIC LEASE RENT AND TERMINATION VALUE FOR RENEWAL TERM.................32 SECTION 15.4. DETERMINATION OF FAIR MARKET RENTAL VALUE...............................32 SECTION 16. EVENTS OF DEFAULT.....................................................................33 SECTION 17. REMEDIES..............................................................................37 SECTION 17.1. REMEDIES FOR LEASE EVENT OF DEFAULT.....................................37 SECTION 17.2. CUMULATIVE REMEDIES.....................................................40 SECTION 17.3. NO DELAY OR OMISSION TO BE CONSTRUED AS WAIVER..........................40 SECTION 18. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS..............................................................................................40 SECTION 19. RIGHT TO SUBLEASE.....................................................................40 SECTION 20. OWNER LESSOR'S RIGHT TO PERFORM.......................................................42 SECTION 21. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE HOLDER REPRESENTATIVE.......................................................42 SECTION 22. MISCELLANEOUS.........................................................................43 SECTION 22.1. AMENDMENTS AND WAIVERS..................................................43 SECTION 22.2. NOTICES.................................................................43 SECTION 22.3. SURVIVAL................................................................44 SECTION 22.4. SUCCESSORS AND ASSIGNS..................................................45 SECTION 22.5. "TRUE LEASE"............................................................46 SECTION 22.6. GOVERNING LAW...........................................................47 SECTION 22.7. SEVERABILITY............................................................47 SECTION 22.8. COUNTERPARTS............................................................47 SECTION 22.9. HEADINGS AND TABLE OF CONTENTS..........................................47 SECTION 22.10. FURTHER ASSURANCES......................................................47 SECTION 22.11. EFFECTIVENESS...........................................................48 SECTION 22.12. LIMITATION OF LIABILITY.................................................48 SECTION 22.13. MEASURING LIFE..........................................................48 EXHIBITS AND SCHEDULES Exhibit A Description of Facility Site Exhibit B Description of Facility
iii TABLE OF CONTENTS (CONTINUED) PAGE Schedule 1-1 Basic Lease Rent Schedule 1-2 Allocation of Basic Lease Rent Schedule 1-3 467 Rent Allocation Schedule 2 Termination Values
iv FACILITY LEASE AGREEMENT (T1) This FACILITY LEASE AGREEMENT (T1), dated as of December 15, 1999 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions hereof, this "FACILITY LEASE"), between Collins Trust I, a Delaware business trust (the "OWNER LESSOR" or the "OWNER TRUST") created for the benefit of Collins Generation I, LLC, a Delaware limited liability company (the "OWNER PARTICIPANT"), and Collins Holdings EME, LLC, a Delaware limited liability company (the "FACILITY LESSEE"). WITNESSETH: WHEREAS, the Owner Lessor is governed by the Amended and Restated Trust Agreement (T1), dated as of December 15, 1999 (the "TRUST AGREEMENT"), between Wilmington Trust Company (the "OWNER TRUSTEE") and the Owner Participant; WHEREAS, pursuant to the Land Deed and the Bill of Sale and Instrument of Assignment, Midwest Generation, LLC ("MIDWEST") has acquired, INTER ALIA, the Facility Site from ComEd; WHEREAS, the Facility Site is more particularly described in Exhibit A hereto, such Exhibit A being attached to this Facility Lease as a part hereof; WHEREAS, pursuant to the Facility Site Lease, Midwest has leased the Ground Interest to the Owner Lessor; WHEREAS, pursuant to the Facility Site Sublease, the Owner Lessor has leased the Ground Interest to Collins Holdings for the term equal to the term of this Facility Lease, including any renewals hereof; WHEREAS, pursuant to the Facility Site Sub-Sublease, Collins Holdings has leased the Ground Interest to Midwest for a term equal to the term of this Facility Lease, including any renewals hereof; WHEREAS, the Facility is located on the Facility Site and is more particu larly described in Exhibit B hereto, such Exhibit B being attached to this Facility Lease as a part hereof; WHEREAS, pursuant to the Facility Deed and the Bill of Sale, the Owner Lessor has acquired from ComEd a 25% undivided ownership interest in the Facility as joint tenant with the other owners of the Facility, with the right to nonexclusive possession of the Facility (the "UNDIVIDED INTEREST"); WHEREAS, the Facility does not include the Facility Site or any part thereof, and no part of the Facility Site is being leased to the Facility Lessee hereunder; and WHEREAS, pursuant to this Facility Lease, the Owner Trust will lease the Undivided Interest to Collins Holdings for the Basic Lease Term and the Renewal Lease Terms, if any, provided herein. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS Capitalized terms used in this Facility Lease, including the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A to the Participation Agreement (T1), dated as of December 15, 1999 (the "PARTICIPA TION AGREEMENT"), among the Facility Lessee, the Owner Lessor, the Owner Trustee, the Owner Participant, Edison Mission Midwest Holdings Co. ("HOLDINGS"), Midwest, Midwest Funding LLC, Citibank, N.A., as Holder Representative, Bayerische Landesbank Girozentrale as RCE LC Issuer (as defined therein) and Bayerische Landesbank International S.A. as Midwest LC Issuer (as defined therein) unless the context hereof shall otherwise require. The general provisions of Appendix A to the Participation Agreement shall apply to the terms used in this Facility Lease and not specifically defined herein. SECTION 2. LEASE OF THE UNDIVIDED INTEREST Upon the terms and conditions set forth herein, the Owner Lessor hereby leases the Undivided Interest to the Facility Lessee, and the Facility Lessee hereby leases the Undivided Interest from the Owner Lessor, for the Basic Lease Term and, subject to the Facility Lessee's exercise of any of the Renewal Options as provided in Section 15, one or more Renewal Lease Terms. The Facility Lessee and the Owner Lessor understand and agree that this Facility Lease is subject to those encumbrances set forth in the Title Policies. The Undivided Interest shall be subject to the terms of this Facility Lease from the date on which this Facility Lease is executed and delivered. SECTION 3. FACILITY LEASE TERM AND RENT 2 SECTION 3.1. BASIC LEASE TERM. The basic lease term of this Facility Lease (the "BASIC LEASE TERM") shall commence on the Closing Date and shall end on September 14, 2033, subject to earlier termination pursuant to Section 10, 13, 14 or 17 hereof. SECTION 3.2. RENT. The Facility Lessee hereby agrees to pay to the Owner Lessor pursuant to Section 3.5 hereof, basic rent for the lease of the Undivided Interest during the Basic Lease Term ("BASIC LEASE RENT") in installments in the amounts shown on Annex I to Schedule 1-1 hereto (as adjusted in accordance with such Schedule 1-1) on each Rent Payment Date and in amounts calculated in accordance with Schedule 1-1 hereto on each other date referred to in Part B of Schedule 1-1 hereto (each such other date, an "ADDITIONAL RENT PAYMENT DATE"). Basic Lease Rent is allocable in arrears over the Basic Lease Term as set forth in Schedule 1-2 hereto. The Facility Lessee shall notify the Facility Lessor and the Holder Representative in writing on or before the date two Business Days prior to each Rent Payment Date and each Additional Rent Payment Date of the amount of the installment of Basic Lease Rent to be paid on such Rent Payment Date or such Additional Rent Payment Date as computed as of such date. Basic Lease Rent may be adjusted from time to time in accordance with Section 3.4 hereof. SECTION 3.3. SUPPLEMENTAL LEASE RENT. The Facility Lessee also agrees to pay to the Owner Lessor, or to any other Person entitled thereto as expressly provided herein or in any other Operative Document, as appropriate, any and all Supplemental Lease Rent, promptly as the same shall become due and owing, or where no due date is specified, promptly after demand by the Person entitled thereto, and in the event of any failure on the part of the Facility Lessee to pay any Supple mental Lease Rent, the Owner Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise for the failure to pay Basic Lease Rent. The Facility Lessee will also pay as Supplemental Lease Rent, to the extent permitted by Requirement of Law, an amount equal to interest at the applicable Overdue Rate on any part of any payment of Basic Lease Rent not paid when due for any period for which the same shall be overdue and on any Supplemental Lease Rent not paid when due (whether on demand or otherwise) for the period from such due date until the same shall be paid. All Supplemental Lease Rent to be paid pursuant to this Section 3.3 shall be payable in the manner set forth in Section 3.5. SECTION 3.4. ADJUSTMENT OF BASIC LEASE RENT AND TERMINATION VALUE. (a) The Facility Lessee and the Owner Lessor agree that Basic Lease Rent, Termination Values, the Equity Portion of Basic Lease Rent and the Equity Portion of Termination Value may be adjusted, either upwards or downwards, at the request of the Facility Lessee, Midwest, the Owner Lessor or the Owner Participant in the following situations: to reflect (A) the principal amount, amortization and interest rate on any New Lessor Notes issued pursuant to Section 2.03 of the Lessor Loan Agreement in connection with a refinancing or refunding of the Lessor Notes pursuant to 3 Section 16.2 of the Participation Agreement, (B) the principal amount, amortization and interest rate on any Additional Lessor Notes issued pursuant to Section 2.03 of the Lessor Loan Agreement in connection with the financing of Improvements to the Facility pursuant to Section 8 herein and (C) the principal amount of the Lessor Notes outstanding following, and to the extent that, a draw is made under each of the RCE Letter of Credit and the Midwest Letter of Credit (or otherwise) and the allocation of such proceeds results in a discharge the Lessor Notes as contemplated by the last sentence of Section 2.06 of the Lessor Loan Agreement. Any adjustments pursuant to this Section 3.4 shall be calculated, FIRST so as not to negatively impact the Owner Participant's Expected Return through the end of the Basic Lease Term and, SECOND at the option of the Facility Lessee (x) to minimize, to the extent possible, the average annual Basic Lease Rent over the Basic Lease Term for GAAP accounting purposes of the Facility Lessee or the Facility Sublessee, as may be applicable, and/or (y) to minimize, to the extent possible, the present value to the Facility Lessee of the Basic Lease Rent; PROVIDED, that no adjustment pursuant to this Section 3.4 shall result in a book loss to the Owner Participant in the year such adjustment is made. Adjustments shall be computed by the Owner Participant, or, if prior to the Closing Date the Equity Investor, using the same method of computation, assumptions and pricing constraints originally used (other than those that have changed as the result of the event giving rise to the adjustment) in the calculation of Basic Lease Rent and Termination Values set forth in Schedule 1-1 and Schedule 2 hereto and shall be subject to the verification procedure described in Section 3.4(c). Adjustments to Basic Lease Rent contemplated by this Section 3.4 shall result in corresponding adjustments to Termination Values. All Basic Lease Rent adjustments shall comply with Revenue Procedures 75-21 and 75-28 and Section 467 of the Code and any proposed, temporary, or final regulations thereunder, in each case as modified and in effect on the date of such adjustment and shall be calculated in such a manner so that, if the Facility Lease were determined to be a "disqualified leaseback or long-term agreement" within the meaning of Section 467 of the Code, the result would be an increase in the Owner Participant's Expected Return (when contrasted with the Owner Participant's Expected Return computed on the assumption that the Facility Lease is not a "disqualified leaseback or long-term agreement"). (b) Anything herein or in any other Operative Document to the contrary notwithstanding, each installment of Basic Lease Rent (excluding any Equity Portion of Basic Lease Rent included in such installment) payable hereunder, whether or not adjusted in accordance with this Section 3.4, shall be in an amount at least sufficient to pay in full principal and interest payable on the Lessor Notes on each Rent Payment Date. Anything herein or in any other Operative Document to the contrary notwithstanding, Termination Values (excluding the Equity Portion of Termination Value) payable on any date under this Facility Lease, whether or not adjusted in accordance with this Section 3.4, shall, together with all other Rent due 4 and owing on such date, exclusive of any portion thereof that is an Excepted Pay ment, be in an amount at least sufficient to pay in full the principal of, premium, if any, and accrued interest on the Lessor Notes payable on such date. (c) Any adjustment pursuant to this Section 3.4 shall initially be computed by the Owner Participant or, if prior to the Closing Date, by the Equity Investor, subject to the verification procedure described in this Section 3.4(c). Once computed, the results of such computation shall promptly be delivered by the Owner Participant or, if prior to the Closing Date, the Equity Investor to the Facility Lessee. Within 20 days after the receipt of the results of any such adjustment, the Facility Lessee may request that Warren & Selbert, Inc. or a nationally recognized firm of accountants or lease advisors selected by the Owner Participant, or if prior to the Closing Date, the Equity Investor, and reasonably satisfactory to the Facility Lessee (the "VERIFIER") verify, on a confidential basis, after consultation with the Owner Participant or the Equity Investor, as the case may be, and the Facility Lessee, the accuracy of such adjustment in accordance with this Section 3.4. The Owner Participant or the Equity Investor, as the case may be, hereby agrees, subject to the execution of an appropriate confidentiality agreement, to provide the Verifier with all necessary information and materials (other than the Owner Participant's income tax returns and accounting records) as shall be necessary in connection with such verification. Each of the Owner Participant or the Equity Investor, as the case may be, and the Facility Lessee shall have the right to communicate with the Verifier and to submit supporting information and data. If the Verifier confirms that such adjustment is in accordance with this Section 3.4, it shall so certify to the Facility Lessee, the Owner Lessor and the Owner Participant or the Equity Investor, as the case may be, and such certification shall be final, binding and conclusive on the Facility Lessee, the Owner Participant or the Equity Investor, as the case may be, and the Owner Lessor. If the Verifier concludes that such adjustment is not in accordance with this Section 3.4, and the adjustments to Basic Lease Rent and Termination Value calculated by the Verifier are different from those calculated by the Owner Participant or the Equity Investor, as the case may be, then it shall so certify to the Facility Lessee, the Owner Lessor and the Owner Participant or the Equity Investor, as the case may be, and the Verifier's calculation shall be final, binding and conclusive on the Facility Lessee, the Owner Lessor and the Owner Participant or the Equity Investor, as the case may be. The final determination of any adjustment hereunder shall be set forth in an amendment to this Facility Lease, executed and delivered by the Owner Lessor and the Facility Lessee and consented to by the Owner Participant or the Equity Investor, as the case may be. The reasonable costs of the Verifier in verifying an adjustment pursuant to this Section 3.4 shall be paid by the Facility Lessee; PROVIDED, HOWEVER, that in the event that such Verifier determines that the present value of the remaining Basic Lease Rent to be made under this Facility Lease as calculated by the Owner Participant or the Equity Investor, as the case may be, is greater than the present value of the correct Basic Lease Rent as certified by the Verifier, in each case, discounted annually at the Discount Rate, by 5 more than ten basis points, then such reasonable costs of the Verifier shall be paid by the Owner Participant or the Equity Investor, as the case may be. Notwithstanding anything herein to the contrary, the sole responsibility of the Verifier shall be to verify the calculations hereunder and matters of interpretation of this Facility Lease or any other Operative Document shall not be within the scope of the Verifier's responsibilities. SECTION 3.5. MANNER OF PAYMENTS. All Rent (whether Basic Lease Rent or Supplemental Lease Rent) and all Termination Value payments shall be paid by the Facility Lessee in lawful currency of the United States of America in immediately available funds to the recipient not later than 11:00 a.m. (New York City time) on the date due. All Rent (including Contingent Prepaid Rent) and all Termination Value payments payable to the Owner Lessor (other than Excepted Payments) shall be paid by the Facility Lessee to the Owner Lessor at its account at Wilmington Trust Company (Account No. 50356-0), or to such other place as the Owner Lessor shall notify the Facility Lessee in writing; PROVIDED, HOWEVER, that so long as the Lessor Notes are outstanding and the Lien created under the Lessor Security Documents has not been discharged, the Owner Lessor hereby irrevocably directs (it being agreed and understood that such direction shall be deemed to have been revoked after the Lien created under the Lessor Security Documents shall have been fully discharged in accordance with its terms), and the Facility Lessee agrees, that all payments of Rent (other than Excepted Payments) and all Termination Value payments payable to the Owner Lessor shall be paid by "wire" transfer directly to the Holder Representative's Account or to such other place as the Holder Representative shall notify the Facility Lessee in writing pursuant to the Participation Agreement, provided, that for as long as the Initial Lessor Notes are outstanding, all Rent payments (other than Excepted Payments) shall be deposited into the Rent Payment Account on the Business Day immediately preceding the Rent Payment Date or Additional Rent Payment Date, as the case may be, and such deposit shall remain the property of the Facility Lessee until transferred into the Holder Representative's Account pursuant to the following sentence. On each Rent Payment Date or Additional Rent Payment Date, as the case may be, Rent shall be paid by transferring the funds on deposit in the Rent Payment Account in the amount equal to the Rent payment (in the amount notified by the Facility Lessee to the Owner Lessor and the Holder Representative) into the Holder Representative's Account. Payments constituting Excepted Payments shall be made to the Person entitled thereto at the address for such Person set forth in the Participation Agreement, or to such other place as such Person shall notify the Facility Lessee in writing. 6 SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT SECTION 4.1. DISCLAIMER OF WARRANTIES. (a) Without waiving any claim the Facility Lessee may have against any manufacturer, vendor or contractor, THE FACILITY LESSEE ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF THE OWNER LESSOR AND THE OWNER PARTICIPANT THAT (i) THE FACILITY AND EACH COMPONENT THEREOF ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO THE FACIL- ITY LESSEE, (ii) THE FACILITY LESSEE IS SATISFIED THAT THE FACILITY AND EACH COMPONENT THEREOF ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, (iii) NEITHER THE OWNER LESSOR NOR THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROP- ERTY OF SUCH KIND, (iv) THE UNDIVIDED INTEREST IS LEASED HEREUNDER TO THE EXTENT PROVIDED HEREBY FOR THE BASIC LEASE TERM AND THE RENEWAL LEASE TERMS, IF ANY, SPECIFIED HEREIN SUBJECT TO ALL REQUIREMENTS OF LAW NOW IN EFFECT OR HEREAFTER ADOPTED, INCLUDING WITHOUT LIMITATION (1) ZONING REGULATIONS, (2) ENVIRONMENTAL LAWS OR (3) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION OF EVERY PART THEREOF "WHEN" THE SAME FIRST BECAME SUBJECT TO THIS FACILITY LEASE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE OWNER LESSOR OR THE OWNER PARTICIPANT AND (v) THE OWNER LESSOR LEASES FOR THE BASIC LEASE TERM AND THE RENEWAL LEASE TERMS, IF ANY, SPECIFIED HEREIN AND THE FACILITY LESSEE TAKES THE UNDIVIDED INTEREST UNDER THIS FACILITY LEASE "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", AND THE FACILITY LESSEE ACKNOWLEDGES THAT NEITHER THE OWNER LESSOR, NOR THE OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE TITLE OF THE FACILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the Owner Lessor represents and warrants that on the Closing Date, the Undivided Interest will be free of Owner Lessor's Liens. It is agreed that all such risks, as between the Owner Lessor and the Owner Participant on 7 the one hand and the Facility Lessee on the other hand are to be borne by the Facility Lessee with respect to acts, occurrences or omissions during the Facility Lease Term. Neither of the Owner Lessor nor the Owner Participant shall have any responsibility or liability to the Facility Lessee or any other Person with respect to any of the following: (x) any liability, loss or damage caused or alleged to be caused directly or indirectly by the Facility or any Component or by any inadequacy thereof or deficiency or defect therein or by any other circumstances in connection therewith; (y) the use, operation or performance of the Facility or any Component or any risks relating thereto; or (z) the delivery, operation, servicing, maintenance, repair, improvement, replacement or decommissioning of the Facility or any Component. The provisions of this paragraph (a) of this Section 4.1 have been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties of the Owner Lessor, express or implied, with respect to the Facility, any Component thereof or the Undivided Interest that may arise pursuant to any Requirement of Law now or hereafter in effect, or otherwise. (b) During the Facility Lease Term, so long as no Lease Event of Default shall have occurred and be continuing, the Owner Lessor hereby appoints irrevocably and constitutes the Facility Lessee its agent and attorney-in-fact, coupled with an interest, to assert and enforce, from time to time, in the name and for the account of the Owner Lessor and the Facility Lessee, as their interests may appear, but in all cases at the sole cost and expense of the Facility Lessee, whatever claims and rights the Owner Lessor may have in respect of the Facility, any Component or the Undivided Interest against any manufacturer, vendor or contractor, or under any express or implied warranties relating to the Facility, any Component or the Undivided Interest. SECTION 4.2. QUIET ENJOYMENT. The Owner Lessor agrees that, notwithstanding any provision of any other Operative Document, so long as no Lease Event of Default shall have occurred and be continuing, neither it nor any party acting by, through or under the Owner Lessor shall interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Facility Lessee of the interest in the Facility or the Undivided Interest conveyed by this Facility Lease subject to the terms of this Facility Lease. SECTION 5. RETURN OF UNDIVIDED INTEREST SECTION 5.1. RETURN. Unless the Undivided Interest is being transferred to the Facility Lessee (or its designee) pursuant to Section 10 or 13 of this Facility Lease, the Facility Lessee shall return the Undivided Interest (together with all Required Improvements and Non-Severable Improvements, if any, title to which shall vest in the Owner Lessor) to the Owner Lessor or any permitted transferee or assignee of the Owner Lessor at the expiration of the Facility Lease Term (or earlier 8 than such date if required pursuant to the provisions of this Facility Lease) by surrendering the Undivided Interest into the possession of the Owner Lessor or such transferee or assignee at the location of the Facility on the Facility Land. SECTION 5.2. CONDITION UPON RETURN. At the time of any return of the Undivided Interest by the Facility Lessee pursuant to Section 5.1, the Facility Lessee agrees that: (a) the Facility Lease, the Facility Site Sublease and the Facility Site Sub-Sublease shall cease and terminate; (b) the Facility will be in at least as good condition as if it had been maintained during the Facility Lease Term in compliance with the provisions of this Facility Lease (including, without limitation the provisions of Section 7) ordinary wear and tear excepted as determined in accordance with the Return Acceptance Tests; (c) the Facility Lessee shall assign an undivided interest equal to the Owner Lessor's Percentage in any and all licenses and permits of any Governmental Entities or other Persons that are required to be obtained in connection with the use, operation or maintenance of the Undivided Interest that are not already in the name of the Owner Lessor to the Owner Lessor or a transferee or designee of the Owner Lessor, to the extent permitted by Requirements of Law and the provisions of such license or permit; (d) the Facility Lessee, at the request of the Owner Lessor, shall sell to the Owner Lessor or its designee or transferee at the then fair market value thereof, determined by agreement between the Facility Lessee and the Owner Lessor or, absent such agreement, by an appraisal conducted according to the Appraisal Procedure, an undivided interest equal to the Owner Lessor's Percentage in any or each Severable Improvement made to the Facility that is owned by the Facility Lessee, subject to any existing encumbrances. The fees and expenses incurred in connection with the appraisal required by this subsection (d) shall be paid by the Owner Lessor; (e) the Facility Lessee, or an Affiliate thereof, shall enter into an agreement or other arrangements reasonably acceptable to the Owner Lessor (the "SUPPORT ARRANGEMENTS") to provide the Facility Lessor with the Support Services; PROVIDED, that the Facility Lessee shall be bound to provide Support Services only to the extent the Facility Lessee is capable of, and is still in the business of, providing such Support Services, and only to the extent that such services are necessary for the operation of the Facility and cannot reasonably and timely be obtained from third parties. Support Arrangements shall provide for the provision of all Support Services during and after expiration of the Facility Lease, and will provide for fair 9 market value compensation to the Facility Lessee, or an Affiliate thereof for such Support Services, payable periodically in advance on no less than a monthly basis, for such rights and other services provided under such arrangements and shall terminate upon expiration or early termination of the Facility Site Lease or at the Facility Lessor's option; and (f) the Facility Lessee shall arrange, at its sole cost and expense, for a Phase I Environmental Survey of the Facility and the Facility Land, which shall be in form, scope and substance reasonably satisfactory to the Owner Participant, not later than 180 days prior to a return of the Undivided Interest pursuant to Section 5.1 or, in connection with a return other than pursuant to Section 5.1, not later than the date of return; PROVIDED that, if as a result of the Phase I Environmental Survey, facts are revealed that would reasonably necessitate a Phase II Environmental Survey, such Phase I Environmental Survey shall be expanded to a Phase II Environmental Survey, which shall be in form, scope and substance reasonably satisfactory to the Owner Participant. Each such survey shall be conducted, with appropriate diligence and good faith, by an environmental consulting firm selected by the Facility Lessee and reasonably acceptable to the Owner Participant. Any reports prepared by such consulting firm documenting the surveys shall be provided promptly upon receipt by the Facility Lessee to the Owner Participant. If, as a result of the environmental surveys conducted pursuant to this Section 5.2(f), further investigation, or abatement, corrective action, removal, monitoring, clean-up, remediation or other response actions relating to Environmental Conditions at, on, under or migrating from the Facility or the Facility Land are required to ensure that the Facility and the Facility Land comply in all material respects with all applicable Environmental Laws, the Facility Lessee shall, at its sole cost and expense, as promptly as is reasonably practical and without materially affecting the continued operation of the Facility or the Facility Site, make arrangements reasonably satisfactory to the Owner Participant for conducting and completing any such clean-up, remediation or other response action in relation to the Environmental Conditions identified in such environmental surveys as required to ensure that the Facility and the Facility Land comply with all applicable Environmental Laws. Nothing in this Section 5.2(f) shall relieve the Facility Lessee of its indemnification obligations under the Participation Agreement. The obligations of the Facility Lessee set forth in this Section 5.2(f) shall survive the termination of this Facility Lease and the expiration of the Facility Lease Term. SECTION 5.3. EXPENSES. Except as provided in Section 5.2(d), the Facility Lessee agrees to pay or reimburse or to cause to be paid or reimbursed, on an After-Tax Basis, on demand, all costs and expenses incurred in connection with any return contemplated by this Section 5. SECTION 5.4. FREIGHT AND CRATE. At the expiration of the Facility Site Lease, the Owner Lessor shall have the right to require the Facility Lessee (i) at the Facility Lessee's sole risk and expense, to dismantle the Facility, to remove the dismantled 10 components of the Facility from the Facility Land and to cause such components to be delivered to a railhead or other suitable common carrier or (ii) at the Owner Lessor's risk and expense, to dismantle the Facility and keep and store such components at the Facility Land for a period not to exceed 180 days; PROVIDED, HOWEVER, the Facility Lessee shall not be so required if it has chosen to purchase the Facility from the Owner Lessor at a price equal to the greater of (a) $1.00 and (b) the Fair Market Sales Value thereof (MINUS the estimated costs of such decommissioning, dismantling, removal and shipment and the estimated cost of restoring the Facility Land to its original condition). The Facility Lessee's obligation to dismantle the Facility under this Section 5.4 shall survive the termination of the Facility Lease. SECTION 6. LIENS The Facility Lessee hereby covenants that it will not directly or indirectly create, incur, assume or suffer to exist any Lien or other encumbrance on or with respect to the Undivided Interest, the Facility, the Facility Site or any Component, or on the Owner Lessor's or the Owner Participant's interest in or under any Operative Document, except Permitted Liens. SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS SECTION 7.1. MAINTENANCE. The Facility Lessee, at its own expense, will (i) cause the Facility to be maintained in as good condition, repair and working order as when delivered on the Closing Date, ordinary wear and tear excepted, without discrimination as compared to other facilities of similar type owned or operated by the Facility Lessee or any of its Affiliates, and in any event, in all material respects (a) in accordance with Prudent Industry Practice, (b) in compliance with all Requirements of Law, including without limitation, all Environmental Laws and (c) in accordance with the terms of all insurance policies required to be maintained pursuant to Section 11 and (ii) cause to be made all repairs, renewals, replacements, betterments and improvements to the Facility, all as in the reasonable judgment of the Facility Lessee may be necessary to operate the Facility in accordance with the Operative Documents. SECTION 7.2. REPLACEMENT OF COMPONENTS. In the ordinary course of maintenance, service, repair or testing the Facility or any Component, the Facility Lessee, at no cost to the Owner Lessor, may remove or cause to be removed from the Facility any Component; PROVIDED, HOWEVER, that the Facility Lessee shall cause such Component to be replaced by a replacement Component which shall be free and clear of all Liens (except Permitted Liens) and shall be in as good operating condition as that of the Component replaced, assuming such replaced Component was maintained in accordance with the terms of this Facility Lease, and does not diminish, other than in an immaterial respect, the current and residual value, remaining useful life or utility of the Facility as measured immediately prior to such replacement, assuming 11 the Facility shall then be in the condition required to have been maintained by the terms of this Facility Lease, or cause the Facility to become "limited use" property within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976- 2 C.B. 647 (each such replacement Component being herein referred to as a "REPLACEMENT COMPONENT"). An undivided interest equal to the Owner Lessor's Percentage in each Component at any time removed from the Facility shall remain subject to this Facility Lease, wherever located, until such time as such Component shall be replaced by a Replacement Component which has been incorporated in the Facility and which meets the requirements for Replacement Components specified above. Immediately upon any Replacement Component becoming incorporated in the Facility, without further act (and with no adjustment to the Purchase Price or Basic Lease Rent), (i) the replaced Component shall no longer be subject to this Facility Lease, (ii) title to the Owner Lessor's undivided interest in the removed Component shall thereupon vest in the Facility Lessee or such other Person as shall be designated by the Facility Lessee, free and clear of all rights of the Owner Lessor and the Holder Representative, (iii) title to an undivided interest equal to the Owner Lessor's Percentage in the Replacement Component shall thereupon vest with the Owner Lessor and such undivided interest shall (a) become subject to this Facility Lease and the Lien of the Security Documents, and (b) be deemed a part of the Undivided Interest for all purposes of this Facility Lease. Notwithstanding anything in this Section 7.2 to the contrary, if the Facility Lessee has determined that any part, Component or portion of the Facility is surplus or obsolete, it shall have the right to remove such part, Component or portion of the Facility without replacing it if such removal would not, other than in an immaterial respect, diminish the current or residual value, the utility or the remaining useful life of the Facility, as measured immediately prior to such replacement, assuming the Facility shall then be in the condition required to have been maintained by the terms of this Facility Lease or cause the Facility to become "limited use" property within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647. SECTION 7.3. ENVIRONMENTAL MATTERS. The Facility Lessee will (i) comply in all material respects and make all reasonable efforts to cause all other Persons to comply in all material respects with all Environmental Laws applicable to the Facility or the Facility Site, and the Facility Lessee shall have the sole responsibility for any and all costs and expenses associated with such compliance; (ii) obtain, comply in all material respects with and maintain all necessary Governmental Approvals required under any applicable Environmental Law in connection with the use, operation and maintenance of the Facility and the Facility Site; 12 (iii) conduct and complete, at its sole cost and expense, any investigation, study, sampling, monitoring and testing and undertake any cleanup, removal, remedial, corrective, mitigation, response or other action necessary or advisable to abate, correct, remove and clean up or remediate all Hazardous Materials Released at, on, in, under or from the Facility or the Facility Site, to the extent required by and in material compliance with applicable Environmental Laws; and (iv) as soon as possible and in any event within fifteen Business Days of Midwest obtaining knowledge thereof, provide the Owner Lessor with written notice of, and copies of all written communications relating to, any pending or threatened material Environmental Claim involving the Facility or the Facility Site. To the extent possible, all such notices shall describe in reasonable detail the nature of the Environmental Claim. SECTION 8. IMPROVEMENTS SECTION 8.1. REQUIRED IMPROVEMENTS. The Facility Lessee, without expense to the Owner Lessor and without the consent of any other Lease Financing Party, shall make or cause to be made any Improvements to the Facility as it relates to the Undivided Interest as are required (w) by Requirements of Law or any Governmental Entity having jurisdiction thereon, (x) by any insurance policies required to be maintained by the Facility Lessee under any Operative Document, (y) by the Operative Documents or (z) to meet Return Acceptance Tests as set forth in Section 5.1 (each, a "REQUIRED IMPROVEMENT"); PROVIDED, HOWEVER, that the Facility Lessee may, in good faith and by appropriate proceedings, diligently contest the validity or application of any Requirement of Law in any reasonable manner which does not involve any risk of (i) foreclosure, sale, forfeiture or loss of, or imposition of a Lien (other than a Permitted Lien) on any part of the Facility or impair the use, operation or maintenance of the Facility in any material respect, or (ii) any criminal liability being incurred by, or any material adverse effect on the interests of, the Owner Participant, the Owner Lessor, the Lender, the Holders, the Holder Representative, any Funding LLC Financing Party, the Facility Lessee or the Facility Sublessee, including, without limitation, subjecting any such Person (except the Facility Sublessee) to regulation as a public utility (or similar regulation) under Requirement of Law; PROVIDED FURTHER, that no such contest may extend beyond the expiration or earlier termination of this Facility Lease. SECTION 8.2. OPTIONAL IMPROVEMENTS. The Facility Lessee at any time may, without expense to the Owner Lessor and without the consent of any other Lease Financing Party, make or cause to be made any Improvement to the Facility as the Facility Lessee considers necessary or desirable in the proper conduct of its business (any such non-Required Improvement being referred to as an "OPTIONAL IMPROVEMENT"); PROVIDED that no Optional Improvement to the Facility shall, other than in an 13 immaterial respect, diminish the current or residual value, remaining useful life or utility of the Facility below the current or residual value, remaining useful life or utility thereof immediately prior to such Optional Improvement, assuming the Facility shall then be in the condition required to have been maintained by the terms of this Facility Lease, or cause the Undivided Interest to become "limited use" property, within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647. SECTION 8.3. TITLE TO IMPROVEMENTS. Title to an undivided interest equal to the Owner Lessor's Percentage in (i) all Required Improvements and (ii) all Non-Severable Improvements shall automatically vest in the Owner Lessor upon being affixed to or incorporated into the Facility, and such undivided interest shall immediately (a) become subject to this Facility Lease, and (b) be deemed part of the Undivided Interest for all purposes of this Facility Lease. No interest in any Optional Improvement which is a Severable Improvement (other than Severable Improvements which are financed by the Owner Lessor by an Additional Equity Investment or a Supplemental Financing pursuant to Section 16.1 of the Participation Agreement) shall vest in the Owner Lessor or become subject to this Facility Lease; PROVIDED, HOWEVER, that if the Facility Lessee shall, at its cost and expense, cause such Optional Improvements which are Severable Improvements to be made to the Facility, the Owner Lessor shall have the right, prior to the return of the Undivided Interest to the Owner Lessor hereunder, to purchase an undivided interest equal to the Owner Lessor's Percentage in any such Optional Improvements which are Severable Improvements. The purchase price for such undivided interest shall be the then Fair Market Sales Value of such undivided interest. If the Owner Lessor does not elect to purchase such Optional Improvements which are Severable Improvements, the Facility Lessee may, and at the request of the Owner Lessor shall, remove such Improvements at the end of the Facility Lease Term. SECTION 8.4. FINANCING OF IMPROVEMENTS. The Facility Lessee shall, subject to limitations on the incurrence of Indebtedness contained in other Operative Documents, at all times have the right to finance Improvements other than through the Facility Lease, so long as no Liens on the Facility, the Facility Site or any portion thereof are granted or created in connection with such financing; PROVIDED, HOWEVER that, in the case of a financing of a Severable Improvement which is not a Required Improvement, a Lien on such Severable, non-Required Improvement may be granted or created in connection with such financing. The Facility Lessee may elect to finance Improvements to the Facility through the Facility Lease in accordance with Section 16.1 of the Participation Agreement. SECTION 9. NET LEASE This Facility Lease is a "net lease". The Facility Lessee's obligation to make all payments payable hereunder (and all amounts, including, without limitation, 14 Termination Value, following termination of this Facility Lease) shall be absolute and unconditional under any and all circumstances and shall not be terminated, extinguished, diminished, lost or otherwise impaired by any circumstance of any character, including, without limitation, by (i) any setoff, counterclaim, recoupment, defense or other right which the Facility Lessee may have against the Owner Lessor, the Owner Participant, the Holder Representative or any other Person, including, without limitation, any claim as a result of any breach by any of said parties of any covenant or provision in this Facility Lease or any other Operative Document, (ii) any lack or invalidity of title or any defect in the title, condition, design, operation, merchantability or fitness for use of the Facility or any Component, or any eviction by paramount title or otherwise, or any unavailability of the Facility, the Facility Site, any Component, any other portion of the Undivided Interest, or any part thereof, (iii) any loss or destruction of, or damage to, the Facility or any Component or interruption or cessation in the use or possession thereof or any part thereof by the Facility Lessee for any reason whatsoever and of whatever duration, (iv) the condemnation, requisitioning, expropriation, seizure or other taking of title to or use of the Facility, the Facility Site, any Component, or any other portion of the Undivided Interest by any Governmental Entity or otherwise, (v) the invalidity or unenforceability or lack of due authorization or other infirmity of this Facility Lease or any other Operative Document, (vi) the lack of right, power or authority of the Owner Lessor to enter into this Facility Lease or any other Operative Document, (vii) any ineligibility of the Facility or any Component for any particular use, whether or not due to any failure of the Facility Lessee to comply with any Requirement of Law, (viii) any event of "force majeure" or any frustration, (ix) any legal requirement similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, (x) any insolvency, bankruptcy, reorganization or similar proceeding by or against the Facility Lessee or any other Person, (xi) any Lien of any Person with respect to the Facility, the Facility Site, any Component, any other portion of the Undivided Interest or any part thereof, or (xii) any other cause, whether similar or dissimilar to the foregoing, any present or future law notwithstanding, except as expressly set forth herein or in any other Operative Document, it being the intention of the parties hereto that all Basic Lease Rent (and all amounts, including, without limitation, Termination Value, in lieu of Basic Lease Rent following termination of this Facility Lease) payable by the Facility Lessee hereunder shall continue to be payable in all events in the manner and at times provided for herein. Such Basic Lease Rent (and all amounts, including, without limitation, Termination Value, in lieu of Basic Lease Rent following termination of this Facility Lease) shall not be subject to any abatement and the payments thereof shall not be subject to any setoff or reduction for any reason whatsoever, including any present or future claims of the Facility Lessee or any other Person against the Owner Lessor or any other Person under this Facility Lease or otherwise. To the extent permitted by Requirements of Law, the Facility Lessee hereby waives any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Facility Lease with respect to the Undivided 15 Interest except in accordance with Section 10, 13, 14 or 17. If for any reason whatsoever this Facility Lease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, the Facility Lessee nonetheless agrees, to the extent permitted by Requirements of Law, to pay to the Owner Lessor an amount equal to each installment of Basic Lease Rent and all Supplemental Lease Rent due and owing, at the time such payment would have become due and payable in accordance with the terms hereof had this Facility Lease not been so terminated. Nothing contained herein shall be construed to waive any claim which the Facility Lessee might have under any of the Operative Documents or otherwise or to limit the right of the Facility Lessee to make any claim it might have against the Owner Lessor or any other Person or to pursue such claim in such manner as the Facility Lessee shall deem appropriate. SECTION 10. EVENTS OF LOSS SECTION 10.1. OCCURRENCE OF EVENTS OF LOSS. (a) Each of the Owner Participant and the Owner Lessor will promptly notify the Facility Lessee of any event of which it is aware that would result in a Regulatory Event of Loss; PROVIDED, HOWEVER, that the failure to provide such notice shall not result in any liability with respect to the Owner Participant or the Owner Lessor and shall not in any way relieve the Facility Lessee of any of its obligations under this Facility Lease, including the obligations under this Section 10. (b) If an Event of Loss described in clauses (i) or (ii) of the definition of Event of Loss shall occur, then, no later than six months following the date that the Facility Lessee has actual knowledge of such occurrence, the Facility Lessee shall notify the Owner Lessor and the other Lease Financing Parties of its election to either (1) subject to the satisfaction of the conditions set forth in Section 10.3 and the terms of the other Operative Documents, rebuild the Facility so that the Facility shall have a current and residual value, remaining useful life and utility at least equal to that of the Facility prior to such Event of Loss, assuming the Facility was in the condition and repair required to be maintained by this Facility Lease, or (2) terminate this Facility Lease and purchase the Facility from the Owner Lessor by paying to the Owner Lessor an amount equal to the applicable Termination Value and paying to the parties entitled thereto all other amounts payable pursuant to Section 10.2. If the Facility Lessee fails to make an election as provided above, the Facility Lessee will be deemed to have made the election to terminate this Facility Lease pursuant to clause (2) of this Section 10.1(b) as of the end of the six month period referred to in the first sentence of this Section 10.1(b). SECTION 10.2. PAYMENT UPON TERMINATION; SPECIAL LESSEE TRANSFER. (a) If either of the following shall occur: 16 (x) the Facility Lessee shall elect (or be deemed to have elected) to terminate this Facility Lease pursuant to clause (2) of Section 10.1(b) following an Event of Loss described in clause (i) or (ii) of the definition of Event of Loss, or (y) an Event of Loss described in clause (iii) or (iv) of the definition of Event of Loss shall occur, then in the case of either (x) or (y), the Facility Lessee shall pay to the Owner Lessor the sum of (A) the Termination Value determined as of the relevant Termination Date, PLUS (B) all reasonable documented out-of-pocket costs and expenses of the other Lease Financing Parties incurred in connection with such Event of Loss, PLUS (C) any unpaid Basic Lease Rent or Renewal Lease Rent, as the case may be, payable on such Termination Date, PLUS (D) all other payments of Rent under this Facility Lease which are due and unpaid on the Termination Date, including reimbursement of Incidental Costs, under any other Operative Document (the "EVENT OF LOSS PAYMENT"). The Facility Lessee shall pay such Event of Loss Payment, in the case of clause (x) above, on the next Termination Date immediately following the earlier of (1) the date of the Facility Lessee's notice of its election to terminate this Facility Lease and (2) the date which is six months following the occurrence of such Event of Loss, and in the case of clause (y) above, on a Termination Date occurring no later than six months following the earlier of the date that the Facility Lessee (i) acquires actual knowledge of the occurrence of such Event of Loss or (ii) receives notice pursuant to Section 10.1(a). Concurrently with the payment of all amounts required to be paid pursuant to this Section 10.2(a), (i) Basic Lease Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Lessee shall cease to have any liability to the Owner Lessor with respect to the Undivided Interest, except for Supplemental Lease Rent and other obligations (including those under Sections 14.1 and 14.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (iii) the Owner Lessor will prepay the Lessor Notes, pursuant to Section 2.13 of the Lessor Loan Agreement, (iv) the Owner Lessor shall transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessor and prepared and recorded at the Facility Lessee's expense) the Undivided Interest to the Facility Lessee (or its designee), on an "as is", "where is" basis, without warranty other than a warranty as to the absence of Owner Lessor's Liens and Owner Participant's Liens, (v) each of this Facility Lease, the Facility Sublease, 17 the Facility Site Lease, the Facility Site Sublease and the Facility Site Sub-Sublease shall terminate and (vi) the Owner Lessor shall execute and deliver appropriate releases and other documents or instruments necessary or reasonably requested by the Facility Lessee to effect the foregoing (including, but not limited to, termination of this Facility Lease) all to be prepared, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. (b) Notwithstanding the foregoing provisions of Section 10.2(a), in the case of a Regulatory Event of Loss, at the option of the Facility Lessee, if (i) the Facility Lessee shall have executed and delivered an assumption agreement to assume the Lessor Notes as permitted by and in accordance with Section 2.14 of the Lessor Loan Agreement, (ii) all other conditions contained in such Section 2.14 of the Lessor Loan Agreement shall have been satisfied and (iii) no Lease Event of Default shall have occurred and be continuing and shall not be cured by such assumption, the obligation of the Facility Lessee to make the Event of Loss Payment shall be reduced by the outstanding principal amount of the Lessor Notes so assumed by the Facility Lessee; PROVIDED, HOWEVER, for so long as the Lessor Notes are outstanding, if the Facility Lessee shall have chosen to assume the Lessor Notes pursuant to this Section 10.2(b), the Facility Lessee (or its designee) shall acquire the Undivided Interest from the Owner Lessor subject to the Lien of the Lessor Security Documents. (c) Notwithstanding the foregoing provisions of Sections 10.2(a) and (b) to the contrary, in the case of a Regulatory Event of Loss, the Facility Lessee (or its designee) so long as the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and all other payments hereunder in full, and in all respects in accordance with Section 19 of the Participation Agreement, may purchase the Owner Participant's Beneficial Interest in lieu of purchasing the Undivided Interest pursuant to Sections 10.2 (a) and (b) and keep the Facility Lease (and Lessor Loan) in place. SECTION 10.3. APPLICATION OF PROCEEDS. Any payments with respect to the Undivided Interest received at any time by the Owner Lessor or the Facility Lessee from any Governmental Entity or from insurance proceeds as a result of the occurrence of an Event of Loss shall be applied as follows: (a) all such payments received at any time by the Facility Lessee shall be promptly paid to the Owner Lessor or, so long as the Lessor Notes are outstanding, to the Holder Representative, for application pursuant to the following provisions of this Section 10.3, except that, the Facility Lessee may retain any amounts that the Owner Lessor would at the time be obligated to pay to the Facility Lessee as reimbursement pursuant to Section 10.3(b); 18 (b) so much of such payments as shall not exceed the Event of Loss Payment required to be paid by the Facility Lessee pursuant to Section 10.3 (a) shall be applied in reduction of the Facility Lessee's obligation to pay such amount if not already paid by the Facility Lessee or, if already paid by the Facility Lessee, shall be applied to reimburse the Facility Lessee for its payment of such amount; and (c) the balance, if any, of such payments remaining thereafter shall be apportioned between the Owner Lessor and the Facility Lessee in accordance with their respective interests in the Facility. Notwithstanding the foregoing, if the Facility Lessee shall have elected to rebuild the Facility pursuant to Section 10.1(a), any insurance proceeds received by the Owner Lessor, Holder Representative or the Facility Lessee as a result of the occurrence of an Event of Loss described in clause (i) or (ii) of the definition of Event of Loss shall be applied as provided in Section 11.7. SECTION 10.4. REBUILD. The Facility Lessee's right to rebuild the Facility pursuant to Section 10.1 (b) shall be subject to the fulfillment, at the Facility Lessee's sole cost and expense, in addition to the conditions contained in Section 10.1(b), of the following conditions: (a) no Material Lease Default or Lease Event of Default shall have occurred and be continuing; (b) on the date the Facility Lessee shall give notice pursuant to Section 10.1(b) of its election to rebuild the Facility in accordance with this Section 10.4, either (i) the Owner Participant shall have received an opinion reasonably satisfactory to it from Hunton & Williams, or from a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to Midwest, to the effect that, assuming the proposed rebuilding is accomplished in the manner and within the time proposed, such rebuilding would not result in any material indemnified, or any unindemnified incremental tax risk to the Owner Participant or (ii) the Owner Participant shall have received an opinion of Hunton & Williams, or another nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to Midwest to the effect that it is more likely than not that such proposed rebuilding would not result in any unindemnified incremental tax risk or any material indemnified incremental tax risk and the Owner Participant shall have received collateral or other security for the indemnification obligations with respect to any such incremental tax risk, such collateral or other security to be acceptable to the Owner Participant in its sole discretion exercised in good faith; (c) on the date the Facility Lessee shall give notice pursuant to Section 10.1(b) of its election to rebuild the Facility in accordance with this Section 10.4, the Facility Lessee shall deliver to the Owner Participant and, so long as the 19 Lessor Notes are outstanding, the Holder Representative (i) a report of the Engineering Consultant, or such other independent engineer reasonably satisfactory to the Owner Participant and, so long as the Lessor Notes are outstanding, the Holder Representative, to the effect that it is reasonable to expect that such rebuilding of the Facility is technologically feasible and economically viable and that such rebuilding can be completed by a date that is 36 months prior to the end of the Basic Lease Term or any Renewal Lease Term then in effect or already elected by the Facility Lessee, and (ii) an appraisal of an Independent Appraiser reasonably acceptable to the Owner Participant, and, so long as the Lessor Notes are outstanding, the Holder Representative to the effect that the rebuilt Facility will have at least the same value, residual value, utility and useful life as the Facility immediately prior to the Event of Loss, assuming the Facility was then in the condition required to have been maintained by the terms of the Facility Lease; (d) on the date the Facility Lessee shall notify the Owner Lessor pursuant to Section 10.1(b) of its election to rebuild the Facility in accordance with this Section 10.4, the Facility Lessee shall demonstrate to the reasonable satisfaction of the Owner Participant and, so long as the Lessor Notes are outstanding, the Holder Representative, adequate financial resources, from insurance proceeds or otherwise, to complete such rebuilding and to pay Basic Lease Rent while the Facility is being rebuilt; (e) the Facility Lessee shall cause the rebuilding of the Facility to commence as soon as reasonably practicable after notifying the Owner Participant and, so long as the Lessor Notes are outstanding, the Holder Representative, of its election to rebuild the Facility in accordance with this Section 10.4 and in all events within 18 months of the occurrence of the event that caused such Event of Loss and will cause work on such rebuilding to proceed diligently thereafter. As the rebuilding of the Facility progresses, title to an undivided interest equal to the Owner Lessor's Percentage in such rebuilt Facility shall vest in the Owner Lessor and such Undivided Interest shall become subject to this Facility Lease and, so long as the Lessor Notes are outstanding, the Lien of the Security Documents, and be deemed a part of the Undivided Interest for all purposes of this Facility Lease and the other Operative Documents, automatically and without any further act by any Person; (f) on the date of the completion of such rebuilding of the Facility (the "REBUILDING CLOSING DATE") the following documents shall be duly authorized, executed and delivered and, if appropriate, filed for recordation by the respective party or parties thereto and shall be in full force and effect, and an executed counterpart of each shall be delivered to the Owner Lessor, the Owner Participant and the Holder Representative: (i) supplements to this Facility Lease subjecting an undivided interest equal to the Owner Lessor's Percentage in the rebuilt Facility to this Facility Lease (with no change in Purchase Price or the Basic Lease Rent as a result of such rebuilding), (ii) so long as the Lessor Notes are outstanding, supplements to the 20 Security Documents subjecting such undivided interest in the Facility to the Lien of the Security Documents, (iii) such recordings and filings, as may be reasonably requested by the Owner Participant or the Holder Representative to be made or filed, (iv) an opinion of counsel to the Facility Lessee, such counsel and such opinion to be reasonably satisfactory to the Owner Participant and, so long as the Lessor Notes are outstanding, the Holder Representative, to the effect that (x) the supplements to this Facility Lease required by clause (i) above constitute effective instruments for subjecting such undivided interest in the rebuilt Facility to this Facility Lease, (y) the supplements to the Security Documents required by clause (ii) above, if any, constitute effective instruments for subjecting such undivided interest in the rebuilt Facility to the Lien of the Security Documents and (z) all filings and other action necessary to perfect and protect the Owner Lessor's interest in an undivided interest equal to the Owner Lessor's Percentage in the rebuilt Facility have been accomplished, (v) an appraisal by an Independent Appraiser, certifying that the Facility as so rebuilt has a current and residual value, remaining useful life and utility at least equal to the current and residual value, remaining useful life and utility of the Facility immediately prior to such rebuilding (assuming the Facility was in the condition and repair required to be maintained by the terms of this Facility Lease), (vi) a report by the Independent Engineer certifying that the Facility as so rebuilt is in a state of repair and condition required by this Facility Lease, (vii) an Officer's Certificate of the Facility Lessee as to compliance with this Section 10.4 and certifying that no Lease Event of Default shall have occurred as a result of the rebuilding, and (viii) satisfactory evidence as to the compliance with Section 11 of this Facility Lease with respect to the Facility, as so rebuilt; and (g) there shall be no material adverse accounting effect under GAAP on the Owner Participant as a result of such rebuilding and the other transactions contemplated by this Section 10.4. SECTION 10.5. APPLICATION OF PAYMENTS NOT RELATING TO AN EVENT OF LOSS. (a) In the event that during the Facility Lease Term title to, or the use of, all or any portion of the Undivided Interest, the Facility or the Facility Site is requisitioned or taken by or pursuant to a request of any Governmental Entity under the power of eminent domain or otherwise for a period or in a manner which does not constitute an Event of Loss, the Facility Lessee's obligation to pay all installments of Basic Lease Rent shall continue for the duration of such requisitioning or taking. The Facility Lessee shall be entitled to receive and retain for its own account all sums payable for any such period by such Governmental Entity as compensation for such requisition or taking of possession; PROVIDED, THAT if at the time of such payment a Material Lease Default or a Lease Event of Default shall have occurred and be continuing, such amounts shall be paid to and held by the Owner Lessor unless the Lessor Loans are outstanding, in which case such amounts shall be paid to and held by the Holder Representative, as security for the obligations of the Facility Lessee 21 under this Facility Lease until such time as no Material Lease Default or Lease Event of Default is continuing. (b) Any insurance proceeds with respect to the Undivided Interest received at any time by the Owner Lessor, the Holder Representative or the Facility Lessee under any of the insurance policies required to be maintained by the Facility Lessee under Section 11 as a result of any damage to the Facility or any part thereof which does not constitute an Event of Loss shall be applied as follows: (i) in accordance with Section 11.7, and (ii) the balance, if any, of such insurance proceeds remaining thereafter shall be paid to the Facility Lessee. SECTION 11. INSURANCE SECTION 11.1. PROPERTY INSURANCE. Subject to Section 11.6, the Facility Lessee will maintain (or cause to be maintained) all risk property insurance, including coverage for boiler and machinery and the peril of flood and the peril of earthquake, customarily carried by prudent operators of coal-fired and oil/gas-fired electric generating facilities of comparable size and risk as the Facility, and, in any case, subject to availability of said insurance on commercially reasonable terms and in an amount equal to the Probable Maximum Loss of the Facility. SECTION 11.2. LIABILITY INSURANCE. Subject to Section 11.6, the Facility Lessee will maintain (or caused to be maintained) liability insurance, including contractual liability coverage, insuring against claims for bodily injury (including death) and property damage to third parties arising out of the ownership, operation, maintenance, condition and use of the Facility and the Facility Site, with limits of not less than (i) $35,000,000 in the aggregate per occurrence if such insurance also covers any of the Other Facilities and (ii) $25,000,000 if such insurance covers solely the Facility and the Facility Site. The Facility Lessee will at least annually review the liability insurance maintained by it or on its behalf and will, if necessary, increase such coverage in order that the liability insurance maintained by it or on its behalf is consistent with that maintained by prudent operators of similar facilities of comparable size and risk to the Facility. Such liability insurance may be purchased either in a single limit or in combination with a general and an excess policy. SECTION 11.3. PROVISIONS WITH RESPECT TO INSURANCE. Subject to Section 11.6, the Facility Lessee will place the insurance maintained pursuant to this Section 11 with companies having an A.M. Best rating of at least "A-7" or, if not so rated, with comparable financial strength. All insurance policies required to be maintained pursuant to Sections 11.1 and 11.2 shall name each of the Owner Participant, the Equity Investor, the Owner Lessor, the Owner Trustee, the Holder Representative and the Lender as additional insureds, as their respective interests may appear (the "ADDITIONAL INSUREDS"). All insurance policies required to be maintained pursuant to the terms hereof shall also provide for at least 30 days' prior written notice (10 days 22 if as a result of non-payment) by the insurance carrier to each Additional Insured in the event of cancellation, non-renewal, termination, expiration or material change. The Facility Lessee will place the insurance required by the terms of this Section 11 with insurance companies which agree to waive all claims for premiums from, and all subrogation rights against, the Additional Insureds. All the insurance maintained pursuant to this Section 11 shall be primary without right of contribution of any other insurance carried by or on behalf of each of the Additional Insureds with respect to its interests in the Facility and the Facility Site. Subject to Section 11.6, to the extent available on commercially reasonable terms, the Facility Lessee will use its best efforts to provide that the respective interests of the Additional Insureds shall not be invalidated by any act or neglect of the Facility Lessee, or any breach or violation by the Facility Lessee of any warranties, declarations or conditions contained in such policies or by the use of the Facility for purposes more hazardous than permitted by such policies. Additionally, to the extent available on commercially reasonable terms, the Facility Lessee will use its best efforts to provide that such policies shall be endorsed to provide that, inasmuch as the policies are written to cover more than one insured, all terms, conditions, insuring agreements and endorsements, with the exception of limits of liability, shall operate in the manner as if there were a separate policy covering each insured. The Facility Lessee shall, at its own expense, make or cause to be made all proofs of loss and take all other steps necessary to collect the proceeds of such insurance. SECTION 11.4. REPORTS. Within 15 days after the expiration and renewal of any insurance policy required to be maintained pursuant to the terms of this Section 11, the Facility Lessee shall furnish each Additional Insured with an executed broker letter identifying all insurance coverage in place and certifying that all premiums in respect of such policies are current. Certificates of insurance shall accompany said letter documenting insurance coverage and the Additional Insured status as required. SECTION 11.5. ADDITIONAL INSURANCE. At any time any Additional Insured may at its own expense and for its own account carry insurance with respect to its interest in the Undivided Interest, PROVIDED, that such insurance does not in any way interfere with the Facility Lessee's ability to obtain insurance with respect thereto as required in this Section 11. Any insurance payments received from policies maintained by an Additional Insured pursuant to the previous sentence shall be retained by such Additional Insured without reducing or otherwise affecting the Facility Lessee's obligations hereunder. SECTION 11.6. AMENDMENT OF INSURANCE REQUIREMENTS. (a) If any insurance required to be maintained by the Facility Lessee pursuant to the Operative Documents (including the limits or deductibles or any other terms under policies for such insurance) ceases to be available on a 23 commercially reasonable basis at the time of renewal, the Facility Lessee shall provide written notice to each Additional Insured accompanied by a letter from the Facility Lessee's insurance broker stating that such insurance is unavailable on a commercially reasonable basis. Such notice shall be given not less than 30 days prior to the scheduled date for renewal of any such policy. Upon receipt of such notice, the Facility Lessee and each Additional Insured shall immediately enter into good faith negotiations in order to agree upon an alternative to such insurance. (b) In the event that a resolution acceptable to the Facility Lessee and all Additional Insureds cannot be reached within 10 days from the date of the notice referred to in paragraph (a) above, the Additional Insureds shall make arrangements for the formation of an insurance panel consisting of the Facility Lessee's insurance advisor (or broker), the Facility Lessor's insurance advisor (or broker), and an independent insurance expert from an internationally recognized insurance brokerage firm, chosen by the Facility Lessee and reasonably acceptable to the Additional Insureds. Such independent expert shall conduct a separate review of the relevant insurance requirements of the Operative Documents and the market for such insurance at the time, giving due consideration to the representations of both insurance advisors, and upon conclusion of such review shall issue a written report stating whether such insurance is available, or unavailable, on a commercially reasonable basis. (c) If the insurance expert concludes that such insurance is not available on a commercially reasonable basis, the insurance expert shall provide a written recommendation (which shall include the amount and type of insurance which is available upon a commercially reasonable basis) not less than 15 days before the date for renewal of such insurance. The Facility Lessee shall, prior to the expiration of the insurance then in effect, obtain such insurance that is available on a commercially reasonable basis. The recommendation of the insurance expert shall be conclusive and binding upon the Additional Insureds, and the Facility Lessee shall, for the immediately succeeding one-year policy period, only be required to carry the insurance that the expert has certified is available on a commercially reasonable basis. (d) All fees, costs and expenses associated with the insurance panel (including review by the insurance expert) shall be paid by the Facility Lessee. SECTION 11.7. APPLICATION OF INSURANCE PROCEEDS. (a) All insurance proceeds up to $5,000,000 on account of any damage to or destruction of the Facility or any part thereof (in each case less the actual costs, fees and expenses incurred in the collection thereof), shall, subject to Section 11.7(d), be paid to or retained by the Facility Lessee for application in repair or replacement of the affected property. If the insurance proceeds on account of such damage or destruction to the Facility exceed $5,000,000 but are less than $25,000,000, then all such insurance proceeds 24 shall, subject to Section 11.7(d), be paid to or retained by the Facility Lessee for application in repair or replacement of the affected property for so long as the Holdings long-term unsecured indebtedness shall be rated at least BBB- and Baa3 by S&P and Moody's, respectively. In all other situations, all insurance proceeds on account of such damage or destruction to the Facility, shall be paid to the Owner Lessor or, if the Lessor Notes are outstanding, the Holder Representative and be applied and dealt with as provided in Section 11.7(b) below. (b) All such proceeds actually received on account of any such damage or destruction other than in connection with an Event of Loss shall, unless a Material Lease Default or a Lease Event of Default shall have occurred and continuing, be paid over to the Facility Lessee or as it may direct from time to time as restoration progresses, to pay (or reimburse the Facility Lessee for) the cost of restoration, if the amount of such proceeds received by the Holder Representative or the Owner Lessor, together with such additional amounts, if any, theretofore expended by the Facility Lessee out of its own funds for such restoration, are sufficient to pay the estimated cost of completing such restoration, but only upon receipt by the Owner Lessor and, so long as the Lessor Notes are outstanding, the Holder Representative of a written application of the Facility Lessee accompanied by an Officer's Certificate of the Facility Lessee setting forth in reasonable detail the nature of such restoration, the actual cash expenditures made to date for such restoration and the estimated cost to complete such restoration and stating that no Lease Event of Default has occurred and is continuing. (c) All such proceeds received or payable on account of an Event of Loss shall, unless the Facility Lessee has elected to rebuild or restore the Facility pursuant to Section 10.2, be dealt with in accordance with Section 10.3. (d) Notwithstanding the foregoing provisions of this Section 11 or Section 10, so long as a Material Lease Default or a Lease Event of Default shall have occurred and be continuing, the proceeds of any insurance required to be maintained pursuant to this Section 11 that would otherwise be payable to or for the account of, or that would otherwise be retained by, the Facility Lessee pursuant to this Section 11 or Section 10.3 will be held as security for the obligations of the Facility Lessee under this Facility Lease by the Owner Lessor or, so long as the Lessor Notes are outstanding, the Holder Representative and at such time thereafter as no Material Lease Default or a Lease Event of Default shall be continuing, such amount shall be paid promptly to the Facility Lessee. SECTION 12. INSPECTION During the Facility Lease Term, each of the Lease Financing Parties and their respective representatives shall have the right, during normal business hours, upon reasonable notice to the Facility Lessee and at no expense (except when a Material 25 Lease Default or a Lease Event of Default has occurred and is continuing) or risk to the Facility Lessee, to inspect the Facility and the records with respect to the operations and maintenance thereof in the Facility Lessee's custody or to which the Facility Lessee has access; PROVIDED, HOWEVER, that any such inspection shall be conducted in accordance with the Operative Documents and so as not to interfere with the operation or maintenance of the Facility or the conduct by the Facility Lessee of its business and shall be in accordance with the Facility Lessee's safety and insurance programs. The Lease Financing Parties shall attempt to conduct their inspections at the same time and, except during the continuance of a Material Lease Default or a Lease Event of Default or during the last 24 months of the Facility Lease Term (unless the Facility Lessee shall have exercised its option to renew the Facility Lease), no more than one inspection a year shall be conducted by any Lease Financing Party. SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS SECTION 13.1. TERMINATION FOR ILLEGALITY. If, as a result of change in Requirements of Law, it shall have become illegal for the Facility Lessee to continue this Facility Lease or for the Facility Lessee to make payments under this Facility Lease or any other Operative Document, and the transactions contemplated by the Operative Documents cannot be restructured to comply with such change in law in a manner reasonably acceptable to the Lease Financing Parties, the Facility Lessee shall have the right, at its option, by giving notice to the Owner Lessor no later than twelve months after the date the Facility Lessee receives notice or first has actual knowledge of such illegality, to terminate this Facility Lease on the Termination Date specified in such notice (which shall be a date occurring not more than 60 days after the date of such notice) and purchase the Undivided Interest by paying to the Owner Lessor the Termination Value determined as of such Termination Date and paying to the Persons entitled thereto all other amounts required to be paid under Section 13.3. It shall be a condition to the termination of this Facility Lease pursuant to this Section 13.1 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to terminate any and all Other Facility Leases to which each such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. SECTION 13.2. TERMINATION FOR BURDENSOME INDEMNITY. If (i) one or more events outside the control of the Facility Lessee or its Affiliates shall have occurred which will, or could reasonably be expected to, give rise to an obligation by the Facility Lessee to pay or incur an indemnity obligation under Section XIV of the Participation Agreement (except for tax indemnity obligations expected on the Closing Date to be incurred) or pursuant to the Tax Indemnity Agreement, (ii) such payment or indemnity obligation (and the underlying cost or tax) can be avoided in 26 whole or in part if the Facility Lessee purchases the Undivided Interest and (iii) the amount of such avoided payments, together with the amount of any indemnity payments made during the Burdensome Buyout Period that could have been avoided if the Facility had been purchased by the Facility Lessee would exceed (on a present value basis, discounted at the Discount Rate, compounded on an annual basis to the date of the termination) 2.5% of the Purchase Price (unless the Owner Participant has waived its right to indemnity payments in excess of 2.5% of the Purchase Price or arranged for its own account for the payment thereof), the Facility Lessee shall have the right, at its option, no later than 24 months after the date the Facility Lessee receives notice or actual knowledge of such event referred to in clause (i) above, to terminate this Facility Lease on the Termination Date specified in the notice provided pursuant to Section 13.1 (which shall be a date occurring not more than 60 days after the date of such notice), and purchase the Undivided Interest by paying to the Owner Lessor the Termination Value determined as of such Termination Date and paying to the Persons entitled thereto all other amounts required to be paid under Section 13.3. It shall be a condition to the termination of this Facility Lease pursuant to this Section 13.2 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to terminate any and all Other Facility Leases to which each such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. SECTION 13.3. PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the Facility Lessee shall have exercised its option under Section 13.1 or 13.2 (each, a "BURDENSOME BUYOUT OPTION"), on the Termination Date specified in the Facility Lessee's notice of such exercise, the Facility Lessee shall pay the Termination Value to the Owner Lessor, and shall pay the following amounts to the Owner Lessor or the Person entitled thereto, without duplication, (a) all amounts of Basic Lease Rent or Renewal Lease Rent, as the case may be, due and payable on or prior to such Termination Date PLUS (b) all reasonable documented out-of-pocket costs and expenses incurred by the Lease Financing Parties, other than Affiliates of the Facility Lessee, in connection with the exercise of the Burdensome Buyout Option due and payable on or prior to the Termination Date PLUS (c) any other Rent payments under the Facility Lease due and unpaid on such Termination Date, including reimbursement of Incidental Costs under the Lessor Loan Agreement, under any other Operative Document. Concurrently with the payment of all sums specified in Section 13.1 or 13.2, as the case may be, and this Section 13.3, (1) Basic Lease Rent for the Undivided Interest shall cease to accrue, (2) the Facility Lessee shall cease to have any liability to the Owner Lessor with respect to the Undivided Interest, except for Supplemental Lease Rent and other obligations (including those under Sections 14.1 and 14.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (3) the Owner Lessor will in connection with a sale of the Facility pursuant to Section 13.1 or 13.2 transfer (by an appropriate instrument of 27 transfer in form and substance reasonably satisfactory to the Owner Lessee and prepared and recorded at the Facility Lessee's expense), the Undivided Interest to the Facility Lessee (or its designee) on an "as is"and "where is" basis, without representations or warranties other than a warranty as to the absence of Owner Lessor's Liens and the Owner Participant's Liens, (4) this Facility Lease shall terminate and (5) the Owner Lessor shall deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepared, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. It shall be a condition of the termination of this Facility Lease pursuant to this Section 13 that the Facility Lessee shall pay all amounts it is obligated to pay under Section 13.1 or 13.2, as the case may be, and this Section 13.3 and all other amounts due by the Facility Lessee under this Facility Lease and the other Operative Documents. The Burdensome Buyout Option must be exercised within the 24 month period (the "BURDENSOME BUYOUT PERIOD") after actual knowledge by the Facility Lessee of the event or illegality, as the case may be, giving rise thereto, and if the Burdensome Buyout Option is not exercised within the Burdensome Buyout Period, the Facility Lessee shall be deemed to have irrevocably waived its right to exercise the Burdensome Buyout Option with respect to such event. If the Facility Lessee fails to consummate the Burdensome Buyout Option under this Section 13 after giving notice of its intention to do so (other than in consequence of a failure of the Owner Lessor or Owner Participant to fulfill their obligations, if any, under Section 13), (i) the Facility Lease shall continue, (ii) such failure to consummate shall not constitute a default under the Facility Lease, and (iii) the Facility Lessee will lose its right to terminate this Facility Lease pursuant to this Section 13.3 as a result of the event or condition giving rise to such Burdensome Buyout Option during the remainder of the Facility Lease Term. The Facility Lessee hereby acknowledges the Lien of the Lessor Security Documents and agrees for the benefit of the Holder Representative that any transfer effected pursuant to this Section 13.3 will be subject to said Lien unless the same has been released or discharged in accordance with the terms of the Lessor Security Documents. SECTION 13.4. ASSUMPTION OF THE LESSOR NOTES; SPECIAL LESSEE TRANSFERS. (a) Notwithstanding the foregoing provisions of Section 13.3 to the contrary, at the option of the Facility Lessee, if (i) the Facility Lessee shall have executed and delivered an assumption agreement to assume the Lessor Notes as permitted by and in accordance with Section 2.13 of the Lessor Loan Agreement, (ii) all other conditions contained in such Section 2.13 of the Lessor Loan Agreement shall have been satisfied, (iii) no Lease Event of Default shall have occurred and be continuing and shall not be cured by such assumption, (iv) the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and to make other payments under the Facility Lease in full and (v) the Facility Lessee shall purchase the Facility pursuant to Section 13.1 or 13.2, as the case may be, then, the obligation of the Facility Lessee to pay Termination Value shall be reduced by the outstanding 28 principal amount of the Lessor Notes so assumed by the Facility Lessee; PROVIDED, HOWEVER, for so long as the Lessor Notes are outstanding, if the Facility Lessee shall have chosen to assume the Lessor Notes pursuant to this Section 13.4(a), the Facility Lessee (or its designee) shall acquire the Undivided Interest from the Owner Lessor subject to the Lien of the Lessor Security Documents. (b) Notwithstanding the foregoing provisions of Sections 13.3 to the contrary, in the case of a Burdensome Buyout Event, the Facility Lessee (or its designee) so long as the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and all other payments hereunder in full, and in all respects in accordance with Section 19 of the Participation Agreement, may purchase the Owner Participant's Beneficial Interest or all of the outstanding membership interests in the Owner Participant, in lieu of purchasing the Undivided Interest pursuant to Sections 13.1 and 13.2, and keep the Facility Lease (and Lessor Loan) in place. SECTION 14. TERMINATION FOR OBSOLESCENCE SECTION 14.1. TERMINATION. Upon at least six months' prior written notice to the Owner Lessor, (which notice shall be accompanied by a certification by the board of directors of Midwest as to one or more of the matters described in clauses (a) and (b) below), the Facility Lessee shall have the option, so long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing on the date of such notice or the proposed Obsolescence Termination Date (as defined below), to terminate this Facility Lease on any Termination Date occurring on or after the seventh anniversary of the Closing Date and not less than 180 days after such notice (the date of termination selected by the Facility Lessee being the "OBSOLESCENCE TERMINATION DATE") which proposed Obsolescence Termination Date shall be set forth in the notice, on the terms and conditions set forth in this Section 14, if (a) the Facility is economically or technologically obsolete as a result of (i) a change in Requirements of Law, regulation or tariff of general application or imposition by the FERC or any other Governmental Entity having or claiming jurisdiction over the Facility Lessee or the Facility of any conditions or requirements (including, without limitation, requiring significant capital improvements to the Facility) relating to the availability, continued effectiveness or renewal of any license or permit required for the operation or ownership of the Facility, or (ii) as a result of any change in the markets for the wholesale purchase and/or sale of energy or any material abrogation of power purchase agreements; (b) an event has occurred that, in the Facility Lessee's good faith judgment, will cause the Facility to become obsolete; or (c) the Facility is surplus to the Facility Lessee's needs or is no longer useful in its trade or business. It shall be a condition to the termination of this Facility Lease pursuant to this Section 14.1 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to terminate any and all Other Facility Leases to which such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an 29 Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. SECTION 14.2. SOLICITATION OF OFFERS. If the Facility Lessee shall give the Owner Lessor notice pursuant to Section 14.1 and the Owner Lessor shall not have elected to retain the Undivided Interest pursuant to Section 14.3 hereof, the Facility Lessee shall (i) as non-exclusive agent for the Owner Lessor, use commercially reasonable efforts to obtain bids from third parties unaffiliated with the Facility Lessee and sell the Owner Lessor's Interest on the Obsolescence Termination Date and (ii) covenant that it will not sell the Owner Lessor's Interest to any third party with whom the Facility Lessee or an Affiliate thereof has an arrangement to use or operate the Facility to generate power for the benefit of the Facility Lessee, the Facility Sublessee or any Affiliate thereof after the termination of this Facility Lease. All of the proceeds of any such sale will be for the account of the Owner Lessor; PROVIDED that, so long as the Lessor Notes are outstanding, the proceeds of such sale shall be paid directly to the Holder Representative. SECTION 14.3. RIGHT OF OWNER LESSOR TO RETAIN THE UNDIVIDED INTEREST. The Owner Lessor may irrevocably elect to retain, rather than sell, the Undivided Interest by giving notice to the Facility Lessee at least 90 days prior to the Obsolescence Termination Date. If the Owner Lessor elects to retain the Undivided Interest pursuant to this Section 14.3, on the Obsolescence Termination Date the Facility Lessee shall pay to the Owner Lessor (i) any Basic Lease Rent or Renewal Lease Rent, as the case may be, payable on the Obsolescence Termination Date, PLUS (ii) the amount set forth under the column headed "Excess of the Cumulative Allocated 467 Fixed Rent and Interest on 467 Fixed Rent over Basic Lease Rent Paid" set forth in Schedule 2 for such Obsolescence Termination Dates (provided that the amount, if any, set forth in Schedule 2 under the column headed "Excess of Basic Lease Rent Paid over the Cumulative Allocated 467 Fixed Rent and Interest on 467 Fixed Rent" shall be credited against the amount payable under this Section 14.3 and any excess payable under this Section 14.3 after such crediting shall be payable by the Owner Lessor to the Facility Lessee), PLUS (iii) all reasonable documented out-of-pocket costs and expenses incurred in connection with exercise by the Owner Lessor of the termination option pursuant to this Section 14 by the other Lease Financing Parties (but excluding the fees and costs of any broker unless engaged by the Facility Lessee on behalf of the Owner Lessor), PLUS (iv) any other Rent payments under the Facility Lease due and unpaid on the Obsolescence Termination Date, including the reimbursement of Incidental Costs under the Lessor Loan Agreement, but not including the outstanding amount of the Lessor Loan on such date, under any other Operative Document. Concurrently with the payment of all sums required to be paid pursuant to this Section 14.3, (i) Basic Lease Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Lessee shall cease to have any liability hereunder or any other Operative Document with respect to the Undivided Interest, except for Supplemental Lease Rent and other obligations (including, without limitation, those under Sections 30 14.1 and 14.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (iii) the Owner Lessor shall pay all outstanding principal and accrued interest on the Lessor Notes and all other amounts due under the Lessor Loan Agreement, including reimbursement of Incidental Costs under the Lessor Loan Agreement, (iv) the Facility Lessee will return the Undivided Interest to the Owner Lessor in accordance with Section 5.1, (v) this Facility Lease shall terminate and (vi) the Owner Lessor shall execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. It shall be a condition precedent to the termination of this Facility Lease pursuant to this Section 14.3, that the Owner Lessor and the Facility Lessee shall each pay all amounts that each is obligated to pay under this Section 14.3. SECTION 14.4. PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the Owner Lessor has not elected to retain the Undivided Interest in accordance with Section 14.3 hereof, on the Obsolescence Termination Date the Owner Lessor shall sell the Owner Lessor's Undivided Interest under this Section 14.4 and its interest in the Ground Interest under Section 6 of the Facility Site Lease, Section 6 of the Facility Site Sublease and Section 6 of the Facility Site Sub-Sublease to the bidder or bidders (which shall not be the Facility Lessee, any Affiliate thereof or any third party with whom the Facility Lessee or an Affiliate thereof has an arrangement to use or operate the Facility to generate power for the benefit of the Facility Lessee, the Facility Sublessee or any Affiliate after the termination of this Facility Lease), that shall have submitted the highest cash bid or bids with respect to the Owner Lessor's Interest. On the Obsolescence Termination Date, the Facility Lessee shall pay to the Owner Lessor (a) the excess, if any, of Termination Value determined as of such Obsoles cence Termination Date over the proceeds of the sale of the Undivided Interest paid to or retained by the Owner Lessor in connection with such sale, PLUS (b) if such Obsolescence Termination Date shall be a Rent Payment Date, any Basic Lease Rent or Renewal Lease Rent due and payable on such Rent Payment Date, PLUS (c) all reasonable out-of-pocket costs and expenses of the Lease Financing Parties (excluding the fees and costs of any broker unless engaged by the Facility Lessee on the Owners Lessor's behalf) incurred in connection with the exercise of the termination option pursuant to this Section 14 due and payable on such Obsolescence Termination Date, PLUS (d) any other Rent payments under the Facility Lease due and unpaid on the Obsolescence Termination Date, including reimbursement of the Owner Lessor for Incidental Costs with respect to the Lessor Notes. If the proceeds from the sale of the Owner Lessor's Interest paid to or retained by the Owner Lessor exceeds the Termination Value as determined as of the Obsolescence Termination Date, the Owner Lessor shall reimburse the Facility Lessee for the amount of the Termination Value paid by the Facility Lessee, if any. Concurrently with the payment of all sums required to be paid pursuant to this Section 14.4, (i) Basic Lease Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Lessee shall cease to have any liability hereunder to the Owner Lessor with respect to the Undivided Interest, 31 except for Supplemental Lease Rent and other obligations (including Sections 14.1 and 14.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (iii) the Owner Lessor will transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessor and prepared and recorded at the Facility Lessee's expense) the Owner Lessor's Interest under this Section 14.4, to the purchaser on an "as is" and "where is" basis, without representations or warranties other than a warranty as to the absence of Owner Lessor's Liens and Owner Participant's Liens, (iv) this Facility Lease shall terminate and (v) the Owner Lessor shall execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. The Facility Lessee may, at its election, revoke its notice of termination on at least 30 days' prior notice to the Owner Lessor, in which event this Facility Lease shall continue with respect to the Undivided Interest; PROVIDED, HOWEVER, that the Facility Lessee shall not be permitted to reissue a notice to terminate pursuant to Section 14.1 more than once in any five year period. The Owner Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Facility Lessee to obtain bids or otherwise take any action in arranging any such sale of the Owner Lessor's Interest other than, if the Owner Lessor has not elected to retain the Undivided Interest, to transfer the Owner Lessor's Interest in accordance with clause (iv) of the second preceding sentence. It shall be a condition of the Owner Lessor's obligation to consummate a sale of the Owner Lessor's Interest that the Facility Lessee shall pay all amounts it is obligated to pay under this Section 14.4. If no sale shall occur on the Obsolescence Termination Date, the notice of termination shall be deemed revoked and this Facility Lease shall continue as to the Undivided Interest in full force and effect in accordance with its terms (without prejudice to the Facility Lessee's right to exercise its rights under this Section 14). It shall be a condition to the termination of this Facility Lease pursuant to this Section 14.4 that each Other Facility Lessee which is an Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also exercise its right to terminate any and all Other Facility Leases to which each such Facility Lessee is a party to the extent that the "Owner Lessor" with respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the extent the Facility Lessee is then entitled to exercise such termination right under such Other Facility Leases. The Facility Lessee hereby acknowledges the Lien of the Lessor Security Documents and agrees for the benefit of the Holder Representative that any transfer effected pursuant to this Section 14.4 will be subject to said Lien unless the same has been released or discharged in accordance with the terms of the Lessor Security Documents. 32 SECTION 15. LEASE RENEWAL SECTION 15.1. WINTERGREEN RENEWAL LEASE TERMS. (a) Not earlier than 42 months prior to, but not less than 18 months prior to, the expiration of the Basic Lease Term, so long as no Lease Event of Default shall have occurred and be continuing on the date any notice is given pursuant to this Section 15.1(a) and no Lease Event of Default or Material Lease Default shall have occurred and be continuing on the date the lease renewal proposed pursuant to this Section 15.1(a) is to commence, the Facility Lessee may deliver to the Owner Lessor a notice (which notice may be in addition to a notice of the Facility Lessee's interest in electing a FMV Renewal Lease Term under Section 15.2) of the Facility Lessee's interest in renewing this Facility Lease at the end of the Basic Lease Term for a term (the "FIRST WINTERGREEN RENEWAL LEASE TERM") selected by the Facility Lessee, which term shall satisfy the following criteria: (i) on the last date of such proposed First Wintergreen Renewal Lease Term, the estimated Fair Market Sales Value of the Facility shall be no less than 20% of the Purchase Price (without taking into account inflation or deflation subsequent to the Closing Date) and (ii) the aggregate of the proposed First Wintergreen Renewal Lease Term and the Basic Lease Term shall be no greater than 80% of the estimated remaining useful life of the Facility, measured from the Closing Date and both (i) and (ii) determined not more than 36 months prior to the expiration of the Basic Lease Term by an Independent Appraiser selected by the Facility Lessee and reasonably acceptable to the Owner Lessor. The Facility Lessee may withdraw any notice given in accordance with this Section 15.1(a) by written notice of such withdrawal to the Owner Lessor, on or prior to the date which is 18 months before the commencement of the proposed First Wintergreen Renewal Lease Term and if such notice is not so withdrawn, the Facility Lessee shall be deemed to have irrevocably elected to renew the Facility Lease for the First Wintergreen Renewal Term. It shall be a condition to the renewal of this Facility Lease pursuant to this Section 15.1(a) that each Other Facility Lessee shall also exercise its rights to renew any and all Other Facility Leases to which such Other Facility Lessee is a party. (b) Not earlier than 42 months prior to, but not less than 18 months prior to, the expiration of the First Wintergreen Renewal Term, so long as no Lease Event of Default shall have occurred and be continuing on the date any notice is given pursuant to this Section 15.1(b) and no Lease Event of Default or Material Lease Default shall have occurred and be continuing on the date the lease renewal proposed pursuant to this Section 15.1(b) is to commence, the Facility Lessee may deliver to the Owner Lessor a notice (which notice may be in addition to a notice of the Facility Lessee's interest in electing a FMV Renewal Lease Term under Section 15.2) of the Facility Lessee's interest in renewing this Facility Lease at the end of the First Wintergreen Renewal Lease Term for a term (the "SECOND WINTERGREEN RENEWAL LEASE TERM") selected by the Facility Lessee, which term shall satisfy the 33 following criteria: (i) on the last date of such proposed Second Wintergreen Renewal Lease Term, the estimated Fair Market Sales Value of the Facility shall be no less than 20% of the Purchase Price (without taking into account inflation or deflation subsequent to the Closing Date) and (ii) the aggregate of the proposed Second Wintergreen Renewal Lease Term, the First Wintergreen Renewal Lease Term and the Basic Lease Term shall be no greater than 80% of the estimated remaining useful life of the Facility, measured from the Closing Date and both (i) and (ii) determined not more than 36 months prior to the expiration of the First Wintergreen Renewal Lease Term by an Independent Appraiser selected by the Facility Lessee and reasonably acceptable to the Owner Lessor. The Facility Lessee may withdraw any notice given in accordance with this Section 15.1(b) by written notice of such withdrawal to the Owner Lessor on or prior to 18 months before commencement of the proposed Second Wintergreen Renewal Lease Term and if such notice is not so withdrawn, the Facility Lessee shall be deemed to have irrevocably elected to renew the Facility Lease for the Second Wintergreen Renewal Term. It shall be a condition to the renewal of this Facility Lease pursuant to this Section 15.1(b) that each Other Facility Lessee shall also exercise its right to renew any and all Other Facility Leases to which each such Other Facility Lessee is a party. SECTION 15.2. FAIR MARKET VALUE RENEWAL LEASE TERMS. Not earlier than 42 months prior to, but not less than 18 months prior to, the expiration of the Basic Lease Term or any Renewal Lease Term, so long as no Lease Event of Default shall have occurred and be continuing on the date any notice is given pursuant to this Section 15.2 and no Lease Event of Default or Material Lease Default shall have occurred and be continuing on the date the lease renewal proposed pursuant to this Section 15.2 is to commence, the Facility Lessee may deliver to the Owner Lessor notice (which notice may be in addition to a notice of the Facility Lessee's interest in electing the First Wintergreen Renewal Lease Term or the Second Wintergreen Renewal Lease Term) of the Facility Lessee's interest in renewing this Facility Lease for a term (each such term, a "FMV RENEWAL LEASE TERM") commencing upon expiration of the Basic Lease Term or the Renewal Lease Term otherwise expiring and extending for no less than two years and no more than five years; PROVIDED that, unless such FMV Renewal Lease Term extends to the end of the useful life of the Facility, no Renewal Lease Term shall extend beyond the date that is 36 months prior to the end of the useful life of the Facility (as set forth in the most recent of the Closing Date Appraisal, the appraisal obtained by the Facility Lessee in connection with the determination of the First Wintergreen Renewal Lease Term and the appraisal obtained by the Facility Lessee in connection with the determination of the Second Wintergreen Renewal Lease Term). The Facility Lessee may withdraw any notice given in accordance with this Section 15.2 by written notice of such withdrawal to the Owner Lessor and if such notice is not so withdrawn, the Facility Lessee shall be deemed to have irrevocably elected to renew the Facility Lease for the FMV Renewal Term. It shall be a condition to the renewal of this Facility Lease pursuant to this Section 15.2 that each Other Facility Lease shall be renewed. 34 SECTION 15.3. BASIC LEASE RENT AND TERMINATION VALUE FOR RENEWAL TERM. During each Renewal Lease Term, Renewal Lease Rent shall be paid on the Rent Payment Dates. The installment of Renewal Lease Rent payable on each such Rent Payment Date during the First Wintergreen Renewal Lease Term and the Second Wintergreen Renewal Lease Term shall be equal to the lesser of (i) the Fair Market Rental Value of the Undivided Interest determined not more than 36 months prior to the expiration of the Basic Lease Term, in case of rent payable during the First Wintergreen Renewal Term, or the First Wintergreen Renewal Lease Term, in the case of rent payable during the Second Wintergreen Renewal Term, and (ii) 50% of the average Basic Lease Rent payable with respect to the Basic Lease Term. Renewal Lease Rent payable on each Rent Payment Date during any FMV Renewal Lease Term for the Undivided Interest shall be equal to the Fair Market Rental Value of the Undivided Interest determined not more than 36 months before the commencement of such FMV Renewal Lease Term. SECTION 15.4. DETERMINATION OF FAIR MARKET RENTAL VALUE. The Fair Market Rental Value of the Undivided Interest as of the commencement of any Renewal Lease Term shall be determined by agreement of the Owner Lessor and the Facility Lessee within six months after receipt by the Owner Lessor of the notice from the Facility Lessee of its election to renew pursuant to Section 15.1 or 15.2 (but not more than 36 months before the commencement of such Renewal Lease Term) or, if they shall fail to agree within such six month period, shall be determined by an appraisal conducted by an Independent Appraiser according to the Appraisal Procedure. The Facility Lessee shall be responsible for such Independent Appraiser's fees and expenses. SECTION 16. EVENTS OF DEFAULT Each of the following events shall constitute a "LEASE EVENT OF DEFAULT" hereunder (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority): (a) the Facility Lessee shall fail to make any payment of Basic Lease Rent, Renewal Lease Rent, Incidental Costs payable as Supplemental Lease Rent, Termination Value or other costs (but in no event interest or principal), fees and expenses associated with the Lessor Notes (other than costs, fees and expenses in respect of the Lessor Notes incurred as a result of the Lessor Loan Event of Default which is not a Lease Event of Default) when due, and such failure shall continue unremedied for five (5) Business Days; or 35 (b) the Facility Lessee shall fail to make any other payment under this Facility Lease, or under any other Operative Document (other than Excepted Payments, unless the Owner Participant shall have declared a default with respect thereto) when due, and such failure shall have continued unremedied for 30 days after receipt by the Facility Lessee of written notice of such failure; or (c) the Facility Lessee or Facility Sublessee shall fail to maintain insurance in the amounts and on the terms set forth in the Operative Documents, including Section 11 hereof, and such failure shall continue unremedied for 10 Business Days after receipt by the Facility Lessee of written notice thereof; or (d) the Facility Lessee, Facility Sublessee, or Holdings, shall fail to perform or observe any other material covenant set forth in this Facility Lease or any other covenant set forth in the Participation Agreement (other than the covenant set forth in Section 5.9 of the Participation Agreement) or in any other Operative Document and such failure shall continue unremedied for 30 days after receipt by the Facility Lessee of written notice thereof; PROVIDED, HOWEVER, that if such failure cannot be remedied within such 30-day period, then the period within which to remedy such failure shall be extended up to an additional 180 days, so long as the Facility Lessee diligently pursues such remedy, such failure is reasonably capable of being remedied within such additional 180-day period and the continuation of such failure during the period of such extension would not have a Material Adverse Effect on the Facility Lessee, Facility Sublessee or Holdings, as the case may be; PROVIDED, FURTHER, that in the case of the Facility Lessee's obligation set forth in clause (b) of Section 7.1, to the extent and for so long as a test, challenge, appeal or proceeding to review with respect to such non-compliance shall be prosecuted in good faith by the Facility Lessee, the failure by the Facility Lessee to comply with the requirements thereof shall not constitute a Lease Event of Default if such test, challenge, appeal or proceeding shall not involve (i) a risk of foreclosure, sale, forfeiture or loss of, or imposition of a Lien on, the Facility or any part thereof or of impairment of the use, operation or maintenance of the Facility, or (ii) a risk of criminal liability being incurred by, or of a material adverse effect on the interests of, the Lender, the Funding LLC Notes, the Owner Lessor, the Owner Participant, the Facility Lessee or the Facility Sublessee (or any Affiliate thereof), including, without limitation, subjecting any such person (except the Facility Sublessee) to regulation as a public utility under Requirements of Law; and PROVIDED, FURTHER, also in the case of the Facility Lessee's obligation set forth in clause (b) of Section 7.1, if such noncompliance is not a type that can be immediately remedied, the failure to comply shall not be a Lease Event of Default if the Facility Lessee is taking all reasonable action to remedy such noncompliance and if, but only if, such noncompliance shall not involve any danger described in clause (i) or (ii) of the preceding proviso; and PROVIDED, FURTHER, such noncompliance, or such test, challenge, appeal or proceeding to review with respect to such noncompliance shall not extend beyond the date that is 36 36 months prior to the scheduled expiration of the Basic Lease Term or any Renewal Lease Term then in effect or already elected by the Facility Lessee; or (e) any representation or warranty of the Facility Lessee, Facility Sublessee or Holdings set forth in the Operative Documents (other than a Tax Representation set forth in of the Tax Indemnity Agreement) shall prove to have been incorrect in any material respect when made and the facts or circumstances upon which such breach of representation or warranty is based continue to be material and unremedied for a period of 30 days after receipt by the Facility Lessee of written notice thereof; PROVIDED, HOWEVER, that if such condition cannot be remedied within such 30-day period, then the period within which to remedy such condition shall be extended up to an additional 60 days, so long as the Facility Lessee diligently pursues such remedy, such condition is reasonably capable of being remedied within such additional 60-day period and the continuation of such condition during the period of such extension would not have a Material Adverse Effect on the Facility Lessee, Facility Sublessee or Holdings, as the case may be; or (f) any of the Facility Lessee, the Facility Sublessee or Holdings shall (i) commence a voluntary case or other proceeding seeking relief under Title 11 of the Bankruptcy Code or liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or apply for or consent to the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) consent to, or fail to controvert in a timely manner, any such relief or the appointment of or taking possession by any such official in any voluntary case or other proceeding commenced against it, or (iii) file an answer admitting the material allegations of a petition filed against it in any such proceeding, or (iv) make a general assignment for the benefit of creditors; or (g) an involuntary case or other proceeding shall be commenced against any of the Facility Lessee, the Facility Sublessee or Holdings, seeking (i) liquidation, reorganization or other relief with respect to it or its debts under Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other similar law now or hereafter in effect, or (ii) the appointment of a trustee, receiver, liquidator, custodian or other similar official with respect to it or any substantial part of its property or (iii) the winding-up or liquidation of either of the Facility Lessee, the Facility Sublessee or Holdings, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days; or (h) default under any bond, debenture, note or other evidence of Indebtedness (but excluding obligations arising under the Operative Documents and non-recourse Indebtedness) for money borrowed by the Facility Lessee, the Facility Sublessee or Holdings under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness 37 of the Facility Lessee, the Facility Sublessee or Holdings, respectively, whether such indebtedness now exists or shall hereafter be created, which Indebtedness is in an aggregate principal amount exceeding (i) $20,000,000 so long as the Funding LLC Notes are outstanding and so long as no Lessor Note or Lessor Notes (or participation interests therein) shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA and remain outstanding, and (ii) $50,000,000 at all other times and which default shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such Indebtedness having been discharged, or such acceleration having been rescinded or annulled; or (i) failure by the Facility Lessee to comply in all material respects with the restrictions on transfer imposed on it by Section 22.4 herein; or (j) any of the Operative Documents (including the Security Documents) to which the Facility Lessee, Midwest or Holdings is a party are declared unenforceable, are terminated, cease to be in full force and effect or fail to constitute valid and perfected first priority security interests (in each case, other than in accordance with their terms) or the Facility Lessee, Midwest or Holdings fails to comply with their respective obligations under Sections 5.8, 7.6 and 9.5 of the Participation Agreement; or (k) so long as the Funding LLC Notes are outstanding and so long as no Lessor Note or Lessor Notes (or participation interests therein) shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA and remain outstanding, EME shall cease to own, directly or indirectly, 50% of the economic equity interests in Midwest free and clear of Liens except Permitted Liens or cease to maintain equivalent voting control of Midwest, or EME shall cease, directly or through a Subsidiary, to be in control of the operations of Midwest's power plants; or (l) so long as the Funding LLC Notes are outstanding and so long as no Lessor Note or Lessor Notes (or participation interests therein) shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA and remain outstanding, MGE shall cease to own, directly or indirectly, 50% of the voting and economic equity interests in Holdings free and clear of Liens except Liens under the Holdings Credit Documentation or cease to maintain equivalent voting control of Holdings, or MGE shall cease, directly or through a Subsidiary, to be in control of the operations of Midwest's power plants; or (m) so long as the Funding LLC Notes are outstanding and so long as no Lessor Note or Lessor Notes (or participation interests therein) shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA and remain outstanding, MGE shall cease to own, directly or indirectly, 38 100% of the economic membership or equity interests in the Facility Lessee, as the case may be, free and clear of Liens except Liens under the Holdings Credit Docu mentation or cease to maintain equivalent voting control of the Facility Lessee; or (n) occurrence of a Regulatory Violation with respect to the Facility Lessee, the Facility Sublessee or Holdings; or (o) default under any bond, debenture, note or other evidence of Indebtedness for money borrowed by Holdings under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of Holdings, respectively, whether such indebtedness now exists or shall hereafter be created, which Indebtedness is (i) in an aggregate principal amount exceeding (x) $20,000,000 so long as the Funding LLC Notes are outstanding and so long as no Lessor Note or Lessor Notes (or participation interests therein) shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA and remain outstanding, and (y) $50,000,000 at all other times, and such default shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or (ii) in any amount incurred in respect of the Tranche C Loans and such default shall have resulted in a termination of commitments in respect thereof or in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, in each case without such Indebtedness having been discharged or such acceleration or termination, as the case may be, having been rescinded or annulled; or (p) (i) any Reportable Event shall occur; (ii) there shall be initiated any action by the Facility Lessee, the Facility Sublessee or any member of the Controlled Group to terminate a Plan; (iii) there shall be initiated proceedings by the PBGC under Section 4042 of ERISA to terminate a Plan or to appoint a trustee to administer a Plan; (iv) any Plan shall incur an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), unless waived; (v) the imposition upon the Facility Lessee, the Facility Sublessee or any member of the Controlled Group or any Plan fiduciary of a material liability resulting from either the engagement by any such party in a transaction prohibited under Section 4975 of the Code or Section 406 of ERISA or any other violation of Title I of ERISA; (vi) the Facility Lessee, the Facility Sublessee or any member of the Controlled Group suffers a partial or complete withdrawal from a Multiemployer Plan, which, with respect to clauses (i) through (vi) above, results in a liability, individually or in the aggregate, of at least $20,000,000; or (q) judgments or orders for the payment of money against the Facility Lessee, the Facility Sublessee or Holdings, which judgments or orders, as the case may be, are in excess of (x) $20,000,000 in the aggregate so long as the Funding LLC Notes are outstanding and so long as no Lessor Note or Lessor Notes 39 (or participation interests therein) shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA and remain outstanding, and (y) $50,000,000 in the aggregate at all other times (in both situations taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without reservation) and which are not vacated, discharged or effectively stayed or bonded within 60 days from the entry thereof; or (r) Holdings shall cease to own, directly or indirectly, 100% of the economic equity interest in Midwest free and clear of Liens except Permitted Liens or cease to maintain equivalent voting control of Midwest; or (s) a Sublease Event of Default shall occur and be continuing; or (t) Midwest shall fail to comply with the covenant set forth in Section 5.9 of the Participation Agreement, PROVIDED, HOWEVER, that the Facility Lessee can remedy such failure by making a payment in the amount of $3, 870,000 in accordance with the provisions of Section 3.5 hereof ("CONTINGENT PREPAID RENT") to be credited against the last installment of the Basic Lease Rent. SECTION 17. REMEDIES SECTION 17.1. REMEDIES FOR LEASE EVENT OF DEFAULT. Upon the occurrence of any Lease Event of Default and at any time thereafter so long as the same shall be continuing, the Owner Lessor may, at its option, declare this Facility Lease to be in default by written notice to the Facility Lessee; and at any time thereafter, so long as the Facility Lessee shall not have remedied all outstanding Lease Events of Default, the Owner Lessor may do one or more of the following as the Owner Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with any mandatory Requirements of Law then in effect: (a) proceed by appropriate court action or actions, either at law or in equity, to enforce performance by the Facility Lessee of the applicable covenants and terms of this Facility Lease or to recover damages for breach thereof; (b) by notice in writing to the Facility Lessee, terminate this Facility Lease whereupon all right of the Facility Lessee to the possession and use of the Undivided Interest under this Facility Lease shall absolutely cease and terminate but the Facility Lessee shall remain liable as hereinafter provided; and thereupon, the Owner Lessor may demand that the Facility Lessee, and the Facility Lessee shall, upon written demand of the Owner Lessor , forthwith return possession of the Undivided Interest to the Owner Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of Section 5, except those provisions relating to periods of notice; and the Owner Lessor may thenceforth hold, 40 possess and enjoy the same free from any right of the Facility Lessee, or its successor or assigns, to use the Undivided Interest for any purpose whatever; (c) sell the Owner Lessor's Interest at public or private sale, as the Owner Lessor may determine, free and clear of any rights of the Facility Lessee under this Facility Lease and without any duty to account to the Facility Lessee with respect to such sale or for the proceeds thereof (except to the extent required by paragraph (f) below if the Owner Lessor elects to exercise its rights under said paragraph and by Requirements of Law), in which event the Facility Lessee's obligation to pay Basic Lease Rent hereunder due for any periods subsequent to the date of such sale shall terminate (except to the extent that Basic Lease Rent is to be included in computations under paragraph (f) below if the Owner Lessor elects to exercise its rights under said paragraph); (d) hold, keep idle or lease to others the Owner Lessor's Interest as the Owner Lessor in its sole discretion may determine, free and clear of any rights of the Facility Lessee under this Facility Lease and without any duty to account to the Facility Lessee with respect to such action or inaction or for any proceeds with respect thereto, except that the Facility Lessee's obligation to pay Basic Lease Rent with respect to the Undivided Interest due for any periods subsequent to the date upon which the Facility Lessee shall have been deprived of possession and use of the Undivided Interest pursuant to this Section 17 shall be reduced by the net proceeds, if any, received by the Owner Lessor from leasing the Undivided Interest to any Person other than the Facility Lessee; (e) whether or not the Owner Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights under paragraph (b) above with respect to the Undivided Interest, the Owner Lessor, by written notice to the Facility Lessee specifying a Termination Date that shall be not earlier than 10 days after the date of such notice, may demand that the Facility Lessee pay to the Owner Lessor, and the Facility Lessee shall pay to the Owner Lessor, on the Termination Date specified in such notice, any unpaid Basic Lease Rent due before such Termination Date and, if such Termination Date shall be a Rent Payment Date, any Basic Lease Rent due and payable on such Rent Payment Date, any Supplemental Lease Rent due and unpaid as of the payment date specified in such notice, plus as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Lease Rent due after the Termination Date specified in such notice), (i) an amount equal to the excess, if any, of the Termination Value computed as of the Termination Date specified in such notice over the Fair Market Sales Value of the Owner Lessor's Interest as of the Termination Date specified in such notice; or (ii) an amount equal to the excess, if any, of Termination Value computed as of the Termination Date specified in such notice over the Fair Market Rental Value of the Owner Lessor's Interest until the end of the Basic Lease Term or the then current Renewal Lease Term, after discounting such Fair Market Rental Value quarterly to present value as 41 of the Termination Date specified in such notice at a rate equal to the Discount Rate; or (iii) an amount equal to the Termination Value computed as of the Termination Date specified in such notice and, upon payment of such Termination Value by the Facility Lessee pursuant to this clause (iii) and all other Rent then due and unpaid by the Facility Lessee, the Owner Lessor will forthwith transfer to the Facility Lessee (or its designee) in accordance with this Section 17.1(e) and Section 6 of the Facility Site Lease on an "as is", "where is" and "with all faults" basis, without representation or warranty other than a warranty as to the absence of Owner Lessor's Liens accompanied by a warranty of the Owner Participant as to the absence of the Owner Participant's Liens, all of its interest in the Owner Lessor's Interest and execute, acknowledge and deliver, and record and file (as appropriate), appropriate releases, including a release from the Lien of the Security Documents, and all other documents or instructions necessary or desirable to effect the foregoing all in form and substance reasonably satisfactory to the Owner Lessor and at the cost and expense of the Facility Lessee, and upon payment of such amounts under either clauses (i) and (ii) of this paragraph (e), this Facility Lease, and the Facility Lessee's obligation to pay Basic Lease Rent hereunder due for any periods subsequent to the date of such payment shall terminate; and (f) if the Owner Lessor shall have sold the Owner Lessor's Interest pursuant to paragraph (c) above, the Owner Lessor may, if it shall so elect, demand that the Facility Lessee pay to the Owner Lessor, and the Facility Lessee shall pay to the Owner Lessor, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Lease Rent due for any periods subsequent to the date of such sale), an amount equal to (A) any unpaid Basic Lease Rent due before the date of such sale PLUS (B) if that date is a Rent Payment Date, the Basic Lease Rent due on that date, PLUS (C) the amount, if any, by which the Termination Value computed as of the Termination Date next preceding the date of such sale or, if such sale occurs on a Rent Payment Date or a Termination Date then computed as of such date, exceeds the net proceeds of such sale, and, upon payment of such amount, this Facility Lease and the Facility Lessee's obligation to pay Basic Lease Rent for any periods subsequent to the date of such payment shall terminate. In addition, the Facility Lessee shall be liable, except as otherwise provided above, for (i) any and all unpaid Basic Lease Rent due hereunder before, or during the exercise of any of the foregoing remedies, (ii) the amount of any Incidental Costs payable under Section 2.15 of the Lessor Loan Agreement, and (iii) on an After-Tax Basis, for legal fees and other costs and expenses incurred by reason of the occurrence of any Lease Event of Default or the exercise of the Owner Lessor's remedies with respect thereto, including the repayment in full of any costs and expenses necessary to be expended in connection with the return of the Undivided Interest in accordance with Section 5.2 hereof, including, without limitation, any costs and expenses incurred by the Owner Lessor, the Owner Participant, the Holder Representative and other Lease Financing Parties in connection with retaking constructive 42 possession of, or in repairing, the Undivided Interest in order to cause it to be in compliance with all maintenance standards imposed by this Facility Lease. SECTION 17.2. CUMULATIVE REMEDIES. The remedies in this Facility Lease provided in favor of the Owner Lessor shall not be deemed exclusive, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law or in equity; and the exercise or beginning of exercise by the Owner Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Owner Lessor of any or all of such other remedies. To the extent permitted by Requirements of Law, the Facility Lessee hereby waives any rights now or hereafter conferred by statute or otherwise which may require the Owner Lessor to sell, lease or otherwise use the Undivided Interest or any Component thereof in mitigation of Owner Lessor's damages as set forth in this Section 17 or which may otherwise limit or modify any of Owner Lessor's rights and remedies in this Section 17. SECTION 17.3. NO DELAY OR OMISSION TO BE CONSTRUED AS WAIVER. No delay or omission to exercise any right, power or remedy accruing to the Owner Lessor upon any breach or default by the Facility Lessee under this Facility Lease shall impair any such right, power or remedy of the Owner Lessor, nor shall any such delay or omission be construed as a waiver of any breach or default, or of any similar breach or default hereafter occurring; nor shall any waiver of a single breach or default be deemed a waiver of any subsequent breach or default. SECTION 18. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS Any moneys received by the Owner Lessor or the Holder Representative pursuant to Section 10.3, 10.5 or 11.7 shall, until paid to the Facility Lessee as provided in accordance with such Sections, be held by the Owner Lessor or the Holder Representative, as the case may be, as security for the Facility Lessee's obligations under this Facility Lease and be invested in Permitted Investments by the Owner Lessor or the Holder Representative, as the case may be, at the sole risk of the Facility Lessee, from time to time as directed in writing by the Facility Lessee if such investments are reasonably available for purchase. Any gain (including interest received) realized as the result of any such Permitted Investment (net of any fees, commissions, taxes and other expenses, if any, incurred in connection with such Permitted Investment) shall be applied or remitted to the Facility Lessee in the same manner as the principal invested. SECTION 19. RIGHT TO SUBLEASE SECTION 19.1. SUBLEASE TO MIDWEST. Except as provided in Section 19.2, the Facility Lessee shall not assign, transfer or sublease all or any portion of its 43 rights in the Owner Lessor's Undivided Interest under this Facility Lease, except that the Facility Lessee shall have the right to sublease the Undivided Interest without the consent of any Lease Financing Party to Midwest, upon the terms and subject to the conditions set forth in the Facility Sublease. The parties hereto acknowledge and consent to the Facility Sublease, and nothing contained in this Section 19 shall limit the terms or the effect of or render the Facility Sublease to Midwest ineffective. SECTION 19.2. OTHER SUBLEASE. In the event the Facility Sublease is terminated, pursuant to the provisions of the Operative Documents, the Facility Lessee shall have the right to sublease the Undivided Interest without the consent of any other Lease Financing Party if: (a) the Midwest Lease Guarantee remains in full force and effect; (b) the sublessee (i) is a solvent corporation, partnership, business trust, limited liability company or other entity (but not individuals) not subject to bankruptcy proceedings, (ii) is not involved in material litigation with the Owner Participant, and (iii) is, or its operating, maintenance and use obligations under the sublease are guaranteed by, or such obligations are contracted to be performed by, an experienced, reputable operator of similar electric generating assets; (c) the sublease does not extend beyond the scheduled expiration of the applicable Basic Lease Term or any Renewal Lease Term then in effect or already elected by the Facility Lessee (and may be terminated upon early termination of the Facility Lease) and is expressly subject and subordinate to the Facility Lease; (d) all terms and conditions of the Facility Lease and the other Operative Documents remain in effect and the Facility Lessee remains fully and primarily liable for its obligations thereunder; (e) no Lease Event of Default under the Facility Lease shall have occurred and be continuing; (f) the sublease prohibits further assignment or subletting; (g) the sublease requires the sublessee to operate and maintain the Undivided Interest in a manner not less favorable than that required under the Facility Lease and the other Operative Documents; (h) the sublessee does not cause the Facility to become "tax-exempt use property" within the meaning of Section 168(h) of the Code (unless the Facility sublessee shall make a payment to the Owner Participant contemporaneously with the execution of the sublease that, in reasonable judgement of the Owner 44 Participant, compensates such Owner Participant for the adverse tax consequences resulting from the classification of the Facility as "tax-exempt use property"); (i) the Owner Lessor (and so long as the Lessor Notes are outstanding, the Lender and the Holder Representative) shall have received an opinion of counsel, which opinion of counsel shall be reasonably acceptable to each such recipient, to the effect that all regulatory approvals required to enter into such sublease shall have been obtained; (j) the Facility sublessee shall pay all reasonable documented out-of-pocket expenses incurred by the other Lease Financing Parties in connection with such sublease; and (k) the Owner Participant shall have received an opinion reasonably satisfactory to it from Hunton & Williams or from a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee, to the effect that such sublease would not result in any material indemnified, or any unindemnified, incremental tax risk to the Owner Participant. As a condition precedent to such sublease, the Facility Lessee shall provide the Owner Lessor, the Owner Participant, and, so long as the Lessor Notes are outstanding, the Holder Representative with all documentation in respect of such sublease and an opinion of counsel to the effect that such sublease complies with the provisions of this Section 19.2 (such documentation, counsel and opinion to be reasonably satisfactory to such recipients). SECTION 20. OWNER LESSOR'S RIGHT TO PERFORM If the Facility Lessee fails to make any payment required to be made by it hereunder or fails to perform or comply with any of its other agreements contained herein after notice to the Facility Lessee and failure of the Facility Lessee to so perform or comply within 10 days thereafter, the Owner Lessor or the Owner Participant may itself make such payment or perform or comply with such agreement in a reasonable manner, but shall not be obligated hereunder to do so, and the amount of such payment and of the reasonable expenses of the Owner Lessor or the Owner Participant incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, together with any Incidental Costs of the Owner Lessor that the Facility Lessee is obligated to pay pursuant to Section 3.3 herein, shall be deemed to be Supplemental Lease Rent, payable by the Facility Lessee to the Owner Lessor on demand. SECTION 21. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE HOLDER REPRESENTATIVE 45 In order to secure the Lessor Notes, the Owner Lessor will assign and grant a Lien to the Holder Representative of all of the Owner Lessor's right, title and interest in, to and under this Facility Lease, and the Undivided Interest (other than Excepted Payments and Excepted Rights). The Facility Lessee hereby consents to such assignment and to the creation of such Lien and security interest and acknowledges receipt of copies of the Lessor Security Documents, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent of the Facility Lessee under any other circumstances. Unless and until the Facility Lessee shall have received written notice from the Holder Representative that the Lien of the Security Documents has been fully terminated, the Holder Representative shall have the right to exercise the rights of the Owner Lessor under this Facility Lease (other than Excepted Rights) to the extent set forth in and subject in each case to the exceptions set forth in the Lessor Security Documents. TO THE EXTENT, IF ANY, THAT THIS FACILITY LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS FACILITY LEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE HOLDER REPRESENTATIVE ON THE SIGNATURE PAGE THEREOF. SECTION 22. MISCELLANEOUS SECTION 22.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition of this Facility Lease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. SECTION 22.2. NOTICES. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or shall be produced by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, PROVIDED such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to such party and any copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other party: 46 If to the Owner Lessor: Collins Trust I c/o Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Facsimile No.: (302) 651-8882 Attention: Corporate Trust Administration with a copy to the Owner Participant: Collins Generation I, LLC c/o PSEG Resources, Inc. 80 Park Plaza, Suite T-22 Newark, NJ 07101 Telephone No.: (973) 456-3650 Facsimile No.: (973) 456-3569 Attention: President and to the Holder Representative: Citibank, N.A. 111 Wall Street 5th Floor, Zone 2 New York, NY 10005 Facsimile No.: (212) 657-3866 Attention: Global Trust & Agency Services If to the Facility Lessee: Collins Holdings EME, LLC One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Facsimile No. : (312) 583-6111 Attention: Georgia R. Nelson with copy to: Edison Mission Energy 18101 Von Karman Avenue Suite 1700 47 Irvine, CA 92612 Facsimile No.: (949) 752-1420 Attention: General Counsel SECTION 22.3. SURVIVAL. Except for the provisions of Sections 3.3, 3.5, 5, 9 and 17, which shall survive, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Facility Lease in accordance with its terms. SECTION 22.4. SUCCESSORS AND ASSIGNS. (a) This Facility Lease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided in Section 22.4(c), the Facility Lessee may not assign the Facility Lease or any other Operative Document, or any interest therein, without the prior written consent of the Owner Lessor and the Owner Participant. (c) The Facility Lessee may, upon satisfaction of the conditions set forth herein and in Section 22.4(d), without the consent of any other Lease Financing Party, so long as the Owner Lessor or Owner Participant does not become regulated as a "public utility" or "public utility holding company" as a result of such assignment, assign the Facility Lease and the other Operative Documents, or any interest therein. In addition to the conditions set forth in the preceding sentence, the Facility Lessee may assign the Facility Lease and the other Operative Documents, or any interest therein, under the following circumstances: (i) to any entity; PROVIDED that such entity's long term senior unsecured Indebtedness is rated equal to or higher than BBB+ from S&P and Baa1 from Moody's; or (ii) to any entity; PROVIDED that the Facility Lessee shall remain secondarily liable under the Facility Lease and all other Operative Documents, and the Midwest Lease Guarantee shall remain in full force and effect. In the case of an assignment pursuant to clause (i) above, the Facility Lessee shall, upon the transferee's assumption of the Facility Lessee's obligations under the Facility Lease and the other Operative Documents in accordance with the terms of this Section 22.4(c) and Section 22.4(d), have no further liability or obligation thereunder. Notwithstanding the foregoing, so long as the Lessor Notes are outstanding, no such assignment shall be permitted unless each of S&P and Moody's shall 48 have confirmed that such assumption shall not result in a downgrade of the then existing credit rating of the Funding LLC Notes below BBB- and Baa3, respectively. (d) Any assignment by the Facility Lessee pursuant to Section 22.4(c) shall be subject to satisfaction of the following additional conditions: (i) the Owner Lessor and the Owner Participant (and, so long as the Lessor Notes are outstanding, the Holder Representative and the Lender) shall have received an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to each recipient thereof, to the effect that all regulatory approvals required in connection with such transfer or necessary to assume the Facility Lessee's obligations under the Operative Documents shall have been obtained; (ii) such transfer shall be pursuant to an assignment and assumption agreement in form and substance reasonably satisfactory to the Owner Participant (and the Holder Representative and the Lender, so long as the Lessor Notes are outstanding); (iii) the Owner Lessor and the Owner Participant (and the Holder Representative and the Lender, so long as the Lessor Notes are outstanding) shall have received an opinion of counsel, which opinion and counsel are reasonably satisfactory to each recipient thereof, as to the validity and enforceability of such assignment and assumption agreement required pursuant to (ii) above; (iv) the Owner Participant shall have received an opinion reasonably satisfactory to it from Hunton & Williams, or from a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee, to the effect that such transfer would not result in any material indemnified, or any unindemnified, incremental tax risk to the Owner Participant; (v) no Material Lease Default or no Lease Event of Default shall have occurred and be continuing; (vi) such transfer by the Facility Lessee shall not result in a Regulatory Event of Loss; (vii) the transferee shall not be involved in material litigation with the Owner Participant; 49 (viii) the Facility Lessee shall pay all reasonable documented out-of-pocket expenses incurred by the other Lease Financing Parties in connection with such assignment ; and (ix) the transferee, or the operator of the Facility retained by the transferee, shall be experienced in operating facilities such as the Facility. The Facility Lessee acknowledges that the Owner Participant is a third party beneficiary of this Section 22.4 and should be entitled to enforce its rights hereunder as if it were a party to this Facility Lease. SECTION 22.5. "TRUE LEASE". This Facility Lease shall constitute an agreement of lease and nothing herein shall be construed as conveying to the Facility Lessee any right, title or interest in or to the Undivided Interest except as lessee only. The parties hereto hereby agree that the Lessee's obligation to make Excepted Payments is a separate and independent obligation from its obligation to make other Rent payments, and that the Lessee's obligation to make Excepted Payments may be assigned, pledged or otherwise transferred separately from the Lessee's obligations to make other Rent payments. The obligation to make Excepted Payments has been included herein for the convenience of the parties. SECTION 22.6. GOVERNING LAW. This Facility Lease was negotiated in the State of New York which the Facility Lessee and the Owner Lessor agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and, in accordance with Section 5-1401 of the New York General Obligations Law, in all respects, including matters of construction, validity and performance, this Facility Lease shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America, EXCEPT that the provisions for the creation and enforcement of the leasehold interest created hereby shall be governed by and construed according to the law of the state in which the Facility is located, it being understood that, to the fullest extent permitted by the law of the state in which the Facility is located, the law of the State of New York shall govern the validity and the enforceability of the representations, warranties, covenants and obligations of the Facility Lessee and the Owner Lessor under this Facility Lease and all other Operative Documents and all of the indebtedness arising hereunder or thereunder. To the fullest extent permitted by law, the Facility Lessee and the Owner Lessor hereby unconditionally and irrevocably waive any claim to assert that the law of any other jurisdiction governs this Facility Lease, except as expressly otherwise provided above. 50 SECTION 22.7. SEVERABILITY. Any provision of this Facility Lease that 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. SECTION 22.8. COUNTERPARTS. This Facility Lease may be executed by the parties hereto in separate counterparts, each of which, subject to Section 21, when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 22.9. HEADINGS AND TABLE OF CONTENTS. The headings of the sections of this Facility Lease and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. SECTION 22.10. FURTHER ASSURANCES. Each party hereto will promptly and duly execute and deliver such further documents and assurances for and take such further action reasonably requested by the other party, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Facility Lease. SECTION 22.11. EFFECTIVENESS. This Facility Lease has been dated as of the date first above written for convenience only. This Facility Lease shall be effective on the date of execution and delivery by the Facility Lessee and the Owner Lessor. SECTION 22.12. LIMITATION OF LIABILITY. It is expressly understood and agreed by the parties hereto that (a) this Facility Lease is executed and delivered by Wilmington Trust Company ("WILMINGTON"), not individually or personally but solely as trustee of the Owner Trust under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it pursuant thereto, (b) each of the representations, undertakings and agreements herein made on the part of the Owner Lessor is made and intended not as personal representations, undertakings and agreements by Wilmington but is made and intended for the purpose for binding only the Owner Lessor, (c) nothing herein contained shall be construed as creating any liability on Wilmington individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto or by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall Wilmington be personally liable for the payment of any indebtedness or expenses of the Owner Lessor or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Owner Lessor under this Facility Lease. 51 SECTION 22.13. MEASURING LIFE. If and to the extent that any of the rights and privileges granted under this Facility Lease, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Facility Lease, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Facility Lease of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Facility Lease, whichever of (a) and (b) is shorter. 52 IN WITNESS WHEREOF, the Owner Lessor and the Facility Lessee have caused this Facility Lease to be duly executed and delivered under seal by their respective officers thereunto duly authorized. COLLINS TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ Kathleen A. Pedelini ---------------------------- Name: Kathleen A. Pedelini Title: Authorized Signer Date: December 15, 1999 COLLINS HOLDINGS EME, LLC By: /s/ John P. Finneran, Jr. ----------------------------- Name: John P. Finneran, Jr. Title: Vice President Date: December 15, 1999 53 EXHIBIT A TO FACILITY LEASE DESCRIPTION OF FACILITY SITE A-1 SCHEDULE 1-1 TO FACILITY LEASE BASIC LEASE RENT A. COMPONENTS OF BASIC LEASE RENT. Basic Lease Rent shall be comprised of three components: "COMPONENT A" of Basic Lease Rent is set forth on Column A in Annex I to this Schedule 1-1; "COMPONENT B" of Basic Lease Rent is set forth on Column B in Annex I to this Schedule 1-1; and "COMPONENT C" of Basic Lease Rent is set forth in Column C of Annex I and is subject to adjustment or calculation as set forth in Part B of this Schedule 1-1. Component C is computed on the basis of "Aggregate Component D" which is set forth on Column D in Annex I to this Schedule 1-1 and equals (i) the sum of each Component B for all Rent Payment Dates set forth in Column B of Annex I to this Schedule 1-1 less the sum of the Maximum Increase Amounts for all Advance Periods as set forth in Annex C to the Initial Lessor Note LESS (ii) the sum of Component B for each Rent Payment Date falling prior to, but not on, the date of computation PLUS (iii) the sum of the Maximum Increase Amounts for the Advance Periods ending prior to, but not on, the date of computation. As set forth in Section 3.4 of this Facility Lease, each component of Basic Lease Rent is subject to adjustment under the circumstances, and in the manner, described in Section 3.4 of this Facility Lease. On any Rent Payment Date or Additional Rent Payment Date, Basic Lease Rent shall equal the sum of Component A, Component B and Component C payable on such Rent Payment Date or Additional Rent Payment Date and each component is payable as set forth in Annex I to this Schedule 1-1. Anything in the foregoing to the contrary notwithstanding, in accordance with Section 3.4(b) of this Facility Lease, each installment of Basic Lease Rent payable under this Facility Lease on any Rent Payment Date or Additional Rent Payment Date, whether or not adjusted in accordance with Section 3.4 of this Facility Lease, shall be in an amount at least sufficient to pay in full principal and interest payable on the Lessor Notes on such Rent Payment Date or Additional Rent Payment Date. B. COMPUTATION OF COMPONENT C. Component C is a variable component intended to reflect a return on Aggregate Component D at a notional interest rate per annum (the "COMPONENT C RATE") that is Schedule 1-1-1 computed on the basis of market-based indices determined on the Closing Date. Component C, as shown in Column C of Annex I to this Schedule 1-1, has been calculated using an assumed Funding Rate equal to 6.4048% per annum, which is the Funding Rate used to calculate Component C on the Closing Date and assuming that there is no Additional Rent Payment Date. The amount of Component C due on any Rent Payment Date and the amount of Component C payable on any Additional Rent Payment Date shall be adjusted or calculated to reflect the calculation described below. The market-based indices applicable to Component C on the Closing Date are identical to the market-based indices used to compute interest on the Initial Lessor Notes, Aggregate Component D is identical to the assumed outstanding principal amount of the Initial Lessor Notes and the Component C Rate is identical to the Funding Rate under the Initial Lessor Notes. The market-based indices for the Initial Lessor Notes and the Funding Rate for the Initial Lessor Notes are set forth below. For ease of administration and to ensure strict compliance by the Facility Lessee with the provisions of Section 3.4(b) of this Facility Lease and the last sentence of Part A of this Schedule 1-1, the Facility Lessor and the Facility Lessee have agreed that the computation of Component C and the computation of interest on the Initial Lessor Notes shall be a single computation and that Component C on any Rent Payment Date or Additional Rent Payment Date shall be calculated in the same manner as, and shall be adjusted or computed, as the case may be, so that it is equal to, the interest payable on the Initial Lessor Notes on the correlative Interest Payment Date under the Initial Lessor Notes. Each Interest Payment Date under, and as defined in, the Initial Lessor Notes to the extent the same is not a Rent Payment Date shall be an Additional Rent Payment Date under this Facility Lease. As provided in Section 16 of the Participation Agreement, any change in the market-based indices or other factors used for the computation of Component C or used in the computation of interest on the Initial Lessor Notes from those in effect on the Closing Date shall be considered a refinancing contemplated by Section 16 of the Participation Agreement, and accordingly, would be subject to the provisions of Section 16 of the Participation Agreement. C. DEFINITIONS. As used in this Schedule 1-1 to this Facility Lease, capitalized terms shall have the meanings assigned thereto in this Facility Lease. In addition, the following terms shall have the meanings set forth below (such meanings to be equally applicable to both the singular and plural forms of the terms defined). Schedule 1-1-2 "APPLICABLE RATE" shall mean, for any day, with respect to any Eurodollar Rate Portion or Base Rate Portion or the facility fees payable under the APA, as the case may be, the applicable rate per annum set forth below under the caption "Eurodollar Margin", "Base Rate Margin" or "Facility Fee Rate," respectively, based upon the ratings by Moody's and S&P, respectively, applicable on such date to the Index Debt:
======================================================================================================================== Index Debt CATEGORY 1 CATEGORY 2 CATEGORY 3 CATEGORY 4 CATEGORY 5 CATEGORY 6 ------------- ------------- ------------- ------------- ------------- ------------- Ratings >BBB+/Baa1 BBB/Baa2 BBB-/Baa3 BB+/Ba1 BB/Ba2 < BB/Ba2 Eurodollar Margin 0.650% 0.850% 1.000% 1.500% 1.750% 1.750% - ------------------------------------------------------------------------------------------------------------------------ Base Rate Margin 0.000% 0.000% 0.000% 0.500% 0.750% 0.750% - ------------------------------------------------------------------------------------------------------------------------ Facility Fee Rate 0.350% 0.400% 0.500% 0.750% 1.000% 1.500% ========================================================================================================================
For purposes of the foregoing, (i) if either Moody's or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 6; (ii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the lowest of the ratings; and (iii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the applicable Rating Agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If Moody's or S&P shall have changed its system of classifications after the date of the APA, a 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. "BASE RATE" shall mean a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank's base rate; and (b) 1/2 of one percent per annum above the Federal Funds Rate. "BASE RATE PORTION" shall mean any portion of any Purchaser Percentage Interest to the extent the same bears interest at the Base Rate. Schedule 1-1-3 "EURODOLLAR RATE" shall mean, for any Interest Period for each Eurodollar Rate Portion, an interest rate per annum appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the APA Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) as of 11:00 A.M. (London time) on the date two Business Days prior to the first day of such Interest Period as the rate for Dollar deposits having a term comparable to such Interest Period, or in the event such offered rate is not available from said Page 3750, at the rate per annum at which Citibank 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, subject, however, to the provisions of Section 18 of the APA. Any provision of the APA (including, without limitation, Annex III thereto) to the contrary notwithstanding, at such time as there shall exist for any Purchaser a Eurodollar Reserve Percentage that is greater than zero, the Eurodollar Rate used in the determination of Eurodollar Rate Portions of such Purchaser shall be the Eurodollar Rate (Reserve Adjusted). "EURODOLLAR RATE PORTION" shall mean any portion of any Purchaser Percentage Interests that have the same Interest Period and bear interest at the same Eurodollar Rate as provided in Section 18(b) of the APA. "EURODOLLAR RATE (RESERVE ADJUSTED)" shall mean, relative to any portion of any Purchaser Percentage Interest to be continued or maintained as, or converted into, a Eurodollar Rate Portion for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) determined pursuant to the following formula: Eurodollar Rate Eurodollar Rate ------------------------- (Reserve Adjusted) = 1.00 - Eurodollar Reserve Percentage The Eurodollar Rate (Reserve Adjusted) for any Interest Period for Eurodollar Rate Portions will be determined by the APA Agent on the basis of the Eurodollar Reserve Percentage in effect on, and the applicable rates furnished to and received by the APA Agent, two Business Days before the first day of such Interest Period. "EURODOLLAR RESERVE PERCENTAGE" shall mean, relative to any Interest Period for Eurodollar Rate Portions, the reserve percentage (expressed as a decimal) equal to Schedule 1-1-4 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 Board of Governors of the Federal Reserve System (or any successor thereto) and then applicable to assets or liabilities consisting of and including "Eurocurrency Liabilities," as currently defined in Regulation D of the Board of Governors of the Federal Reserve System, having a term approximately equal or comparable to such Interest Period. "FEDERAL FUNDS RATE" shall mean, for any period, a fluctuating interest rate per annum equal for each day during such period to 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, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the APA Agent from three Federal funds brokers of recognized standing selected by it. "FINANCE FACILITY" shall mean the Uncommitted Finance Facility, dated December 15, 1999, among the Lender and the Securitization Company, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "FUNDING LLC MATURITY DATE" shall mean December 3, 2004 or, if such day is not a Business Day, the immediately preceding Business Day. "FUNDING RATE" shall mean (1) for any day prior to the Funding LLC Maturity Date or any day occurring on or after the Funding LLC Maturity Date if the Funding LLC Note shall have been repaid or refinanced in full (a) with respect to the Securitization Company Percentage Interest, the Quoted Rate for such day, and (b) with respect to the Purchaser Percentage Interest (i) to the extent that the Purchaser Percentage Interest is a Eurodollar Rate Portion, the Eurodollar Rate for the related Interest Period plus the Applicable Rate therefor for such day and (ii) to the extent that such Purchaser Percentage Interest is a Base Rate Portion, the Base Rate plus the Applicable Rate therefor for such day, and (2) for any day occurring on or after the Funding LLC Maturity Date on which the Funding LLC Note shall not have been repaid or refinanced in full, a rate per annum equal to the sum of the Base Rate plus 5.00% per annum (for the first three months) and, thereafter, the sum of the Base Rate plus the initial 5.00% per annum PLUS an additional 1.00% per annum (so incrementally increasing by 1.00% per annum each three-month period thereafter). The Funding Rate with respect to the Securitization Company Percentage Interest shall be computed by the UFF Agent in accordance with the Finance Facility and advised to the Holder Representative from time to time in accordance with Section 2 of the Schedule 1-1-5 Finance Facility. The Funding Rate with respect to the Purchaser Percentage Interest shall be computed by the APA Agent in accordance with the APA and advised to the Holder Representative from time to time in accordance with Section 18(b)(v) of the APA. "INDEX DEBT" shall mean each of the Midwest Funding Note and the obligations of Holdings in respect of the "Tranche A Loans" and the "Tranche B Loans" under the Holdings Credit Agreement. "INTEREST PAYMENT DATE" shall mean (a) with respect to the Securitization Company Percentage Interest and the Purchaser Percentage Interest to the extent that the Purchaser Percentage Interest is a Base Rate Portion, the sixth day of each of January, April, July and October and the Funding LLC Maturity Date (or, if such day is not a Business Day, the next succeeding Business Day) and (b) with respect to the Purchaser Percentage Interest to the extent that the Purchaser Percentage Interest is a Eurodollar Rate Portion, the last day of the Interest Period for such Eurodollar Rate Portion and, in the case of a Eurodollar Rate Portion with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, in each case commencing with the first such day after the date of the APA. "INTEREST PERIOD" shall mean: (a) with respect to any portion of the Securitization Company Percentage Interest, the period commencing (if the initial period for such portion) on the date such portion was acquired and (for each period thereafter) on the last day of the immediate preceding Interest Period for such portion and ending on the last day of each of March, June, September and December and the Funding LLC Maturity Date; and (b) with respect to any portion of the Purchaser Percentage Interest that is a Eurodollar Rate Portion, the period commencing on the date such portion was acquired or the date of the conversion of any Base Rate Portion into such Eurodollar Rate Portion and ending on the last day of the period selected by the Lender (at the Owner Lessor's direction) pursuant to Section 18(a) of the APA and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period for such portion and ending on the last day of the period selected by the Lender (at the Owner Lessor's direction) pursuant to such Section 18(a); the duration of each such Interest Period shall be one, two, three or six months (or such longer or Schedule 1-1-6 shorter period as the Purchasers determine is available), as the Lender may, in accordance with such Section 18(a), select; PROVIDED, HOWEVER, that: (i) the Lender may not select any Interest Period that ends after the Funding LLC Maturity Date; (ii) the Lender may not have in effect at any time more than eight Interest Periods with respect to Eurodollar Rate Portions; (iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, PROVIDED, HOWEVER, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (iv) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the final calendar month of such Interest Period, such Interest Period shall end on the last Business Day of such final calendar month. "OVERDUE RATE" shall mean with respect to any default in the payment when due prior to the Funding LLC Maturity Date of any principal of, or interest on, any Portion payable by the Owner Lessor under the Lessor Loan Agreement, the sum of the otherwise applicable interest rate hereunder in respect of such Portion, including the Applicable Rate therefor plus 2.00% per annum so long as such default in continuing. The Overdue Rate shall be computed by the APA Agent in accordance with the APA and advised to the Holder Representative, the Owner Lessor, the Facility Lessee and the Facility Sublessee from time to time in accordance with Section 18(b) of the APA. "PORTION" shall mean a portion of the principal amount of a Lessor Note consisting of a Purchaser Percentage Interest or a Securitization Company Percentage Interest or a portion of either. The Portions shall be computed by the APA Agent in accordance with the APA and advised to the Holder Representative from time to time in accordance with Section 18(b) of the APA. "PURCHASER" has the meaning specified in the APA. Schedule 1-1-7 "PURCHASER PERCENTAGE INTEREST" shall mean, for any day, the percentage interest of the Purchasers in a Lessor Note on such day under the APA. The Purchaser Percentage Interest shall be computed by the APA Agent in accordance with the APA and advised to the Holder Representative from time to time in accordance with Sections 2(c) and 4(c) of the APA. "QUOTED RATE" shall mean, for any Interest Period of (a) any portion of the Securitization Company Percentage Interest a per annum rate equal to the sum of (i) the per annum rate equivalent to the weighted average of the per annum rates paid or payable by the Securitization Company from time to time as interest on or otherwise (by means of interest rate hedges or otherwise) in respect of those promissory notes issued by the Securitization Company that are allocated, in whole or in part, by the APA Agent (on behalf of the Securitization Company) to fund such portion, as the case may be, during such Interest Period, as determined by the APA Agent (on behalf of the Securitization Company) and reported to the Lender, which rates shall reflect and give effect to the commissions of placement agents and dealers in respect of such promissory notes, to the extent such commissions are allocated, in whole or in part, to such promissory notes by the APA Agent (on behalf of the Securitization Company); PROVIDED, HOWEVER, that if any component of such rate is a discount rate, in calculating the "Quoted Rate" for such Interest Period the APA Agent shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum PLUS (ii) that per annum rate which will result in an aggregate yield to the Securitization Company equal to the total of the amounts payable by the Lender on account of (y) the program fee, insurance premium fee, securitization fee and other fees in respect of the Finance Facility and the APA, as set forth in the letter dated December 13, 1999, among the Securitization Company, the Lender, Citibank and CNAI (as amended, supplemented or otherwise modified from time to time, the "SECURITIZATION FEE LETTER") and (z) the management fee and other fees as set forth in the letter dated December 13, 1999, among Lord Securities Corporation and Holdings (as amended, supplemented or otherwise modified from time to time, the "MANAGEMENT FEE LETTER" and, together with the Securitization Fee Letter, the "MIDWEST FUNDING FEE LETTERS") or (b) if the Securitization Company dos not fund or maintain such Securitization Company Percentage Interest, the rate established therefor under the Finance Facility or APA for the Person funding or maintaining such Securitization Company Percentage Interest under the circumstance contemplated by clause (h) of the definition of "Lender Rate" set out in the Finance Facility. "RELATED COMMERCIAL PAPER" shall mean, with respect to any Securitization Company Portion in which the Securitization Company holds any Percentage Schedule 1-1-8 Interests, the promissory notes issued by the Securitization Company to fund or maintain such Securitization Company Portion. "SECURITIZATION COMPANY" shall mean CXC Incorporated, a Delaware corporation. "SECURITIZATION COMPANY PERCENTAGE INTEREST" shall mean, for any day, the Percentage Interest of the Securitization Company or any other Person (other than a Purchaser or any transferee thereof) holding an interest in the Percentage Interest of the Securitization Company in a Lessor Note on such day under the APA. The Securitization Company Percentage Interest shall be computed by the APA Agent and advised to the Holder Representative from time to time in accordance with Section 2 of the APA. "UFF AGENT" shall mean Citicorp North America, Inc., as agent for the Securitization Company under the Finance Facility, together with its successors and assigns. Schedule 1-1-9 ANNEX I TO SCHEDULE 1-1 TO FACILITY LEASE
Component A Component B Component C(1) Rent Payment of Basic Lease Rent of Basic Lease Rent of Basic Lease Rent Aggregate Component D Date (Column A) (Column B) (Column C) (Column D) - ----------------- ----------------------- ---------------------------- ---------------------- ----------------------------
- -------------- (1) Subject to adjustment in accordance with Schedule 1-1. Component C of Basic Lease Rent is payable in arrears Schedule 1-1-10 SCHEDULE 1-2 TO FACILITY LEASE ALLOCATION OF BASIC LEASE RENT RENTAL PERIOD ENDING ON BASIC LEASE RENT(1) - -------------------------------------- ------------------------------------- - --------------- (1) Reflects Basic Lease Rent computed using the Funding Rate applicable to Component C on the Closing Date. Schedule 1-2-1 SCHEDULE 1-3 TO FACILITY LEASE 467 RENT ALLOCATION
RENTAL PERIOD ENDING 467 FIXED 467 INTEREST ON SUM OF 467 ON RENT FIXED RENT FIXED RENT AND 467 INTEREST ON FIXED RENT - --------------------------------- ------------------ ------------------------- ------------------------
Schedule 1-3-1 SCHEDULE 2 TO FACILITY LEASE TERMINATION VALUES(1) (EXCLUDING RENT PAYABLE)
Column A Excess of the Column B allocation of Excess Basic Lease Column C Column D Basic Lease Rent Rent paid over Termination Value Termination Value(2) Termination Over Basic allocation of ot including Column (Columns A + B + C) Equity Portion of Date Lease Rent paid Basic Lease Rent A or Column B ($ Dollars) Termination Values - ------------- -------------------- ---------------------- --------------------- -------------------- ---------------------
- ------------------------- (1) [If the Termination Date is not also a Rent Payment Date, the Termination Value shall be increased by an amount equal to the amount of interest accrued on the Lessor Notes, from and including the immediately preceding Rent Payment Date to, but excluding, the Termination Date.] (2) Termination Values have been computed so as to reflect a credit for Basic Lease Rent previously paid but allocated to periods after such Termination Date and to include an additional amount for Basic Lease Rent previously accrued, but not yet paid as of such Termination Date. Schedule 2-1 EX-10.95-1 33 a2031364zex-10_951.txt EXHIBIT 10.95.1 Exhibit 10.95.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 10.95 - --------------------------------------------------------------------------- Facility Lease Agreement (T2), dated as of December 15, 1999, between Collins Trust II, as Owner Lessor, and Collins Holdings EME, LLC, as Facility Lessee. This Facility Lease Agreement differs from Exhibit 10.95 in the following respects: In the Definitions section - Section 1, (T1) is replaced by (T2). In Section 3.5, "Account No. 50356-0" is replaced by "Account No. 50357-0" Facility Lease Agreement (T3), dated as of December 15, 1999, between Collins Trust III, as Owner Lessor, and Collins Holdings EME, LLC, as Facility Lessee. This Facility Lease Agreement differs from Exhibit 10.95 in the following respects: In the Definitions section- Section 1, (T1) is replaced by (T3). In Section 3.5, "Account No. 50356-0" is replaced by "Account No. 50358-0" Facility Lease Agreement (T4), dated as of December 15, 1999, between Collins Trust IV, as Owner Lessor, and Collins Holdings EME, LLC, as Facility Lessee. This Facility Lease Agreement differs from Exhibit 10.95 in the following respects: In the Definitions section - Section 1, (T1) is replaced by (T4). In Section 3.5, "Account No. 50356-0" is replaced by "Account No. 50359-0" EX-10.96 34 a2031364zex-10_96.txt EXHIBIT 10.96 EXHIBIT 10.96 EXECUTION COPY AMENDMENT ONE AMENDMENT ONE (this "AMENDMENT") dated as of June 23, 2000 by and between Collins Trust I (the "OWNER LESSOR") and Collins Holdings EME, LLC (the "FACILITY LESSEE"). WHEREAS, the Owner Lessor and the Facility Lessee have entered into that certain Facility Lease Agreement (T1), dated as of December 15, 1999 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions thereof, the "FACILITY LEASE"). WHEREAS, the Owner Lessor, the Facility Lessee, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A. have entered into that certain Participation Agreement, dated as of December 15, 1999 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions thereof, the "PARTICIPATION AGREEMENT"). WHEREAS, Midwest desires to enter into the Synthetic Lease Transaction; WHEREAS, Midwest has requested, and the Owner Lessor and the Facility Lessee have agreed, to amend and waive certain provisions of the Facility Lease so as to permit the Synthetic Lease Transaction; and WHEREAS, Midwest has requested, and the other parties to the Participation Agreement have agreed, in that certain Amendment Two, dated as of June 23, 2000, by and among the parties to the Participation Agreement, ("AMENDMENT TWO TO THE PARTICIPATION AGREEMENT"), to amend and waive certain provisions of the Participation Agreement so as to permit the Synthetic Lease Transaction; NOW, THEREFORE, the parties hereto agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment, terms defined in the Facility Lease are used herein (and in the introductions and recitals hereto) as defined therein. Section 2. AMENDMENT TO THE FACILITY LEASE. Subject to the satisfaction of the conditions precedent specified in Section 3 below, but effective as of the Amendment Effective Date, the Facility Lease shall be amended as follows: (a) SECTION 16(h) of the Facility Lease shall be amended by inserting the following phrase immediately after the phrase "but excluding obligations arising under the Operative Documents" in the second line of SECTION 16(h) of the Facility Lease: ", Synthetic Lease Liabilities". (b) SECTION 16 of the Facility Lease shall be amended by adding Section 16(u) to the Facility Lease as follows: "(u) The Synthetic Lease Trust shall have commenced to exercise remedies in accordance with Section 15 of the Synthetic Lease to terminate the Synthetic Lease and repossess any of the Synthetic Lease Assets.". Section 3. CONDITIONS PRECEDENT. This Amendment shall not become effective until the date (the "AMENDMENT EFFECTIVE DATE") on which each of the following conditions precedent has been satisfied: (a) Delivery to the parties hereto of this Amendment duly executed and delivered by each other party hereto; (b) All conditions precedent contained in Section 4 of Amendment Two to the Participation Agreement have been satisfied. Section 4. MISCELLANEOUS. Except as expressly amended hereby, all of the terms and provisions of the Facility Lease are and shall remain in full force and effect. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by 2 signing any such counterpart. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective officers thereunto duly authorized. COLLINS HOLDINGS EME, LLC By: /s/ Debbie L. Keller ------------------------------------------- Name: Debbie L. Keller Title: Vice President Date: July 10, 2000 COLLINS TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ James P. Lawler ------------------------------------------- Name: James P. Lawler Title: Vice President Date: July 10, 2000 EX-10.96-1 35 a2031364zex-10_961.txt EXHIBT 10.96.1 Exhibit 10.96.1 Schedule Identifying Substantially Identical Agreement(s) to Exhibit 10.96 Amendment One, dated as of June 23, 2000, by and between Collins Trust II and Collins Holdings EME Amendment One, dated as of June 23, 2000, by and between Collins Trust III and Collins Holdings EME Amendment One, dated as of June 23, 2000, by and between Collins Trust IV and Collins Holdings EME EX-10.96-2 36 a2031364zex-10_962.txt EXHIBIT 10.96.2 Exhibit 10.96.2 AMENDMENT TWO AMENDMENT TWO (this "AMENDMENT") dated as of August 17, 2000 by and between Collins Trust I (the "OWNER LESSOR") and Collins Holdings EME, LLC (the "FACILITY LESSEE"). WHEREAS, the Owner Lessor and the Facility Lessee have entered into that certain Facility Lease Agreement (T1), dated as of December 15, 1999 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions thereof, the "FACILITY LEASE"). WHEREAS, the Owner Lessor, the Facility Lessee, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A. have entered into that certain Participation Agreement (T1), dated as of December 15, 1999 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions thereof, the "PARTICIPATION AGREEMENT"). WHEREAS, Midwest desires to enter into the Leveraged Lease Transaction; WHEREAS, Midwest has requested, and the Owner Lessor and the Facility Lessee have agreed, to amend and waive certain provisions of the Facility Lease so as to permit the Leveraged Lease Transaction; and WHEREAS, Midwest has requested, and the other parties to the Participation Agreement have agreed, in that certain Amendment Three, dated as of August 17, 2000, by and among the parties to the Participation Agreement, ("AMENDMENT THREE TO THE PARTICIPATION AGREEMENT"), to amend and waive certain provisions of the Participation Agreement so as to permit the Leveraged Lease Transaction; NOW, THEREFORE, the parties hereto agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment, terms defined in the Facility Lease are used herein (and in the introductions and recitals hereto) as defined therein. Section 2. AMENDMENT TO THE FACILITY LEASE. Subject to the satisfaction of the conditions precedent specified in Section 3 below, but effective as of the Amendment Effective Date, the Facility Lease shall be amended as follows: (a) SECTION 16(h) of the Facility Lease shall be amended by inserting the following phrase immediately after the phrase "but excluding obligations arising under the Operative Documents" in the second line of SECTION 16(h) of the Facility Lease: ", Synthetic Lease Liabilities, Powerton/Joliet Lease Liabilities". (b) SECTION 16 of the Facility Lease shall be amended by adding SECTIONS 16(v), 16(w) and 16(x) to the Facility Lease as follows: "(v) any of the Powerton/Joliet Lease Trusts (or the related Lease Indenture Trustee (under, and as defined in the related, Powerton/Joliet Lease Operative Documents) should have commenced to exercise remedies in accordance with Section 17 of the Powerton/Joliet Leases to terminate any of the Powerton/Joliet Leases and repossess any of the Powerton/Joliet Lease Assets. (w) Edison Mission Energy shall fail to make payment or fail to perform its obligations under any Powerton/Joliet Lease Guarantee or any Powerton/Joliet Lease Intercompany Note within five Business Days after any such payment becomes due in accordance with the terms thereof or hereof. (x) any of the Powerton/Joliet Lease Guarantees or the Powerton/Joliet Lease Intercompany Notes is declared unenforceable or is terminated, or Edison Mission Energy or any Powerton/Joliet Trust shall assert that any of the Powerton/Joliet Lease Guarantees or the Powerton/Joliet Lease Intercompany Notes to which it is a party shall no longer be in full force and effect.". Section 3. CONDITIONS PRECEDENT. This Amendment shall not become effective until the date (the "AMENDMENT EFFECTIVE DATE") on which each of the following conditions precedent has been satisfied or will be satisfied contemporaneously with this Amendment becoming effective: 2 (a) Delivery to the parties hereto of this Amendment duly executed and delivered by each other party hereto; (b) All conditions precedent contained in Section 4 of Amendment Three to the Participation Agreement have been satisfied. Section 4. MISCELLANEOUS. Except as expressly amended hereby, all of the terms and provisions of the Facility Lease are and shall remain in full force and effect. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective officers thereunto duly authorized. COLLINS HOLDINGS EME, LLC By: /s/ Maria Litos --------------- Name: Maria Litos Title: Vice President and Assistant Secretary Date: August 24, 2000 COLLINS TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ James P. Lawler ------------------- Name: James P. Lawler Title: Vice President Date: August 24, 2000 EX-10.96-3 37 a2031364zex-10_963.txt EXHIBIT 10.96.3 Exhibit 10.96.3 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 10.96.2 - ----------------------------------------------------------------------------- Amendment Two, dated as of August 17, 2000, by and between Collins Trust II and Collins Holdings EME, LLC Amendment Two, dated as of August 17, 2000, by and between Collins Trust III and Collins Holdings EME, LLC Amendment Two, dated as of August 17, 2000, by and between Collins Trust IV and Collins Holdings EME, LLC EX-10.97 38 a2031364zex-10_97.txt EXHIBIT 10.97 Exhibit 10.97 DRAFTED BY AND, WHEN RECORDED, RETURN TO: Matthew Hartley, Esq. Skadden, Arps, Slate, Meagher and Flom (Illinois) 333 West Wacker Drive Chicago, Illinois 60606 - -------------------------------------------------------------------------------- FACILITY SUBLEASE AGREEMENT (T1) Dated as of December 15, 1999 by and among COLLINS HOLDINGS EME, LLC, as Facility Sublessor, MIDWEST GENERATION, LLC, as Facility Sublessee and COLLINS TRUST I, as Owner Lessor COLLINS STATION FOSSIL-FUEL-FIRED ELECTRIC GENERATING FACILITY ================================================================================ CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE FACILITY SUBLESSOR IN AND TO THIS SUBLEASE AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF THE OWNER LESSOR AND THE OWNER LESSOR HAS ASSIGNED ITS RIGHT, TITLE AND INTEREST IN AND TO SUCH COLLATERAL SECURITY TO CITIBANK, N.A., NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS HOLDER REPRESENTATIVE UNDER A LESSOR LOAN AGREEMENT, DATED AS OF DECEMBER 15, 1999 BETWEEN SAID HOLDER REPRESENTATIVE, AS SECURED PARTY FOR THE BENEFIT OF THE HOLDERS THEREUNDER, MIDWEST FUNDING LLC, AS INITIAL HOLDER, AND THE OWNER LESSOR, AS DEBTOR. SEE PARAGRAPH 4 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF. AS PROVIDED IN PARAGRAPH 4 HEREOF, THIS FACILITY SUBLEASE AGREEMENT CONSTITUTES A MORTGAGE OVER THE SUBLESSOR'S LEASEHOLD ESTATE IN THE UNDIVIDED INTEREST GRANTED BY THE FACILITY LEASE AND OVER THE SUBLESSOR'S LEASEHOLD ESTATE IN THE GROUND INTEREST GRANTED BY THE FACILITY SITE SUBLEASE. Facility Sublease (T1) FACILITY SUBLEASE AGREEMENT (T1) This FACILITY SUBLEASE AGREEMENT (T1), dated as of December 15, 1999 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions hereof, this "FACILITY SUBLEASE"), by and among Collins Holdings EME, LLC, a Delaware limited liability company ("COLLINS HOLDINGS" or the "FACILITY SUBLESSOR"), Midwest Generation, LLC, a Delaware limited liability company ("MIDWEST" or the "FACILITY Sublessee") and Collins Trust I, a Delaware business trust (the "OWNER LESSOR") created for the benefit of Collins Generation I, LLC, a Delaware limited liability company (the "OWNER PARTICIPANT"). WITNESSETH: WHEREAS, the Owner Lessor is governed by the Amended and Restated Trust Agreement, dated as of December 15, 1999, between Wilmington Trust Company (acting thereunder not in its individual capacity but solely as owner trustee, the "OWNER TRUSTEE") and the Owner Participant; WHEREAS, pursuant to the Land Deed and the Bill of Sale and Instrument of Assignment, Midwest has acquired, INTER ALIA, the Facility Site from Commonwealth Edison Company or its successors or assigns ("COMED"), which Facility Site is more particularly described in Exhibit A to the Facility Lease, such Exhibit A being attached to the Facility Lease as a part thereof; WHEREAS, pursuant to the Facility Site Lease, Midwest has leased the Ground Interest to the Owner Lessor; WHEREAS, pursuant to the Facility Site Sublease, the Owner Lessor has leased the Ground Interest to Collins Holdings; WHEREAS, pursuant to the Facility Site Sub-Sublease, Collins Holdings has leased the Ground Interest to Midwest for a term equal to the term of the Facility Lease, including any renewals thereof; WHEREAS, the Facility is located on the Facility Site and is more particularly described in Exhibit B to the Facility Lease, such Exhibit B being attached to the Facility Lease as a part thereof; WHEREAS, pursuant to the Facility Deed and the Bill of Sale, the Owner Lessor has acquired from ComEd a 25% undivided ownership interest in the Facility Facility Sublease (T1) as joint tenant with the other owners of the Facility, with the right to nonexclusive possession of the Facility (the "UNDIVIDED INTEREST"); WHEREAS, the Facility does not include the Facility Site or any part thereof, and no part of the Facility Site is being subleased to the Facility Sublessee hereunder; WHEREAS, pursuant to the Facility Lease, the Owner Trust has leased the Undivided Interest to Collins Holdings for the Basic Lease Term and the Renewal Lease Terms, if any, provided therein; and WHEREAS, pursuant to this Facility Sublease, Collins Holdings will sublease the Undivided Interest to Midwest for the Basic Lease Term and the Renewal Lease Terms, if any, as provided herein. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Capitalized terms used in this Facility Sublease, including the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A to the Participation Agreement (T1), dated as of December 15, 1999 (the "PARTICIPATION AGREEMENT"), among the Facility Sublessor, the Owner Lessor, the Owner Trustee, the Owner Participant, Edison Mission Midwest Holdings Co. ("HOLDINGS"), Midwest, Midwest Funding LLC, Citibank, N.A., as Holder Representative, Bayerische Landesbank International S.A., as Midwest LC Issuer (as defined therein) and Bayerische Landesbank Girozentrale, as RCE LC Issuer (as defined therein) unless the context hereof shall otherwise require. The general provisions of Appendix A to the Participation Agreement shall apply to the terms used in this Facility Sublease and not specifically defined herein. 2. SUBLEASE OF THE UNDIVIDED INTEREST. The Facility Sublessor hereby subleases the Undivided Interest, upon the terms and conditions set forth herein, to the Facility Sublessee for a term coterminous with that of the Facility Lease. 3. INCORPORATION OF FACILITY LEASE HEREIN. Except as set forth herein to the contrary, the terms and provisions of the Facility Lease are incorporated by reference herein in their entirety MUTATIS MUTANDIS and as in effect from time to time. Without limiting the generality of the foregoing, (i) the Facility Sublessee hereunder shall have rights and obligations under this Facility Sublease identical to the rights and obligations of the Facility Lessee under the Facility Lease, as in effect from time to time and (ii) the Facility Sublessor hereunder shall have rights and obligations under this Facility Sublease identical to the rights and obligations of the Owner Lessor under the Facility Lease, as in effect from time to time. All references in the Facility Sublease (T1) 2 Operative Documents to terms and provisions of the Facility Sublease shall be references to the correlative terms and provisions of the Facility Lease as incorporated by reference herein. 4. GRANTING CLAUSE. In order to secure the prompt payment of Rent and all other amounts from time to time due or to become due from the Facility Lessee to the Owner Lessor under the Facility Lease, and the performance and observance by the Facility Lessee of all the agreements, covenants and provisions contained in the Facility Lease, and for the uses and purposes and subject to the terms and provisions of the Facility Lease, and in consideration of the premises and of the covenants contained in the Facility Lease, and of the acceptance of the Facility Lease by the Owner Lessor, the Facility Sublessor has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto and for the security and benefit of, the Owner Lessor, a first priority security interest (the "SUBLESSOR SECURITY INTEREST") in all estate, right, title and interest now held or hereafter acquired by the Facility Sublessor in, to and under the following described property, rights, interests and privileges, whether now or hereafter acquired (such property, rights and privileges as are conveyed pursuant to this granting clause and the rights to enforce and collect the sums as set forth herein, being hereinafter referred to as the "SUBLESSOR COLLATERAL"): (i) this Facility Sublease and all payments of any kind by the Facility Sublessee hereunder, the Facility Sublessor's leasehold estate in the Undivided Interest granted by the Facility Lease, the Facility Sublessor's leasehold estate in the Ground Interest granted by the Facility Site Sublease, the Facility Site Sub-Sublease and the Sub-Sublease Ground Interest thereunder and all payments of any kind by the Facility Site Sub-Sublessee thereunder (including, without limitation, all Sub-Sublease Ground Rent); the Collins Facility Operating Agreements; and all and any interest in any property now or hereafter granted or required to be granted to the Facility Sublessor pursuant to any provision of this Facility Sublease or the Facility Site Sub-Sublease (the documents specifically referred to above in this paragraph (i) are collectively referred to as the "SUBLESSOR COLLATERAL DOCUMENTS"), including, without limitation, (x) all rights of the Facility Sublessor or the Facility Sublessee (to the extent assigned by the Facility Sublessee to the Facility Sublessor) to receive any payments or other amounts or to exercise any election or option or to make any decision or determination or to give or receive any notice, consent, waiver or approval or to make any demand or to take any other action under or in respect of any such document, as well as all the rights, powers and remedies on the part of the Facility Sublessor or the Facility Sublessee (to the extent assigned by the Facility Sublessee to the Facility Sublessor), whether acting under any such document or by statute or at law or in equity or otherwise, arising out of any Material Sublease Default Facility Sublease (T1) 3 or Sublease Event of Default and (y) any right to restitution from the Facility Sublessee, any further sublessee or any other Person in respect of any determination of invalidity of any such document; (ii) all rents, issues, profits, revenues, proceeds, damages, claims and other income from the property described in this Granting Clause; (iii) all damages resulting from breach or termination of any of the Sublessor Collateral Documents or arising from bankruptcy, insolvency or other similar proceedings involving any party to the Sublessor Collateral Documents; and (iv) all proceeds of the foregoing. In respect of the mortgage granted by the Facility Sublessor pursuant to this paragraph 4, the Owner Lessor, as mortgagee, will have all remedies available to it under law and equity to enforce its rights hereunder and otherwise secured hereby. Concurrently with the delivery hereof, the Facility Sublessor is delivering to the Owner Lessor the original executed counterpart of the Facility Sublease to which a chattel paper receipt is attached and the Owner Lessor is delivering to the Holder Representative such original counterpart of the Facility Sublease to which a chattel paper receipt is attached. 5. PERFORMANCE BY FACILITY SUBLESSEE HEREUNDER. (a) Performance by the Facility Sublessee under this Facility Sublease shall constitute performance by the Facility Lessee under the Facility Lease. The Facility Lessee shall be discharged from performance under the Facility Lease to the extent of performance by the Facility Sublessee under the Facility Sublease. The Facility Sublessee shall perform its obligations hereunder directly for the benefit of the Owner Lessor and the Owner Lessor shall be entitled directly to enforce, to the exclusion of the Facility Sublessor, all rights which the Facility Sublessor has against the Facility Sublessee in its own name or in the name of the Facility Sublessor. (b) Any notices, elections or other actions that may be taken by the Facility Lessee under the Facility Lease may be taken by the Facility Sublessee hereunder. Until the time that this Facility Sublease shall have been terminated in accordance with its terms, all notices delivered by the Owner Lessor to the Facility Lessee pursuant to the Facility Lease shall be delivered at the same time to the Facility Sublessee hereunder and any such notice shall not be effective under the Facility Lease until so delivered. 6. CONSENT TO ASSIGNMENT BY FACILITY SUBLESSOR; ENFORCEMENT BY OWNER LESSOR. The Facility Sublessee consents to the assignment of, and granting of a Lien Facility Sublease (T1) 4 and security interest to the Owner Lessor in, the Sublessor Collateral, as set forth above, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent of the Facility Sublessee under any other circumstances. The Facility Sublessee acknowledges the grant of the Sublessor Security Interest in the Sublessor Collateral to the Owner Lessor and expressly agrees that the Owner Lessor shall not be required to, and the Facility Sublessee hereby expressly waives any and all rights to require the Owner Lessor to seek to, enforce any remedies against the Facility Lessee or with respect to any security interest, lien or encumbrance granted to the Owner Lessor by the Facility Lessee. The Facility Sublessee acknowledges receipt of copies of the Facility Lease. Each of the Facility Sublessee and Facility Sublessor acknowledges and consents to the assignment to the Holder Representative (for the benefit of the Holders) by the Owner Lessor of all of the Owner Lessor's right, title and interest in, to and under the Sublessor Collateral as provided in the Granting Clause of the Lessor Loan Agreement. The Facility Sublessor further acknowledges and consents to any subsequent assignments of the Sublessor Collateral by the Holders or the Holder Representative. Upon an occurrence and continuation of the Lessor Loan Event of Default (as defined in the Lessor Loan Agreement), the Holder Representative shall be entitled to exercise the remedies provided for in the Lessor Loan Agreement, including without limitation, foreclosure , as provide in Section 4.04 of the Lessor Loan Agreement, in accordance with the terms thereof and applicable Illinois foreclosure laws. TO THE EXTENT, IF ANY, THAT THIS FACILITY SUBLEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS FACILITY SUBLEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE HOLDER REPRESENTATIVE ON THE SIGNATURE PAGE THEREOF. 7. MANNER OF PAYMENTS. All Rent and all Termination Value payments payable to the Facility Sublessor shall be paid by the Facility Sublessee to the Owner Lessor at its account at Wilmington Trust Company (Account No. 50356-0), or to such other place as the Owner Lessor shall notify the Facility Sublessee in writing; PROVIDED, HOWEVER, that so long as the Lessor Notes are outstanding and the Lien created under the Lessor Security Documents has not been discharged, the Owner Lessor hereby irrevocably directs (it being agreed and understood that such direction shall be deemed to have been revoked after the Lien created under the Lessor Security Documents shall have been fully discharged in accordance with its terms), and the Facility Sublessee agrees, that all payments of Rent and all Termination Value payments payable to the Owner Lessor shall be paid by "wire" transfer directly to the Holder Representative's Account or to such other place as the Holder Representative shall notify the Facility Sublessee in writing pursuant to the Participation Facility Sublease (T1) 5 Agreement; PROVIDED, FURTHER, that so long as the Initial Lessor Notes are outstanding, all Rent payments shall be deposited into the Rent Payment Account on the Business Day immediately preceding the Rent Payment Date or Additional Rent Payment Date, as the case may be. On each Rent Payment Date or Additional Rent Payment Date, as the case may be, Rent shall be paid by transferring the funds on deposit in the Rent Payment Account in the amount equal to the Rent payment (in the amount notified by the Facility Sublessee to the Owner Lessor and the Holder Representative) into the Holder Representative's Account. 8. NOTICE OF ACTION UPON FACILITY SUBLEASE EVENT OF DEFAULT. The Owner Lessor and the Holder Representative, as the case may be, shall give the Facility Sublessee, the Owner Participant, the Owner Lessor or the Holder Representative, as the case may be, not less than 30 days' prior written notice of the date on or after which the Holder Representative or the Owner Lessor intends to exercise remedies under paragraph 6 hereof. 9. GOVERNING LAW. This Facility Sublease was negotiated in the State of New York which the Facility Sublessee and the Facility Sublessor agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and, in accordance with Section 5-1401 of the New York General Obligations Law, in all respects, including matters of construction, validity and performance, this Facility Sublease shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America, EXCEPT that the provisions for the creation and enforcement of the leasehold interest or mortgage lien created hereby shall be governed by and construed according to the law of the state in which the Facility is located, it being understood that, to the fullest extent permitted by the law of the state in which the Facility is located, the law of the State of New York shall govern the validity and the enforceability of the representations, warranties, covenants and obligations of the Facility Sublessee and the Facility Sublessor under this Facility Sublease and all other Operative Documents and all of the indebtedness arising hereunder or thereunder. To the fullest extent permitted by law, the Facility Sublessee and the Facility Sublessor hereby unconditionally and irrevocably waive any claim to assert that the law of any other jurisdiction governs this Facility Sublease, except as expressly otherwise provided above. 10. NOTICES. All notices and other communications provided to any party hereto under this Agreement shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth below or at such other address or facsimile number as may be designated by such party in a written notice to the other party: To Facility Sublessee: Midwest Generation, LLC One Financial Place Facility Sublease (T1) 6 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Facsimile: (312) 583-6111 Attn: Georgia R. Nelson To Facility Sublessor: Collins Holdings EME, LLC One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Facsimile: (312) 583-6111 Attn: Georgia R. Nelson COPY TO: Edison Mission Midwest Holdings Co. 18101 Von Karman Avenue, Suite 1700 Irvine, CA 92612 Facsimile: (949) 752-1420 Attn: General Counsel To Owner Lessor: Collins Trust I c/o Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Facsimile: (302) 651-8882 Attention: Corporate Trust Administration Any notice, if mailed and properly addressed with postage prepaid shall be effective five (5) 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). 11. LIMITATION ON LIABILITY. It is expressly understood and agreed by the parties hereto that (a) this Facility Sublease is executed and delivered by the Trust Company not individually or personally but solely as the Owner Trustee of the Owner Lessor under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it pursuant thereto, (b) each of the representations, undertakings and agreements herein made on the part of the Owner Lessor is made and intended not as personal representations, undertakings and agreements by the Trust Company, but is made and intended for the purpose for binding only the Owner Lessor, (c) nothing herein contained shall be construed as creating any liability on the Trust Company, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly Facility Sublease (T1) 7 waived by the parties hereto or by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall the Trust Company be personally liable for the payment of any indebtedness or expenses of the Owner Lessor or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Owner Lessor under this Facility Sublease. Facility Sublease (T1) 8 IN WITNESS WHEREOF, the Facility Sublessor, the Facility Sublessee and the Owner Lessor have caused this Facility Sublease to be duly executed and delivered under seal by their respective officers thereunto duly authorized. COLLINS TRUST I By: Wilmington Trust Company, not in its individual capacity, but solely as Owner Trustee hereunder By: /s/ KATHLEEN A. PEDELINI ------------------------- Name: Kathleen A. Pedelini Title: Authorized Signer Date: December 15, 1999 COLLINS HOLDINGS EME, LLC By: /s/ JOHN P. FINNERAN, JR. --------------------------- Name: John P. Finneran, Jr. Title: Vice President Date: December 15, 1999 MIDWEST GENERATION, LLC By: /s/ JOHN P. FINNERAN, JR. ---------------------------- Name: John P. Finneran, Jr. Title: Vice President Date: December 15, 1999 Facility Sublease (T1) 9 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this 15 day of December, 1999, by KATHLEEN A. PEDELINI, AUTHORIZED SIGNER, of WILMINGTON TRUST COMPANY, a Delaware banking corporation, to be the free act and deed on behalf of the banking corporation as the Owner Trustee under the AMENDED AND RESTATED TRUST AGREEMENT (T1) dated as of December 15, 1999. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ ANN L. LINK --------------------------- Notary Public My Commission Expires AUGUST 21, 2001 AFFIX SEAL - ------------------------------ Facility Sublease (T1) 10 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On the 15th day of December, 1999, before me personally appears JOHN P. FINNERAN, JR., personally known and acknowledged himself to me to be the VICE PRESIDENT, of COLLINS HOLDINGS EME, LLC, a Delaware limited liability company, and that as such officer, being duly authorized to do so pursuant to its bylaws or a resolution of its board of directors, executed and acknowledged the foregoing instrument for the purposes therein contained, by signing the name of the limited liability liability company, as such officer, as his free and voluntary act and deed and the free and voluntary act and of said officer of said limited liability company. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ ANN L. LINK -------------------------- Notary Public My Commission Expires AUGUST 21, 2001 AFFIX SEAL - ------------------------------ Facility Sublease (T1) 11 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On the 15th day of December, 1999, before me personally appears JOHN P. FINNERAN, JR., personally known and acknowledged himself to me to be the VICE PRESIDENT, of MIDWEST GENERATION, LLC, a Delaware limited liability company, and that as such officer, being duly authorized to do so pursuant to its bylaws or a resolution of its board of directors, executed and acknowledged the foregoing instrument for the purposes therein contained, by signing the name of the limited liability liability company, as such officer, as his free and voluntary act and deed and the free and voluntary act and of said officer of said limited liability company. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ ANN L. LINK --------------------------- Notary Public My Commission Expires AUGUST 21, 2001 AFFIX SEAL - ------------------------------ Facility Sublease (T1) 12 EX-10.97-1 39 a2031364zex-10_971.txt EXHIBIT 10.97.1 Exhibit 10.97.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 10.97 Facility Sublease Agreement (T2), dated as of December 15, 1999, by and among Collins Holdings EME, LLC, Midwest Generation, LLC and Collins Trust II. This Facility Sublease Agreement differs from Exhibit 10.97 in the following respects: In paragraph 1 - Definitions, "(T1)" is replaced by "(T2)." Facility Sublease Agreement (T3), dated as of December 15, 1999, by and among Collins Holdings EME, LLC, Midwest Generation, LLC and Collins Trust III. This Facility Sublease Agreement differs from Exhibit 10.97 in the following respects: In paragraph 1 - Definitions, "(T1)" is replaced by "(T3)." Facility Sublease Agreement (T4), dated as of December 15, 1999, by and among Collins Holdings EME, LLC, Midwest Generation, LLC and Collins Trust IV. This Facility Sublease Agreement differs from Exhibit 10.97 in the following respects: In paragraph 1 - Definitions, "(T1)" is replaced by "(T4)." EX-10.98 40 a2031364zex-10_98.txt EXHIBIT 10.98 Exhibit 10.98 - -------------------------------------------------------------------------------- PARTICIPATION AGREEMENT (T1) Dated as of December 15, 1999 among COLLINS HOLDINGS EME, LLC COLLINS TRUST I, WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee, COLLINS GENERATION I, LLC, EDISON MISSION MIDWEST HOLDINGS CO., MIDWEST GENERATION, LLC, MIDWEST FUNDING LLC, BAYERISCHE LANDESBANK INTERNATIONAL S.A., as issuer of the Midwest Letter of Credit, BAYERISCHE LANDESBANK GIROZENTRALE, as issuer of the RCE Letter of Credit and CITIBANK, N.A., as Holder Representative COLLINS STATION FOSSIL FUEL-FIRED ELECTRIC GENERATING FACILITY - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- SECTION I DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT ........................-3- SECTION II PARTICIPATION; CLOSING DATE; TRANSACTION COSTS......................................-4- SECTION 2.1 AGREEMENTS TO PARTICIPATE...........................................-4- SECTION 2.2 CLOSING DATE; PROCEDURE FOR PARTICIPATION...........................-6- SECTION 2.3 TRANSACTION COSTS...................................................-7- SECTION III REPRESENTATIONS AND WARRANTIES......................................................-7- SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF MIDWEST...........................-7- SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF HOLDINGS.........................-14- SECTION 3.3 REPRESENTATIONS AND WARRANTIES OF COLLINS HOLDINGS.................-18- SECTION 3.4 REPRESENTATIONS AND WARRANTIES OF THE OWNER LESSOR.................-20- SECTION 3.5 REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE AND THE TRUST COMPANY..............................................-23- SECTION 3.6 REPRESENTATIONS AND WARRANTIES OF THE OWNER PARTICIPANT............-25- SECTION IV CLOSING CONDITIONS.................................................................-27- SECTION 4.1 OPERATIVE DOCUMENTS................................................-27- SECTION 4.2 ACQUISITION OF THE FACILITY AND FACILITY SITE......................-28- SECTION 4.3 THE LESSOR NOTES...................................................-28- SECTION 4.4 THE FUNDING LLC NOTES..............................................-28- SECTION 4.5 PURCHASE AGREEMENT.................................................-28- SECTION 4.6 OTHER DOCUMENTS....................................................-28- SECTION 4.7 LETTERS OF CREDIT..................................................-28- SECTION 4.8 REPRESENTATIONS AND WARRANTIES.....................................-28- SECTION 4.9 DEFAULTS, EVENTS OF DEFAULT, EVENTS OF LOSS........................-29- SECTION 4.10 CONSENTS...........................................................-29- SECTION 4.11 GOVERNMENTAL ACTIONS...............................................-29- SECTION 4.12 INSURANCE..........................................................-29- SECTION 4.13 ENGINEERING REPORT.................................................-29- SECTION 4.14 ENVIRONMENTAL REPORT...............................................-29- SECTION 4.15 REPORT OF ENVIRONMENTAL CONSULTANT.................................-29- SECTION 4.16 APPRAISAL; CONDITION OF THE FACILITY...............................-30- SECTION 4.17 FUEL REPORT........................................................-30- PARTICIPATION AGREEMENT (T1) SECTION 4.18 MARKET REPORT......................................................-30- SECTION 4.19 OPINION WITH RESPECT TO CERTAIN TAX ASPECTS........................-30- SECTION 4.20 RATING.............................................................-30- SECTION 4.21 OPINIONS OF COUNSEL................................................-30- SECTION 4.22 RECORDINGS AND FILINGS.............................................-31- SECTION 4.23 TAXES..............................................................-31- SECTION 4.24 NO CHANGES IN REQUIREMENTS OF LAW..................................-31- SECTION 4.25 REGISTERED AGENT FOR MIDWEST, COLLINS HOLDINGS AND HOLDINGS.......................................................-31- SECTION 4.26 FAS 13.............................................................-31- SECTION 4.27 RENT ADJUSTMENTS...................................................-31- SECTION 4.28 TITLE INSURANCE....................................................-32- SECTION 4.29 PARENT GUARANTY....................................................-32- SECTION 4.30 SURVEY.............................................................-32- SECTION 4.31 MIDWEST LEASE GUARANTEES...........................................-32- SECTION 4.32 HOLDINGS GUARANTEE.................................................-32- SECTION 4.33 NO MATERIAL ADVERSE CHANGE.........................................-32- SECTION V AFFIRMATIVE COVENANTS OF MIDWEST...................................................-32- SECTION 5.1 DELIVERY OF CERTAIN INFORMATION....................................-32- SECTION 5.2 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS......................-34- SECTION 5.3 COMPLIANCE WITH REQUIREMENTS OF LAW AND CONTRACTUAL OBLIGATIONS............................................-34- SECTION 5.4 MAINTENANCE OF PROPERTIES..........................................-34- SECTION 5.5 INSURANCE..........................................................-34- SECTION 5.6 ENVIRONMENTAL COVENANT.............................................-35- SECTION 5.7 ENVIRONMENTAL COVENANT WITH RESPECT TO THE FACILITY AND THE FACILITY SITE..............................................-35- SECTION 5.8 FURTHER ASSURANCES.................................................-36- SECTION VI NEGATIVE COVENANTS OF MIDWEST......................................................-36- SECTION 6.1 MERGER, CONSOLIDATION..............................................-36- SECTION 6.2 SALE OF ASSETS.....................................................-37- SECTION 6.3 MERGER AND CONSOLIDATION...........................................-37- SECTION 6.4 CHANGES IN LEGAL FORM OR BUSINESS..................................-38- SECTION VII AFFIRMATIVE COVENANTS OF HOLDINGS..................................................-38- SECTION 7.1 FINANCIAL INFORMATION, REPORTS, NOTICES............................-38- SECTION 7.2 EXISTENCE; CONDUCT OF BUSINESS.....................................-41- SECTION 7.3 COMPLIANCE WITH REQUIREMENTS OF LAW AND CONTRACTUAL OBLIGATIONS............................................-41- SECTION 7.4 BOOKS AND RECORDS; INSPECTION RIGHTS...............................-41- SECTION 7.5 IMPLEMENTATION OF YEAR 2000 PLAN...................................-42- SECTION 7.6 FURTHER ASSURANCES.................................................-42- SECTION VIII NEGATIVE COVENANTS OF HOLDINGS.....................................................-42- SECTION 8.1 INDEBTEDNESS.......................................................-42- SECTION 8.2 LIENS..............................................................-44- SECTION 8.3 MERGER, CONSOLIDATION, SALE OF SUBSTANTIALLY ALL ASSETS............-45- SECTION 8.4 SALE OF ASSETS.....................................................-46- SECTION 8.5 INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND ACQUISITIONS.......................................................-46- SECTION 8.6 TRANSACTIONS WITH AFFILIATES.......................................-47- SECTION 8.7 AMENDMENT, WAIVER OR ASSIGNMENT OF CERTAIN DOCUMENTS...............-47- SECTION 8.8 SPECULATIVE TRANSACTIONS...........................................-47- SECTION 8.9 RESTRICTIVE AGREEMENTS.............................................-47- SECTION 8.10 CHANGES IN LEGAL FORM OR BUSINESS..................................-47- SECTION 8.11 CAPITAL EXPENDITURES...............................................-47- SECTION 8.12 DIVIDENDS AND OTHER PAYMENTS.......................................-48- SECTION IX AFFIRMATIVE COVENANTS OF COLLINS HOLDINGS..........................................-49- SECTION 9.1 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS......................-49- SECTION 9.2 COMPLIANCE WITH REQUIREMENTS OF LAW AND CONTRACTUAL OBLIGATIONS............................................-49- SECTION 9.3 MAINTENANCE OF PROPERTIES..........................................-49- SECTION 9.4 NOTICES OF MATERIAL EVENTS.........................................-49- SECTION 9.5 FURTHER ASSURANCES.................................................-51- SECTION X NEGATIVE COVENANTS OF COLLINS HOLDINGS.............................................-51- SECTION 10.1 SOLE PURPOSE NATURE................................................-51- SECTION 10.2 INDEBTEDNESS.......................................................-51- SECTION 10.3 LIENS..............................................................-51- SECTION 10.4 PROHIBITION OF FUNDAMENTAL CHANGES.................................-51- SECTION 10.5 INVESTMENTS........................................................-52- SECTION 10.6 BANKRUPTCY.........................................................-52- SECTION XI COVENANTS OF THE TRUST COMPANY, THE OWNER TRUSTEE AND THE OWNER LESSOR.......................................................-52- SECTION 11.1 COMPLIANCE WITH THE TRUST AGREEMENT................................-52- SECTION 11.2 OWNER LESSOR'S LIENS...............................................-52- SECTION 11.3 AMENDMENTS TO OPERATIVE DOCUMENTS..................................-52- SECTION 11.4 TRANSFER OF THE OWNER LESSOR'S INTEREST............................-53- SECTION 11.5 OWNER LESSOR; TRUST ESTATE.........................................-53- SECTION 11.6 LIMITATION ON INDEBTEDNESS AND ACTIONS.............................-53- SECTION 11.7 CHANGE OF LOCATION.................................................-53- SECTION 11.8 BANKRUPTCY OF TRUST................................................-54- SECTION XII COVENANTS OF THE OWNER PARTICIPANT.................................................-54- SECTION 12.1 RESTRICTIONS ON TRANSFER OF BENEFICIAL INTEREST....................-54- SECTION 12.2 OWNER PARTICIPANT'S LIENS..........................................-56- SECTION 12.3 AMENDMENTS OR REVOCATION OF TRUST AGREEMENT........................-56- SECTION 12.4 PROHIBITION ON FUNDAMENTAL CHANGES.................................-57- SECTION 12.5 BANKRUPTCY FILINGS.................................................-57- SECTION 12.6 INSTRUCTIONS.......................................................-57- SECTION 12.7 APPOINTMENT OF SUCCESSOR OWNER TRUSTEE.............................-57- SECTION 12.8 COOPERATION........................................................-57- SECTION XIII COVENANTS OF THE HOLDER REPRESENTATIVE.............................................-58- SECTION 13.1 THE HOLDER REPRESENTATIVE'S LIENS..................................-58- SECTION XIV MIDWEST'S INDEMNIFICATIONS.........................................................-58- SECTION 14.1 GENERAL INDEMNITY..................................................-58- SECTION 14.2 GENERAL TAX INDEMNITY..............................................-65- SECTION XV MIDWEST'S AND COLLINS HOLDINGS' RIGHT OF QUIET ENJOYMENT..........................................................................-75- SECTION XVI SUPPLEMENTAL FINANCING OF IMPROVEMENTS; OPTIONAL REFINANCINGS......................-75- SECTION 16.1 FINANCING IMPROVEMENTS.............................................-75- SECTION 16.2 OPTIONAL REFINANCING OF LESSOR LOAN................................-78- SECTION 16.3 LEVEL 7 REFINANCING................................................-80- SECTION 16.4 COOPERATION........................................................-80- SECTION XVII PRE-CLOSING ADJUSTMENTS TO BASIC LEASE RENT AND TERMINATION VALUE..............................................................-81- SECTION XVIII RIGHT OF FIRST REFUSAL; RIGHT OF FIRST OFFER.......................................-82- SECTION 18.1 RIGHT OF FIRST OFFER...............................................-82- SECTION 18.2 RIGHT OF FIRST REFUSAL.............................................-83- SPECIAL LESSEE TRANSFER..................................................................................-84- SECTION XX MIDWEST'S DIRECTIONS...............................................................-85- SECTION XXI AGREEMENT WITH RESPECT TO COLLINS HOLDINGS.........................................-86- SECTION XXII MISCELLANEOUS......................................................................-86- SECTION 22.1 CONSENTS.........................................................-86- SECTION 22.2 SUCCESSOR OWNER LESSOR...........................................-86- SECTION 22.3 BANKRUPTCY OF TRUST ESTATE.......................................-86- SECTION 22.4 AMENDMENTS AND WAIVERS...........................................-87- SECTION 22.5 NOTICES..........................................................-87- SECTION 22.6 SURVIVAL.........................................................-89- SECTION 22.7 SUCCESSORS AND ASSIGNS...........................................-89- SECTION 22.8 GOVERNING LAW....................................................-89- SECTION 22.9 SEVERABILITY.....................................................-90- SECTION 22.10 COUNTERPARTS.....................................................-90- SECTION 22.11 HEADINGS AND TABLE OF CONTENTS...................................-90- SECTION 22.12 LIMITATION OF LIABILITY..........................................-90- SECTION 22.13 CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY, PROCESS AGENT....................................................-91- SECTION 22.14 FURTHER ASSURANCES...............................................-92- SECTION 22.15 EFFECTIVENESS....................................................-92- SECTION 22.16 MEASURING LIFE...................................................-92- SECTION 22.17 NO PARTNERSHIP, ETC..............................................-93- SECTION 22.18 RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTEREST..................-93- APPENDICES: Appendix A Definitions EXHIBITS: Exhibit A Form of Land Deed Exhibit A1 Letter instructions regarding transfer of Assets Exhibit B Form of Facility Deed Exhibit C Form of Facility Lease EXHIBIT A: Description of Facility Site EXHIBIT B: Description of Facility EXHIBIT F: Collins Improvements SCHEDULE 1-1: Amount of Basic Lease Rent and Equity Portion of Basic Lease Rent SCHEDULE 1-2: Allocation of Basic Lease Rent SCHEDULE 1-3: 467 Rent Allocation SCHEDULE 2: Termination Dates and Termination Values and Equity Portion of Termination Values Exhibit D Form of Memorandum of the Facility Lease EXHIBIT A: Description of Facility EXHIBIT B: Description of Site EXHIBIT D-1: Form of Facility Site Lease Exhibit E Form of Facility Sublease Exhibit F Form of Facility Site Lease Exhibit G Form of Memorandum of the Facility Site Lease Exhibit H Form of Facility Site Sublease Exhibit I Form of Memorandum of the Facility Site Sublease Exhibit J Form of Facility Site Sub-Sublease Exhibit K Form of Memorandum of the Facility Site Sub-Sublease Exhibit L Form of Lessor Loan Agreement Exhibit M Form of Lessor Notes Exhibit N Form of Mortgage Exhibit O Form of Pledge Agreement (MGE) Exhibit P Form of Pledge Agreement (Holdings) Exhibit Q Form of Pledge Agreement (EMOC) Exhibit R Form of Intercreditor Agreement Exhibit S Form of APA and Finance Facility Exhibit T Form of Funding LLC Notes Exhibit U Form of Trust Agreement Exhibit V Form of OP LLC Agreement Exhibit W Form of Tax Indemnity Agreement Exhibit X Form of Purchase Agreement Exhibit Y Form of Owner Participant Guaranty Exhibit Z Form of Midwest OP Lease Guaranty Exhibit AA Form of Midwest Lessor Lease Guaranty Exhibit BB Form of Holdings Guarantee Exhibit CC Form of Midwest Letter of Credit Exhibit DD Form of Midwest Reimbursement Agreement Exhibit EE Form of RCE Letter of Credit Exhibit FF Form of RCE Reimbursement Agreement Exhibit GG Form of RCE Agreement Exhibit HH Letter of Credit Guarantee Exhibit II Form of Collins Holdings, LLC Agreement Exhibit JJ Opinion of SASM&F, special counsel to Midwest, Collins Holdings and Holdings Exhibit KK Opinion of Hopkins & Sutter, special Illinois regulatory counsel to Midwest, Collins Holdings and Holdings Exhibit LL Opinion of Hunton & Williams, special New York Counsel to the Owner Participant and the OP Guarantor Exhibit MM Opinion of Mary Ellen Olson, counsel to Midwest, Collins Holdings, Holdings and the Owner Participant Exhibit NN Opinions of Richards Layton & Finger, P.A., counsel to the Owner Lessor and the Owner Trustee Exhibit OO Opinion of Kelley Drye, special counsel to the Holder Representative Exhibit PP Opinion of Milbank, Tweed, Hadley & McCloy, LLP, special counsel to the Securitization Company and the APA Purchasers Exhibit QQ Opinion of Van Ness Feldman, special federal regulatory counsel to Midwest, Collins Holdings and Holdings Exhibit RR Form of Assignment and Assumption Agreement Exhibit SS List of Competitors SCHEDULES: Schedule 3.1(c) Midwest Governmental Approvals Part B - Non-final Approvals Part C - Threatened Approvals Schedule 3.1(d) Midwest Disclosures Schedule 3.2(d) Holdings Governmental Approvals Part B - Non-final Approvals Part C - Threatened Approvals Schedule 3.2(e) Holdings Disclosures Schedule 3.3(d) Collins Holdings Governmental Approvals Part B - Non-final Approvals Part C - Threatened Approvals Schedule 4.22 Recordings and Filings Schedule 12.1(c) Pricing Assumptions Attachment A Attachment A to Schedules 3.1(c), 3.2(d) and 3.3(d)
PARTICIPATION AGREEMENT (T1) This PARTICIPATION AGREEMENT (T1), dated as of December 15, 1999 (as amended, supplemented or otherwise modified from time to time, in accordance with the provisions hereof, this "PARTICIPATION AGREEMENT" or this "AGREEMENT"), among, (i) COLLINS HOLDINGS EME, LLC, a Delaware limited liability company as the Facility Lessee and as the Facility Sublessor (in, together with its successors and permitted assigns, called "COLLINS HOLDINGS"), (ii) COLLINS TRUST I, a Delaware business trust created for the benefit of Collins Generation I, LLC, as the Facility Lessor and as the Ground Lessee (herein, together with its successors and permitted assigns, called the "OWNER LESSOR"), (iii) WILMINGTON TRUST COMPANY, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, except as expressly provided herein, but solely as trustee under the Trust Agreement (herein in its capacity as a trustee under the Trust Agreement, together with its successors and permitted assigns, called the "OWNER TRUSTEE", and herein in its individual capacity, together with its successors and permitted assigns, called the "TRUST COMPANY"), (iv) COLLINS GENERATION I, LLC, a Delaware limited liability company (herein, together with its successors and permitted assigns, called the "OWNER PARTICIPANT"), (v) EDISON MISSION MIDWEST HOLDING CO., a corporation organized under the laws of the State of Delaware (herein, together with its successors and permitted assigns, called "HOLDINGS", (vi) MIDWEST GENERATION, LLC, a Delaware limited liability company, as the Facility Sublessee and as the Ground Lessor (herein, together with its successors and permitted assigns, called "MIDWEST"), (vii) MIDWEST FUNDING LLC, a Delaware limited liability company, as a lender (herein, together with its successors and permitted assigns, called the "LENDER") (viii) BAYERISCHE LANDESBANK INTERNATIONAL S.A., as issuer of the Midwest Letter of Credit (herein, together with its Successors, called the "MIDWEST LC ISSUER", (ix) BAYERISCHE LANDESBANK GIROZENTRALE, as issuer of the RCE Letter of Credit (herein, together with its successors, called the "RCE LC ISSUER") and (x) CITIBANK, N.A., a national banking association not in its individual capacity, except as expressly provided herein, but solely as holder representative under the Lessor Loan Agreement (herein in its capacity as PARTICIPATION AGREEMENT (T1) holder representative, together with its successors and permitted assigns, called the "HOLDER REPRESENTATIVE"). WITNESSETH: WHEREAS, EME has entered into that certain Asset Sale Agree ment, dated as of March 22, 1999 (the "ASA") for the acquisition of certain electric generation and related assets located in the State of Illinois, including the fossil fuel-fired electric generating facility known as the Collins Station, consisting of two 554-megawatt (net) units and three 530-megawatt (net) units, located near the town of Morris, in Grundy County, Illinois; WHEREAS, pursuant to the ASA, Midwest (i) as designee of EME, will acquire the ComEd Assets (except for the Facility) from ComEd and (ii) will cause ComEd to transfer the Undivided Interest directly to the Owner Lessor; WHEREAS, Midwest will (i) lease the Ground Interest to the Owner Lessor pursuant to the Facility Site Lease, (ii) sub-sublease the Ground Interest from Collins Holdings pursuant to the Facility Site Sub-sublease, and (iii) sublease the Undivided Interest from Collins Holdings pursuant to the Facility Sublease; WHEREAS, the Owner Lessor will (i) lease the Ground Interest from Midwest pursuant to the Facility Site Lease, (ii) sublease the Ground Interest to Collins Holdings pursuant to the Facility Site Sublease and (iii) lease the Undivided Interest to Collins Holdings pursuant to the Facility Lease; WHEREAS, Collins Holdings will (i) lease the Undivided Interest from the Owner Lessor pursuant to the Facility Lease, (ii) sublease the Undivided Interest to Midwest pursuant to the Facility Sublease, (iii) sublease the Ground Interest from the Owner Lessor pursuant to the Facility Site Sublease and (iv) sub-sublease the Ground Interest to Midwest pursuant to the Facility Site Sub-sublease; WHEREAS, concurrently with the execution and delivery of this Agreement, the Equity Investor and Midwest have entered into the Purchase Agreement pursuant to which the Equity Investor will acquire from Midwest its membership interest in the Owner Participant; -2- WHEREAS, the Owner Participant has entered into the Trust Agreement, pursuant to which the Owner Participant has authorized the Owner Lessor to, among other things and subject to the terms and conditions thereof and hereof, (i) issue the Lessor Notes and sell such Lessor Notes to the Lender, (ii) lease the Ground Interest from Midwest pursuant to the Facility Site Lease, (iii) lease the Undivided Interest to Collins Holdings pursuant to the Facility Lease, (iv) sublease the Ground Interest to Collins Holdings pursuant to the Facility Site Sublease and (v) grant to the Holder Representative for the benefit of the Holders liens and security interests in the Trust Estate to secure the Owner Lessor's obligations with respect to the Lessor Notes; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lender has entered into the Funding LLC Financing Documents pursuant to which the Funding LLC Note Holders will purchase the Funding LLC Notes on the Closing Date from the Lender; WHEREAS, the Owner Lessor will issue the Initial Lessor Notes to the Lender and grant to the Holder Representative liens and security interests in the Trust Estate to secure its obligations with respect to the Lessor Notes; WHEREAS, concurrently with the execution and delivery of this Agreement, Holdings shall enter into the Holdings Guarantee for the benefit of the Owner Lessor; WHEREAS, concurrently with the execution and delivery of this Agreement, Midwest shall enter into the Midwest Lessor Lease Guaranty for the benefit of the Owner Lessor and the Midwest OP Lease Guarantee for the benefit of the Owner Participant; WHEREAS, concurrently with the execution and delivery of this Agreement, Midwest and the Midwest LC Issuer will enter into the Midwest LC Documents pursuant to which the Midwest LC Issuer will issue a Midwest Letter of Credit; WHEREAS, concurrently with the execution and delivery of this Agreement, the Owner Lessor and the RCE LC Issuer will enter into the RCE LC Documents pursuant to which the RCE LC Issuer will issue an RCE Letter of Credit. WHEREAS, the Lender will use the proceeds from the sale of the Funding LLC Notes to purchase the Initial Lessor Notes from the Owner Lessor; -3- WHEREAS, the OP Guarantor will guarantee the payment and performance obligations of the Owner Participant and the Equity Investor under the Operative Documents pursuant to the Owner Participant Guaranty; and WHEREAS, the parties hereto desire to consummate the transactions contemplated hereby. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION I DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT The capitalized terms used in this Agreement, including the foregoing recitals, and not otherwise defined herein shall have the respective meanings specified in Appendix A hereto. The general provisions of Appendix A shall apply to terms used in this Agreement and specifically defined herein. SECTION II PARTICIPATION; CLOSING DATE; TRANSACTION COSTS SECTION 2.1 AGREEMENTS TO PARTICIPATE. Subject to the terms and conditions of this Agreement, and in reliance on the agreements, representations and warranties made herein, the parties agree to participate in the transactions described in this SECTION 2.1 on the Closing Date as follows: (a) The Owner Participant will provide funds in an amount sufficient to (i) fund the Equity Investment and (ii) pay the Transaction Costs which the Owner Lessor is responsible to pay pursuant to SECTION 2.3(a) hereof (collectively, the "OWNER PARTICIPANT'S COMMITMENT"); (b) The Owner Lessor will (i) issue the Initial Lessor Notes, (ii) sell the Initial Lessor Notes to the Lender and (iii) grant to the Holder Representative, for the benefit of the Holders, CERTAIN liens and security interests in the Trust Estate to secure its obligations with respect to the Lessor Notes; (c) The Lender will (i) issue the Funding LLC Notes (for an amount sufficient to fund the Lender's Commitment) and (ii) use the proceeds of such issuance to purchase the Initial Lessor Notes from the Owner Lessor (the "LESSOR LOANS"); -4- (d) The Owner Lessor will use the proceeds of the (i) Equity Commitment and (ii) the Lessor Loans to pay (x) the Purchase Price for the Undivided Interest to ComEd and (y) the Transaction Costs which the Owner Lessor is responsible to pay pursuant to SECTION 2.3(a) hereof; (e) Midwest will (i) acquire the Other Facilities from ComEd pursuant to the Bill of Sale and Instrument of Assignment on the terms and conditions set forth in the ASA and (ii) will cause ComEd to transfer the Undivided Interest directly to the Owner Lessor by issuing the Facility Deed and a Bill of Sale to the Owner Lessor; (f) The Owner Lessor and Collins Holdings will enter into the Facility Lease, pursuant to which the Owner Lessor will lease the Undivided Interest to Collins Holdings and Collins Holdings will lease the Undivided Interest from the Owner Lessor; (g) Collins Holdings and Midwest will enter into a Facility Sublease, pursuant to which Collins Holdings will sublease the Undivided Interest to Midwest and Midwest will sublease the Undivided Interest from Collins Holdings; (h) Midwest will (i) acquire the Facility Site from ComEd pursuant to the Land Deed and the Bill of Sale and Instrument of Assignment on the terms and conditions set forth in the ASA and (ii) will enter into the Facility Site Lease with the Owner Lessor, pursuant to which Midwest will lease the Ground Interest to the Owner Lessor and the Owner Lessor will lease the Ground Interest from Midwest; (i) The Owner Lessor and Collins Holdings will enter into the Facility Site Sublease, pursuant to which the Owner Lessor will sublease the Ground Interest to Collins Holdings and Collins Holdings will sublease the Ground Interest from the Owner Lessor; (j) Collins Holdings and Midwest will enter into the Facility Site Sub-sublease, pursuant to which Collins Holdings will sub-sublease the Ground Interest to Midwest and Midwest will sub-sublease the Ground Interest from Collins Holdings; (k) Midwest and the Equity Investor will enter into the Purchase Agreement, pursuant to which Midwest will sell its membership interest in the Owner Participant to the Equity Investor and the Equity Investor will purchase Midwest's membership interest in the Owner Participant from Midwest; -5- (l) The OP Guarantor will guarantee the performance and payment obligations of the Owner Participant and the Equity Investor under the Operative Documents pursuant to the Owner Participant Guaranty; (m) Holdings will enter into the Holdings Guarantee and Letter of Credit Guarantee; (n) The Owner Lessor and RCE LC Issuer will enter into the RCE Documents and the RCE LC Issuer will issue the RCE Letters of Credit; (o) Midwest and the Midwest LC Issuer will enter into the Midwest LC Documents and the Midwest LC Issuer will issue the Midwest Letters of Credit. (p) Midwest will enter into the Midwest Lessor Lease Guaranty and the Midwest OP Lease Guaranty; (q) The Owner Participant, Collins Holdings and Midwest will enter into the Tax Indemnity Agreement; (r) The Owner Lessor will pay all Transaction Costs which the Owner Lessor is responsible to pay pursuant to SECTION 2.3 hereof; and (s) the parties will enter into the agreements referred to above and the other Operative Documents, in each case, in substantially the form attached hereto. SECTION 2.2 CLOSING DATE; PROCEDURE FOR PARTICIPATION. (a) CLOSING DATE. The closing of the transactions contemplated hereby (the "CLOSING") shall take place after 10:00 a.m., New York City time, on the Scheduled Closing Date or such other date as the parties hereto shall mutually agree (the "CLOSING DATE"), at the offices of SASM&F, 919 Third Avenue, New York, New York 10022. (b) PROCEDURES FOR FUNDING. Unless the Closing Date shall have been postponed pursuant to SECTION 2.2(c), subject to the terms and conditions of this Agreement, the Owner Participant and the Lender shall, not later than 10:00 a.m., New York City time, on the Business Day immediately preceding the Scheduled Closing Date (the "FUNDING DATE"), by transferring or delivering the following amounts, in funds immediately available on the Scheduled Closing Date pursuant to the terms of the Funding Agreement: -6- (i) The Owner Participant shall make the Owner Participant's Commitment available for the purpose of providing (a) the funds needed to pay Transaction Costs required to be paid by the Owner Lessor in accordance with the terms hereof and (b) a portion of the funds necessary to pay the Purchase Price in an amount equal to the Equity Investment, which equity contribution shall be held in trust for the benefit of the Owner Participant (x) until such Transaction Costs and Purchase Price are paid in accordance with the terms hereof or (y) as otherwise agreed in writing by the parties hereto (or, in the event that the Closing is postponed, to be held or returned in accordance with the terms of the Funding Agreement); (ii) Pursuant to the terms and conditions of the Lessor Loan Agreement, the Lender shall make the Lessor Loan to the Owner Lessor by purchasing the Lessor Notes from the Owner Lessor for an amount equal to the Lender's Commitment, the proceeds of the Lessor Loan to be held in trust for the benefit of the Lender (x) until such proceeds are applied to payment of the Purchase Price in accordance with the terms hereof or (y) as otherwise agreed in writing by the parties hereto (or, in the event that the Closing is postponed, to be held or returned in accordance with the terms of the Funding Agreement); and (iii) Pursuant to the terms of the ASA, the proceeds of the Equity Investment and the Lessor Loan will be used to pay the Purchase Price for the Undivided Interest. (c) POSTPONEMENT OF THE CLOSING. The Scheduled Closing Date may be postponed from time to time for any reason if Midwest gives the Owner Participant, the Owner Lessor, the Owner Trustee, and the Holder Representative a telex, telegraphic, facsimile or telephonic (confirmed in writing) notice of such postponement and notice of the date to which the Closing has been postponed, such notice of postponement to be received by each party no later than 10:00 a.m., New York City time, on the Business Day immediately preceding the Scheduled Closing Date. If, prior to receipt of a postponement notice under this SECTION 2.2(c), the Owner Participant or the Lender shall have provided funds in accordance with SECTION 2.2(b), such funds shall be returned to the Owner Participant or the Lender, as applicable, as soon as reasonably practicable, but in no event later than the Business Day, following the Scheduled Closing Date, unless the Owner Participant or the Lender shall have otherwise directed. (d) EXPIRATION OF COMMITMENTS. The obligations of the parties hereto shall expire at 11:59 p.m., New York City time, on February 28, 2000. If the -7- Closing Date has not occurred on or before February 28, 2000, the parties hereto shall have no obligation to consummate the transactions contemplated under this Agreement and, except as provided in SECTIONS 2.3, 14.1 and 14.2, all obligations of the Lease Financing Parties shall cease and terminate. SECTION 2.3 TRANSACTION COSTS. (a) If the transactions contemplated by this Agreement are consummated, all Transaction Costs not to exceed the Maximum Transaction Costs, which shall be substantiated by an appropriate invoice or otherwise supported in reasonable detail, shall be paid by the Owner Lessor with the funds provided by the Owner Participant pursuant to SECTION 2.2(b) above. Midwest shall be responsible for Transac tion Costs in excess of the Maximum Transaction Costs. All other fees, costs and expenses incurred by the parties hereto shall be for their respective accounts whether or not the Overall Transaction is consummated. (b) Following the Closing Date, Collins Holdings, as the Facility Lessee, will be responsible for, and will pay as Supplemental Lease Rent at no after-tax cost to the Owner Lessor (i) the annual administration fees, if any, (ii) fees and expenses of the Owner Trustee, (iii) Incidental Costs and (iv) other fees and costs (but in no event interest or principal) payable with respect to the Lessor Notes (other than costs, fees and expenses associated with or resulting from a Lessor Loan Event of Default which is not a Lease Event of Default). SECTION III REPRESENTATIONS AND WARRANTIES SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF MIDWEST. Midwest represents and warrants that, as of the Closing Date: (a) ORGANIZATION; POWER. Midwest (i) is a Delaware limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) is duly qualified to do business and in good standing in each jurisdiction where the nature of its business requires such qualification, and (iii) has all requisite power and authority and holds all material requisite Governmental Approvals to enter into and perform its obligations under this Agreement and each of the other Operative Documents to which it is or will be a party and to conduct the business of owning and operating the ComEd Assets and the sale and marketing of wholesale electric power and other products and service related thereto, except, with respect to clauses (ii) and (iii) above, where 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 on Midwest. All of the equity interest in Midwest is owned by Holdings. -8- (b) DUE AUTHORIZATION; NON-CONTRAVENTION. The execution, delivery and performances of this Agreement and each of the Operative Documents to which it is or will be a party have been or when executed and delivered will be duly authorized by all necessary company action and do not and will not: (i) contravene the Organic Documents of Midwest; (ii) contravene any Requirement of Law or Contractual Obligation, binding on or affecting Midwest; or (iii) result in, or require the creation or imposition of, any Lien (other than pursuant to the Operative Documents) on any of the properties of Midwest. In case of clauses (ii) and (iii), except where such contravention, creation or imposition would not result in a Material Adverse Effect on Midwest. (c) GOVERNMENT APPROVALS. (i) As of the Closing Date, all Governmental Approvals required in connection with the execution and delivery of, or the transactions contemplated by, this Agreement and the other Operative Documents to which Midwest is a party and the conduct of the business by Midwest are listed on SCHEDULE 3.1 (c) and have been duly obtained or made and are in full force and effect, in each case, other than (a) as may be required under existing Requirements of Law to be obtained, given, accomplished or renewed at any time after the Closing Date or from time to time after the Closing Date in connection with the maintenance or operation of the Facility, (b) which are routine in nature and which cannot be obtained and such failure to obtain would not result in a Material Adverse Effect on Midwest, or are not normally applied for, prior to the time they are required, and which Midwest has no reason to believe will not be timely obtained, (c) as may be required in connection with any refinancing of the Lessor Notes or the issuance of Additional Lessor Notes, (d) as may be required in consequence of any transfer of the Beneficial Interest or any transfer of ownership of the Undivided Interest or the Trust Estate by the Owner Lessor or any relinquishment of the use or operation of the Undivided Interest by Midwest and (e) filing and recording to perfect the Lien of the Holder Representative, and the ownership and leasehold interests conveyed pursuant to this Agreement to the extent arrangements have been made satisfactory to the Owner Participant, the Owner Lessor and the Holder Representative. Except as noted in Part B of SCHEDULE 3.1 (c), all Governmental Approvals that have been obtained pursuant to the first sentence of this SECTION 3.1(c) 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 -9- application having been made. No such Governmental Approval is the subject of any pending or, except as indicated in PART C of SCHEDULE 3.1 (c), threatened judicial or administrative proceeding. (ii) As of the Closing Date, all consents and approvals required to be obtained from Persons other than Governmental Authorities in connections with the transactions contemplated by the Operative Documents and the ASA 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, result in a Material Adverse Effect on Midwest. (d) ACCURACY OF INFORMATION. (i) All factual information listed on SCHEDULE 3.1(d) (other than projection and "forward-looking" information) is true and materially accurate in every material respect on the date as of which such information is dated or certified, and to the knowledge of Midwest, such information is not incomplete by omitting to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. (ii) All projections and other "forward- looking" information heretofore or contemporaneously furnished by Midwest and its Affiliates in writing to the Owner Participant, the OP Guarantor, the Owner Lessor, the Holder Representative, the Lender and any of the Funding LLC Note Holders for purposes of this Agreement or the transactions contemplated by the other Operative Documents were prepared in good faith and are based on reasonable assumptions. (e) VALIDITY. Each of the Operative Documents to which Midwest is a party constitutes, or, upon the due execution and delivery thereof by Midwest, will constitute, the legal, valid and binding obligation of Midwest 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 and except as indicated in the legal opinion of SASM&F delivered pursuant to SECTION 4.21 hereof). (f) COMPLIANCE WITH REQUIREMENTS OF LAW. Midwest is in compliance with all Requirements of Law (including ERISA and regulations of the Federal Reserve System) and Contractual Obligations applicable to it, except to the extent that failure to so comply would not result in a Material Adverse Effect on Midwest. (g) MARGIN REGULATION. Midwest is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and -10- no proceeds of the Lessor Notes and the Equity Investment as contemplated by this Agreement and the other Operative Documents will be used for a purpose which violates, or would be inconsistent with, the Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in the Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this SECTION 3.1 with such meanings. (h) LITIGATION. There is no pending or, to the knowledge of Midwest, threatened, action, suit, investigation or proceeding or labor controversy against Midwest or any of its properties, business, assets or revenues or affecting any Governmental Approval before any Governmental Authority which, if determined adversely to Midwest (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without any reservations), would result in a Material Adverse Effect on Midwest. (i) TITLE; LIENS. (i) Midwest has good, clear, marketable record fee title in the Facility Site, free and clear of all Liens, encumbrances or title defects other than Permitted Encumbrances and Lease Permitted Liens. (ii) Upon execution and delivery of the Operative Documents and recording of the instruments referred to in SCHEDULE 4.19, good, clear, record and valid leasehold interest in the Ground Interest will be duly, validly and effectively conveyed to the Owner Lessor upon the terms and conditions in the Facility Site Lease, free and clear of all Liens, encumbrances or title defects other than Permitted Encumbrances and Lease Permitted Liens. (iii) Giving effect to the transaction contemplated by the ASA and upon execution and delivery of the Operative Documents, good, clear, record and marketable fee simple title to the Undivided Interest will be duly, validly and effectively conveyed to the Owner Lessor, free and clear of all Liens, encumbrances or title defects other than Permitted Encumbrances and Lease Permitted Liens. (iv) None of the Permitted Encumbrances and Lease Permitted Liens will, on and after the Closing, materially interfere with the use, operation or possession of the Facility (as contemplated by the Operative Documents) or the use of or the exercise by the Owner Lessor of its rights under the Facility Site Lease with respect to the Facility. -11- (j) TITLE, LIENS. Midwest has 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, trademarks, trade names, service marks and copyrights) purported to be owned, leased or held by it, free and clear of all Liens, encumbrances or title defects, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except Permitted Encumbrances and Permitted Liens. (k) TAX RETURNS. Midwest has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by Midwest and with respect to which adequate reserves have to the extent required by GAAP been set aside on its books). (l) INVESTMENT COMPANY ACT. Midwest is not subject to any regulation as an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (m) HOLDING COMPANY ACT. (i) Midwest is an "exempt wholesale generator" under PUHCA, is interconnected with the high voltage network and has access to transmission services and ancillary services to sell wholesale electric power, and has the authority to sell wholesale electric power at market-based rates. (ii) Midwest is not subject to (i) regulation as a "holding company", a "public utility company" or a "subsidiary company" or an "affiliate" of a "holding company" required to register under PUHCA or (ii) public utility regulation or regulation as an alternative retail electric supplier under the laws of the State of Illinois. (n) ENVIRONMENTAL WARRANTIES. Except as has not or would not, individually or in the aggregate, result in a Material Adverse Effect on Midwest: (i) (A) To the knowledge of Midwest, all facilities and property owned, leased or operated by Midwest have been, and continue to be, owned, leased or operated in compliance with all applicable Environmental Laws and (B) Midwest is and has been in compliance with all applicable Environmental Laws. (ii) There are no pending or, to the knowledge of Midwest, threatened Environmental Claims involving or against Midwest. -12- (iii) Midwest has obtained (or will obtain in due course promptly after the Closing Date) and is in compliance with all Governmental Approvals required under any applicable Environmental Law necessary for its business and, with respect to the Governmental Approvals not obtained by the Closing Date, (a) Midwest has no reason to believe that such approvals will not be timely obtained and (b) the failure to have obtained such Governmental Approvals by the Closing Date will not result in a Material Adverse Effect on Midwest. (iv) No property owned, leased or operated by Midwest is listed or, to the knowledge of Midwest, 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. (v) To the knowledge of Midwest, no Environmental Conditions exist at, on, under or about any property owned, operated or leased by Midwest which, with the passage of time, or the giving of notice or both, would give rise to any Environmental Claim. (vi) Other than as provided in the ASA, Midwest has not 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. (o) YEAR 2000. The computer and management information systems of Midwest which are material to its business taken as a whole are Year 2000 Ready. (p) 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, 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 Midwest 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 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 Midwest or any member of the Controlled Group: (i) a Reportable Event; (ii) a complete or partial withdrawal from any Multiemployer Plan by -13- Midwest or any member of the Controlled Group; (iii) any liability of Midwest or any member of the Controlled Group under ERISA if Midwest 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 Midwest 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 on Midwest, other than liability for continuation coverage described in Part 6 of Title I of ERISA. (q) LOCATION OF CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS, ETC. The chief executive office and principal place of business of Midwest and the office where Midwest keeps its corporate records concerning the Facility, the Facility Site and the Operative Documents is located at One Finance Place, 440 South LaSalle Street, Suite 3500, Chicago, Illinois 60605. (r) ACCESS; EGRESS. Midwest has sufficient access to public roads, easements of ingress and egress and other rights of access to permit use and operation of the Facility and the Facility Site as contemplated by the Operative Documents. (s) ABILITY TO DELIVER POWER. Midwest has rights necessary to deliver power to the point of interconnection to the electricity grid. (t) POWER SALES AGREEMENTS AND OTHER CONTRACTS. There are no contracts or agreements providing for sales of power and ancillary services produced by the Facility or for the use and operation of the Facility that have a term which extends beyond the expiration of the Basic Lease Term other than the Interconnection Agreements. (u) UTILITY SERVICES. The Facility and the Facility Site have available all public utility necessary services for the use and operation of the Facility as currently being used and as contemplated by the Operative Documents. (v) SUBDIVISION. No subdivision is necessary in connection with the transaction contemplated by Operative Documents. (w) ADEQUATE RIGHTS. Based upon Requirements of Law in effect on the Closing Date, the rights and interests made, or to be made available to the Owner Lessor or its permitted transferees pursuant to the Operative Documents, together with the rights of the Owner Lessor as owner of the Undivided Interest, are sufficient to permit the following actions by the Owner Lessor or any such permitted transferee -14- following the expiration or termination of the Facility Lease: (i) the occupation, interconnection, maintenance and repair of the Facility, (ii) the use, operation and possession of the Facility, (iii) the construction, use, operation, possession, maintenance and renewal of all modifications, additions, improvements, replacements and substitutions thereof and thereto, (iv) appropriate ingress to and egress from the Facility for any reasonable purpose in connection with the exercise of rights under the Operation Agreement and such Person's interest in the Facility, (v) access to the off-site unloading dock, transportation and storage areas for fuel handling, storage and transportation and access to the off-site lake for water-cooling, (vi) transmission of the electric energy and ancillary services provided by the Facility to the nearest point of interconnection to the relevant electricity grid and (vii) the disposal of by-products and waste from the Facility. (x) RETURN ACCEPTANCE TESTS. Midwest has no reason to believe that the Facility will not be able to satisfy the return conditions set forth in SECTION 5 of the Facility Lease as of the expiration of the Facility Lease Term if the Facility is maintained in accordance with Section 7 of the Facility Lease. (y) REPRESENTATIONS OF COLLINS HOLDINGS. The representations of Collins Holdings set forth in Section 3.3 hereof are true and correct. (z) NO DEFAULTS. NO EVENT OF LOSS. No Lease Event of Default, Material Lease Default or event that with the passage of time or notice or both would constitute a Lease Event of Default has occurred or will occur upon execution and delivery of the Operative Documents. No Event of Loss has occurred or will occur upon the execution and delivery of the Operative Documents. SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF HOLDINGS. Holdings represents and warrants that, as of the Closing Date: (a) PRO-FORMA FINANCIAL STATEMENTS. The pro forma financial statements furnished by Holdings to the Funding LLC Note Holders, the Owner Lessor, the Owner Participant and the Holder Representative on and as of the Closing Date (i) are based on reasonable assumptions as to all legal and factual matters material to the estimates set forth therein and (ii) such assumptions were developed and utilized consistently and in good faith. (b) ORGANIZATION; POWER. Holdings (i) is a Delaware corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) is duly qualified to do business and in good standing in each jurisdiction where the nature of its business requires such qualification, and (iii) has all requisite power and authority and holds all material requisite Governmental Approvals to enter into and perform its obligations under this Agreement and each of the other Operative -15- Documents to which it is or will be a party and to conduct its business as currently conducted and currently expected to be conducted, except, with respect to clauses (ii) and (iii) above, where 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 on Holdings. All of the equity interest in Holdings is owned by MGE. (c) DUE AUTHORIZATION; NON-CONTRAVENTION. The execution, delivery and performances of this Agreement and each of the Operative Documents to which it is or will be a party have been or when executed and delivered will be duly authorized by all necessary company action and do not and will not: (i) contravene the Organic Documents of Holdings; (ii) contravene any Requirement of Law or Contractual Obligation, binding on or affecting Holdings; or (iii) result in, or require the creation or imposition of, any Lien (other than pursuant to the Operative Documents) on any of the properties of Holdings. In case of clauses (ii) and (iii), except where such contravention, creation or imposition would not result in a Material Adverse Effect on Holdings. (d) GOVERNMENT APPROVALS. (i) As of the Closing Date, all Governmental Approvals required in connection with the execution and delivery of, or the transactions contemplated by, this Agreement and the other Operative Documents to which Holdings is a party and the conduct of the business by Holdings are listed on SCHEDULE 3.2 (d) and have been duly obtained or made and are in full force and effect, in each case, other than (A) as may be required under existing Requirements of Law to be obtained, given, accomplished or renewed at any time after the Closing Date or from time to time after the Closing Date in connection with the transactions contemplated by the Operative Documents and (B) which are routine in nature and which cannot be obtained and such failure to obtain would not result in a Material Adverse Effect on Holdings, or are not normally applied for, prior to the time they are required, and which Holdings has no reason to believe will not be timely obtained. Except as noted in Part B of SCHEDULE 3.2 (d), all Governmental Approvals that have been obtained pursuant to the first sentence of this SECTION 3.2(d) 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. No such Governmental Approval is the subject of any pending or, except as indicated in PART C of SCHEDULE 3.2 (d), threatened judicial or administrative proceeding. -16- (ii) As of the Closing Date, all consents and approvals required to be obtained from Persons other than Governmental Authorities in connection with the transactions contemplated by the Operative Documents and the ASA 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, result in a Material Adverse Effect on Holdings. (e) ACCURACY OF INFORMATION. (i) All factual information listed on SCHEDULE 3.2(e) (other than projections and "forward-looking" information) is true and materially accurate in every material respect on the date as of which such information is dated or certified, and to the knowledge of Holdings, such information is not incomplete by omitting to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. (ii) All projections and other "forward-looking" information heretofore or contemporaneously furnished by Holdings and its Affiliates in writing to the Owner Participant, the OP Guarantor, the Owner Lessor, the Holder Representative, the Lender and any of the Funding LLC Note Holders for purposes of this Agreement or the transactions contemplated by the other Operative Documents were prepared in good faith and are based on reasonable assumptions. (f) VALIDITY. Each of the Operative Documents to which Holdings is a party constitutes, or, upon the due execution and delivery thereof by Holdings, will constitute, the legal, valid and binding obligation of Holdings 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 and except as indicated in the legal opinion of SASM&F delivered pursuant to SECTION 4.21 hereof). (g) COMPLIANCE WITH REQUIREMENTS OF LAW. Holdings is in compliance with all Requirements of Law (including ERISA and regulations of the Federal Reserve System) and Contractual Obligations applicable to it, except to the extent that failure to so comply would not result in a Material Adverse Effect on Holdings. (h) MARGIN REGULATION. Holdings is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Lessor Notes and the Equity Investment as contemplated by this Agreement and other Operative Documents will be used for a purpose which violates, or would be inconsistent with, the Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in the Regulations T, U and X of the Federal -17- Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this SECTION 3.2 with such meanings. (i) LITIGATION. There is no pending or, to the knowledge of Holdings, threatened, action, suit, Environmental Claim, investigation, proceeding or labor controversy against Holdings or any of its properties, business, assets or revenues or affecting any Governmental Approval before any Governmental Authority hereto which, if determined adversely to Holdings (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without any reservations), would result in a Material Adverse Effect on Holdings. (j) TITLE, LIENS. Holdings has 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, 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 Permitted Liens. (k) TAX RETURNS. Holdings has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by Holdings by appropriate proceedings and with respect to which adequate reserves have to the extent required by GAAP been set aside on its books). (l) INVESTMENT COMPANY ACT. Holdings is not subject to regulation as an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (m) HOLDING COMPANY ACT. Holdings is not subject to (i) regulation as a "holding company," a "public utility company," or a "subsidiary company" or an "affiliate " of a "holding company" required to register under PUHCA or (ii) public utility regulation or regulation as an alternative retail electric supplier under the laws of the State of Illinois. (n) YEAR 2000. The computer and management information systems of Holdings which are material to its business taken as a whole are Year 2000 Ready. (o) 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, no steps have been taken to terminate any Pension Plan; no -18- 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 Holdings 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 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 Holdings or any member of the Controlled Group: (i) a Reportable Event; (ii) a complete or partial withdrawal from any Multiemployer Plan by Holdings or any member of the Controlled Group; (iii) any liability of Holdings or any member of the Controlled Group under ERISA if Holdings 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 Holdings 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 on Holdings, other than liability for continuation coverage described in Part 6 of Title I of ERISA. (p) LOCATION OF CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS, ETC. The chief executive office and principal place of business of Holdings and the office where Holdings keeps its corporate records is located at 18101 Von Karman Avenue, Suite 1700, Irvine, California 92612. SECTION 3.3 REPRESENTATIONS AND WARRANTIES OF COLLINS HOLDINGS. Collins Holdings represents and warrants that, as of the Closing Date: (a) ORGANIZATION; POWER. Collins Holdings (i) is a Delaware limited liability company, duly organized, validly existing and is in good standing under the laws of the State of Delaware, (ii) is duly qualified to do business and is in good standing in each jurisdiction where the nature of its business requires such qualification, and (iii) has all requisite power and authority and holds all material requisite Governmental Approvals to enter into and perform its obligations under this Agreement and each of the other Operative Documents to which it is or will be a party, except, with respect to clauses (ii) and (iii) above, where 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 on Collins Holdings. All of the membership interest in Collins Holdings is owned by MGE. (b) DUE AUTHORIZATION; NON-CONTRAVENTION. The execution, delivery and performance of this Agreement and each of the Operative Documents to -19- which it is or will be a party have been or when executed and delivered will be duly authorized by all necessary company action and do not and will not: (i) contravene the Organic Documents of Collins Holdings; (ii) contravene any Requirement of Law or Contractual Obligation, binding on or affecting Collins Holdings; or (iii) result in, or require the creation or imposition of, any Lien (other than pursuant to the Operative Documents) on any of the properties of Collins Holdings. In case of clauses (ii) and (iii), except where such contravention, creation or imposition would not result in a Material Adverse Effect on Collins Holdings. (c) VALIDITY. Each of the Operative Documents to which Collins Holdings is a party constitutes, or, upon the due execution and delivery thereof by Collins Holdings, will constitute, the legal, valid and binding obligation of Collins Holdings 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 and except as indicated in the legal opinion of SASM&F delivered pursuant to SECTION 4.21 hereof). (d) GOVERNMENT APPROVALS. As of the Closing Date, all Governmental Approvals required in connection with the transactions contemplated by this Agreement and the other Operative Documents to which Collins Holdings is a party and the conduct of business by Collins Holdings are listed on SCHEDULE 3.3 (d) and have been duly obtained or made and are in full force and effect, in each case, other than (i) as may be required under existing Requirements of Law to be obtained, given, accomplished or renewed at any time after the Closing Date or from time to time after the Closing Date in connection with the maintenance or operation of the Facility, (ii) which are routine in nature and which cannot be obtained and such failure to obtain would not result in a Material Adverse Effect on Collins Holdings, or are not normally applied for, prior to the time they are required, and which Collins Holdings has no reason to believe will not be timely obtained, (iii) as may be required in connection with any refinancing of the Lessor Notes or the issuance of Additional Lessor Notes, (iv) as may be required in consequence of any transfer of the Beneficial Interest or any transfer of ownership of the Undivided Interest or the Trust Estate by the Owner Lessor or any relinquishment of the use or operation of the Undivided Interest by Collins Holdings and (v) appropriate filing and recording to perfect the Lien of the Holder Representative, and the ownership and leasehold interests conveyed pursuant to this Agreement to the extent arrangements have -20- been made satisfactory to the Owner Participant, the Owner Lessor and the Holder Representative. Except as noted in Part B of SCHEDULE 3.3 (d), all Governmental Approvals that have been obtained pursuant to the first sentence of this SECTION 3.3(d) 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. No such Governmental Approval is the subject of any pending or, except as indicated in PART C of SCHEDULE 3.3 (d) threatened judicial or administrative proceeding. (e) COMPLIANCE WITH REQUIREMENTS OF LAW. Collins Holdings is in compliance with all Requirements of Law (including ERISA and regulations of the Federal Reserve System) and Contractual Obligations applicable to it, except to the extent that failure to so comply would not result in a Material Adverse Effect on Collins Holdings. (f) MARGIN REGULATION. Collins Holdings is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Lessor Notes and the Equity Investment as contemplated by this Agreement and other Operative Documents will be used for a purpose which violates, or would be inconsistent with, the Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in the Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this SECTION 3.3 with such meanings. (g) LITIGATION. There is no pending or, to the knowledge of Collins Holdings, threatened, action, suit, Environmental Claim, investigation or proceeding or labor controversy against Collins Holdings or any of its properties, business, assets or revenues or affecting any Governmental Approval before any Governmental Authority hereto which, if determined adversely to it (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without any reservations), would result in a Material Adverse Effect on Collins Holdings. (h) TITLE; LIENS. Collins Holdings has 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, 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 Permitted Encumbrances and Lease Permitted Liens. (i) TAX RETURNS. Collins Holdings has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all -21- Taxes shown to be due and payable on such returns or pursuant to any assessment received by it. (j) INVESTMENT COMPANY ACT. Collins Holdings is not subject to any regulation as an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (k) HOLDING COMPANY ACT. Collins Holdings is not subject to (i) regulation as a "holding company" or a "subsidiary company" or an "affiliate " of a "holding company" required to register under PUHCA or (ii) public utility regulation under the laws of the State of Illinois. (l) YEAR 2000. The computer and management information systems of Collins Holdings which are material to its business taken as a whole are Year 2000 Ready. (m) LOCATION OF CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS, ETC. The chief executive office and principal place of business of Collins Holdings and the office where Collins Holdings keeps its corporate records is located at One Financial Place, 440 South LaSalle Street, Suite 3500, Chicago, IL 60605. SECTION 3.4 REPRESENTATIONS AND WARRANTIES OF THE OWNER LESSOR. The Owner Lessor represents and warrants that as of the Closing Date: (a) DUE ORGANIZATION. The Owner Lessor is a duly organized and validly existing "business trust" as such term is defined in 12 Del. C. Section 3801 (a) under the laws of the State of Delaware of which the Owner Participant is the beneficial owner, and has the power and authority to enter into and perform its obligations under this Agreement and each of the other Operative Documents to which it is or will be a party. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. (i) This Agreement and each of the other Operative Documents (other than the Lessor Notes) to which the Owner Lessor is or will be a party has been or when executed and delivered will be duly authorized, executed and delivered by the Owner Lessor, and assuming the due authorization, execution and delivery of this Agreement by each party hereto other than the Owner Lessor, this Agreement constitutes, and when executed and delivered each of the other Operative Documents (other than the Lessor Notes) to which it is or will be a party, will be the legal, valid and binding obligations of the Owner Lessor, enforceable against the Owner Lessor in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. -22- (ii) Upon the execution of the Lessor Notes by the Owner Lessor and delivery of such Lessor Notes against payment therefor, the Lessor Notes will constitute legal, valid and binding obligations of the Owner Lessor, enforceable against the Owner Lessor in accordance with their terms, except as the same may be limited by bank ruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) NON-CONTRAVENTION. The execution and delivery by the Owner Lessor of this Agreement and the other Operative Documents to which it is or will be a party, the consummation by the Owner Lessor of the transactions contemplated hereby and thereby, and the compliance by the Owner Lessor with the terms and provisions hereof and thereof, do not and will not contravene (except where such contravention would not result in a Material Adverse Effect on the Owner Lessor) (i) the Trust Agreement or any of the Organic Documents of the Owner Lessor or (ii) any Requirement of Law or the provisions of, or constitute a default by the Owner Lessor under any indenture, mortgage, deed of trust or other material contract, agreement or instrument to which the Owner Lessor is a party or by which the Owner Lessor or its property is bound, or in the creation of any Owner Lessor's Lien upon the Trust Estate; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Owner Lessor to act as operator of the Facility following a Lease Event of Default or the expiration or termination of the Facility Lease. (d) GOVERNMENTAL ACTIONS. Assuming the representation and warranties of Midwest contained in paragraphs (c), (f), (l), (m) and (n) of SECTION 3.1 and the representations and warranties of Collins Holdings contained in paragraphs (d), (e), (j) and (k) of SECTION 3.3 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority is required for the due execution, delivery or performance by the Owner Lessor, as the case may be, of the Trust Agreement, the Lessor Notes, this Agreement or the other Operative Documents to which the Owner Lessor is or will be a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Owner Lessor to act as operator of the Facility following a Lease Event of Default or the expiration or termination of the Facility Lease. (e) LITIGATION. There is no pending or, to the knowledge of the Owner Lessor, threatened, action, suit, investigation or proceeding against the Owner Lessor before any Governmental Authority which, if determined adversely to it, would materially adversely affect the ability of the Owner Lessor to perform its obligations -23- under the Trust Agreement, the Lessor Notes, this Agreement or the other Operative Documents to which it is or will be a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the Lien of the Holder Representative on the Trust Estate or which questions the validity or enforceability of any Operative Document to which the Owner Lessor is or will be a party. (f) LIENS. The Owner Lessor's right, title and interest in and to the Trust Estate is free of any Owner Lessor's Liens. (g) COMPLIANCE WITH REQUIREMENTS OF LAW. The Owner Lessor is in compliance with all Requirements of Law, rules, regulations, orders, judgments, writs and decrees (including ERISA and regulations of the Federal Reserve System), except where failure to so comply, individually or in the aggregate, would not result or has not resulted in a Material Adverse Effect on the Owner Lessor. (h) INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. The Owner Lessor is not (i) an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, (ii) a "holding company," a "public utility company" or a "subsidiary company" of a "holding company" within the meaning of PUHCA, or (iii) subject to any other Requirement of Law which purports to restrict or regulate its ability to borrow money. (i) SECURITIES ACT. Neither the Owner Lessor nor anyone authorized by it has directly or indirectly offered or sold any interest in the Lessor Notes or any part thereof, or in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Lessor Notes or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (j) LOCATION OF CHIEF EXECUTIVE OFFICE; PRINCIPAL PLACE OF BUSINESS; SITUS. The chief executive office and principal place of business of the Owner Lessor where the Owner Lessor will keep its corporate records concerning the Facility, the Facility Site and the Operative Documents is located in Wilmington, Delaware. The situs of the Owner Lessor is in Delaware. (k) PAYMENT OF TAXES. The Owner Lessor has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by the Owner Lessor and with respect to which adequate reserve have, to the extent required by GAAP, been set aside on its books). -24- SECTION 3.5 REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE AND THE TRUST COMPANY. The Trust Company (only with respect to representations and warranties relating to the Trust Company) and the Owner Trustee hereby severally represent and warrant that, as of the Closing Date: (a) DUE INCORPORATION; ETC. The Trust Company is a banking corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority, as the Owner Trustee and/or in its individual capacity to the extent expressly provided herein or in the Trust Agreement, to enter into and perform its obligations under the Trust Agreement, this Agreement and each of the other Operative Documents to which it is or will be a party. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. (w) The Trust Agreement has been duly authorized, executed and delivered by the Trust Company, and (x) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, the Trust Agreement constitutes the legal, valid and binding obligation of the Trust Company, enforceable against it in its individual capacity or as Owner Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (i) (y) This Agreement has been duly authorized, executed and delivered by the Owner Trustee and the Trust Company, and (z) assuming the due authorization, execution and delivery of this Agreement by each party hereto other than the Owner Trustee and the Trust Company, this Agreement constitutes a legal, valid and binding obligation of the Owner Trustee and the Trust Company, enforceable against the Trust Company or the Owner Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (ii) (x) Each of the other Operative Documents to which the Trust Company or the Owner Trustee is or will be a party has been or when executed and delivered will be duly authorized, executed and delivered by the Trust Company or the Owner Trustee and (y) assuming the due authorization, execution and delivery of each of the other Operative Documents by each party thereto other than the Trust Company or the Owner Trustee, each of the other Operative Documents to -25- which the Trust Company or the Owner Trustee is or will be a party constitutes or when executed and delivered will constitute a legal, valid and binding obligation of the Trust Company or the Owner Trustee, as the case may be, enforceable against the Trust Company or the Owner Trustee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) NON-CONTRAVENTION. The execution and delivery by the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, of the Trust Agreement, this Agreement and the other Operative Documents to which it is or will be a party, the consummation by the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, of the transactions contemplated hereby and thereby, and the compliance by the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, with the terms and provisions hereof and thereof, do not and will not (i) contravene any Requirement of Law of the State of Delaware or the United States governing the banking or trust powers of the Trust Company, the Trust Agreement, or its Organic Documents, or (ii) contravene the provisions of, or constitute a default by the Trust Company under, or result in the creation of any Owner Lessor's Lien attributable to it in its individual capacity and unrelated to the transactions contemplated by the Operative Documents upon the Trust Estate under any indenture, mortgage or other material contract, agreement or instrument to which the Trust Company is a party or by which the Trust Company or its property is bound; PROVIDED, HOWEVER, that no representation is made with respect to the right, power or authority of the Trust Company or the Owner Trustee to act as operator of the Facility following a Lease Event of Default. (d) GOVERNMENTAL ACTIONS. Assuming the representations and warranties of Midwest contained in paragraphs (c), (f), (l), (m) and (n) of SECTION 3.1 and the representations and warranties of Collins Holdings contained in paragraphs (d), (e), (j) and (k) of SECTION 3.3 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority of the State of Delaware or the United States governing the banking or trust powers of the Trust Company is required for the due execution, delivery or performance by the Trust Company or the Owner Trustee, as the case may be, of the Trust Agreement, this Agreement or the other Operative Documents to which the Trust Company or the Owner Trustee is or will be a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given. (e) LITIGATION. There is no pending or, to the actual knowledge of the Trust Company, threatened action, suit, investigation or proceeding against the Trust Company either in its individual capacity or as the Owner Trustee, as the case may -26- be, before any Governmental Authority of the State of Delaware or the United States governing its banking and trust powers which, if determined adversely to it, would materially adversely affect the ability of the Trust Company, in its individual capacity or as Owner Trustee, as the case may be, to perform its obligations under the Trust Agreement, this Agreement or the other Operative Documents to which it is or will be a party or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the security interest of the Holder Representative in the Trust Estate or which question the validity or enforceability of any Operative Document to which the Trust Company, in its individual capacity or as the Owner Trustee, is or will be a party. (f) LIENS. The Trust Estate is free of any Owner Lessor's Liens attributable to the Trust Company or the Owner Trustee. SECTION 3.6 REPRESENTATIONS AND WARRANTIES OF THE OWNER PARTICIPANT. The Owner Participant represents and warrants that, as of the Closing Date and giving effect to the transactions contemplated by the Purchase Agreement: (a) DUE ORGANIZATION. The Owner Participant is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the necessary power and authority to enter into and perform its obligations under this Agreement, the Trust Agreement, the OP LLC Agreement and the Tax Indemnity Agreement. (b) DUE AUTHORIZATION, ENFORCEABILITY; ETC. This Agreement, the Trust Agreement, the Tax Indemnity Agreement and the other Operative Documents to which it is or will be a party have been or when executed and delivered will be duly authorized, executed and delivered by the Owner Participant and assuming the due authorization, execution and delivery by each other party thereto, this Agreement, the Trust Agreement, the Tax Indemnity Agreement and the other Operative Documents to which it is or will be a party constitute or when executed and delivered will constitute the legal, valid and binding obligations of the Owner Participant, enforceable against the Owner Participant in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) NON-CONTRAVENTION. The execution and delivery by the Owner Participant of this Agreement, the Trust Agreement, the OP LLC Agreement and the Tax Indemnity Agreement, the consummation by the Owner Participant of the transactions contemplated hereby and thereby, and the compliance by the Owner Participant with the terms and provisions hereof and thereof, do not and will not contravene any Requirement of Law binding on the Owner Participant (except where such contravention -27- would not result in a Material Adverse Effect on the Owner Participant), or its Organic Documents, or contravene the provisions of, or constitute a default under, or result in the creation of any Owner Participant's Lien (other than any Lien created under any Operative Document) upon the Trust Estate under any indenture, mortgage or other material contract, agreement or instrument to which the Owner Participant is a party or by which the Owner Participant or its property is bound (it being understood that no representation or warranty is being made as to any Requirement of Law relating to the Facility or the Facility Site other than its representations set forth in SECTION 3.6(g) hereof or Section 4975 of the Code). (d) GOVERNMENTAL ACTION. Assuming the representations and warranties of Collins Holdings contained in paragraphs (d), (e), (j) and (k) of SECTION 3.3 and the representation and warranties of Midwest contained in (c), (f), (l), (m) and (n) of SECTION 3.1 are true, no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority is required for the due execution, delivery or performance by the Owner Participant of this Agreement, the Trust Agreement, the OP LLC Agreement or the Tax Indemnity Agreement, other than any authorization or approval or other action or notice or filing as has been duly obtained, taken or given (it being understood that no representation or warranty is being made as to any Requirements of Law relating to the ownership or operation of the Facility or the Facility Site). (e) LITIGATION. There is no pending or, to the knowledge of the Owner Participant, threatened action, suit, investigation or proceeding against the Owner Participant before any Governmental Authority which, if determined adversely to it, would materially adversely affect the Owner Participant's ability to perform its obligations under this Agreement, the Trust Agreement, the OP LLC Agreement or the Tax Indemnity Agreement or would materially adversely affect the Facility, the Facility Site or any interest therein or part thereof or the Lien of the Holder Representative in the Trust Estate or which questions the validity or enforceability of any Operative Document to which the Owner Participant is or will be a party. (f) LIENS. The Trust Estate is free of any Owner Participant's Liens. (g) ERISA. No part of the funds to be used by the Owner Participant to make its investment pursuant to this Agreement, directly or indirectly, constitutes or is deemed to constitute assets (within the meaning of ERISA and any applicable rules, regulations and court decisions thereunder) of any Plan. -28- (h) REGULATORY EVENT OF LOSS. The Owner Participant is not aware of any fact or circumstance that would constitute or cause a Regulatory Event of Loss. (i) SECURITIES ACT. Neither the Owner Participant nor anyone authorized by it has directly or indirectly offered or sold any interest in the Beneficial Interest, the Lessor Notes or any part thereof, or in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Lessor Notes or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (j) HOLDING COMPANY ACT AND FEDERAL POWER ACT. Immediately prior to executing this Agreement, the Owner Participant is not (i) an "electric utility", "electric utility company", "public utility", "public-utility company", "holding company" under the Federal Power Act or PUHCA or (ii) a "subsidiary" or "affiliate" of a "holding company" required to register under PUHCA. (k) PAYMENT OF TAXES. The Owner Participant has filed all federal, state and local tax returns and reports required by law to have been filed by it and has paid all Taxes shown to be due and payable on such returns or pursuant to any assessment received by it (other than Taxes and assessments which are being diligently contested in good faith by the Owner Participant and with respect to which adequate reserve have, to the extent required by GAAP, been set aside on its books). SECTION IV CLOSING CONDITIONS The obligations of the Owner Participant, the Owner Lessor, the Owner Trustee, Collins Holdings, Midwest, Holdings, the Lender, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative to consummate the transactions contemplated hereby on the Closing Date shall be subject to prior or concurrent satisfaction or waiver of the following conditions, except that the obligations of any Person shall not be subject to such Person's own performance or compliance. SECTION 4.1 OPERATIVE DOCUMENTS. On or before the Closing Date, each of the Operative Documents to be delivered at the Closing shall have been duly authorized, executed and delivered by the parties thereto in substantially the form attached as an Exhibit hereto, shall each be in full force and effect, and executed counterparts of each shall have been delivered to each of the parties hereto. SECTION 4.2 ACQUISITION OF THE FACILITY AND FACILITY SITE. All conditions precedent contained in the ASA shall have been satisfied or waived and (i) the Owner -29- Trust shall have purchased the Undivided Interest from ComEd and (ii) Midwest shall have purchased the Ground Interest from ComEd; SECTION 4.3 THE LESSOR NOTES. Each of the conditions precedent contained in the Lessor Loan Agreement shall have been satisfied or waived and the Initial Holder shall have purchased the Initial Lessor Notes pursuant to, and in accordance with, the terms of the Lessor Loan Agreement; SECTION 4.4 THE FUNDING LLC NOTES. Each of the conditions precedent contained in the Funding LLC Financing Documents shall have been satisfied or waived and the Funding LLC Note Holders shall have purchased the Funding LLC Notes pursuant to, and in accordance with the terms of, the Funding LLC Financing Documents and the proceeds from the sale by the Lender of the Funding LLC Notes shall have been provided to the Owner Lessor through the purchase by the Initial Holder of the Initial Lessor Notes. SECTION 4.5 PURCHASE AGREEMENT. The Equity Investor shall have purchased Midwest's membership interest in the Owner Participant pursuant to the Purchase Agreement. SECTION 4.6 OTHER DOCUMENTS. Each of Collins Holdings, the Owner Lessor, the Owner Trustee, the Owner Participant, Holdings, Midwest, the Lender, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative shall have received certified copies of the Organic Documents of each of the other parties hereto (except for the Holder Representative, the Midwest LC Issuer and the RCE LC Issuer, who shall not be required to provide such documents) and resolutions of the board of directors or managers (or managing members), as the case may be, of each such other Lease Financing Party duly authorizing the Overall Transaction and such documents and such evidence as each party may reasonably request in order to establish the authority of each such other party to consummate the transactions contemplated by this Agreement, the taking of all corporate and other proceedings in connection therewith and compliance with the conditions herein or therein set forth and the incumbency of all officers signing any of the Operative Documents. Each of the foregoing documents shall be reasonably satisfactory to the recipient. SECTION 4.7 LETTERS OF CREDIT. The Midwest LC Issuer shall have issued the Midwest Letters of Credit and the RCE LC Issuer shall have issued the RCE Letters of Credit. SECTION 4.8 REPRESENTATIONS AND WARRANTIES. The representation and warranties set forth in SECTION 3 hereof shall be true and correct on and as of the Closing Date with the same effect as though made on and as of the Closing Date and each of the Lease -30- Financing Parties shall have received a certificate of each of the other parties hereto to such effect. SECTION 4.9 DEFAULTS, EVENTS OF DEFAULT, EVENTS OF LOSS. No Lease Event of Default, or Event of Loss or event that, with the passage of time or giving of notice or both, would constitute a Lease Event of Default or an Event of Loss shall have occurred and be continuing. SECTION 4.10 CONSENTS. All material permits, licenses, approvals and consents necessary to consummate the Overall Transaction shall have been duly obtained and shall be in full force and effect and in the form and substance satisfactory to each of the Lease Financing Parties. SECTION 4.11 GOVERNMENTAL ACTIONS. All actions, if any, required to have been taken by any Governmental Authority on or prior to the Closing Date in connection with the transactions contemplated by any Operative Documents on the Closing Date, including, without limitation, the FERC Orders, shall have been taken and all orders, permits, waivers, exemptions, authorizations and approvals of and registrations with such Governmental Authorities required to be in effect on the Closing Date in connection with the transactions contemplated by the Operative Documents on the Closing Date shall have been issued; and all such orders, permits, waivers, exemptions, authorizations and approvals shall be in full force and effect on the Closing Date. SECTION 4.12 INSURANCE. Insurance (including all related endorsements) complying with the requirements of SECTION 11 of the Facility Lease shall be in full force and effect and all premiums thereon shall be current. The Owner Participant, the OP Guarantor, the Owner Trustee, the Owner Lessor, the Lender, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative shall have received a certificate or certificates dated the Closing Date of an independent insurance broker or carrier reasonably satisfactory to such Persons stating that such insurance is in full force and effect. The Equity Investor and the Owner Participant shall have received a report from their insurance consultant in form and substance satisfactory to them. SECTION 4.13 ENGINEERING REPORT. The Owner Participant, the OP Guarantor, the Lender, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative shall have received, on or before the Closing Date, a copy of the Engineering Report and a reliance letter issued by the Engineering Consultant, each such document in form and substance reasonably satisfactory to the recipients. SECTION 4.14 ENVIRONMENTAL REPORT. The Owner Participant, the OP Guarantor, the Lender, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative -31- shall have received copies of the Environmental Report in form and substance reasonably satisfactory to the recipients. SECTION 4.15 REPORT OF ENVIRONMENTAL CONSULTANT. The Owner Participant, the OP Guarantor, the Lender, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative shall have received a copy of the Report of Environmental Consultant in form and substance reasonably satisfactory to the recipients. SECTION 4.16 APPRAISAL; CONDITION OF THE FACILITY. The Owner Participant and the OP Guarantor shall have received the Closing Date Appraisal prepared by the Appraiser addressed and delivered only to the Equity Investor and the Owner Participant and satisfactory in form and substance to the recipients. The Owner Participant shall be satisfied that the Facility shall be in the condition described in the Closing Date Appraisal. The Lender and the Holder Representative shall have received a copy of the verification of value, useful life and estimated residual value prepared by the Appraiser in connection with the appraisal of assets subject to the Facility Lease, each of which will be reasonably satisfactory to the recipients. SECTION 4.17 FUEL REPORT. The Owner Participant, the OP Guarantor, the Lender, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative shall have received copies of the Fuel Report in form and substance reasonably satisfactory to the recipients. SECTION 4.18 MARKET REPORT. The Owner Participant, the OP Guarantor, the Lender and the Holder Representative shall have received copies of the Market Report in form and substance reasonably satisfactory to the recipients. SECTION 4.19 OPINION WITH RESPECT TO CERTAIN TAX ASPECTS. The Owner Participant and the OP Guarantor shall have received a satisfactory tax opinion, dated the Closing Date, of Hunton & Williams addressed and delivered only to the Owner Participant and the OP Guarantor. SECTION 4.20 RATING. The Funding LLC Loans shall be rated at least BBB- and Baa3 by S&P and Moody's, respectively. SECTION 4.21 OPINIONS OF COUNSEL. Each of the relevant Lease Financing Parties shall have received an opinion or opinions, dated the Closing Date, of (a) SASM&F, special counsel to Midwest, Collins Holdings and Holdings, substantially in the form of Exhibit JJ, (b) Hopkins & Sutter, special Illinois regulatory counsel to Midwest, Collins Holdings and Holdings, substantially in the form of Exhibit KK, (c) Hunton & Williams, special New York counsel to the Owner Participant and the OP Guarantor, substantially in the form of Exhibit LL, (d) Mary Ellen Olson, counsel to Midwest, Collins Holdings, -32- Holdings and the Owner Participant, substantially in the form of Exhibit MM, (e) Richards, Layton & Finger, P.A., counsel to the Owner Lessor, the Trust Company, and the Owner Trustee, substantially in the form of Exhibit NN, (f) Kelley Drye, special counsel to the Holder Representative, substantially in the form of Exhibit OO, (g) Milbank, Tweed, Hadley & McCloy LLP, special counsel to the Securitization Company and APA Purchasers, substantially in the form of Exhibit PP addressed to such Person, and (h) Van Ness Feldman, special federal regulatory to Midwest, Collins Holdings and Holdings, substantially in the form of Exhibit QQ. Each such Person expressly consents to the rendering by its counsel of the opinion referred to in this SECTION 4.21 and acknowledges that such opinion shall be deemed to be rendered at the request and upon the instructions of such Person, each of whom has consulted with and has been advised by its counsel as to the consequences of such request, instructions and consent. Furthermore, each such counsel shall, to the extent requested, permit the Rating Agencies and the Funding LLC Note Holders to rely on their opinion as if such opinion were addressed to such parties. SECTION 4.22 RECORDINGS AND FILINGS. All filings and recordings listed on Schedule 4.22 hereto shall have been duly made and all filing, recordation, transfer and other fees payable in connection therewith shall have been paid; and the filing of all precautionary financing statements under the Uniform Commercial Code of Illinois and any other mortgages, security agreements or other documents as may be reasonably requested by counsel to the Owner Participant or the Holder Representative to perfect the right, title and interest of the Owner Lessor in the Owner Lessor's Interest, or any part thereof or interest therein and the Lien of the Holder Representative in the Trust Estate, shall have been made. SECTION 4.23 TAXES. All Taxes, if any, due and payable on or before the Closing Date in connection with the execution, delivery, recording and filing of this Agreement or any other Operative Document, or any document or instrument contemplated thereby shall have been duly paid in full. SECTION 4.24 NO CHANGES IN REQUIREMENTS OF LAW. No change shall have occurred in Requirements of Law or the interpretation thereof by any competent court or other Governmental Authority that would make it illegal for the Equity Investor, the Owner Participant, the Owner Lessor, the Owner Trustee, Holdings, Collins Holdings or Midwest, to participate in any of the transactions contemplated by the Operative Documents or would materially adversely affect the Other Facilities, the Undivided Interest or the Ground Interest. No change in the Tax law shall have occurred with respect to which no adjustment has been made pursuant to Section 17 hereof. SECTION 4.25 REGISTERED AGENT FOR MIDWEST, COLLINS HOLDINGS AND HOLDINGS. CT Corporation System shall have been appointed by Midwest, Collins Holdings and PARTICIPATION AGREEMENT (T1) -33- Holdings as registered agent for service of process in the State of New York as provided in the Operative Documents and CT Corporation System shall have accepted such appointment. SECTION 4.26 FAS 13. The present value of Basic Lease Rent payable during the Basic Lease Term under the Facility Sublease (taking into account any rent adjustment through or contemplated on the Closing Date), together with all rent payable under the Facility Site Sublease and all Transaction Costs financed through the Facility Lease, discounted at the Discount Rate, shall satisfy the 90 percent test for operating lease treatment under FAS 13. SECTION 4.27 RENT ADJUSTMENTS. No rent adjustment made or contemplated on the Closing Date (other than adjustments to reflect a change in Transaction Costs or the actual interest rate on the Lessor Loan) shall cause either (i) the after-tax present value of Basic Lease Rent discounted at 6% per annum, compounded annually to increase by more than 100 basis points or (ii) the total Basic Lease Rent to increase by more than 2.0%. SECTION 4.28 TITLE INSURANCE. Each of the Title Policies shall have been delivered to Collins Holdings, the Owner Participant, the Owner Lessor, the Owner Trustee and the Holder Representative. SECTION 4.29 PARENT GUARANTY. The OP Guarantor shall have executed and delivered to the other Lease Financing Parties an Owner Participant Guaranty substantially in the form of Exhibit Y hereto. SECTION 4.30 SURVEY. The Owner Participant, the OP Guarantor, the Lender and the Holder Representative shall have received a copy of the Survey in form and substance reasonably satisfactory to the recipients. SECTION 4.31 MIDWEST LEASE GUARANTEES. Midwest shall have executed and delivered to the Midwest OP Lease Guaranty substantially in the form of Exhibit Z hereto and the Midwest Lessor Lease Guaranty substantially in the form of Exhibit AA hereto. SECTION 4.32 HOLDINGS GUARANTEES. Holdings shall have executed and delivered the Holdings Guarantee and the Letter of Credit Guarantee. SECTION 4.33 NO MATERIAL ADVERSE CHANGE. No material adverse change shall have occurred with respect to Midwest, Collins Holdings, the Facility or the Facility Site since September 24, 1999. -34- SECTION V AFFIRMATIVE COVENANTS OF MIDWEST Midwest covenants and agrees that it will perform the obligations set forth in this SECTION 5. From and following the date when the Funding LLC Notes are repaid in full and each Lessor Note (or participation interest therein), if any, that shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA has been paid in full, (i) the obligations of Midwest set forth in SECTIONS 5.4 and 5.5 hereof shall apply with respect to the Facility only and (ii) the covenants set forth in SECTION 5.6 shall no longer have any force or effect. SECTION 5.1 DELIVERY OF CERTAIN INFORMATION. (i) Midwest shall furnish prompt written notice to the Owner Trustee, the Owner Lessor, the Owner Participant and the Holder Representative: (a) as soon as possible and in any event within five Business Days after any Authorized Officer of Midwest obtains knowledge of the occurrence of any default under any material agreement to which Midwest is a party or any termination thereof, in each case, together with a statement of an Authorized Officer of Midwest setting forth details of such event of default, default or termination and the action Midwest has taken and proposes to take with respect thereto; (b) as soon as possible and in any event within five Business Days after 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 3.1(h), notice thereof; (c) immediately upon becoming aware of the institution of any steps by Midwest 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 Midwest 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 Midwest 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 Midwest 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 Midwest or any member of the Controlled Group from a Multiemployer Plan, notice thereof and copies of all documentation relating thereto; -35- (d) as soon as possible and in any event within five Business Days after any Authorized Officer of Midwest obtains knowledge of the occurrence thereof, notice that any Governmental Authority may revoke, or refuse to grant or renew, or materially modify, any material Governmental Approval described in SECTION 3.1(c); (e) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Midwest, or compliance with the terms of this Agreement or the other Operative Documents, as the Owner Trustee, the Owner Lessor, the Owner Participant and the Holder Representative may reasonably request; (f) concurrently with the payment of Contingent Prepaid Rent, notice of such payment and the amount thereof; (g) immediately upon becoming aware of any change in operations of Midwest that would cause Midwest to fail to qualify for EWG status or to lose exemption from regulation under PUHCA; and (h) concurrently with the delivery of any notice, report, request, demand, certificate, financial statement or other instrument to the Owner Lessor pursuant to the Facility Lease (but without duplication of deliveries required under SECTION 5.1(i)), Midwest shall furnish a copy of the same to the Holder Representative with sufficient copies for each Holder. SECTION 5.2 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. Midwest shall continue to engage in the business of owning and operating the Generating Assets 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 limited liability company 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 SECTIONS 6.1, 6.2 OR 6.3. SECTION 5.3 COMPLIANCE WITH REQUIREMENTS OF LAW AND CONTRACTUAL OBLIGATIONS. Midwest shall 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 such non-compliance would not result in a Material Adverse Effect on Midwest. SECTION 5.4 MAINTENANCE OF PROPERTIES. Midwest shall (a) maintain the Generating Assets in all material respects (i) in good condition, repair and working order (ordinary wear and tear excepted), except where the failure to do so would not result in a Material Adverse Effect on Midwest, (ii) in accordance with Prudent Industry Practice, -36- and (iii) in accordance with the terms of all insurance policies required to be maintained pursuant to SECTION 5.5, and (b) make such repairs, renewals, replacements, betterments and improvements to the Generating Assets as in the reasonable judgment of Midwest are necessary so that the Generating Assets may be operated in accordance with their intended purpose. The provisions of this SECTION 5.4 shall be deemed to be supplemental to, but not duplicative of, the other provisions of the Operative Documents that relate to the use and maintenance of the Facility. SECTION 5.5 INSURANCE. (i) Midwest shall maintain with financially sound and reputable insurance companies insurance in 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 Assets, subject to the availability of such coverage on commercially reasonable terms, all on terms and conditions which are in accordance with Prudent Industry Practice. All such policies shall comply with the insurance requirements of the Operative Documents. (ii) The provisions of this SECTION 5.5 shall be deemed to be supplemental to, but not duplicative of, the provisions of any of the Operative Documents that require the maintenance of insurance. SECTION 5.6 ENVIRONMENTAL COVENANT. Midwest shall: (a) comply, and make all reasonable efforts to cause other Persons to comply, with all applicable Environmental Laws and obtain, comply with and maintain all necessary Governmental Approvals required under any applicable Environmental Law, in each case, except where such noncompliance or failure, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect on Midwest; and (b) promptly upon the request of the Owner Trustee, the Owner Lessor, the Owner Participant, the Lender or the Holder Representative if there has been a Lease Event of Default which has not been fully and timely cured, permit, and be responsible for all reasonable costs and expenses incurred by, an environmental consultant whom the Owner Participant (which environmental consultant shall, so long as the Lessor Notes are outstanding, be reasonably acceptable to the Holder Representative) in its discretion designates to perform an environmental assessment (including, reviewing documents; interviewing knowledgeable employees and representatives of Midwest; and sampling and analyzing soil, air, surface water, groundwater, and/or other media in or about property owned or leased by Midwest, or on which operations of Midwest otherwise take place). Such environmental assessment shall be in form, scope and substance reasonably satisfactory to the Owner Participant and, so long as the Lessor Notes are -37- outstanding, the Holder Representative. Midwest shall cooperate fully in the conduct of such environmental assessment upon written demand by the Owner Participant or the Holder Representative. The Owner Participant 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 SECTION 5.6 (b), the Owner Participant or the Holder Representative 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 5.6 as the Owner Trustee, the Owner Lessor, the Owner Participant, the Lender or the Holder Representative may reasonably request from time to time. SECTION 5.7 ENVIRONMENTAL COVENANT WITH RESPECT TO THE FACILITY AND THE FACILITY SITE. Midwest shall: (a) comply, and make all reasonable efforts to cause other Persons to comply, with all applicable Environmental Laws and obtain, comply with and maintain all necessary Governmental Approvals required under any applicable Environmental Law in connection with the use, operation and maintenance of the Facility and the Facility Site, in each case, except where such noncompliance or failure, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect on Midwest; (b) promptly upon the request of the Owner Trustee, the Owner Lessor or the Owner Participant, if there has been a Lease Event of Default which has not been fully and timely cured, arrange for, and be responsible for all costs and expenses incurred in connection with, the environmental surveys in accordance with the terms of SECTION 5.2(f) of the Facility Lease. (c) provide copies of such information to evidence compliance with this SECTION 5.7 as the Owner Trustee, the Owner Lessor or the Owner Participant, may reasonably request from time to time. SECTION 5.8 FURTHER ASSURANCES. Upon written request of the Owner Trustee, the Owner Lessor, the Owner Participant, the Lender or the Holder Representative, Midwest shall 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 preserve, protect and perfect the ownership of the Undivided Interest and the interest of the Owner Lessor in the Facility Site Lease and to maintain Liens on the Lessor Collateral in favor of the -38- Holder Representative that are duly perfected in accordance with all applicable Requirements of Law. SECTION 5.9 REPLACEMENT LETTER OF CREDIT. In the event that the rating of the Midwest LC Issuer and/or its Parent, respectively, falls below "AA-" from S&P or "Aa3" by Moody's (the "ISSUER DOWNGRADE EVENT"), Midwest shall (i) promptly upon an occurrence of such event, give a written notice to the Owner Lessor of such occurrence and (ii) if such Issuer Downgrade Event is continuing, (A) replace the Midwest Letter of Credit and (B) if the RCE Letter of Credit Issuer is an Affiliate of the Midwest LC Issuer, acting as an agent for the Owner Lessor pursuant to SECTION 20 hereof, cause the RCE Letter of Credit to be replaced within 45 days of the occurrence of the Issuer Downgrade Event with a replacement letter of credit (collectively, the "REPLACEMENT LETTERS OF CREDIT") issued by a financial institution acceptable to the RCE Agent and the Owner Lessor. The expiration date of the Replacement Letters of Credit shall be the later of (i) the expiration date of the Midwest Letter of Credit or the RCE Letter of Credit, as the case may be, and (ii) the next Business Day following the first anniversary of the payment of the Contingent Prepaid Rent (the "REPLACEMENT LC TERMINATION DATE"). The obligation of Midwest to comply with this covenant shall terminate on such Replacement LC Termination Date. SECTION VI NEGATIVE COVENANTS OF MIDWEST Midwest covenants and agrees that it will perform the obligations set forth in each of SECTIONS 6.1, 6.2, 6.3 and 6.4. From and following the date when the Funding LLC Notes are paid in full and each Lessor Note (or participation interest therein), if any, that shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA has been paid in full, the covenants set forth in SECTIONS 6.1 and 6.2 hereof shall no longer have any force or effect and Midwest shall be required only to comply with the covenants set forth in SECTION 6.3. SECTION 6.1 MERGER, CONSOLIDATION. Midwest shall not consolidate or merge with or into any other Person, or purchase or otherwise acquire all or substantially all of the assets of any Person, unless: (a) No Lessor Loan Event of Default has occurred and is continuing or would occur after giving effect to such consolidation, merger or asset acquisition; (b) Midwest is the entity resulting from such consolidation or surviving in such merger; and -39- (c) after giving effect to such transaction no Rating Event shall occur and be continuing. SECTION 6.2 SALE OF ASSETS. Midwest shall not 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 (each such event, an "ASSET DISPOSITION"), unless the aggregate net book value of all such assets, together with the net book value of all other assets sold, transferred, leased, contributed or conveyed by Midwest pursuant to this SECTION 6.2 since the Closing Date, does not exceed the Permitted Percentage; PROVIDED, HOWEVER, that notwithstanding anything to the contrary contained herein, Midwest may (i) sell or otherwise dispose of assets as and to the extent necessary to comply with Requirements of Law; PROVIDED, HOWEVER, that if after giving effect to any Asset Dispositions required to be made under this CLAUSE (i) the aggregate net book value of sales made under this SECTION 6.2 would exceed the Permitted Percentage, Midwest shall make a prepayment of all Net Cash Proceeds therefrom pursuant to the terms of the Holdings Credit Agreement, (ii) sell or otherwise dispose of Cash Equivalent Investments, (iii) enter into the Facility Site Lease and the Other Facility Site Leases and (iv) transfer certain railcars or rights to railcars as part of the Transco Transaction; PROVIDED, FURTHER, that any Asset Disposition pursuant to this proviso shall not be included in the calculation of the aggregate net book value of assets sold pursuant to this SECTION 6.2. SECTION 6.3 MERGER AND CONSOLIDATION. Midwest shall not consolidate or merge with any other Person (unless it is the surviving entity) or sell, transfer or otherwise dispose of all or substantially all of its assets in one or a series of transactions, unless (i) no Lease Event of Default shall have occurred and be continuing prior to and after giving effect to such merger, consolidation or sale, (ii) the entity resulting from such consolidation, surviving such merger or to whom such assets are transferred shall (a) be a corporate entity organized under the laws of the United States of America, any state thereof or the District of Columbia, and (b) expressly assume, pursuant to an agreement reasonably acceptable to the other Lease Financing Parties, each obligation of Midwest under the Operative Documents, (iii) the Owner Participant shall have received an opinion reasonably satisfactory to it from Hunton & Williams, or from a nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to Midwest to the effect that such consolidation, merger or sale of assets would not result in any material indemnified, or any unindemnified, incremental tax risk to the Owner Participant, (iv) the Owner Participant and, so long as the Lessor Notes are outstanding, the Holder Representative shall have received an opinion of counsel reasonably satisfactory to each such Person (y) with respect to the agreement referred to in the immediately preceding clause (ii) (b) and (z) addressing other customary matters and (v) after giving effect to such transaction, the credit rating of Holdings or any successor or surviving -40- entity shall be equal to or greater than the credit rating of Holdings immediately prior to consummating such transaction. Midwest shall not sell more than 50% of its assets without the prior written consent of the Owner Lessor and, so long as the Lessor Notes are outstanding, the Holder Representative which consent may not be unreasonably withheld, PROVIDED, HOWEVER, that such consent shall not be required in connection with such sale or disposition if the Funding LLC Notes or the senior unsecured long-term debt obligations of Holdings are rated at least Baa3 by Moody's and BBB- by S&P taking into account such sale of the assets. SECTION 6.4 CHANGES IN LEGAL FORM OR BUSINESS. Midwest shall not change its legal form or Organic Documents except as permitted by SECTION 6.1, change its Fiscal Year or engage in any business other than the construction, ownership, maintenance and operation of the Generating Assets, the sale of wholesale electric power therefrom and related products and services and such other business as may be reasonably incidental thereto. SECTION VII AFFIRMATIVE COVENANTS OF HOLDINGS Holdings covenants and agrees that it will perform the obligations set forth in this SECTION 7. From and following the date when the Funding LLC Notes are repaid in full and each Lessor Note (or participation interest therein), if any, that shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(h) of the APA has been paid in full, (i) the obligations of Holdings set forth in SECTION 7.1 (d),(e), (l) and 7.4 hereof shall apply with respect to the Facility only and (ii) the covenant set forth in SECTION 7.1(n) hereof shall no longer have any force and effect. SECTION 7.1 FINANCIAL INFORMATION, REPORTS, NOTICES. Holdings shall furnish to the Owner Trustee, the Owner Lessor, the Owner Participant, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative: (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 Holdings, consolidated balance sheets of Holdings (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 Holdings (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 Officer of Holdings 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 Holdings, commencing with the 1999 Fiscal Year, a copy of the annual audit report for such Fiscal Year for Holdings (which will include results for its -41- Consolidated Subsidiaries), including therein consolidated balance sheets of Holdings (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 Holdings (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 Holdings, 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 7.1(a), and on each Quarterly Payment Date on which Holdings intends to make any capital expenditure pursuant to SECTION 8.11 or any Restricted Payment pursuant to SECTION 8.12 and, commencing January 1, 2000, within 60 days after each other Quarterly Payment Date, a certificate, executed by an Authorized Officer of Holdings with responsibility for financial matters, showing (i) the 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, (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 and (iv) the Debt to Capital Ratio as at the last day of the immediately preceding 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 Owner Lessor and, so long as the Lessor Notes are outstanding, the Holder Representative; (d) within 120 days after the end of each calendar year, Holdings shall deliver a report for the preceding calendar year with respect to the Generating Assets covering the following matters: (i) production, including availability, output, planned outages and unplanned outages (and the reason for such unplanned outages); (ii) environmental matters to the extent the same shall have given rise to material claims against Holdings or any of its Subsidiaries; (iii) health and safety matters to the extent the same shall have given rise to material claims against Holdings or any of its Subsidiaries; (iv) significant plant activities, such as major plant overhauls, alterations, modifications and other capital expenditures, significant changes in plant operations and major operating incidents; and (v) market activities, quantities and average price of delivered energy and capacity; (e) concurrently with the delivery of the annual report referred to in Section 7.1(d) above, Holdings shall furnish an operating budget for the Generating Assets 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 -42- experience for the preceding calendar year (or portion thereof) against the income statement projections for the preceding calendar year (or portion thereof); (f) as soon as possible and in any event within five Business Days after any Authorized Officer of Holdings obtains knowledge of the occurrence of (i) each Default under this Agreement and (ii) any default under any other material agreement to which Holdings or any of its subsidiaries is a party or any termination thereof, in each case, together with a statement of such Authorized Officer setting forth details of such Default, default or termination and the action which Holdings or such subsidiary of Holdings has taken and proposes to take with respect thereto; (g) as soon as possible and in any event within five Business Days after 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 3.2(i); (h) promptly after the sending or filing thereof, copies of all reports and registration statements which Holdings files with the Securities and Exchange Commission or any national securities exchange; (i) immediately upon becoming aware of the institution of any steps by Holdings 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 Holdings 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 Holdings 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 Holdings 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 Holdings 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 Officer of Holdings obtains knowledge or notice of the occurrence of any changes in Holdings' Debt Rating by Moody's or S&P; -43- (k) within ten Business Days after each anniversary of the Closing Date, a certificate from Holdings's insurers or insurance agents evidencing that the insurance policies in place satisfy the requirements of the Operative Documents; (l) as soon as possible and in any event within five Business Days after any Authorized Officer of Holdings obtains (i) knowledge of the occurrence thereof, notice of any casualty, damage or loss to the Generating Assets, whether or not insured, through fire, theft, other hazard or casualty, involving a probable loss of $5,000,000 or more or (ii) knowledge of (A) the occurrence, notice of any cancellation, notice of threatened or potential cancellation or (B) any material change in the terms, coverage or amounts of any policy of insurance which would result in such policy deviating from Prudent Industry Practice; (m) as soon as possible and in any event within five Business Days after any Authorized Officer of Holdings obtains knowledge of the occurrence thereof, notice that any Governmental Authority may revoke, or refuse to grant or renew, or materially modify, any material Governmental Approval described in SECTION 3.1(c); (n) concurrently with the delivery of the financial statements referred to in SECTION 7.1(b), Holdings shall cause to be delivered to the Lender and the Holder Representative, letters from each of S&P and Moody's ("RATING LETTERS") setting forth, as of the date of such letters, each Debt Rating; and (o) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Holdings, or compliance with the terms of this Agreement or the other Operative Documents, as the Owner Trustee, the Owner Lessor, the Owner Participant, the Lender and the Holder Representative may reasonably request. SECTION 7.2 EXISTENCE; CONDUCT OF BUSINESS. Holdings will do or cause to be done all things necessary to 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 permitted by SECTION 8.3. For as long as the Funding LLC Notes are outstanding and so long as no Lessor Note or Lessor Notes (or participation interests therein) shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA and remain outstanding, Holdings shall not, and shall cause each of its subsidiaries not to, engage in any business other than owning and operating electrical generating assets and selling and marketing wholesale electric power and other products and services related thereto or investing in entities that engage in the foregoing. -44- SECTION 7.3 COMPLIANCE WITH REQUIREMENTS OF LAW AND CONTRACTUAL OBLIGATIONS. Holdings shall, and shall cause each of its Subsidiaries 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 on Holdings. SECTION 7.4 BOOKS AND RECORDS; INSPECTION RIGHTS. Holdings shall, and shall cause each of its Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Owner Lessor, the Owner Participant, the Lender, the Holder Representative and each of the Funding LLC Note Holders or any of their respective representatives (at the Holder Representative's or such Funding LLC Note Holders' expense), at reasonable times and intervals upon reasonable prior notice, to visit all of its offices and sites and to discuss its financial matters with its officers and independent public accountant. Holdings shall, at any reasonable time and from time to time upon reasonable prior notice, permit the Owner Lessor, the Owner Participant, the Lender, the Holder Representative and each of the Funding LLC Note Holders or any of their respective agents or representatives to examine and make copies of and abstracts from the records and books of account of Holdings and its subsidiaries; PROVIDED that by virtue of this SECTION 7.4, Holdings shall not be deemed to have waived any right to confidential treatment of the information obtained, subject to the provisions of Requirements of Law or court order. The provisions of this SECTION 7.4 shall be deemed to be supplemental to, but not duplicative of, the other provisions of the Operative Documents that relate to inspection of the Facility and the books and records relating thereto. SECTION 7.5 IMPLEMENTATION OF YEAR 2000 PLAN. Holdings shall ensure that its, and its Subsidiaries', computer based systems are able to effectively process data including dates on and after January 1, 2000. SECTION 7.6 FURTHER ASSURANCES. Upon written request of the Owner Lessor, the Owner Participant, the Lender or the Holder Representative, Holdings shall, and shall cause each of its subsidiaries 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 preserve, protect and perfect the ownership of the Undivided Interest and the interest of the Owner Lessor in the Ground Lease and to maintain Liens on the Lessor Collateral in favor of the Holder Representative that are duly perfected in accordance with all applicable Requirements of Law. SECTION VIII NEGATIVE COVENANTS OF HOLDINGS -45- For as long as any of the Funding LLC Notes are outstanding and each Lessor Note (or participation interest therein), if any, that shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA has been paid in full, Holdings covenants and agrees to perform the obligations set forth in this SECTION 8. SECTION 8.1 INDEBTEDNESS. Holdings shall not and shall not permit its Subsidiaries to create, incur, assume or permit to exist any Indebtedness, other than: (a) Indebtedness under the Holdings Credit Agreement; (b) Capitalized Lease Liabilities and Operating Lease Liabilities outstanding (or anticipated to be outstanding) on the Closing Date and set forth on Schedule 8.2.1(a) to the Holdings Credit Agreement and other Capitalized Lease Liabilities and Operating Lease Liabilities entered into in the ordinary course of business not to exceed at any time an aggregate principal amount equal to $50,000,000; (c) Indebtedness under Interest Rate Hedging Transactions; (d) subject to SECTION 8.11, Indebtedness of the Holdings Loan Parties incurred to finance the acquisition, construction or improvement of any fixed or capital assets in accordance with and subject to SCHEDULE 8.2.1(d) to the Holdings Credit Agreement; (e) Indebtedness consisting of reimbursement obligations of the Holdings Loan Parties in respect of (i) letters of credit (other than the Midwest Letters of Credit), surety bonds and performance bonds used by the Holdings Loan Parties in the ordinary course of business in an aggregate amount not to exceed $40,000,000 at any time and (ii) the Midwest Letters of Credit; (f) Indebtedness of Holdings incurred to refinance (x) the Holdings Facility, (y) any other Existing Indebtedness of Holdings or (z) the Funding LLC Loans (in part to the extent of amortization of the Lessor Notes or in whole in the event that the Facility Lease and the Facility Sublease are terminated) (each such refinancing of the Funding LLC Loans, a "FUNDING LLC REFINANCING"), PROVIDED that (A) the average life of any such Indebtedness shall not be less than, in the case of Indebtedness incurred to refinance the Holdings Loans (other than the Holdings Loans borrowed for working capital), five (5) years, or, in the case of Indebtedness incurred to refinance other Indebtedness of Holdings, 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 the amount of fees and expenses incurred in connection with such issuance; -46- (g) Indebtedness (including guarantees thereof by Midwest) in the form of commercial paper in an amount which, when added to the sum of (x) the aggregate outstanding principal amount of Holdings Loans (other than Holdings Loans borrowed for working capital) and (y) the outstanding principal amount of any Indebtedness incurred pursuant to SECTION 8.1(g) (or subsequent refinancings of such Indebtedness) does not exceed the sum of (A) $1,679,000,000 PLUS (B) the aggregate principal amount of Funding LLC Refinancings by Holdings; (h) Indebtedness in the form of subordinated, unsecured intercompany loans between the Holdings Loan Parties that are subject to the EMOC Loan Documents; (i) Indebtedness in the form of guarantees made by and reimbursement obligations with respect to letters of credit issued for the account of Holdings in the ordinary course of business related to the Generating Assets in connection with fuel procurement, sales, transportation or management purchases or exchanges made by affiliates of Holdings related to physical capacity, energy and emission credits related to the Generating Assets and financial instruments related thereto and purchases, sales or exchanges of energy or emission credits; (j) Indebtedness of Holdings under the Letter of Credit Guarantee; (k) Indebtedness of Midwest under the Midwest Lessor Lease Guaranty, the Midwest OP Lease Guaranty; and (l) other Indebtedness of Holdings, provided that (A) Holdings shall have delivered 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 Closing 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 tranche of the Holdings Facility available for working capital been outstanding during such period, the Debt Service Coverage Ratio for such period would have been equal or greater than 2.50 to 1.00; (B) the most recently delivered Ratings Letters confirm that the Debt Ratings are at least BBB- and Baa3 by S&P and Moody's respectively; and (C) to the extent that such Indebtedness incurred since the date of the most recently delivered Ratings Letters would exceed $200 million in the aggregate, Holdings shall have received written confirmation that the incurrence of such Indebtedness would not result in a downgrade of the Holdings' Debt Rating below BBB- or Baa3 from S&P and Moody's, respectively. SECTION 8.2 LIENS. Holdings shall not and shall not permit its Subsidiaries to create, incur, assume or permit to exist any Liens on such Person's respective property, revenues or assets, whether now owned or hereafter acquired, other than: -47- (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, material men and landlords incurred in the ordinary course 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 in connection with workers' compensation, unemployment insurance or other forms of governmental insurance or benefits; (d) Liens granted in the ordinary course as security for the performance of tenders, statutory obligations, leases and contracts (other than for Indebtedness) or to secure obligations on surety or appeal bonds; (e) easements, rights-of-way, zoning or 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 Holdings or such Subsidiary; (f) Liens on cash collateral securing investments and guarantee obligations; (g) judgment Liens in existence (i) less than 30 days after the entry thereof so long as the payment thereof is effectively bonded or otherwise adequately secured or (ii) less than 60 days after entry thereof so long as no enforcement, levy, collection or foreclosure proceeding has commenced or with respect to which execution has been stayed or payment of which is covered in full by insurance; (h) Liens, title defects and adverse claims that neither individually nor in the aggregate materially diminish the use or value of the property affected thereby; (i) Permitted Encumbrances; (j) Liens specifically permitted under or created pursuant to the Operative Documents; -48- (k) Liens to secure Indebtedness permitted by clauses 8.1(b), 8.1(f), 8.1(k), 8.1(l) and 8.1(g), provided that such Indebtedness shall be secured on a pro rata basis with the Holdings Loans and Holdings' Guarantee; (l) purchase money Liens to secure Indebtedness permitted by clause 8.1(e), provided that such Liens do not encumber any assets other than those acquired or constructed with the proceeds of such Indebtedness; and (m) extensions or renewals of any Lien otherwise permitted to be incurred under this SECTION 8.2 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. SECTION 8.3 MERGER, CONSOLIDATION, SALE OF SUBSTANTIALLY ALL ASSETS. Holdings will not liquidate or dissolve, consolidate or merge with or into any other Person, or purchase or otherwise acquire all or substantially all of the assets of Person, unless: (a) No Lessor Loan Event of Default has occurred and is continuing or would occur after giving effect to such liquidation, dissolution, consolidation, merger or asset acquisition; (b) Holdings is the entity resulting from such consolidation or surviving in such merger; and (c) after giving effect to such transaction no Rating Event shall occur and be continuing. SECTION 8.4 SALE OF ASSETS. Holdings shall not, and shall not permit its Subsidiaries to, consummate any Asset Disposition, unless the aggregate net book value of all such assets, together with the net book value of all other assets sold, transferred, leased, contributed or conveyed by Holdings and its Subsidiaries pursuant to this SECTION 8.4 since the Closing Date, does not exceed the Permitted Percentage; PROVIDED, HOWEVER, that notwithstanding anything to the contrary contained herein, Holdings and its Subsidiaries may (i) sell or otherwise dispose of assets as and to the extent necessary to comply with Requirements of Law; PROVIDED, HOWEVER, that if after giving effect to any Asset Dispositions required to be made under this CLAUSE (i) the aggregate net book value of sales made under this SECTION 8.4 would exceed the Permitted Percentage, Holdings shall make a prepayment of all Net Cash Proceeds therefrom pursuant to the terms of the Holdings Loan Agreement, (ii) sell or otherwise dispose of Cash Equivalent Investments, (iii) enter into the Facility Site Lease and the Other Facility Site Leases and (iv) transfer certain railcars or rights to railcars as part of the Transco Transaction; PROVIDED, FURTHER, -49- that any Asset Disposition pursuant to clauses (i) through (iv) of this paragraph shall not be included in the calculation of the aggregate net book value of assets sold pursuant to this SECTION 8.4. SECTION 8.5 INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND ACQUISITIONS. Holdings shall not, and shall not permit any of its Subsidiaries to, create or acquire, make, incur, assume or suffer to exist any Investment in any other Person, except: (i) Investments existing on the Closing Date; (ii) Investments into Midwest, provided that no Lease Event of Default shall be in existence or shall occur after giving effect to the making of such Investment; (iii) Investments in the form of payments made under the Facility Sublease and the Other Facility Subleases; and (iv) 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 8.6 TRANSACTIONS WITH AFFILIATES. Holdings shall not, and shall not permit its Subsidiaries to, enter into, or cause, suffer or permit to exist, any Transaction with an Affiliate unless such arrangement or contract is fair and reasonable to Holdings and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of Holdings with a Person which is not one of its Affiliates. SECTION 8.7 AMENDMENT, WAIVER OR ASSIGNMENT OF CERTAIN DOCUMENTS. Holdings shall not, and shall not permit any of its Subsidiaries to terminate, amend, supplement or otherwise modify any ComEd Agreement (i) in any materially adverse manner with respect to its term, offtake requirement or payment provision or (ii) otherwise in a manner which would result in a Material Adverse Effect on Holdings without the prior written consent of the Holder Representative, which consent shall not be unreasonably withheld or delayed. SECTION 8.8 SPECULATIVE TRANSACTIONS. Holdings shall not, and shall not permit its Subsidiaries to, directly or indirectly engage in transactions for (or incur Indebtedness under SECTION 8.1(i) in connection with) any speculative purpose, including speculative transactions relating to (x) fuel procurement or sales, (y) purchases, sales or exchanges -50- related to capacity and energy from the Generating Assets or financial instruments related thereto or (z) purchases, sales or exchanges of energy or emission credits. SECTION 8.9 RESTRICTIVE AGREEMENTS. Holdings shall not and shall not permit any of its Subsidiaries to enter into any agreement (other than the Holdings Credit Documentation and the Operative Documents as in effect on the Closing Date) (a) expressly restricting the ability of Holdings to amend or otherwise modify the Holdings Credit Documentation, (b) restricting the ability of any Holdings Loan Party to make any payments, directly or indirectly, to Holdings by way of dividends or make distributions on its capital stock or member or other ownership interests or to pay any Indebtedness owed to any Holdings Loan Party or (c) restricting the ability of any Holdings Loan Party to make loans or advances to Holdings or any other Holdings Loan Party. SECTION 8.10 CHANGES IN LEGAL FORM OR BUSINESS. Holdings shall not change its legal form or Organic Documents except as permitted by SECTION 8.3, change its Fiscal Year or engage in any business other than the business contemplated by the Operative Documents. SECTION 8.11 CAPITAL EXPENDITURES. Holdings will not and will not permit its Subsidiaries to make any capital expenditures (other than Necessary Capital Expenditures) or other asset purchases in excess of $5,000,000 per annum so long as (a) the Debt Service Coverage Ratio for the preceding 12-month period ended on the last day of the immediately preceding Fiscal Quarter is less than 1.75 to 1.00 (to be computed for the first time on the date which is 12 months after the Closing Date) and (b) the projected Debt Service Coverage Ratio for each of the two succeeding 12-month periods is less than 1.75 to 1.00 or (c) any Debt Rating falls into Level 2, Level 3 or Level 4 of the CAPEX Limitation Grid. SECTION 8.12 DIVIDENDS AND OTHER PAYMENTS. Holdings shall not, and shall not permit any of its Subsidiaries 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 Holdings 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 Holdings 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 Holdings may make Restricted Payments to Holdings; and (b) Holdings may make Restricted Payments in respect of its capital stock on any Quarterly Payment Date if: (i) Holdings has paid all amounts then due and -51- payable in respect of the Holdings Loans; (ii) no Lessor Loan Event of Default shall have occurred and be continuing or will occur after giving effect to the making of such payment; and (iii) (A) the Debt Service Coverage Ratio for the 12-month period 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 1.75 to 1.00; PROVIDED, that (x) on any Quarterly Payment Date on which any Debt Rating falls into Level 2 of the CAPEX Limita- tion Grid, 50% of any Excess Cash Flow shall be deposited into the Cashflow Recapture Fund until the amount on deposit in such Cashflow Recapture Fund equals the amount of the Fixed Charges payable during the next six months calculated as of such Quarterly Payment Date; (y) on any Quarterly Payment Date on which any Debt Rating falls into Level 3 of the CAPEX Limitation Grid, 100 % of any Excess Cash Flow shall be deposited into the Cashflow Recapture Fund; and (z) at any time any Debt Rating falls into Level 4 of the CAPEX Limitation Grid, all Excess Cash Flow generated by Holdings, if any, and all amounts on deposit in the Cashflow Recapture Fund will be used to make prepayments of the Holdings Loans pursuant to the Holdings Credit Agreement. To the extent that any funds have been deposited into the Cashflow Recapture Fund, the funds will be held as security for the repayment of the Holdings Loans and Holdings' obligations under its guarantee of the lease obligations of Collins Holdings under the Facility Lease and will only be released once each Debt Rating falls into Level 1 of the CAPEX Limitation Grid. SECTION IX AFFIRMATIVE COVENANTS OF COLLINS HOLDINGS Collins Holdings covenants and agrees that it will perform the obligations set forth in this SECTION 9. SECTION 9.1 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. Collins Holdings shall preserve, renew and keep in full force and effect its legal existence and take all necessary action to maintain all material rights, privileges and franchises necessary or desirable in the normal conduct of its business. SECTION 9.2 COMPLIANCE WITH REQUIREMENTS OF LAW AND CONTRACTUAL OBLIGATIONS. Collins Holdings shall 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 such non-compliance would not result in a Material Adverse Effect on Collins Holdings. SECTION 9.3 MAINTENANCE OF PROPERTIES. Collins Holdings shall (a) maintain its properties which are necessary or useful in the proper conduct of its business (i) in good -52- condition, repair and working order (ordinary wear and tear excepted), except where the failure to do so would not result in a Material Adverse Effect on Collins Holdings, (ii) in accordance with Prudent Industry Practice, and (iii) in compliance with all material Requirements of Law, and (b) make such repairs, renewals, replacements, betterments and improvements to such properties as in the reasonable judgment of Collins Holdings are necessary so that such properties may be operated in accordance with their intended purpose. The provisions of this Section 9.3 shall be deemed to be supplemental to, but not duplicative of, the provisions of the Facility Lease. SECTION 9.4 NOTICES OF MATERIAL EVENTS. (i) Collins Holdings will furnish to the Owner Trustee, the Owner Lessor, the Owner Participant, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative prompt written notice of the following: (a) as soon as possible and in any event within five Business Days after any Authorized Officer of Collins Holdings obtains knowledge of the occurrence of (i) any Lease Event of Default and (ii) any default under any other material agreement to which Collins Holdings is a party or any termination thereof, in each case, together with a statement of an Authorized Officer of Collins Holdings setting forth details of such Lease Event of Default, default or termination and the action Collins Holdings has taken and proposes to take with respect thereto; (b) as soon as possible and in any event within five Business Days after the commencement of, or the occurrence of any material adverse development with respect to, any litigation, action, proceeding, Environmental Claim or labor controversy of the type described in SECTION 3.3(g); (c) immediately upon becoming aware of the institution of any steps by Collins Holdings 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 Collins Holdings 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 Collins Holdings 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 Collins Holdings with respect to any -53- 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 Collins Holdings or any member of the Controlled Group from a Multiemployer Plan, notice thereof and copies of all documentation relating thereto; (d) as soon as possible and in any event within five Business Days after any Authorized Officer of Collins Holdings obtains knowledge of the occurrence thereof, notice of any casualty, damage or loss to properties owned by Collins Holdings which are necessary or useful in the proper conduct of its business, whether or not insured, through fire, theft, other hazard or casualty, involving a probable loss of $5,000,000 or more; (e) as soon as possible and in any event within five Business Days after any Authorized Officer of Collins Holdings obtains knowledge of the occurrence thereof, notice that any Governmental Authority may revoke, or refuse to grant or renew, or materially modify, any material Governmental Approval described in SECTION 3.3(d); (f) concurrently with the payment of Contingent Prepaid Rent, notice of such prepayment and the amounts thereof; (g) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Collins Holdings, or compliance with the terms of this Agreement or the other Operative Documents, as the Owner Trustee, the Owner Lessor, the Owner Participant and the Holder Representative may reasonably request; and (h) concurrently with the delivery of any notice, report, request, demand, certificate, financial statement or other instrument (but without duplication of deliveries required under SECTION 9.1(i)) to the Owner Lessor pursuant to the Facility Lease, Collins Holdings shall furnish a copy of the same to the Holder Representative with sufficient copies for each Holder. Each notice delivered under SECTION 9.4(i) shall be accompanied by a statement of an Authorized Officer or other executive officer of Collins Holdings setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. -54- SECTION 9.5 FURTHER ASSURANCES. Upon written request of the Owner Trustee, the Owner Lessor, the Owner Participant, the Lender or the Holder Representative, Collins Holdings shall 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 preserve, protect and perfect the ownership of the Undivided Interest and the interest of the Owner Lessor in the Ground Lease and to maintain Liens on the Lessor Collateral in favor of the Holder Representative that are duly perfected in accordance with all applicable Requirements of Law. SECTION X NEGATIVE COVENANTS OF COLLINS HOLDINGS SECTION 10.1 SOLE PURPOSE NATURE. Collins Holdings shall not enter into or engage in any business other than as contemplated by the Facility Lease, the Facility Sublease, the Facility Site Sublease, the Facility Site Sub-sublease and the Tax Indemnity Agreement and the activities related thereto. SECTION 10.2 INDEBTEDNESS. Collins Holdings shall not create, incur, assume, suffer to exist or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, other than Indebtedness incurred hereunder and under the other Operative Documents. SECTION 10.3 LIENS. Collins Holdings shall not create, incur, assume or suffer or permit to exist, directly or indirectly, any Lien on any of its property now owned or hereafter acquired, except the Liens specifically permitted under the Operative Documents. SECTION 10.4 PROHIBITION OF FUNDAMENTAL CHANGES. Collins Holdings shall not enter into any transaction of merger or consolidation, change its form of organization or its business, liquidate or dissolve itself (or suffer any liquidation or dissolution) or discontinue its business or sell all or substantially all of its assets. SECTION 10.5 INVESTMENTS. Collins Holdings shall not form or have any Subsidiaries, make investments, loans or advances or otherwise acquire any stock, obligations or securities of any person, except that Collins Holdings may make investments specifically permitted under the Operative Documents. SECTION 10.6 BANKRUPTCY. Collins Holdings shall not commence any case, proceeding or other action under any existing or future law of any jurisdiction, relating to bankruptcy, insolvency, reorganization, agreement, adjustment, winding-up, liquidation, dissolution, composition, or other relief with respect to it or its debts, or seek appoint- -55- ment of a receiver, trustee, custodian, or other similar official for it or for all or any substantial part of its assets, or make a general assignment for the benefit of its creditors or take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in this Section 10.6. SECTION XI COVENANTS OF THE TRUST COMPANY, THE OWNER TRUSTEE AND THE OWNER LESSOR SECTION 11.1 COMPLIANCE WITH THE TRUST AGREEMENT. Each of the Owner Lessor, the Trust Company and the Owner Trustee hereby severally covenants and agrees severally and as to itself only that it will: (a) comply with all of the terms of the Trust Agreement applicable to it; and (b) not amend, supplement, or otherwise modify SECTION 9.01, SECTION 10.01 or SECTION 10.02 of the Trust Agreement without the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default has occurred and is continuing or the Holder Representative so long as the Lessor Notes are outstanding. SECTION 11.2 OWNER LESSOR'S LIENS. The Trust Company, the Owner Trustee and the Owner Lessor each covenants severally and as to itself only that it will not directly or indirectly create, incur, assume or suffer to exist any Owner Lessor's Lien attributable to it and will promptly notify in writing Collins Holdings, the Owner Participant and Holder Representative of the imposition of any such Lien of which it has actual knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Owner Lessor's Lien attributable to it. SECTION 11.3 AMENDMENTS TO OPERATIVE DOCUMENTS. The Owner Trustee and the Trust Company each covenants severally and as to itself only that it will not unless such action is expressly contemplated by the Operative Documents, or with respect to the Owner Trustee and the Owner Lessor, unless it is expressly directed by the Owner Participant in writing, (a) through its own action terminate any Operative Document to which it is a party, (b) amend, supplement, waive or modify (or consent to any such amendment, supplement, waiver or modification) any Operative Document (other than the Trust Agreement, amendments to and modifications of which are governed by SECTION 11.1 hereof) in any manner other than with respect to administrative or ministerial matters or (c) except as provided in SECTION 16.2 hereof, take any action to prepay or refund the Lessor Notes or amend any of the payment terms of the Lessor Notes without, in each case, the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing and, in the case of clause (a) or -56- (b), the Holder Representative so long as the Funding LLC Notes are outstanding and so long as no Lessor Note or Lessor Notes (or participation interests therein) shall have been assigned or otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA and remain outstanding. SECTION 11.4 TRANSFER OF THE OWNER LESSOR'S INTEREST. Other than as contemplated by the Operative Documents, each of the Owner Lessor and the Owner Trustee covenants severally and as to itself only that it will not assign, pledge, sell, lease, convey or otherwise transfer any of its then existing right, title or interest in and to the Owner Lessor's Interest, the Trust Estate or the other Operative Documents without the consent of Midwest and, so long as the Lessor Notes are outstanding, the Holder Representative, which consent may not be unreasonably withheld. Nothing in this SECTION 11.4 shall limit the ability of the Owner Trustee or the Owner Participant to appoint a successor Owner Trustee pursuant to SECTION 9 of the Trust Agreement. SECTION 11.5 OWNER LESSOR; TRUST ESTATE. Each of the Owner Trustee and the Owner Lessor covenants severally and as to itself only that it will not voluntarily take any action to subject the Owner Lessor or the Trust Estate to the provisions of any applicable bankruptcy or insolvency law (as now or hereafter in effect). SECTION 11.6 LIMITATION ON INDEBTEDNESS AND ACTIONS. Each of the Owner Trustee and the Owner Lessor covenants severally and as to itself only that it will not incur any indebtedness nor enter into any business or activity except as required or expressly permitted or contemplated by any Operative Document. SECTION 11.7 CHANGE OF LOCATION. The Owner Trustee shall use all reasonable efforts to give the Owner Participant, the Holder Representative, the Lender, Midwest and Collins Holdings 30 days' written notice of any relocation of the Owner Trustee's chief executive office or the place where documents and records relating to the Owner Trustee or the Trust Estate are kept from the location set forth in SECTION 3.4(j) and of any change in its name, but in any event the Owner Trustee and the Owner Lessor shall give such notice within 30 days after such relocation or name change. SECTION 11.8 BANKRUPTCY OF TRUST. Each of the Trust Company, the Owner Trustee and the Owner Lessor hereby agrees severally and as to itself only that it shall not voluntarily take any action that shall, or cause any action to be taken that is intended to, submit the Owner Lessor, as debtor, to any proceeding under any Requirement of Law involving bankruptcy, insolvency, reorganization or other laws affecting the rights of creditors generally unless a Lease Event of Default or a Material Lease Default shall have occurred and be continuing (in which case, if the Lien of the Lessor Collateral shall not have been discharged, the Trust Company, the Owner Trust or the Owner Lessor shall not -57- take such action unless the Holder Representative shall have given its prior written consent to such action in its sole discretion). SECTION XII COVENANTS OF THE OWNER PARTICIPANT SECTION 12.1 RESTRICTIONS ON TRANSFER OF BENEFICIAL INTEREST. (a) The Owner Participant covenants and agrees that it shall not during the Facility Lease Term assign, convey or transfer any of its right, title or interest in the Beneficial Interest without the prior written consent of Midwest and, so long as the Lessor Notes are outstanding, without the prior written consent of the Holder Representative; PROVIDED, HOWEVER, that the Owner Participant may assign, convey or transfer all or any part of its interest in the Beneficial Interest without such consent to a Person (the "TRANSFEREE") which shall assume the duties and obligations of the Owner Participant under the Operative Documents with respect to the interest being transferred pursuant to an Assignment and Assumption Agreement substantially in the form of Exhibit RR hereto, if each of the following conditions shall have been satisfied: (i) Midwest, the Owner Trustee and, so long as the Lessor Notes are outstanding, the Holder Representative shall have received an opinion of counsel, which opinion and counsel are reasonably satisfactory to each recipient thereof, to the effect that such Assignment and Assumption Agreement is a legal, valid and binding obligation of, and is enforceable against, each party thereto, that all regulatory approvals required in connection with such transfer or necessary to assume the Owner Participant's obligations under the Operative Documents shall have been obtained and that the proposed transfer of the Beneficial Interest will not require registration the Securities Act; (ii) the Transferee shall be a "United States person" within the meaning of Section 7701 (a)(30) of the Code; (iii) the Transferee or a guarantor of such Transferee meets the following criteria: (1) the Consolidated Tangible Net Assets of at least equal to $75 million calculated in accordance with GAAP, (2) agrees to be bound by the terms of the Operative Documents pursuant to an Assumption and Assignment Agreement substantially in the form of Exhibit RR hereto, and (3) so long as no Lease Event of Default shall have occurred and be continuing, such Transferee is not a Competitor of, or in material litigation with, Midwest or any Affiliate of Midwest, unless waived by Midwest; -58- (iv) the transferring Owner Participant shall pay, without any right of indemnification from Midwest or any other Person, all reasonable documented out-of-pocket costs, fees and expenses incurred in connection with any such transfer by (x) the other Lease Financing Parties, except Midwest, and (y) Midwest, so long as no Lease Event of Default shall have occurred and be continuing; and (v) following such transfer, there shall be not more than four Owner Participants with interests (Undivided Interests or beneficial trust interests) in the Facility. (b) For purposes of the preceding clause (a), a "COMPETITOR" of Midwest shall be an entity which, or an Affiliate of which, is significantly involved as a seller or trader of capacity or energy in the electric market; PROVIDED that, the foregoing restriction shall not apply in the case of a Transferee that is an Affiliate of such a seller or trader so long as (i) such Transferee is an entity involved in making passive investments such as the Owner Participant's contemplated investment in this transaction, (ii) such Transferee has in place procedures which shall be reasonably acceptable to Midwest to prevent such Affiliate that is a seller or trader of capacity from acquiring confidential information relating to such passive investments and agrees in writing with Midwest to maintain and abide by such procedures, and (iii) neither such Transferee nor any Affiliate thereof is an entity that is (x) actively involved in the generation of electricity in Mid-American Interconnected Network and/or the East Central Reliability Council or any successor thereto, or (y) on the List of Competitors, attached hereto as Exhibit SS, which may, from time to time, but no more often than once per year, be modified by Midwest, and shall contain a list of up to six entities (including Affiliates) which Midwest reasonably believes in its good faith judgment are Competitors of Midwest. Notwithstanding the foregoing, the restrictions set forth in clause (i) or (iii) (1) and (iii) (3) of SECTION 12.1(a) above shall not inure to the benefit of Midwest if such transfer is in connection with the exercise of remedies during a Lease Event of Default. (c) Midwest shall not be responsible for any adverse tax consequence to the Owner Lessor or the Owner Participant resulting from any transfer pursuant to this SECTION 12.1 and the Pricing Assumptions (as set forth on SCHEDULE 12.1 (c) hereto) shall not be changed as a result of any such transfer except if such transfer is in connection with the exercise of remedies during a Lease Event of Default. (d) The Owner Participant shall give the Owner Lessor, the Owner Trustee, the Holder Representative, Collins Holdings and Midwest 30 days' prior written notice of such transfer, or 10 days in the case of a transfer to an Affiliate of the Owner Participant, specifying the name and address of any proposed Transferee and such additional information as shall be necessary to determine whether the proposed transfer -59- satisfies the requirements of this SECTION 12.1. If requested by the Owner Participant or the Holder Representative, Midwest shall acknowledge qualifying transfers. (e) Upon any such transfer in compliance with this SECTION 12.1 (i) such Transferee shall, to the extent of the Beneficial Interest conveyed to the Transferee, (x) be deemed the "Owner Participant" for all purposes, and (y) enjoy the rights and privileges and perform the obligations of the Owner Participant hereunder and under the Assignment and Assumption Agreement, the Owner Participant Guaranty and each other Operative Document to which such Owner Participant is a party, and each reference in this Agreement, the Assignment and Assumption Agreement, the Owner Participant Guaranty and each other Operative Document to the "Owner Participant" shall thereafter be deemed to include such Transferee, to the extent of the Beneficial Interest conveyed to the Transferee, for all purposes and (ii) the transferor Owner Participant and the Guarantor, if any, of such transferor Owner Participant's obligations shall be released from all obligations hereunder and under each other Operative Document to which such transferor or Guarantor is a party or by which such transferor Owner Participant or Guarantor is bound to the extent such obligations are expressly assumed by a Transferee; PROVIDED, HOWEVER, that in no event shall any such transfer waive or release the transferor or its Guarantor from any liability existing immediately prior to or occurring simultaneously with such transfer. SECTION 12.2 OWNER PARTICIPANT'S LIENS. The Owner Participant covenants that it will not directly or indirectly create, incur, assume or suffer to exist any Owner Participant's Lien and the Owner Participant shall promptly notify Midwest, Collins Holdings, the Lender and Holder Representative in writing of the imposition of any such Lien of which the Owner Participant has actual knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Owner Participant's Lien. SECTION 12.3 AMENDMENTS OR REVOCATION OF TRUST AGREEMENT. The Owner Participant covenants that it will not (a) amend, supplement, or otherwise modify SECTION 9.01, SECTION 10.01 or SECTION 10.02 of the Trust Agreement except for amendments required by the Operative Documents or by Requirements of Law or which are administrative or ministerial in nature without the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default has occurred and is continuing, and without the prior written consent of the Holder Representative so long as the Lessor Notes are outstanding, or (b) revoke, or otherwise waive compliance with or terminate the Trust Agreement without the prior written consent of Midwest so long as no Material Lease Default or Lease Event of Default has occurred and is continuing, and the Holder Representative so long as the Lessor Notes are outstanding. -60- SECTION 12.4 PROHIBITION ON FUNDAMENTAL CHANGES. The Owner Participant shall not change its form of organization and shall not enter into or engage in any business other than as contemplated by the Operative Documents and the activities related thereto. SECTION 12.5 BANKRUPTCY FILINGS. The Owner Participant agrees that it will not file a petition, or join in the filing of a petition, seeking reorganization, arrangement, adjustment or composition of, or in respect of, the Owner Lessor under the Bankruptcy Code, or any other applicable Federal or state law or the law of the District of Columbia. SECTION 12.6 INSTRUCTIONS. The Owner Participant agrees that it will not instruct the Owner Lessor to take any action prohibited by this Agreement or any other Operative Document. SECTION 12.7 APPOINTMENT OF SUCCESSOR OWNER TRUSTEE. Notwithstanding any other provision of this Agreement, a successor Owner Trustee shall not be appointed by the Owner Participant without the consent of Midwest and, so long as the Lessor Notes are outstanding, the Holder Representative unless such successor Owner Trustee (a) meets the requirements of the Trust Agreement, (b) has a combined capital and surplus of at least $150 million, and (c) Midwest and, so long as the Lessor Notes are outstanding, the Holder Representative shall have received at the expense of the Owner Participant: (i) an opinion or opinions of counsel, such counsel and such opinion to be reasonably acceptable to such parties, to the effect that no regulatory consents or approvals are required, or (ii) such other documentation reasonably satisfactory to Midwest or the Holder Representative, as the case may be; PROVIDED, HOWEVER, that if Wilmington Trust Company resigns as Owner Trustee, is terminated for cause, or shall become incapable of acting or shall be adjudged bankrupt or insolvent or a receiver of the Owner Trustee or its properties shall be appointed or any public officer shall take charge or control of the Owner Trustee or its property or affairs for the purpose of rehabilitation, conservation or liquidation, the opinion required by clause (c) shall be at the expense of Midwest. SECTION 12.8 COOPERATION. Owner Lessor agrees, and each of the Owner Participant and the Owner Trustee agree to cause the Owner Lessor to, at the request of Midwest and at the sole After-Tax cost and expense of Midwest, take such actions as may be necessary for the Owner Lessor to take as the owner of the Facility for purposes of obtaining the valid and effective issue, transfer or amendment, as the case may be, of all Governmental Approvals to the extent the same are required for the use, ownership, operation or maintenance of the Facility, the Facility Site, the Undivided Interest, the Ground Interest or any Component by Midwest or Collins Holdings or any permitted assignee of Midwest or Collins Holdings in the manner contemplated by the Operative Documents. Midwest shall pay on an After-Tax Basis all reasonable costs and expenses -61- (including, without limitation, the reasonable fees and expenses of counsel) of Owner Lessor and each other Person party to an Operative Document incurred in connection with any such action. It is understood and agreed that, with respect to any action requested of it, and taken by it, under this Section, the Owner Lessor, the Owner Participant and the Owner Trustee shall make no representation or warranty as to, and shall have no responsibility for the effectiveness of such action to accomplish or promote the objective intended by the Person making such request. SECTION XIII COVENANTS OF THE HOLDER REPRESENTATIVE SECTION 13.1 THE HOLDER REPRESENTATIVE'S LIENS. The Holder Representative will not directly or indirectly create, incur, assume or suffer to exist any Holder Representative's Lien attributable to it and arising out of events or conditions not related to its rights in the Lessor Collateral or the administration thereof, and will promptly notify the Owner Participant, the OP Guarantor, the Owner Trustee, Collins Holdings and Midwest in writing of the imposition of any such Lien of which it has actual knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Holder Representative's Lien. SECTION XIV MIDWEST'S INDEMNIFICATIONS SECTION 14.1 GENERAL INDEMNITY. (a) CLAIMS IDENTIFIED. Subject to the exclusions stated in paragraph (b) below, Midwest and Collins Holdings jointly and severally agree to indemnify, protect, defend and hold harmless, and do hereby indemnify the Owner Participant, the OP Guarantor, the Owner Lessor, the Trust Company in its individual capacity, the Owner Trustee, the Equity Investor, the Holder Representative, each Holder, the Midwest LC Issuer, the RCE LC Issuer, Funding LLC and each Funding LLC Note Holder, the RCE Agent, the APA Agent, each APA Purchaser, Citicorp North America, Inc., Lord Securities Corporation, Midwest Funding, Inc. and the Surety and their respective Affiliates, successors, assigns, agents, members, partners, directors, officers or employees (each an "INDEMNITEE") against any and all Claims (including Environmental Claims) (whether or not any of the transactions contemplated by the Operative Documents are consummated) imposed on, incurred or suffered by or asserted against such Indemnitee in any way relating to or resulting from or arising out of or attributable to: (i) the construction, financing, refinancing, acquisition, operation, rebuilding, warranty, ownership, use, possession, maintenance, repair, lease, condition, alteration, modification, restoration, refurbishing, return, purchase, sale or other disposition, insuring, sublease, or other use or non-use of the Facility, the Facility Site, the Undivided -62- Interest, the Ground Interest or any Component or any portion thereof or any interest therein; (ii) the conduct of the business or affairs of Midwest or Collins Holdings at the Facility and the Facility Site; (iii) the manufacture, design, purchase, acceptance, rejection, delivery or condition of, or improvement to, the Facility, the Facility Site, the Undivided Interest, the Ground Interest, or any Component, or any portion of any thereof or any interest therein; (iv) the Facility Lease, the Facility Site Lease, the Facility Site Sublease, the Facility Site Sub-sublease or any other Operative Document, the execution or delivery thereof or the performance, enforcement, attempted enforcement or amendment, supplement or modification of any terms thereof, or the transactions contemplated thereby or resulting therefrom; (v) any actual or alleged Environmental Condition or Environmental Claim at, in, on, under, from or related in any way to the Facility or the Facility Site or any portion thereof or any Component; (vi) the reasonable costs and expenses of any Indemnitee in connection with amendments or supplements to the Operative Documents requested or consented to by Midwest or required or necessary as a result of a Lease Event of Default; (vii) the imposition of any Lien other than, with respect to a particular Indemnitee (or a Related Party), a Lien arising by or through such Indemnitee that is prohibited by the terms of this Agreement or other Operative Documents; (viii) any violation by, or liability relating to, Midwest or Collins Holdings of, or under, any Requirement of Law, whether now or hereafter in effect (including Environmental Laws), or any action of any Governmental Authority or other Person taken with respect to the Facility or the Facility Site, the Operative Documents or the interest of any Indemnitee under the Operative Documents or the presence, Release, generation, management, recycling, use, storage, transportation, treatment or manufacture of any Hazardous Material in, at, under, to or from the Facility, the Facility Site or any Component; -63- (ix) the non-performance or breach by Midwest, Holdings or Collins Holdings of any obligation contained in this Agreement or any other Operative Document or the falsity or inaccuracy of any representation, warranty or obligation of Midwest, Holdings or Collins Holdings contained in this Agreement or any other Operative Document; (x) the continuing fees (if any) and expenses of the Owner Lessor and the Owner Trustee (including the reasonable compensation and expenses of their counsel, accountants and other professional persons) arising out of the Owner Lessor's or the Owner Trustee's discharge of their respective duties under or in connection with the Operative Documents; (xi) the continuing fees (if any) and expenses of Holder Representative, the Lender and the Funding LLC Note Holders (including the reasonable compensation and expenses of their respective counsel, accountants and other professional persons) arising out of the discharge of their respective duties under or in connection with the Operative Documents; (xii) the applications of Part 4 and 5 of Subtitle B of Title I of ERISA (including, without limitation, any penalties imposed under Section 501(i) or (1) of ERISA) or any excise taxes, charges or penalties imposed under Section 4975 of the Code; (xiii) the issuance of Lessor Notes in accordance with Section 2.03 of the Lessor Loan Agreement; and (xiv) in any other way relating to the transactions contemplated by the Operative Documents and Additional Covered Documents. (b) CLAIMS EXCLUDED. Any Claim, to the extent relating to or resulting from or arising out of or attributable to any of the following, is excluded from Midwest's and Collins Holdings' agreement to indemnify any Indemnitee under this SECTION 14.1: (i) acts, omissions or events occurring after expiration or other termination of the Facility Lease and, where required by the Facility Lease, return of the Facility to the Owner Lessor or its designee in compliance with the provisions of the Facility Lease, except to -64- the extent such Claim is an Environmental Claim that relates to, results from, arises out of or is attributable to an Environmental Condition that was in existence at the Facility or the Facility Site prior to or as of such expiration or termination of the Facility Lease and the return of the Facility; (ii) with respect to a particular Indemnitee and Related Parties, any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) by or on behalf of (a) in the case of the Owner Participant of any of its interest in the Beneficial Interest, or (b) in the case of the Owner Lessor, and if such action is taken at the written direction of the Owner Participant, the Owner Participant and Related Parties, of all or any of the Owner Lessor's interest in the Facility or the Facility Site, or (c) all or any of the Lender's interest in the Lessor Notes or the collateral therefor, unless such transfer is required by the terms of the Operative Documents or occurs in connection with the exercise of remedies during a Lease Event of Default; (iii) with respect to any Indemnitee and Related Parties, any Claim attributable to the gross negligence or willful misconduct of the Indemnitee seeking indemnification or a Related Party of such Indemnitee; (iv) as to any Indemnitee, any Claim attributable to the noncompliance of such Indemnitee or a Related Party, with any of the terms of, or any misrepresentation or breach of warranty by such Indemnitee contained in any Operative Document or any breach by such Indemnitee or a Related Party of any covenant contained in any Operative Document attributable to such Indemnitee or Related Party, unless attributable to Midwest or Collins Holdings or the breach by another Person of its obligations under the Operative Documents or imputed to the Indemnitee; (v) with respect to the Owner Trustee and the Trust Company, any Claim constituting or arising from an Owner Lessor's Lien attributable to it; (vi) with respect to Holder Representative, any Claim arising from a Holder Representative's Lien; (vii) with respect to the Owner Participant, any claim constituting or arising from an Owner Participant's Lien; -65- (viii) any Claim relating to the payment of any amount which constitutes Transaction Costs which the Owner Participant is obligated to pay pursuant to SECTION 2.3(a) hereof or any other amount to the extent such Indemnitee or a Related Party has expressly agreed in any Operative Document to pay such amount without a right of reimbursement; (ix) any Claim that is a Tax, or is a cost of contesting a Tax, whether or not Midwest is required to indemnify therefor pursuant to SECTION 14.2 or under the Tax Indemnity Agreement; (x) any failure on the part of the Owner Trustee to distribute in accordance with the Trust Agreement any amounts received by it under the Operative Documents and distributable by it thereunder; (xi) any Claim relating to the costs and expenses of any Indemnitee in connection with any amendments or supplements to the Operative Documents requested by such Indemnitee or a Related Party if such amendment or supplement is not required by the Operative Documents; (xii) any Claim that constitutes principal and/or interest on the Lessor Notes, any Additional Lessor Notes or the corresponding payments under the Funding LLC Notes on any Additional Funding LLC Notes, respectively; (xiii) any Claim that constitutes the RCE LC Reimbursement Obligations and any interest thereon; and (xiv) any Claim arising out of obligations expressly assumed by the Indemnitee seeking indemnification or a Related Party thereof. PROVIDED that the terms "omission," "gross negligence" and "willful misconduct," when applied with respect to the Owner Trustee, the Owner Participant, the OP Guarantor, the Equity Investor, the Owner Lessor, Citicorp North America, Inc., Lord Securities Corporation, Midwest Funding, Inc., the Holder Representative, any Holder, the Midwest LC Issuer, the RCE LC Issuer, any Funding LLC Note Holder, the RCE Agent, the APA Agent, each APA Purchaser, the Surety or any Affiliate of any thereof, shall not include any liability imputed as a matter of law to such Indemnitee solely by reason of such -66- entity's interest in the Facility or the Facility Site or such Indemnitee's failure to act in respect of matters which are or were the obligation of Midwest under this Agreement or any other Operative Document. (c) INSURED CLAIMS. Subject to the provisions of paragraph (e) of this SECTION 14.1, in the case of any Claim indemnified by Midwest hereunder which is covered by a policy of insurance maintained by Midwest, each Indemnitee agrees, unless it and each other Indemnitee shall waive its rights to indemnification (for itself and each Related Party thereto) in a manner reasonably acceptable to Midwest, to cooperate, at the sole cost and expense of Midwest, with insurers in exercise of their rights to investigate, defend or compromise such Claim. (d) AFTER-TAX BASIS. Midwest agrees that any payment or indemnity pursuant to this SECTION 14.1 in respect of any Claim shall be made on an After-Tax Basis to the Indemnitees. (e) CLAIMS PROCEDURE. Each Indemnitee shall promptly after such Indemnitee shall have actual knowledge thereof notify Midwest in writing of any Claim as to which indemnification is sought; PROVIDED, that the failure so to notify Midwest shall not reduce or affect Midwest's liability which it may have to such Indemnitee under this SECTION 14.1. Any amount payable to any Indemnitee pursuant to this SECTION 14.1 shall be paid within fifteen (15) days after receipt of such written demand therefor from such Indemnitee, accompanied by a certificate of such Indemnitee stating in reasonable detail the basis for the indemnification thereby sought and (if such Indemnitee is not a party hereto) an agreement to be bound by the terms hereof as if such Indemnitee were such a party. The foregoing shall not, however, constitute an obligation to disclose confidential information of any kind without the execution of an appropriate confidentiality agreement. Promptly after Midwest receives notification of such Claim accompanied by a written statement describing in reasonable detail the Claims which are the subject of and basis for such indemnity and the computation of the amount so payable, Midwest shall notify such Indemnitee in writing whether it intends to pay, object to, compromise or defend any matter involving the asserted liability of such Indemnitee. Midwest shall have the right to investigate and so long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing, Midwest shall have the right in its sole discretion, to defend or compromise any Claim for which indemnification is sought under this SECTION 14.1 which Midwest acknowledges in writing to the applicable Indemnitee is subject to indemnification hereunder; PROVIDED that no such defense or compromise shall involve any danger of (i) foreclosure, sale, forfeiture or loss of, or imposition of a Lien on any part of the Undivided Interest, the Ground Interest, the Trust Estate or the Lessor Collateral or the impairment of the Facility in any material respect or (ii) any criminal liability being incurred or any material adverse effect on such Indemnitee, PROVIDED, FURTHER, that no Claim shall be compromised by Midwest on a basis that admits any -67- criminal violation or gross negligence or willful misconduct on the part of such Indemnitee without the express written consent of such Indemnitee; and PROVIDED, FURTHER, that to the extent that other Claims unrelated to the transactions contemplated by the Operative Documents are part of the same proceeding involving such Claim, Midwest may assume responsibility for the contest or compromise of such Claim only if the same may be and is severed from such other Claims (and each Indemnitee agrees to use reasonable efforts to obtain such a severance). If Midwest elects, subject to the foregoing, to compromise or defend any such asserted liability, it may do so at its own expense and by counsel selected by it and reasonably satisfactory to such Indemnitee. Upon Midwest's election to compromise or defend such asserted liability and prompt notification to such Indemnitee of its intent to do so, such Indemnitee shall cooperate at Midwest's expense with all reasonable requests of Midwest in connection therewith and will provide Midwest with all information not within the control of Midwest as is reasonably available to such Indemnitee which Midwest may reasonably request; PROVIDED, HOWEVER, that such Indemnitee shall not, unless otherwise required by Requirement of Law, be obligated to disclose to Midwest or any other Person, or permit Midwest or any other Person to examine (i) any income tax returns of the Owner Participant or (ii) any confidential information or pricing information not generally accessible by the public possessed by the Owner Participant (and, in the event that any such information is made available, Midwest shall treat such information as confidential and shall take all actions reasonably requested by such Indemnitee for purposes of obtaining a stipulation from all parties to the related proceeding providing for the confidential treatment of such information from all such parties). Where Midwest, or the insurers under a policy of insurance maintained by Midwest, undertake the defense of such Indemnitee with respect to a Claim (with counsel reasonably satisfactory to each such Person such Indemnitee and without reservation of rights against such Indemnitee), no additional legal fees or expenses of such Indemnitee in connection with the defense of such Claim shall be indemnified hereunder unless such fees or expenses were incurred at the request of Midwest or such insurers. Notwithstanding the foregoing, an Indemnitee may participate at its own expense in any judicial proceeding controlled by Midwest pursuant to the preceding provisions, but only to the extent that such party's participation does not in the reasonable opinion of counsel to Midwest interfere with such control; PROVIDED, HOWEVER, that such party's participation does not constitute a waiver of the indemnification provided in this SECTION 14.1; PROVIDED, FURTHER, that if and to the extent that (i) such Indemnitee is advised by counsel that an actual or potential conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel or (ii) there is a risk that such Indemnitee may be indicted or otherwise charged in a criminal complaint and such Indemnitee informs Midwest that such Indemnitee desires to be represented by separate counsel, such Indemnitee shall have the right to control its own defense of such Claim and the reasonable fees and expenses of such defense (including, without limitation, the reasonable fees and expenses of such separate counsel) shall be borne by Midwest. So long as no Lease Event of Default shall have occurred and be -68- continuing, no Indemnitee shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of Midwest unless (i) the Indemnitee waives its rights to indemnification hereunder or (ii) Midwest has not acknowledged its indemnity obligation with respect thereto and there is a significant risk that a default judgment will be entered against such Indemnitee. Nothing contained in this SECTION 14.1(e) shall be deemed to require an Indemnitee to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. (f) SUBROGATION. To the extent that a Claim indemnified by Midwest under this SECTION 14.1 is in fact paid in full by Midwest or an insurer under an insurance policy maintained by Midwest, Midwest (so long as no Lease Event of Default shall have occurred and be continuing) or such insurer shall be subrogated to the rights and remedies of the Indemnitee on whose behalf such Claim was paid to the extent of such payment (other than rights of such Indemnitee under insurance policies maintained at its own expense) with respect to the transaction or event giving rise to such Claim. Should an Indemnitee receive any refund, in whole or in part, with respect to any Claim paid by Midwest hereunder, it shall promptly pay over to Midwest the lesser of (i) the amount refunded reduced by the amount of any Tax incurred by reason of the receipt or accrual of such refund and increased by the amount of any Tax (but not in excess of the amount of such reduction) saved as a result of such payment or (ii) the amount Midwest or any of its insurers has paid in respect of such Claim; PROVIDED that, so long as a Material Lease Default or Lease Event of Default shall have occurred and is continuing such amount may be held by the Owner Lessor as security for Midwest's obligations under the Facility Lease and the other Operative Documents. Any Person seeking indemnity under this SECTION 14.1 who is not a party to this Agreement shall agree to the terms and conditions set forth in this SECTION 14.1 as a condition to making any such claim for indemnity under this SECTION 14.1. SECTION 14.2 GENERAL TAX INDEMNITY. (a) INDEMNITY. Except as provided in paragraph (b), Midwest and Collins Holdings, jointly and severally, agree to indemnify on an After-Tax Basis each of the Owner Participant, the OP Guarantor, the Equity Investor, the Owner Lessor, the Trust Company in its individual capacity, the Owner Trustee, the OP Member, the Holder Representative, the Funding LLC Noteholders, the Lessor Noteholders and the Funding LLC, their respective successors and assigns, the past and present partners or members of or holders of the ownership interests in, as the case may be, the Owner Participant and the Affiliates of each of the foregoing (each a "TAX INDEMNITEE") and to hold each Tax Indemnitee harmless from and to defend each Tax Indemnitee against all Taxes that are imposed upon any Tax Indemnitee, the Facility, the Facility Site, the Undivided Interest, the Ground Interest, or any portion or Component thereof or any interest therein, or upon -69- any Operative Document or interest therein, arising out of, in connection with or relating to, any of the following: (i) the construction, financing, refinancing, acquisition, operation, warranty, ownership, use, possession, maintenance, repair, lease, condition, alteration, modification, restoration, refurbishing, return, purchase, sale or other disposition, insuring, sublease, or other use or non-use of the Facility, Undivided Interest, Ground Interest or the Facility Site, or any portion or Component thereof or any interest therein; (ii) the conduct of the business or affairs of Midwest at the Facility and the Facility Site; (iii) the manufacture, design, purchase, acceptance, rejection, delivery or condition of, or improvement to, the Facility, the Undivided Interest, the Ground Interest, the Facility Site, or any portion or Component thereof, or any interest therein; (iv) the Facility Lease, the Facility Site Lease, the Facility Site Sublease, any Lessor Note, any Funding LLC Note or any other Operative Document, the execution or delivery thereof, or the performance, enforcement or amendment of any terms thereof; (v) the payment or receipt of Basic Lease Rent, Renewal Lease Rent, Supplemental Lease Rent, any amount due on any Lessor Note or Funding LLC Note or any other amount payable under the Facility Lease; or (vi) otherwise relating to the transactions contemplated by the Operative Documents. (b) EXCLUDED TAXES. The indemnity provided for in paragraph (a) above shall not extend to any of the following Taxes (the "EXCLUDED TAXES"): (i) Taxes imposed on, based on or measured by gross or net income or receipts or capital or net worth (other than sales, use, property, ad valorem, rental, stamp, transfer, excise, license and value added taxes, and other than franchise tax imposed by the State of Illinois upon the Owner Participant, the Owner Lessor or their respective Affiliates under the Business Corporation Act of 1983, as amended, or any successor legislation thereto); -70- (ii) Taxes attributable to any period after expiration or other termination of the Facility Lease and, where required by the Facility Lease, return of the Facility to the Owner Lessor or its designee in accordance with the Facility Lease (or, (a) in the case of the Holder Representative, after the repayment of the Lessor Notes, or (b) in case of the Funding LLC and the Funding LLC Note Holders, after the sale or other disposition of the Lessor Notes by the Funding LLC); (iii) Taxes imposed on a Tax Indemnitee attributable to the gross negligence or willful misconduct of such Tax Indemnitee or any Related Party of such Tax Indemnitee; (iv) Taxes in the nature of capital gain, accumulated earnings, personal holding company, excess profits, succession or estate, minimum, alternative minimum, preference, franchise, conduct of business and other similar taxes (other than franchise tax imposed by the State of Illinois upon the Owner Participant, the Owner Lessor or their respective Affiliates under the Business Corporation Act of 1983, as amended, or any successor legislation thereto); (v) Taxes imposed on a Tax Indemnitee that arise out of, or are caused by, any act or omission of such Tax Indemnitee (or any Related Party thereof) that is expressly prohibited by any Operative Document or by a breach by such Tax Indemnitee (or any Related Party thereof) of any of its representations, warranties or covenants under any Operative Document; (vi) Taxes arising out of, or caused by, any voluntary assignment, sale, transfer or other voluntary disposition, or any involuntary transfer or disposition resulting from a bankruptcy or similar proceeding for relief of debtors in which such Tax Indemnitee is a debtor, by (or a foreclosure by a creditor of) (A) the Owner Participant of any of its Beneficial Interest, (B) the Owner Lessor of all or any of its interest in the Facility or the Facility Site, or (C) the Funding LLC of any interest in the Lessor Notes or the Collateral, unless (i) such transfer or disposition occurs during the continuance of a Lease Event of Default, or (ii) such transfer or disposition is required under, or occurs pursuant to, the Operative Documents and the price paid is other than Fair Market Sales Value; (vii) Taxes arising in connection with Owner Participant's Liens or Owner Lessor's Liens; -71- (viii) Taxes imposed on any assignee or successor-in-interest to a Tax Indemnitee to the extent any such Taxes exceed the Taxes that would have been imposed had no assignment or transfer taken place determined under the law as in effect on the date of transfer; PROVIDED that this exclusion shall not apply to the computation of the gross-up amounts necessary to make a payment on an After-Tax Basis, nor to a transferee, assignee or successor in interest that acquires the interest of a Tax Indemnitee pursuant to a transfer or disposition in connection with the exercise of remedies during the continuance of a Lease Event of Default; (ix) Taxes that are included as a part of Transaction Costs; (x) Taxes imposed on, based on, or measured by any compensation that any Owner Trustee, the Holder Representative or the Funding LLC receives for its services; (xi) any U.S. federal income taxes, including with respect to the Owner Participant, Taxes for which Midwest is obligated to indemnify the Owner Participant under the Tax Indemnity Agreement (or which are expressly excluded from indemnification thereunder); (xii) other than with respect to any Funding LLC Note Holder, the Funding LLC, Lessor Noteholders or Holder Representative or any Related Party in respect of any thereof (a "LENDER INDEMNITEE"), Taxes resulting from the Owner Lessor not being treated as a grantor trust or a nonentity for federal, state or local income tax purposes; (xiii) Taxes attributable to the failure of any Tax Indemnitee to comply with certification, information, documentation, reporting or other similar requirements concerning the nationality, residence, identity, connection with the jurisdiction imposing such Taxes or other similar matters; PROVIDED that the foregoing exclusion shall only apply if such Tax Indemnitee is eligible and obligated to comply with such requirement and shall have been given timely written notice of such requirement by Midwest; (xiv) Taxes imposed on a Tax Indemnitee where the Tax Indemnitee's breach of its contest obligations under Section 14.2(g) effectively precludes Midwest's ability to contest the Taxes; -72- (xv) Taxes imposed on any Tax Indemnitee resulting from an amendment, modification, supplement or waiver to any Operative Document which was not requested by Midwest and as to which Midwest is not a party and the Tax Indemnitee (or, in the case of the Owner Participant, the Facility Lessor if acting at the express direction of the Owner Participant) is a party unless such amendment, modification, supplement or waiver (A) was required by applicable law or the Operative Documents, (B) may be necessary or appropriate to, and is in conformity with, any amendment, modification, supplement or waiver to any Operative Document agreed to by Midwest in writing, or (C) is made while a Lease Event of Default shall have occurred and be continuing; (xvi) Taxes imposed under Section 4975 of the Code, Section 406 of ERISA or any comparable laws of any governmental authority to the extent resulting from action by such Tax Indemnitee other than, in the case of the Owner Participant, the taking of any action at the request or direction of Midwest; (xvii) Taxes imposed to the extent such Taxes result from the Tax Indemnitee (and in the case of the Owner Lessor, only if acting at the written direction of the Owner Participant) being organized under the laws of a jurisdiction other than the United States or any State thereof (other than, in the case of a Lender Indemnitee, such Taxes which did not exist under law in effect on the date such Lender Indemnitee became a party to this transaction); (xviii) Any Taxes imposed on a Tax Indemnitee to the extent that such taxes would not have been imposed but for the activities of such Tax Indemnitee unrelated to the transactions contemplated hereby; (xix) Taxes imposed on a Tax Indemnitee in the nature of interest, penalties, fines and additions to tax (i) payable as a result of such Tax Indemnitee's failure to file, in a procedurally proper manner and on a timely basis, any tax reports, returns or statements as to which Midwest has timely notified such Tax Indemnitee in writing of the requirement to file, unless such failure is otherwise caused by the failure of Midwest to fulfill its obligations, if any, with respect to such return (including provision of information sufficient to enable such Tax Indemnitee to file such report, return or statement), or (ii) to the extent not attributable to or resulting from Taxes for which an indemnity is provided hereunder; and -73- (xx) Taxes for as long as such Taxes are being contested pursuant to the contest provisions contained in Section 14.2(g). (c) PAYMENT. Each payment required to be made by Midwest or Collins Holdings to a Tax Indemnitee pursuant to this Section 14.2 shall be paid either (i) when due directly to the applicable taxing authority by Midwest if it is permitted to do so, or (ii) where direct payment is not permitted and with respect to gross up amounts in immediately available funds to such Tax Indemnitee by the latest of (A) 15 days following Midwest's receipt of the Tax Indemnitee's written demand for the payment (which demand shall be accompanied by a statement of the Tax Indemnitee describing in reasonable detail the Taxes for which the Tax Indemnitee is demanding indemnity and the computation of such Taxes), (B) in the case of amounts which are being contested pursuant to such paragraph (g), 15 days following the time and in accordance with a final determination of such contest or (C) in the case of any indemnity demand for which Midwest has requested review and determination pursuant to paragraph (d) below, the completion of such review and determination, but in no event later than the date which is three Business Days prior to the date payment of such Taxes is due. Any amount payable to Midwest pursuant to paragraph (e) or (f) below shall be paid within 15 days after the Tax Indemnitee realizes a Tax Benefit giving rise to a payment under paragraph (e) or receives a refund or credit giving rise to a payment under paragraph (f), as the case may be, and shall be accompanied by a statement of the Tax Indemnitee computing in reasonable detail the amount of such payment. Upon the final determination of any contest pursuant to paragraph (g) below in respect of any Taxes for which Midwest has made a Tax Advance, the amount of Midwest's obligation under paragraph (a) above shall be determined as if such Tax Advance had not been made. Any obligation of Midwest under this Section 14.2 and the Tax Indemnitee's obligation to repay the Tax Advance will be satisfied first by set off against each other, and any difference owing by either party will be paid within 10 days of such final determination. (d) INDEPENDENT EXAMINATION. Within 15 days after Midwest receives any computation from the Tax Indemnitee, Midwest may request in writing that an independent public accounting firm selected by the Tax Indemnitee and reasonably acceptable to Midwest review and determine on a confidential basis the amount of any indemnity payment by Midwest to the Tax Indemnitee pursuant to this Section 14.2 or any payment by a Tax Indemnitee to Midwest pursuant to paragraph (e) or (f) below. The Tax Indemnitee and Midwest shall cooperate with such accounting firm and supply it with all information reasonably necessary for the accounting firm to conduct such review and determination, PROVIDED that such accounting firm shall agree in writing in a manner satisfactory to the Tax Indemnitee, or Midwest, as the case may be, to maintain the confidentiality of such information, and PROVIDED FURTHER that neither any Tax Indemnitee nor Midwest shall be required to disclose any of its tax returns or books that such Tax Indemnitee or Midwest, as the case may be, reasonably deems to be confidential in -74- connection with such verification, and the parties hereto agree that such Tax Indemnitee, or Midwest, as the case may be, shall have sole control over the positions taken with respect to such party's tax returns and filings. The fees and disbursements of such accounting firm will be paid by Midwest; PROVIDED that such fees and disbursements will be paid by the Tax Indemnitee if the accountants determine that the present value of the total payments as calculated by the Tax Indemnitee is more than 105 percent of the present value of the correct payments (such present values in each case to be determined by the Discount Rate). In the event such accounting firm determines that such computations are incorrect, then such firm shall determine what it believes to be the correct computations. The computations of the accounting firm shall be final, binding and conclusive upon Midwest and the Tax Indemnitee. The parties hereto agree that the independent public accounting firm's sole responsibility shall be to verify the computation of any payment pursuant to this Section 14.2 and that matters of interpretation of this Participation Agreement or any other Operative Document are not within the scope of the independent accountant's responsibility. Such accounting firm shall be requested to make its determination within 30 days. (e) TAX BENEFIT. If, as the result of any Taxes paid or indemnified against by Midwest under this Section 14.2, the aggregate Taxes actually paid by the Tax Indemnitee in connection with such payment for any taxable year and not subject to indemnification pursuant to this Section 14.2 are less (whether by reason of a deduction, credit, allocation or apportionment of income or otherwise) than the amount of such Taxes that otherwise would have been payable by such Tax Indemnitee (a "TAX BENEFIT"); then to the extent such Tax Benefit was not taken into account in determining the amount of indemnification payable by Midwest under paragraph (a) above and provided no Lease Event of Default shall have occurred and be continuing (in which event the payment provided under this Section 14.2(e) shall be deferred until the Lease Event of Default has been cured), such Tax Indemnitee shall pay to Midwest the lesser of (A) (y) the amount of such Tax Benefit, plus (z) an amount equal to any United States federal, state or local income tax benefit resulting to the Tax Indemnitee from the payment under clause (y) above and this clause (z) (determined using the same assumptions as set forth in the second sentence under the definition of After-Tax Basis) and (B) the amount of the indemnity paid pursuant to this Section 14.2 giving rise to such Tax Benefit, provided that any excess of the amount described in clause (A) over the amount described in clause (B) shall be carried forward and applied to reduce pro tanto any subsequent obligations of Midwest to make payment to such Tax Indemnitee pursuant to this Section 14.2. If it is subsequently determined that the Tax Indemnitee was not entitled to such Tax Benefit, the portion of such Tax Benefit that is required to be repaid or recaptured will be treated as Taxes for which Midwest must indemnify the Tax Indemnitee pursuant to this Section 14.2 without regard to paragraph (b) hereof. -75- (f) REFUND. If a Tax Indemnitee obtains a refund or credit or would have received such refund or credit but for a counterclaim or other claim not indemnified by Midwest hereunder against which such refund or credit has not been applied (an "offset refund or credit") of all or part of any Taxes paid, reimbursed or advanced by Midwest pursuant to this Section 14.2, the Tax Indemnitee shall pay to Midwest within 15 days of such receipt, or in the case of an offset refund or credit, within 15 days of the resolution of such contest (x) the amount of such refund or credit (net of any Tax payable by the Tax Indemnitee as a result of the receipt or accrual of such refund or credit) plus (y) an amount equal to any Tax Benefit realized by such Tax Indemnitee by reason of such payment to Midwest (determined using the same assumptions as set forth in the second sentence under the definition of After-Tax Basis), PROVIDED that (A) if at the time such payment is due to Midwest a Lease Event of Default shall have occurred and be continuing, such amount shall not be payable until such Lease Event of Default has been cured, and (B) the amount payable to Midwest pursuant to this sentence shall not exceed the amount of the indemnity payment in respect of such refunded or credited Taxes that was made by Midwest (and such excess shall be carried forward and applied to reduce pro tanto any subsequent obligations of Midwest to make payments to such Tax Indemnitee pursuant to this Section 14.2). If it is subsequently determined that the Tax Indemnitee was not entitled to such refund or credit, the portion of such refund or credit that is required to be repaid or recaptured will be treated as Taxes for which Midwest must indemnify the Tax Indemnitee pursuant to this Section 14.2 without regard to paragraph (b) hereof. If, in connection with a refund or credit of all or part of any Taxes paid, reimbursed or advanced by Midwest pursuant to this Section 14.2, a Tax Indemnitee receives an amount representing interest on such refund or credit, the Tax Indemnitee shall pay to Midwest within 15 days (1) the amount of such interest that shall be fairly attributable to such Taxes paid, reimbursed or advanced by Midwest prior to the receipt of such refund or credit (net of Taxes payable in respect of the receipt or accrual of such interest) and (2) any Tax savings resulting from payments made by the Tax Indemnitee under this Section 14.2. (g) CONTEST. (i) NOTICE OF CONTEST. If a written claim is made by any taxing authority against a Tax Indemnitee for any Taxes with respect to which Midwest may be required to indemnify against hereunder (a "TAX CLAIM"), such Tax Indemnitee shall give Midwest written notice of such Tax Claim promptly after its receipt, and shall furnish Midwest with copies of such Tax Claim and all other writings received from the taxing authority to the extent relating to such claim, provided that failure so to notify Midwest shall not relieve Midwest of any obligation to indemnify the Tax Indemnitee hereunder except to the extent such failure effectively precludes Midwest from contesting such Tax. The Tax Indemnitee shall -76- not pay such Tax Claim until at least 30 days after providing Midwest with such written notice, unless (a) the Tax Indemnitee is required to do so by law or regulation and (b) in the written notice described above, the Tax Indemnitee has notified Midwest of such requirement. (ii) CONTROL OF CONTEST. Subject to subsection (g)(iii) below, Midwest will be entitled to contest (acting through counsel selected by Midwest and reasonably satisfactory to the Tax Indemnitee), and control the contest of, any Tax Claim if (i) such Tax Claim may be segregated procedurally and contested independently from tax claims for which Midwest is not obligated to indemnify the Tax Indemnitee, PROVIDED that if the Tax Indemnitee reasonably determines at any time that permitting Midwest to conduct or continue to conduct such contest could have material adverse business or other consequences to such Tax Indemnitee, such Tax Indemnitee shall have the right to control or reassert control over such contest, or (ii) the Tax Indemnitee requests that Midwest control such contest; PROVIDED that in the case of any such contest pursuant to (i) or (ii) Midwest shall use all reasonable efforts to contest such Tax Claim in its own name, and PROVIDED FURTHER that such contest shall be at Midwest's sole cost and expense. Midwest shall consult in good faith with the Tax Indemnitee and its counsel and shall provide the Tax Indemnitee with copies of any reports or claims issued by the relevant auditing agent or taxing authority, but the decisions regarding what actions to be taken shall be made by Midwest in its sole judgment. In the case of all other Tax Claims, the Tax Indemnitee will contest the Tax Claim at Midwest's expense if Midwest shall request that the Tax be contested (in accordance with subsection (g)(iii) below), and the following rules shall apply with respect to such contest: (1) the Tax Indemnitee will control the contest of such Tax Claim in good faith (acting through counsel selected by the Tax Indemnitee and reasonably satisfactory to Midwest), (2) at Midwest's written request, if payment is made to the applicable taxing authority, the Tax Indemnitee shall use all reasonable efforts to obtain a refund thereof in appropriate administrative or judicial proceedings, (3) the Tax Indemnitee conducting such contest shall consult with and keep reasonably informed Midwest and its designated counsel with respect to such Tax Claim and shall consider and -77- consult in good faith with Midwest regarding any request (a) to resist payment of Taxes if practical and (b) not to pay such Taxes except under protest if protest is necessary and proper, but the decision regarding what actions to be taken shall be made by the Tax Indemnitee in its sole judgment. (4) Notwithstanding paragraph (3), above, the Tax Indemnitee shall not otherwise settle, compromise or abandon such contest without Midwest's prior written consent except as provided in paragraph (g)(iv) below. (iii) CONDITIONS OF CONTEST. Notwithstanding the foregoing, no contest with respect to a Tax Claim will be required or permitted pursuant to this Section 14.2, and Midwest shall be required to pay the applicable Taxes without contest, unless: (1) within 30 days after notice by the Tax Indemnitee to Midwest of such Tax Claim, Midwest shall request in writing to the Tax Indemnitee that such Tax Claim be contested, provided that if a shorter period is required for taking action with respect to such Tax Claim and the Tax Indemnitee notifies Midwest of such requirement, Midwest shall use reasonable best efforts to request such contest within such shorter period, and such Tax Indemnitee shall take no action for as long as it is legally able to do so, (2) no Lease Event of Default has occurred and is continuing, (3) there is no risk of sale, forfeiture or loss of, or the creation of a Lien (other than a Permitted Lien) on the Facility, Owner Lessor's or Owner Participant's interest in the Facility, the Facility Site, the Undivided Interest, the Ground Interest or any portion or Component thereof or any interest therein as a result of such Tax Claim; PROVIDED that this clause (3) shall not apply if Midwest shall have posted and maintained a bond or otherwise provided security for Midwest's obligations under Section 14.2 satisfactory to the Tax Indemnitee in its reasonable discretion, or the Tax is fully paid in either manner specified in clause (5) below, (4) there is no risk of imposition of any criminal penalties, -78- (5) if such contest involves payment of such Tax, Midwest will either advance to the Tax Indemnitee on an interest-free basis and with no after-tax cost to such Tax Indemnitee (a "TAX ADVANCE") or pay such Tax Indemnitee the amount payable by Midwest pursuant to Section 14.2(a) above with respect to such Tax, and such Tax Indemnitee shall promptly pay to Midwest any net Tax Benefit recognized which results from any imputed interest deduction arising from such interest free Tax Advance plus any net Tax Benefit recognized which result from making any such payment. (6) Midwest agrees to pay (and pays on demand) and with no after-tax cost to such Tax Indemnitee all reasonable costs, losses and expenses incurred by the Tax Indemnitee in connection with the contest of such claim (including, without limitation, all reasonable legal, accounting and investigatory fees and disbursements), (7) the Tax Indemnitee has been provided at Midwest's sole expense with an opinion, reasonably acceptable to such Tax Indemnitee, of independent tax counsel of recognized standing selected by Midwest and reasonably acceptable to the Tax Indemnitee to the effect that there is a Reasonable Basis for contesting such Tax Claim, (8) in the case of a judicial appeal, no appeal to the U.S. Supreme Court shall be required of the Tax Indemnitee or shall be permitted by Midwest. (9) In the case of a judicial contest, Midwest shall have delivered to the Tax Indemnitee a written acknowledgment of its liability under this Section 14.2 for such Taxes, PROVIDED, HOWEVER, that Midwest shall not be bound by its acknowledgment of liability if the contest is resolved on the basis of a written decision of the adjudicator that clearly indicates the basis for the conclusion that Midwest has no liability under this Section 14.2 with respect to such Tax, unless Midwest's conduct of the contest has materially prejudiced the Tax Indemnitee. (iv) WAIVER OF INDEMNIFICATION. Notwithstanding anything to the contrary contained in this Section 14.2, the Tax Indemnitee at any time may elect to decline to take any action or any further action with respect to a Tax Claim and may in its sole discretion settle or compromise any contest with respect to such Tax Claim without Midwest's consent if the Tax Indemnitee: -79- (1) waives its right to any indemnity payment by Midwest pursuant to this Section 14.2 in respect of such Tax Claim (and any other claim for Taxes with respect to any other taxable year the contest of which is effectively precluded by the Tax Indemnitee's declination to take action with respect to the Tax Claim), and (2) promptly repays to Midwest any Tax Advance and any amount paid to such Tax Indemnitee under Section 14.2 (a) above in respect of such Taxes. Except as provided in the preceding sentence, any such waiver shall be without prejudice to the rights of the Tax Indemnitee with respect to any other Tax Claim. (h) REPORTS. (i) If any report, statement or return is required to be filed by a Tax Indemnitee with respect to any Tax that is subject to indemnification under this Section 14.2, Midwest will (1) notify the Tax Indemnitee in writing of such requirement not later than 30 days prior to the date such report, statement or return is required to be filed (determined without regard to extensions) and (2) either (y) if permitted by applicable law, prepare such report, statement or return for filing by Midwest in such manner as will show the ownership of the Facility by the Owner Lessor for United States federal, state and local income tax purposes (if applicable), send a copy of such report, statement or return to the Tax Indemnitee and timely file such report, statement or return with the appropriate taxing authority, or (z) if so directed by the Tax Indemnitee or in any event if practicable and if the return to be filed reflects only information in respect of the transactions contemplated by the Operative Documents, prepare and furnish to such Tax Indemnitee not later than 30 days prior to the date such report, statement or return is required to be filed (determined without regard to extensions) a proposed form of such report, statement or return for filing by the Tax Indemnitee. (ii) Each of the Tax Indemnitee or Midwest, as the case may be, will timely provide the other, at Midwest's expense, with all information in its possession that the other party may reasonably require and request to satisfy its obligations under this paragraph (h), but only if and to the extent that such Tax Indemnitee is legally entitled to furnish such information. -80- (i) NON-PARTIES. If a Tax Indemnitee is not a party to this Agreement, Midwest may require such Tax Indemnitee to agree in writing, in a form reasonably acceptable to Midwest, to the terms of this Section 14 (to the extent applicable to such Tax Indemnitee) prior to making any payment to such Tax Indemnitee under this Section. SECTION XV MIDWEST'S AND COLLINS HOLDINGS' RIGHT OF QUIET ENJOYMENT Each party to this Agreement acknowledges notice of, and consents in all respects to, the terms of the Facility Lease, the Facility Sublease, the Facility Site Sublease and the Facility Site Sub-sublease and expressly, severally and as to its own actions only, agrees that, so long as no Lease Event of Default has occurred and is continuing, neither it nor any party acting by, through or under such party shall take or cause to be taken any action contrary to Collins Holdings' rights under the Facility Lease and the Facility Site Sublease and Midwest's rights under the Facility Sublease and the Facility Site Sub-sublease, including the right to possession, use and quiet enjoyment of the Undivided Interest and the Ground Interest. SECTION XVI SUPPLEMENTAL FINANCING OF IMPROVEMENTS; OPTIONAL REFINANCINGS SECTION 16.1 FINANCING IMPROVEMENTS. Upon the written request of Midwest delivered at least 90 days prior to any proposed financing of the cost of any Required or Non-Severable Improvement, the Owner Lessor and the Holder Representative agree to cooperate with Midwest to (a) issue Additional Lessor Notes by the Owner Lessor to finance such Improvement which will rank pari passu with the Lessor Notes then outstanding; and (b) execute and deliver an amendment to the Facility Lease to reflect the adjustments required by clause (v) below; PROVIDED, HOWEVER, that the Owner Participant shall have been given the opportunity, but shall have no obligation, to provide all or part of the funds required to finance the Owner Lessor's Percentage of any such Improvement by making an Additional Equity Investment in such amount, if any, as it may determine in its sole discretion. Midwest shall have no obligation to accept and the Owner Participant shall not be obligated to provide such Additional Equity Investment. The obligation to finance such Improvement through the issuance of Additional Lessor Notes (any financing of Improvements through the issuance of such Additional Lessor Notes being called a "SUPPLEMENTAL FINANCING") is subject to the limitations on incurrence of additional Indebtedness set forth in the Operative Documents and the following additional conditions: (i) there shall be no more than one such financing in any calendar year; -81- (ii) Improvements shall be made in compliance with the Operative Documents; (iii) such Improvement is a Required Improvement; (iv) subject to Section 2.03 of the Lessor Loan Agreement, the Additional Lessor Notes shall have a final maturity date no later than the expiration date of the Basic Lease Term or any Renewal Term then in effect or already elected by Collins Holdings as instructed by Midwest and will be fully repaid out of additional Basic Lease Rent or Renewal Rent and Termination Value as adjusted pursuant to the Operative Documents; (v) appropriate adjustments to Basic Lease Rent and Termination Value (determined without regard to any tax benefits associated with such Improvements, unless the Owner Participant is making an Additional Equity Investment) shall also be made to protect the Owner Participant's Expected Return; (vi) Midwest shall have paid, on an After-Tax Basis, all reasonable out-of-pocket costs and expenses of the Lease Financing Parties, including the reasonable fees and expenses of counsel to the Owner Participant, the Owner Lessor, the Owner Trustee and the Holder Representative, in each case to the extent incurred in connection with any financing or refinancing pursuant to this SECTION 16; (vii) no Lease Event of Default shall have occurred and be continuing unless the Improvements to be constructed with the proceeds of the Additional Lessor Notes shall cure such Lease Event of Default, and any such Improvements shall be made in compliance with the Operative Documents; (viii) the sum of (y) the principal amount of such Additional Lessor Notes and (z) the principal amount of all comparable additional lessor notes used to finance such Improvements pursuant to the Other Facility Leases, is not less than $20 million and not greater than 100% of the cost of the Improvements being financed; PROVIDED that the sum of (I) the outstanding balance of the Lessor Notes and (II) all comparable lessor notes issued and outstanding of the Other Owner Lessors under the respective lessor loan agreements to which such Other Owner -82- Lessors are party never exceeds (x) 90% of the lesser of (1) the fair market value of the Facility taking into account such Improvements, as determined pursuant to the Appraisal Procedure, and (2) the sum of (t) the Purchase Price, (u) the comparable purchase price for each of the Other Undivided Interests and (v) the cost of the Improvement being financed; (ix) the Owner Participant shall have received a favorable opinion reasonably satisfactory to it from Hunton & Williams, or from nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to Midwest, to the effect that such financing would not result in any material indemnified, or any unindemnified, incremental tax risk to the Owner Participant; (x) the Owner Participant shall not suffer any material adverse accounting effects under GAAP as a result of providing such additional financing; (xi) the cost of the Improvement, together with the cost of all previous Improvements financed with Additional Lessor Notes is not greater than 25% of the sum of (x) the Purchase Price and (y) the comparable purchase price for each of the Other Undivided Interests; unless the Facility Lessee shall have received confirmation that giving effect to the financing in connection with such Improvement, the Funding LLC Debt rating will not fall below BBB- or Baa3 from S&P and Moody's, respectively; and (xii) Midwest shall have made or delivered such representations, warranties, covenants, opinions or certificates as the Owner Participant may reasonably request. (xiii) such Additional Lessor Notes are issued pursuant to and in accordance with SECTION 2.03 of the Lessor Loan Agreement and Midwest and Collins Holdings shall have delivered such certificates, reports and other documents and shall have taken all other actions which are required to be delivered or taken by them pursuant to SECTION 2.03 of the Lessor Loan Agreement. Notwithstanding the prior provision dealing with the financing of Improvements through the Facility Lease, Midwest shall at all times have the right to finance Improvements to the Facility other than through the Facility Lease; PROVIDED that Improvements may only be financed other than through the Facility Lease if such financing would not result in any Lien on the Facility or the Facility Land and shall be subject to the limita- -83- tions on incurrence of additional Indebtedness contained in the other Operative Documents; PROVIDED FURTHER, that Required Improvements and Non-Severable Improvements shall automatically, upon being affixed to the Facility, become the property of the Owner Lessor and subject to the Facility Lease. SECTION 16.2 OPTIONAL REFINANCING OF LESSOR LOAN. Midwest will have the right, exercisable on no more than three occasions, for as long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing, to request the Owner Lessor, and the Owner Lessor shall reasonably consider and shall not unreasonably refuse, to refund or refinance the Lessor Notes, in the public or private market, in whole but not in part, through the issuance of new notes to the public (notes issued in such refinancing, the "NEW LESSOR NOTES"), to the Funding LLC, to a pass through trust or to such other funding vehicles as may be used at that time or to any other party that is not the Facility Lessee, the Facility Sublessee or any Affiliate thereof; PROVIDED that any refinancing under this SECTION 16.2 shall also be subject to satisfaction of the following conditions: (i) the Owner Lessor shall be able to issue and sell the New Lessor Notes in an amount adequate to accomplish such refunding or refinancing; (ii) the Owner Participant shall receive an opinion reasonably satisfactory to it from Hunton & Williams or from nationally recognized tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Lessee, to the effect that such refinancing (as opposed to the right to request such refinancing) would not result in any material indemnified or any unindemnified incremental tax risk to the Owner Participant (including tax risks relating to the classification of the Lessor Notes as qualified nonrecourse indebtedness; provided, however, that absent a change in law or judicial, administrative or legislative interpretation thereof after the Closing Date, there would not be incremental tax risk with respect to the allocation of interest expense for foreign tax credit purposes from a refinancing consummated in accordance with the provisions set forth below); (iii) all documentation in connection with such refinancing shall be reasonably satisfactory to the Owner Lessor, the Owner Trustee, and the Owner Participant and conditions set forth therein shall be met; -84- (iv) other than for the first such refinancing, the Owner Participant shall be entitled to a consent fee of $25,000 in connection therewith; (v) the refinancing shall not result in any other material adverse effect on the rights or interests of the Owner Lessor or the Owner Participant; (vi) New Lessor Notes shall be issued in compliance with Section 467 of the Code and any proposed, temporary, or final regulation thereunder, in each case as modified and in effect on the date of such issuance. (vii) all necessary authorizations, approvals and consents in connection with such refinancing shall have been obtained from each Person whose authorization, approval or consent is necessary to consummate such refinancing with respect to the Facility Lessee, the Owner Lessor and the Holder Representative, and such authorizations, approvals and consents shall be in full force and effect on the closing date of such refinancing; (viii) if (i) the principal amount of the New Lessor Notes exceeds that of the Lessor Notes existing on the refinancing date or (ii) the final maturity date of the New Lessor Notes is different from that of the existing Lessor Notes, the consummation of the transactions contemplated by the refinancing shall not cause the Owner Participant to account for the transactions contemplated by the Operative Documents as other than a "leveraged lease" under FAS 13; (ix) all payment dates for principal and interest payments on the New Lessor Notes shall become Rent Payment Dates; (x) on the closing date of such refinancing, each of the Facility Lessee, the Owner Lessor and the Holder Representative shall have executed and delivered all appropriate supplements to the Operative Documents that are necessary to consummate such refinancing, in form and substance reasonably satisfactory to the Owner Lessor and the Holder Representative; (xi) each of the Owner Lessor, the Owner Participant and the Holder Representative shall have received an opinion -85- of counsel for the Facility Lessee on such matters as they may reasonably request and in form and substance reasonably satisfactory to the Owner Participant and the Holder Representative; (xii) Midwest and Collins Holdings shall have delivered such certificates, reports and other documents and shall have taken all other actions which are required to be delivered or taken by them pursuant to SECTION 2.03 of the Lessor Loan Agreement; (xiii) each of the Owner Lessor, the Owner Participant and the Holder Representative shall have received from the Facility Lessee a certificate dated the date of the issuance of the New Lessor Notes executed on behalf of the Facility Lessee by an Authorized Officer thereof stating that all conditions precedent to the issuance of such New Lessor Notes have been satisfied or waived; (xiv) the consummation of any transaction contemplated by such refinancing shall not violate any Requirements of Law except to the extent that such non-compliance with the Requirements of Law would not have a material adverse effect on the Owner Lessor. (xv) the New Lessor Notes shall have a final maturity date no later than six months after the stated maturity date of the Initial Lessor Notes as set forth in Section 2.02(a) of the Lessor Loan Agreement and the weighted average life to maturity of the New Lessor Notes shall not vary from the remaining weighted average life-to-maturity of the Lessor Notes (immediately prior to such refinancing) by more than six months; and (xvi) the principal amount of the New Lessor Notes shall not exceed by more than 5 percent the remaining principal amount of the Lessor Notes (immediately prior to such refinancing). (xvii) the New Lessor Notes shall satisfy the requirements of Temp. Treas. Reg. Section 1.861 - 10T(b)(2)(iii), (iv) and (v) and not be excluded by reason of Temp. Treas. Reg. Section 1.861 - 10T(b)(4). SECTION 16.3 LEVEL 7 REFINANCING. At any time the Facility Lessee is notified in writing by the Owner Lessor or the Holder Representative that the Lessor Loan Rate will increase to Level 7 as a result of the occurrence of a Level 7 Event, the Facility Lessee shall, subject to the conditions set forth in SECTION 16.2 above, arrange for the refinancing -86- of the Lessor Notes. The Facility Lessee and the Owner Lessor shall make corresponding changes to Basic Lease Rent and the Termination Value in accordance with the rent adjustment provisions set forth in SECTION 3 of the Facility Lease. SECTION 16.4 COOPERATION. The Owner Participant will cooperate with and reasonably assist Midwest in connection with any refinancing and/or assumption of the Lessor Notes, so long as such refinancing is in accordance with the terms of the Operative Documents. The Owner Participant will execute such agreements and documents as may be necessary with respect to any such refinancing and will instruct the Owner Lessor to act accordingly. Nothing contained in this SECTION 16 shall limit Midwest's right to request a refinancing in accordance with SECTION 16.2, above, refinance the Lessor Notes and to make corresponding changes to Basic Lease Rent and the Termination Value in accordance with the rent adjustment provisions set forth in SECTION 3 of the Facility Lease. SECTION 16.5 LETTER OF CREDIT. Contemporaneously with any refinancing of the Lessor Notes pursuant to Section 16.2 or 16.3 effected at a time when the Midwest Letter of Credit or RCE Letter of Credit is outstanding or Midwest LC Reimbursement Obligations or RCE LC Reimbursement Obligations are outstanding, (a) Midwest shall cause any such outstanding Midwest Letter of Credit to be cancelled or otherwise terminated and all such Midwest LC Reimbursement Obligations to be paid in full and (b) the Owner Lessor shall cause any such outstanding RCE Letter of Credit to be cancelled or otherwise terminated and all such RCE LC Reimbursement Obligations to be paid in full. SECTION XVII PRE-CLOSING ADJUSTMENTS TO BASIC LEASE RENT AND TERMINATION VALUE (a) Prior to or on the Closing Date, Basic Lease Rent and Termination Values (and the allocations of Basic Lease Rent and 467 Fixed Rent) shall be adjusted, either upward or downward, in accordance with the Facility Lease: (i) at Midwest's option, to re-optimize the Lessor Loan; and (ii) to reflect any changes in the Pricing Assumptions, including, without limitation, (x) the initial interest rate on any of the Lessor Notes which is different from the applicable Lessor Loan Rate set forth in the Pricing Assumptions, (y) an increase in the Maximum Transaction Costs amount assumed in the Pricing Assumptions, unless Midwest has elected to pay such increase, and (z) a Closing Date other than the Scheduled Closing Date; and (iii) at the request of Midwest or the Owner Participant to reflect any enactment, promulgation, release or -87- adoption of, amendment to or change in the Code, Treasury Regulations, Revenue Rulings or Revenue Procedures ("TAX LAW CHANGE") enacted prior to the Closing; PROVIDED that if any adjustment required by this paragraph would cause (x) on an After-Tax Basis the present value of Basic Lease Rent as a percentage of the Purchase Price discounted at 6% to increase by more than 100 basis points or (y) the total Basic Lease Rent to increase by more than 2.0%, Midwest shall not be obligated to close the Overall Transaction. (b) Any adjustment pursuant to this SECTION 17 shall be calculated (A) so as not to negatively affect the Owner Participant's Expected Return through the Basic Lease Term and (B) to maintain operating lease treatment for Midwest; PROVIDED, HOWEVER, that to the extent it is not possible as the transaction is then structured to achieve both (A) and (B), the Owner Trust, the Owner Participant and Midwest shall work in good faith to restructure the transaction in a manner which would achieve both results; and PROVIDED, FURTHER, that to the extent consistent with preserving both such objectives, all adjustments shall at the option of Midwest be calculated to (x) minimize the average annual Basic Lease Rent over the Basic Lease Term for Midwest's GAAP accounting purposes and/or (y) minimize, to the extent possible, the present value to Midwest of the Basic Lease Rent; and PROVIDED, FURTHER, that to the extent that any adjustment pursuant to this SECTION 17 fails to maintain operating lease treatment for Midwest, Midwest shall not be obligated to close the Overall Transaction. Adjustments will be made using the same method of computation, assumptions and pricing constraints originally used (other than those that have changed as the result of the event giving rise to the adjustment) in the calculation of the Basic Lease Rent (and the allocation of Basic Lease Rent and 467 Fixed Rent) and corresponding adjustments to Termination Values will be made. Adjustments may not result in a book loss to the Owner Participant in the year of adjustment and will be computed by the Owner Participant (or the OP Guarantor if prior to the Closing Date) based upon the Tax Assumptions and the Pricing Assumptions used to calculate the Basic Lease Rent and Termination Values and shall be subject to verification procedure set forth in the Facility Lease. SECTION XVIII RIGHT OF FIRST REFUSAL; RIGHT OF FIRST OFFER. SECTION 18.1 RIGHT OF FIRST OFFER. In the event the Owner Participant desires to sell, lease, convey or otherwise transfer some or all of its Beneficial Interest other than to an Affiliate of the Owner Participant (other than in connection with the exercise of remedies following a Lease Event of Default) prior to the expiration of the Facility Lease Term, the Owner Participant must first offer to sell such Beneficial Interest to the Facility Lessee on the terms and conditions set forth in this SECTION 18.1. Such offer shall be made to the Facility Lessee in the form of a proposed term sheet, which proposed term -88- sheet shall include an outline of the price and of the terms, conditions and provisions upon which the Owner Participant would be willing to transfer such Beneficial Interest or any part thereof. The Facility Lessee will thereafter have the right within a period of forty-five (45) days from and after the receipt by the Facility Lessee of such proposed term sheet to notify the Owner Participant of its intent to exercise its right to purchase hereunder. If the Facility Lessee elects to exercise the right provided in the preceding sentence, it shall within 60 days of such notice purchase, and the Owner Participant shall sell, the Beneficial Interest on the same terms and conditions as the offer giving rise to such right. If the Facility Lessee does not give such notice to the Owner Participant within the forty-five (45) day period or does not purchase the Beneficial Interest within 60 days of such notice, the Owner Participant will be free to so sell, lease, convey or otherwise transfer such Beneficial Interest, or a portion thereof, at a price no less than the price set forth in the proposed term sheet and on terms and conditions, taken as a whole, that, other than in an immaterial respect, are no less favorable to the Owner Participant than the terms and conditions set forth in the proposed term sheet, unless the failure to purchase the Beneficial Interest within 60 days is attributable to the Owner Participant. In the event that the terms or conditions are revised in any way that the price is reduced or any of the other terms and conditions thereof, taken as a whole change the agreement for sale, lease, conveyance or transfer such that the terms and conditions of any such subsequent transaction are less favorable, other than in an immaterial respect, to the Owner Participant, the Owner Participant must again comply with the notice and acceptance provisions of this SECTION 18.1. It is understood and agreed among the parties hereto that the transaction contemplated by this SECTION 18.1 shall not effect a merger of the Facility Lessee's ownership interest in the Facility and the Facility Site with the Owner Lessor's Interest. SECTION 18.2 RIGHT OF FIRST REFUSAL. In the event the Owner Participant desires to sell, lease, convey or otherwise transfer some or all of its Beneficial Interest or cause the Owner Lessor to sell, lease, convey or otherwise transfer its Owner Lessor's Interest at any time within three years after expiration or termination other than to an Affiliate of the Owner Participant (other than pursuant to SECTION 13 and 14 of the Facility Lease) of the Facility Lease to any Person other than the Facility Lessee or an Affiliate thereof, the Facility Lessee shall have the right, unless such sale, lease, conveyance or transfer is in connection with the exercise of remedies upon a Lease Event of Default, to purchase, lease or otherwise acquire such interest on the terms and conditions set forth in the bid that the Owner Participant intends to accept. The Owner Participant shall give the Facility Lessee prompt written notice of all bona fide offers that have been received from any other Person to purchase or acquire the Owner Lessor's Interest or Owner Participant's Beneficial Interest or any part of either during such three-year period following the expiration or termination of the Facility Lease, and which offers it wishes to accept, together with a full and complete statement of the price and all of the material terms, conditions and provisions contained in such offers. The Facility Lessee shall thereafter -89- have the right within a period of forty-five (45) days from and after the receipt by the Facility Lessee of such notice to notify the Owner Participant of its intent to exercise its rights of first refusal. If the Facility Lessee elects to exercise the right provided in the preceding sentence, it shall within 60 days of such notice purchase, and the Owner Participant shall sell, the Beneficial Interest on the same terms and conditions as the offer giving rise to such right. If the Facility Lessee does not give such notice to the Owner Participant within the forty-five (45) day period or does not purchase the Beneficial Interest within sixty (60) days of such notice, the Owner Participant shall be free to proceed under the terms and conditions as set forth in its irrevocable notice to the Facility Lessee, unless the failure to purchase the Beneficial Interest within sixty (60) days is attributable to the Owner Participant. In the event that the terms or conditions are revised in any way that changes the agreement for sale, lease, conveyance or transfer such that the terms and conditions thereof, other than in immaterial respects, are less favorable to the Owner Participant (including any reduction in price or a change in the terms of payment thereof in a manner that is beneficial to the potential purchaser), the Owner Participant must again comply with the notice and acceptance provisions of this SECTION 18.2. In connection with the Facility Lessee's exercise of the right of first refusal pursuant to this SECTION 18.2 with respect to the Owner Lessor's Interest, the Ground Interest shall be conveyed to the Facility Lessee. SECTION XIX SPECIAL LESSEE TRANSFER In the case of a Regulatory Event of Loss or Burdensome Buyout Event under the Facility Lease, the Facility Lessee (or its designee), so long as the Facility Lessee shall remain liable under the Facility Lease to pay Basic Lease Rent and all other payments under the Facility Lease, upon not less than 30 days' written notice to the Owner Participant and the Holder Representative, on the applicable Termination Date, may purchase the Owner Participant's Beneficial Interest, or, in the case of a Burdensome Buyout Event, the membership interest in the Owner Participant, and keep the Facility Lease (and the Lessor Loan) in place; PROVIDED, that (i) the Owner Participant shall not suffer any detriment (including tax or book consequences) from such purchase (as compared to that which would have resulted had the Facility Lessee terminated the Facility Lease and purchased the Owner Lessor's Interest), (ii) the Facility Lessee satisfies the transferee requirements contained in SECTION 12.1 hereof applicable to transfers by the Owner Participant, if applicable and (iii) the Facility Lessee pays all expenses incurred by the other Lease Financing Parties in connection therewith. If the Facility Lessee chooses to purchase the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be, pursuant to the preceding sentence, on the applicable Termination Date, the Facility Lessee (or its designee) shall pay to the Owner Participant or to the Equity Investor, as the case may be, the Special Lessee Transfer Amount determined as of such date, plus all amounts due and payable to the Owner -90- Participant or Equity Investor, as the case may be, on such date under the Operative Documents. Concurrently with the payment of all sums required to be paid pursuant to this SECTION 19 (or on such later date of transfer of the Owner Participant's Beneficial Interest or membership interest in the Owner Participant, as the case may be, in accordance with clause (ii) below) (i) the Facility Lessee shall cease to have any liability to the Owner Participant with respect to the Operative Documents, except for obligations (including those under SECTIONS 14.1 and 14.2 hereof and the Tax Indemnity Agreement) surviving pursuant to the express terms of any Operative Document or which have otherwise accrued but not been paid as of such date and (ii) the Owner Participant or the Equity Investor, as the case may be, will transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessor and prepared and recorded at the Facility Lessee's expense) the Owner Participant's Beneficial Interest or membership interest in the Owner Participant, as the case may be, to the Facility Lessee (or its designee); PROVIDED, HOWEVER, that if the Lessor Notes are outstanding, such transfer shall not be made to the Facility Lessee, but shall be made to the Facility Lessee's designee promptly upon the Facility Lessee's designation of such designee and such designee will agree not to transfer the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be, to the Facility Lessee for as long as the Lessor Notes are outstanding. The Owner Participant or Equity Investor, as the case may be, shall make any transfer under this SECTION 19 on an "as is," "where is" basis, without warranty other than as to the absence of Owner Lessor's Liens and Owner Participant's Liens on the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be. It is understood and agreed among the parties hereto that the transaction contemplated by this SECTION 19 shall not effect a merger of the Facility Lessee's leasehold interest in the Facility and subleasehold interest in the Facility Site with the Owner Lessor's Interest. The Facility Lessee will pay all reasonable costs and expenses of the Lease Financing Parties in connection with any transfer pursuant to this SECTION 19. Subsequent to such transfer, the Facility Lessee and the Owner Lessor may, without the consent of the Holder Representative, waive the Regulatory Event of Loss or Burdensome Buyout Event that gave rise to the right to purchase the Owner Participant's Beneficial Interest or the membership interest in the Owner Participant, as the case may be, and the Facility Lease shall continue in full force and effect in accordance with its terms. SECTION XX MIDWEST'S DIRECTIONS Collins Holdings, the Owner Lessor, the Owner Trustee, the Owner Participant, Holdings, Midwest, the Lender, the Holder Representative, the Midwest LC Issuer and the RCE LC Issuer hereby agree that, so long as no Material Lease Default, -91- Material Sublease Event of Default, Lease Event of Default or Sublease Event of Default shall have occurred and be continuing: (a) Midwest shall have the exclusive right to make all elections contemplated by Section 2.02(d) of the Lessor Loan Agreement, including, without limitation, all elections with respect to conversions and continuations of Base Rate Advances (as defined in the APA) and Eurodollar Advances (as defined in the APA) as contemplated by Section 18(a) and 18(h) of the APA; (b) Midwest shall have the exclusive right to make all elections contemplated by Annex C to the RCE Reimbursement Agreement, including without limitation, all elections with respect to conversions and continuations of Base Rate Loans (as defined in the RCE Reimbursement Agreement) and LIBO Rate Loans (as defined in the RCE Reimbursement Agreement) as contemplated by Sections 1.3 and 2.2 of such Annex C; (c) Midwest shall have the exclusive right to instruct the Holder Representative to invest funds in Permitted Investments as contemplated by Section 3.07 of the Lessor Loan Agreement; (d) Midwest shall receive copies of all notices delivered to the Owner Lessor under the Lessor Loan Agreement; (e) the Lender or the Holder Representative, as the case may be, shall deliver to Midwest copies of all notices delivered to the Lender or the Holder Representative, respectively under the APA or the Finance Facility within one Business Day of its receipt thereof; (f) pursuant to Section 18(d) of the APA, the Lender shall, within one Business Day of request therefor from Midwest, request that the APA Purchasers extend the Stated Commitment Termination Date (as defined in the APA) for an additional 364 days; (g) pursuant to Section 18(h) of the APA, the Lender shall, within one Business Day of request therefor from Midwest, notify an APA Purchaser of its intent to prepay in full any Eurodollar Rate Advances (as defined in the APA) owing to such APA Purchaser; and (h) pursuant to Section 2 of the Finance Facility, the Lender shall request Advances (as defined in the Finance Facility), within one Business Day of request therefor from Midwest. -92- SECTION XXI AGREEMENT WITH RESPECT TO COLLINS HOLDINGS Each of the parties hereto agrees that it shall not institute against, or solicit or join any other Person in instituting against, Collins Holdings any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or any other proceeding under any federal or state bankruptcy or similar law, for one year and a day after the payment in full of all amounts due by and satisfaction of all obligations of, Collins Holdings under the Facility Lease. SECTION XXII MISCELLANEOUS SECTION 22.1 CONSENTS. The Owner Participant covenants and agrees that it shall not unreasonably withhold its consent to any consent requested of the Owner Lessor under the terms of the Operative Documents that by its terms is not to be unreasonably withheld by the Owner Lessor. SECTION 22.2 SUCCESSOR OWNER LESSOR. The parties hereto agree that the transfer or assignment pursuant to the terms of the Trust Agreement by the Owner Lessor to a successor Owner Lessor, pursuant to the trust created thereunder, will not violate the terms of any Operative Document. SECTION 22.3 BANKRUPTCY OF TRUST ESTATE. If (i) all or any part of the Trust Estate becomes the property of a debtor subject to the reorganization provisions of Title 11 of the United States Code, as amended from time to time, (ii) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal or interest on the Lessor Notes, and (iii) the Holder Representative actually receives any Excess Amount, as defined below, which reflects any payment by the Owner Participant on account of clause (ii) above, the Holder Representative shall promptly refund to the Owner Participant such Excess Amount. For purposes of this SECTION 22.3, "EXCESS AMOUNT" means the amount by which such payment exceeds the amount which would have been received by the Holder Representative if the Owner Participant had not become subject to the recourse liability referred to in clause (ii) above. Nothing contained in this SECTION 22.3 shall prevent the Holder Representative from enforcing any personal recourse obligations (and retaining the proceeds thereof) of the Owner Participant as contemplated by this Agreement (other than referred to in clause (ii)). SECTION 22.4 AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition of this Agreement may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing, executed by each party hereto. -93- SECTION 22.5 NOTICES. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to each party hereto at its address set forth below or, in the case of any such party hereto, at such other address as such party may from time to time designate by written notice to the other parties hereto: If to Midwest: One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Facsimile No.: (312) 583-6111 Attention: Georgia R. Nelson with a copy to Holdings at the address below If to Holdings: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92612 Facsimile No.: (949) 752-1420 Attention: General Counsel If to the Owner Lessor, the Owner Trustee or the Trust Company: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Telephone No.: (302) 651-1000 Facsimile No. (302) 651-8882 Attention: Corporate Trust Administration with a copy to the Owner Participant -94- If to the Owner Participant: Collins Generation I, LLC c/o PSEG Resources Inc. 80 Park Plaza, Suite T-22 Newark, NJ 07101 Telephone No.: (973) 456-3560 Facsimile No.: (973)-456-3569 Attention: President If to the Lender: Midwest Funding LLC c/o Lord Securities Corporation 2 World Trade Center 7th Floor, New York, NY 10005 Attention: Dwight Jenkins Telephone No.: Facsimile No.: If to the Holder Representative: Citibank, N.A. 111 Wall Street, 5th Floor, Zone 2 New York, NY 10005 Attention: Global Trust & Agency Services Facsimile No.: (212) 657-3866 If to Collins Holdings: One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Facsimile No.: (312) 583-6111 Attention: Georgia R. Nelson with a copy to Holdings A copy of all notices provided for herein shall be sent by the party giving such notice to each of the other parties hereto. In addition, Midwest shall (unless otherwise directed by the applicable Rating Agency) provide to each Rating Agency a copy of any information, -95- report or notice it gives to the Holder Representative hereunder or any other Operative Documents. SECTION 22.6 SURVIVAL. All warranties, representations, indemnities and covenants made by any party hereto, herein or in any certificate or other instrument delivered by any such party or on the behalf of any such party under this Agreement shall be considered to have been relied upon by each other party hereto and shall survive the consummation of the transactions contemplated hereby and in the other Operative Documents regardless of any investigation made by any such party or on behalf of any such party. In addition, the indemnifications by Midwest under SECTIONS 14.1 and 14.2 of this Agreement shall, subject to SECTIONS 14.1(B) and 14.2(B), respectively, expressly survive the expiration or early termination (in either case, for whatever reason) of the Facility Lease or the transfer or other disposition (including by resignation and removal) of the respective interests of the Owner Participant, the Owner Lessor, the Trust Com pany, the Owner Trustee and the Holder Representative in, to and under this Agreement and other Operative Documents. SECTION 22.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof, including each successive holder of the Owner Participant's Beneficial Interest permitted under SECTION 12.1. Except as expressly provided herein or in the other Operative Documents, no party hereto may assign its interests herein without the consent of the other parties hereto. SECTION 22.8 GOVERNING LAW. This Agreement has been delivered in the State of New York and shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance without giving effect to the conflicts of laws provisions thereof except New York General Obligations Law Section 5-1401. SECTION 22.9 SEVERABILITY. If any provision hereof shall be invalid, illegal or unenforceable under Requirement of Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. SECTION 22.10 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. SECTION 22.11 HEADINGS AND TABLE OF CONTENTS. The headings of the sections of this Agreement and the Table of Contents are inserted for purposes of convenience only -96- and shall not be construed to affect the meaning or construction of any of the provisions hereof. SECTION 22.12 LIMITATION OF LIABILITY. (a) None of the Owner Participant, the Owner Lessor, the Owner Trustee, the Trust Company, the Lender, the Holder Representative or any Holder shall have any obligation or duty to Midwest or to others with respect to the transactions contemplated hereby, except those obligations or duties expressly set forth in this Agreement and the Operative Documents, and neither the Owner Lessor, the Owner Trustee, the Trust Company, the Lender, any Holder nor the Holder Representative shall be liable for performance by any other party hereto of such other party's obligations or duties hereunder. Without limitation of the generality of the foregoing, under no circumstances whatsoever shall the Owner Participant be liable to Midwest, Holdings or Collins Holdings for any action or inaction on the part of the Owner Lessor or the Owner Trustee in connection with the transactions contemplated herein, whether or not such action or inaction is caused by willful misconduct or gross negligence of the Owner Lessor, unless such action or inaction is at the written direction of the Owner Participant. (b) The Trust Company is executing the Operative Documents to which it is a party solely as trustee under the Trust Agreement and not in its individual capacity, except as expressly provided herein or therein, and in no case whatsoever shall the Trust Company be personally liable for, or for any loss in respect of, any of the statements, representations, warranties, agreements or obligations of the Owner Lessor or the Owner Trustee hereunder or under any other Operative Document, as to all of which the other parties hereto agree to look solely to the Trust Estate; PROVIDED, HOWEVER, that the Trust Company shall be liable hereunder for its own gross negligence or willful misconduct or for a breach of its representations, warranties and covenants made in its individual capacity. (c) The Holder Representative is entering into the Operative Documents to which it is a party solely as a Holder Representative under the Lessor Security Documents, and not in its individual capacity, except as expressly provided herein or therein, and in no case whatsoever shall the Holder Representative be personally liable for, or for any loss in respect of, any of the statements, representations, warranties, agreements or obligations of the Owner Lessor hereunder or under any other Operative Document, as to all of which the other parties hereto agree to look solely to the Trust Estate and Lessor Collateral; PROVIDED, HOWEVER, that the Holder Representative shall be liable hereunder for its own gross negligence, willful misconduct, bad faith or a breach of its representations, warranties and covenants made in its individual capacity. -97- (d) The right of the Holder Representative to perform any discretionary act enumerated herein or in any other Operative Document (including, without limitation, the right to consent to any action which requires its consent and the right to waive any provision of, or consent to any change or amendment to, any of the Operative Documents) shall not be construed as a duty, and the Holder Representative shall not be accountable or liable for other than its gross negligence, willful misconduct or bad faith in the performance or non-performance of such acts. In connection with any such discretionary acts, the Holder Representative may in its own judgement (but shall not, except as otherwise provided in the Lessor Security Documents or as otherwise required by Requirement of Law, have any obligation to) request in writing the approval of the holders of the Funding LLC Notes. (e) The Owner Participant will give Midwest at least 15 days' prior notice of any proposed amendment or supplement to the Trust Agreement (other than amendments solely effecting a transfer of the Owner Participant's interest in the Trust Estate or with respect to administrative matters) and deliver true, complete and fully executed copies to Midwest of any amendment or supplement to the Trust Agreement. No amendment or supplement to the Trust Agreement that could materially adversely affect the interests of the Holder Representative shall become effective without the prior written consent of the Holder Representative. SECTION 22.13 CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY, PROCESS AGENT. (a) Each of the parties hereto (i) hereby irrevocably submits to the nonexclusive jurisdiction of the Supreme Court of the State of New York, New York County (without prejudice to the right of any party to remove to the United States District Court for the Southern District of New York) and to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of this Agreement, the other Operative Documents, or the subject matter hereof or thereof or any of the transactions contemplated hereby or thereby brought by any of the parties hereto or their successors or assigns; (ii) hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court, or in such federal court; and (iii) to the extent permitted by Requirement of Law, hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding any claim that it is not personally subject to the jurisdiction of the above-named courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement, the other Operative Documents, or the subject matter hereof or thereof may not be enforced in or by such court. -98- (b) TO THE EXTENT PERMITTED BY REQUIREMENT OF LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES THE RIGHT TO DEMAND A TRIAL BY JURY, IN ANY SUCH SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT, THE OTHER OPERATIVE DOCUMENTS, OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY BROUGHT BY ANY OF THE PARTIES HERETO OR THEIR SUCCESSORS OR ASSIGNS. (c) By the execution and delivery of this Agreement, Midwest Holdings and Collins Holdings designate, appoint and empower CT Corporation System as their authorized agent to receive for and on their behalf service of any summons, complaint or other legal process in any such action, suit or proceeding in the State of New York for so long as any obligation of Midwest, Holdings and Collins Holdings shall remain outstanding hereunder or under any of the other Operative Documents. Midwest Holdings and Collins Holdings shall grant an irrevocable power of attorney to CT Corporation System in respect of such appointment and shall maintain such power of attorney in full force and effect for so long as any obligation of Midwest Holdings and Collins Holdings shall remain outstanding hereunder or under any of the Operative Documents. SECTION 22.14 FURTHER ASSURANCES. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Agreement and the other Operative Documents. SECTION 22.15 EFFECTIVENESS. This Agreement has been dated as of the date first above written for convenience only. This Agreement shall be effective on the date of execution and delivery by each of the parties hereto. SECTION 22.16 MEASURING LIFE. If and to the extent that any of the options, rights and privileges granted under this Agreement, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Agreement, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Agreement of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. -99- Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Agreement, whichever of (a) and (b) is shorter. SECTION 22.17 NO PARTNERSHIP, ETC. The parties hereto intend that nothing contained in this Agreement or any other Operative Document shall be deemed or construed to create a partnership, joint venture or other co-ownership arrangement by and among any of them. SECTION 22.18 RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTEREST. (a) No OP Member shall, during the Facility Lease Term, assign, convey or transfer any of its right, title or interest in the Membership Interest or cause the Owner Participant to issue additional membership interests without the prior written consent of Midwest and, so long as the Lessor Notes are outstanding, the Holder Representative; PROVIDED, HOWEVER, that an OP Member may assign, convey or transfer all or any part of its interest in the Membership Interest without such consent to a Person (the "MEMBER TRANSFEREE"), if the Owner Participant Guaranty shall remain outstanding and in full force and effect or each of the following conditions shall have been satisfied: (i) the Member Transferee shall be either (A) an Affiliate of the Owner Participant which does not otherwise qualify under clause (B) below provided the Owner Participant Guaranty shall remain in full force and effect, or (B) a Person which guarantees all of the Owner Participant's obligations under the Operative Documents pursuant to a guaranty substantially in the form of Exhibit Y hereto and meets the following criteria: (1) the tangible net worth of the Member Transferee is at least equal to $75 million calculated in accordance with GAAP; and (2) unless waived by Midwest, and so long as no Material Lease Default or Lease Event of Default shall have occurred and be continuing, such Member Transferee is not a Competitor (as defined in SECTION 12.1(b)) of, or in material litigation with, Midwest or any Affiliate of Midwest; (ii) the total number of Unrelated Members, after giving effect to such transactions shall not exceed three; and (iii) the Member Transferee agrees in the guaranty or in another written instrument reasonably acceptable to Midwest and, so long as the Lessor Notes are outstanding, the Holder Representative to be bound by this SECTION 22.18. -100- (b) Neither the Facility Lessee, nor the Facility Sublessee shall be responsible for any adverse tax consequence to the Owner Lessor, the Owner Participant or the Guarantor resulting from any transfer pursuant to this SECTION 22.18 and the Pricing Assumptions shall not be changed as a result of any such transfer. (c) The OP Member shall give the Owner Lessor, the Owner Trustee, the Midwest LC Issuer, the RCE LC Issuer and Midwest 30 days prior written notice of such transfer, or 10 days in the case of a transfer to an Affiliate of the Owner Participant, specifying the name and address of any proposed Member Transferee and such additional information as shall be necessary to determine whether the proposed transfer satisfies the requirements of this SECTION 22.18. If requested by the OP Member, the Owner Participant, the Midwest LC Issuer, the RCE LC Issuer or the Holder Representative, Midwest shall acknowledge qualifying transfers. All reasonable fees, expenses and charges of the Holder Representative and Midwest (including reasonable attorneys' fees and expenses in connection with any such transfer or proposed transfer), including any of the foregoing relating to any amendments to the Operative Documents required in connection therewith, shall be paid by the OP Member, without any right of indemnification from Midwest or any other Person; PROVIDED, HOWEVER, that the OP Member shall have no obligation to pay fees, expenses or charges of Midwest as a result of any transfer while a Material Lease Default or a Lease Event of Default is continuing, in which case Midwest shall be obligated to pay such costs. (d) Upon any transfer to a Member Transferee specified in clause (a)(i)(B) of this SECTION 22.18 and compliance with all of the other provisions of this SECTION 22.18, (i) the Member Transferee shall, to the extent of the Membership Interest conveyed to the Member Transferee, be deemed an "OP Member" for purposes of this SECTION 22.18 and the Person executing the guaranty pursuant to such clause (a)(i)(B) shall be deemed a "Guarantor" for all purposes and each reference in this Agreement and each other Operative Document to the "Guarantor" shall thereafter be deemed to include such Member Transferee or the Person executing such guaranty, as the case may be, to the extent of the obligations expressly transferred to the Member Transferee and guaranteed by such Person, for all purposes and (ii) the existing Guarantor shall be released from all obligations under its Owner Participant Guaranty to the extent such obligations are expressly guaranteed by the Member Transferee or such Affiliate; PROVIDED, HOWEVER, that in no event shall any such transfer waive or release the existing Guarantor from any liability existing immediately prior to or occurring simultaneously with such transfer. Except as expressly provided in the immediately preceding sentence, no transfer of any Membership Interest shall effect the obligations of the existing Guarantor under the Owner Participant Guaranty or any other Guarantor under its Guaranty. (e) Notwithstanding anything herein to the contrary, any transfer of Membership Interest pursuant to this SECTION 22.18 shall be subject to Midwest's right of -101- first offer and right of first refusal set forth in SECTION 18.1 and 18.2, respectfully, to the same extent as if such transfer were a transfer by the Owner Participant of its Beneficial Interest. SECTION 22.19 ISSUER DOWNGRADE EVENT. Each of the Midwest LC Issuer and the RCE LC Issuer hereby covenants and agrees that it will promptly furnish to Midwest, Collins Holdings and the Owner Participant a written notice of any downgrade of its rating. -102- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized. COLLINS HOLDINGS EME, LLC By: /s/ Michael P. Childers ---------------------------------------------- Name: Michael P. Childers Title: Vice President Date: December 15, 1999 COLLINS TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ Kathleen A. Pedelini ---------------------------------------------- Name: Kathleen A. Pedelini Title: Authorized Signer Date: December 15, 1999 WILMINGTON TRUST COMPANY, not in its individual capacity, except as ex pressly provided herein, but solely as Owner Trustee By: /s/ Kathleen A. Pedelini ---------------------------------------------- Name: Kathleen A. Pedelini Title: Authorized Signer Date: December 15, 1999 COLLINS GENERATION I, LLC By: /s/ Christopher P. Kelleher ---------------------------------------------- Name: Christopher P. Kelleher Title: Vice President Date: December 15, 1999 EDISON MISSION MIDWEST HOLDINGS CO., By: /s/ Fred W. McCluskey ---------------------------------------------- Name: Fred W. McCluskey Title: Vice President Date: December 15, 1999 MIDWEST GENERATION, LLC By: /s/ Fred W. McCluskey ---------------------------------------------- Name: Fred W. McCluskey Title: Vice President Date: December 15, 1999 CITIBANK, N.A. not in its individual capacity, but solely as Holder Representative By: /s/ Jenny Cheng ---------------------------------------------- Name: Jenny Cheng Title: Vice President Date: December 15, 1999 MIDWEST FUNDING LLC By: /s/ Dwight Jenkins ---------------------------------------------- Name: Dwight Jenkins Title: Vice President Date: December 15, 1999 BAYERISCHE LANDESBANK INTERNATIONAL S.A., a banking institution organized under the laws of Luxembourg, as issuer of the Midwest Letter of Credit By: /s/ Peter Radermacher By: /s/ Peter Lang ----------------------------- ------------------------------- Name: Peter Radermacher Name: Peter Lang ------------------------ -------------------------- Title: Directeur - Adjoint Title: Mandataire Commercial ----------------------- ------------------------- Date: December 15, 1999 Date: December 15, 1999 BAYERISCHE LANDESBANK GIROZENTRALE, as issuer of the RCE Letter of Credit By: /s/ Dietmar Rieg By: /s/ Cornelia Wintergerst ----------------------------- ------------------------------- Name: Dietmar Rieg Name: Cornelia Wintergerst ------------------------ -------------------------- Title: First Vice President Title: Second Vice President ----------------------- ------------------------- Date: December 15, 1999 Date: December 15, 1999 EXHIBIT RR TO THE PARTICIPATION AGREEMENT FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT - -------------------------------------------------------------------------------- ASSIGNMENT AND ASSUMPTION AGREEMENT (T1) Dated as of [ ] between [ ] as Transferor and [ ] as Transferee Collins Station Fossil Fuel-Fired Electric Generating Facility - -------------------------------------------------------------------------------- ASSIGNMENT AND ASSUMPTION AGREEMENT (T1) This ASSIGNMENT AND ASSUMPTION AGREEMENT (T1), dated as of [ ] (this "Agreement"), between [ ], a [ ], (the "Transferor"), and [ ], a [ ] (the "Transferee"). WITNESSETH: WHEREAS, the Transferor entered into the Participation Agreement (T1) and certain other Operative Documents; and WHEREAS, the Transferor desires to sell and assign to the Transferee the Beneficial Interest and all of the Transferor's right, title and interest in, to and under the Operative Documents, and the Transferee desires to (i) purchase the Beneficial Interest and accept from the Transferor the assignment of all of the Transferor's right, title and interest in, to and under the Operative Documents and (ii) assume all of the duties and obligations of the Transferor under the Operative Documents. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. DEFINITIONS Capitalized terms used in this Agreement, including the recitals, and not otherwise defined herein shall have the respective meanings specified in Appendix A to the Participation Agreement (T1), dated as of December 15, 1999 (the "Participation Agreement"), among Collins Holdings EME, LLC ("CHE"), Collins Trust I (the "Owner Lessor"), Collins Generation I, LLC (the "Owner Participant"), Wilmington Trust Company (the "Owner Trustee"), Edison Mission Midwest Holdings Co. ("Holdings"), Midwest Generation, LLC ("Midwest"), Midwest Funding, LLC ("Funding LLC"), Bayerische Landesbank International S.A., as issuer of the Midwest Letter of Credit, Bayerische Landesbank Girozentrale, as issuer of the RCE Letter of Credit and Citibank, N.A., as Holder Representative, in their capacities referred to therein, and the Transferor, unless the context hereof shall otherwise require. The general provisions of Appendix A to the Participation Agreement shall apply to terms used in this Agreement and specifically defined herein. SECTION 2. ASSIGNMENT BY THE TRANSFEROR In accordance with Section 12.1 of the Participation Agreement, the Transferor hereby sells, assigns, conveys and transfers to the Transferee as of the date hereof (the "Transfer Date") the Beneficial Interest and all of the Transferor's right, title and interest in, to and under each Operative Document to which it is a party and all other contracts, agreements, documents and instruments relating to the Beneficial Interest by which the Transferor is bound, and any proceeds therefrom, together with all other documents and instruments evidencing any of such right, title and interest, except such rights of the Transferor as have accrued to the Transferor prior to the Transfer Date (such excepted rights include the right to receive any amounts due or accrued to the Transferor with respect to the Beneficial Interest under the Trust Agreement or other Operative Documents as of the Transfer Date and the right to receive any Excepted Payments pursuant to the Participation Agreement or the Tax Indemnity Agreement as of or in respect of events occurring or arising on or prior to the Transfer Date). SECTION 3. ASSUMPTION BY THE TRANSFEREE The Transferee hereby assumes, and agrees it is unconditionally bound in respect of, as of the date hereof, all duties and obligations of the Transferor pursuant to the Trust Agreement and under each of the other Operative Documents to which the Transferor is a party and all other contracts, agreements, documents and instruments relating to the Beneficial Interest to which the Transferor is a party or by which the Transferor is bound. The Transferee agrees as of the date hereof, it shall be deemed a party to each of the Operative Documents to which the Transferor is a party and any other contract, agreement, document or other instrument relating to the Beneficial Interest to which the Transferor is a party or by which it is bound and the Transferee agrees that it is liable for all of the duties and obligations of the Transferor under the Operative Documents to which the Transferor is a party and all other contracts, agreements, documents and instruments relating to the Beneficial Interest to which the Transferor is a party or by which the Transferor is bound as though it were identified as the "Owner Participant" therein. SECTION 4. TRANSFEREE AS OWNER PARTICIPANT In consequence of the assumption set forth in Section 3, (a) the Transferee shall be deemed the "Owner Participant" for all purposes, and shall enjoy the rights and privileges and perform the obligations of the Owner Participant under each Operative Document, and each reference in each other Operative Document to the "Owner Participant" shall be deemed to include the Transferee for all purposes, and (b) the Transferor and the guarantor, if any, of the Transferor's obligations shall be released from all obligations under each Operative Document and shall have no further duty, obligation, liability or burden under any Operative Document; PROVIDED, HOWEVER, that in no event shall the assignment and assumption effected by this Agreement waive or release the Transferor from any liability on account of any breach of its obligations thereunder existing immediately prior to or occurring simultaneously with the assignment and assumption effected hereby or of any of its representations, warranties, covenants or obligations set forth in the Operative Documents. SECTION 5. PAYMENTS The Transferor hereby covenants and agrees to pay over to the Transferee, if and when received following the Transfer Date any amounts (including any sums payable as interest in respect thereof) paid to or for the benefit of the Transferor that, under Section 2 hereof, belong to the Transferee, and the Transferee hereby covenants and agrees to pay over to the Transferor, if and when received following the Transfer Date, any amounts (including any sums payable as interest in respect thereof) paid to or for the benefit of the Transferee that, under Section 2 hereof, belong to the Transferor. SECTION 6. CERTAIN REPRESENTATIONS OF THE TRANSFEREE The Transferee represents and warrants that such Transferee, or a guarantor of such Transferee, meets the following criteria: (a) has Consolidated Tangible Net Assets of at least $75 million calculated in accordance with GAAP; (b) is "a United States person" within the meaning of section 7701(a)(30) of the Code; and (c) neither the Transferee nor any of its Affiliates is a Competitor of, or engaged in material litigation with, Midwest, or any Affiliate of Midwest.(1) SECTION 7. OPINION OF COUNSEL - ---------------- (1) The representation in Section 6(c) hereof shall be replaced with the following representation if the Transferee or any of its Affiliates is a Competitor of, or engaged in material litigation with, Midwest and the criteria contained in the following representation shall have been met: The Transferee represents and warrants that (i) the Transferee is an entity involved in making passive investments such as the Transferor's contemplated investment in this transaction, (ii) such Transferee has in place procedures which shall be reasonably acceptable to Midwest to prevent its Affiliate that is a Competitor from acquiring confidential information relating to such passive investments and agrees in writing with Midwest to maintain and abide by such procedures, and (iii) neither such Transferee nor any Affiliate thereof is an entity that is (x) actively involved in the generation of electricity in Mid-American Interconnected Network and/or the East Central Reliability Council or any successor thereto, or (y) on the List of Competitors, attached as Exhibit SS to the Participation Agreement, which may, from time to time, but no more often than once per year, be modified by Midwest, and shall contain a list of up to six entities (including Affiliates) which Midwest reasonably believes in its good faith judgment are Competitors of Midwest or its Affiliates. SECTION 7. OPINION OF COUNSEL Prior to, or on the date hereof, the Transferor shall have delivered to Midwest, the Owner Trustee and, so long as the Lessor Notes are outstanding, the Holder Representative an opinion of counsel relating to this Agreement. Such opinion and counsel shall be reasonably satisfactory to each recipient thereof, to the effect that this Agreement is a legal, valid and binding obligation of, and is enforceable against, each party hereto and (ii) to the effect that all regulatory approvals required in connection with the transfer contemplated by this Agreement or necessary to assume the Transferor's obligations under the Operative Documents shall have been obtained and that the proposed transfer of the Beneficial Interest will not require registration the Securities Act. SECTION 8. BENEFICIARIES CHE, Holdings, Midwest, Funding LLC, the Owner Lessor, the Owner Trustee, and so long as the Lessor Notes are outstanding, the Holder Representative, together with their respective successors and permitted assigns, are each third party beneficiaries of this Agreement (each, a "Beneficiary" or, together, the "Beneficiaries"). SECTION 9. MISCELLANEOUS SECTION 9.1.AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition of this Agreement may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. SECTION 9.2.NOTICES. The Transferee hereby designates that copies of all communications and notices to the Transferor pursuant to the Operative Documents shall be sent to the Transferee at its address set forth below. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to each party hereto at its address set forth below or, in the case of either party hereto, at such other address as such party may from time to time designate by written notice to the other party hereto: If to the Transferor: Facsimile No.: Telephone No.: Attention: If to the Transferee: Facsimile No.: Telephone No.: Attention: SECTION 9.3. SURVIVAL. All warranties, representations, indemnities and covenants made by any party hereto, herein or in any certificate or other instrument delivered by either party or on the behalf of either party under this Agreement, shall be considered to have been relied upon by the other party hereto and shall survive the consummation of the transactions contemplated hereby on the date of execution and delivery of this Agreement regardless of any investigation made by either party or on behalf of such party. SECTION 9.4. SUCCESSORS AND ASSIGNS. The Transferee covenants and agrees that it shall obtain any and all consents required under the Operative Documents if the Transferee assigns its interest under this Agreement. If the Transferee assigns such interest under this Agreement, then this Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the respective successors and assigns as permitted by and in accordance with the terms hereof. SECTION 9.5. GOVERNING LAW. This Agreement shall be in all respects governed by and construed in accordance with the laws of the State of New York, including all matters of construction, validity and performance (without giving effect to the conflicts of laws provisions thereof, other than New York General Obligations Law Section 5-1401). SECTION 9.6. SEVERABILITY. Any provision of this Agreement that 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 unenforce- able such provision in any other jurisdiction. SECTION 9.7. COUNTERPARTS. This Agreement may be executed by the parties hereto in separated counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 9.8. HEADINGS. The headings of the sections of this Agreement are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. SECTION 9.9. FURTHER ASSURANCES. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Agreement. SECTION 10. WAIVER OF RIGHT TO PARTITION So long as the Facility or any part thereof as originally constructed, reconstructed or added to is used or useful for the generation of electrical power and energy, or to the end of the period permitted by applicable law, whichever first occurs, the Transferee waives its right to partition whether by partition in kind or sale and division of the proceeds thereof, and agrees that it will not resort to any action at law or in equity to partition and further waive the benefit of all laws that may now or hereafter authorize such partition of the properties comprising the Facility. It is agreed that this covenant shall be deemed to run with the land. All instruments of conveyance which effect, evidence or vest the ownership interest of the Transferee in the Transferee shall contain this waiver of right to partition. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized. [ ], as Transferor By: --------------------------------------- Name: Title: Date: [ ], as Transferee By: --------------------------------------- Name: Title: Date: SCHEDULE 3.1(c) TO THE PARTICIPATION AGREEMENT MIDWEST GOVERNMENTAL APPROVALS PART A: Governmental Approvals 1. Approval under Section 203 of the Federal Power Act for sale of step-up transformers. 2. Exempt Wholesale Generator determinations under Section 32 of the Public Utility Holding Company Act of 1935 (one for each of Midwest Generation, LLC, Collins Trust I, Collins Trust II, Collins Trust III and Collins Trust IV). 3. Acceptance for filing of market-based rates for sales of power and reassignment of transmission from the Facilities under Section 205 of the Federal Power Act. 4. Acceptance for filing of transition Power Purchase Agreements between the Borrower and ComEd under Section 205 of the Federal Power Act: to be filed within 30 days of commencement of service. 5. Acceptance for filing of the Interconnection Agreements under Section 205 of the Federal Power Act. 6. Receipt of all permits and licenses that are required under any Requirement of Law for the operation of the ComEd Assets in order to comply in all material respects with its obligations under the Power Purchase Agreements. See Attachment A to Schedules 3.1(c), 3.2(d) and 3.3(d). 7. Expiration of notice period for blanket preapproval under 18 CFR part 34. 8. Illinois Commerce Commission approval of transfer of assets. 9. The Illinois statute that makes the public interest findings requisite to obtaining EWG status at FERC, as required under section 32(c) of PUHCA. PART B: Final Governmental Approvals for which the period for the filing of notice of rehearing or application for judicial review have not yet expired.
GOVERNMENTAL APPROVAL DEADLINE TO SEEK REHEARING TIME TO FILE APPEAL OR TO PROTEST PREAPPROVALS - ---------------------------- ---------------------------- -------------------------------- 1. 203 Order (issued Novem- December 8, 1999 60 days after order on rehear- ber 8, 1999) ing 2. EWG order (issued No- no rehearing provided for in no statutory deadline to file an vember 9, 1999) PUHCA appeal under PUHCA 3. Acceptance for filing of 30 days after order 60 days after order on rehear- transition Power Purchase ing Agreements under Section 205 of the Federal Power Act: to be filed within 30 days of commencement
PART C: Possible Appeals of Governmental Approvals No approval listed in Part C above is the subject of any pending, or threatened judicial or administrative proceeding. SCHEDULE 3.1(d) TO THE PARTICIPATION AGREEMENT FACTUAL INFORMATION OF MIDWEST 1. Factual information provided in writing by EME pertaining to EME and its Affiliates in the ASA. 2. Factual information provided in writing by EME pertaining to all reports and registration statements filed by EME with the Securities and Exchange Commission or any national securities exchange. 3. Factual information provided in writing by EME pertaining to the Information Memorandum, dated October, 1999. 4. Factual information provided in writing by EME or its Affiliates to: (a) the Engineering Consultant, in connection with the preparation of the Engineering Report; (b) the Market Consultant, in connection with the preparation of the Market Report; (c) the Fuel Consultant, in connection with the preparation of the Fuel Report; and (d) the Appraiser, in connection with the preparation of the Closing Date Appraisal. 5. Factual information provided in writing by EME or its Affiliates to FERC and to the Commerce Commission of the State of Illinois in connection with the Overall Transaction. SCHEDULE 3.2(d) TO THE PARTICIPATION AGREEMENT HOLDINGS GOVERNMENTAL APPROVALS PART A: Governmental Approvals 1. Approval under Section 203 of the Federal Power Act for sale of step-up transform ers. 2. Exempt Wholesale Generator determinations under Section 32 of the Public Utility Holding Company Act of 1935 (one for each of Midwest Generation, LLC, Collins Trust I, Collins Trust II, Collins Trust III and Collins Trust IV). 3. Acceptance for filing of market-based rates for sales of power and reassignment of transmission from the Facilities under Section 205 of the Federal Power Act. 4. Acceptance for filing of transition Power Purchase Agreements between the Borrower and ComEd under Section 205 of the Federal Power Act: to be filed within 30 days of commencement of service. 5. Acceptance for filing of the Interconnection Agreements under Section 205 of the Federal Power Act. 6. Receipt of all permits and licenses that are required under any Requirement of Law for the operation of the ComEd Assets in order to comply in all material respects with its obligations under the Power Purchase Agreements. See Attachment A to Schedules 3.1(c), 3.2(d) and 3.3(d). 7. Expiration of notice period for blanket preapproval under 18 CFR part 34. 8. Illinois Commerce Commission approval of transfer of assets. 9. The Illinois statute that makes the public interest findings requisite to obtaining EWG status at FERC, as required under section 32(c) of PUHCA. PART B: Final Governmental Approvals for which the period for the filing of notice of rehearing or application for judicial review have not yet expired.
GOVERNMENTAL APPROVAL DEADLINE TO SEEK REHEARING TIME TO FILE APPEAL OR TO PROTEST PREAPPROVALS - ----------------------------- ----------------------------- -------------------------------- 1. 203 Order (issued Novem- December 8, 1999 60 days after order on rehear- ber 8, 1999) ing 2. EWG order (issued No- no rehearing provided for in no statutory deadline to file an vember 9, 1999) PUHCA appeal under PUHCA 3. Acceptance for filing of 30 days after order 60 days after order on rehear- transition Power Purchase ing Agreements under Section 205 of the Federal Power Act: to be filed within 30 days of commencement
PART C: Possible Appeals of Governmental Approvals No approval listed in Part C above is the subject of any pending, or threatened judicial or administrative proceeding. SCHEDULE 3.2(e) TO THE PARTICIPATION AGREEMENT FACTUAL INFORMATION OF HOLDINGS 1. Factual information provided in writing by EME pertaining to EME and its Affiliates in the ASA. 2. Factual information provided in writing by EME pertaining to all reports and registration statements filed by EME with the Securities and Exchange Commission or any national securities exchange. 3. Factual information provided in writing by EME pertaining to the Information Memorandum, dated October, 1999. 4. Factual information provided in writing by EME or its Affiliates to: (a) the Engineering Consultant, in connection with the preparation of the Engineering Report; (b) the Market Consultant, in connection with the preparation of the Market Report; (c) the Fuel Consultant, in connection with the preparation of the Fuel Report; and (d) the Appraiser, in connection with the preparation of the Closing Date Appraisal. 5. Factual information provided in writing by EME or its Affiliates to FERC and to the Commerce Commission of the State of Illinois in connection with the Overall Transaction. SCHEDULE 3.3(d) TO THE PARTICIPATION AGREEMENT COLLINS HOLDINGS GOVERNMENTAL APPROVALS PART A: Governmental Approvals 1. Approval under Section 203 of the Federal Power Act for sale of step-up transformers. 2. Exempt Wholesale Generator determinations under Section 32 of the Public Utility Holding Company Act of 1935 (one for each of Midwest Generation, LLC, Collins Trust I, Collins Trust II, Collins Trust III and Collins Trust IV). 3. Acceptance for filing of market-based rates for sales of power and reassignment of transmission from the Facilities under Section 205 of the Federal Power Act. 4. Acceptance for filing of transition Power Purchase Agreements between the Borrower and ComEd under Section 205 of the Federal Power Act: to be filed within 30 days of commencement of service. 5. Acceptance for filing of the Interconnection Agreements under Section 205 of the Federal Power Act. 6. Receipt of all permits and licenses that are required under any Requirement of Law for the operation of the ComEd Assets in order to comply in all material respects with its obligations under the Power Purchase Agreements. See Attachment A to Schedules 3.1(c), 3.2(d) and 3.3(d). 7. Expiration of notice period for blanket preapproval under 18 CFR part 34. 8. Illinois Commerce Commission approval of transfer of assets. 9. The Illinois statute that makes the public interest findings requisite to obtaining EWG status at FERC, as required under section 32(c) of PUHCA. PART B: Final Governmental Approvals for which the period for the filing of notice of rehearing or application for judicial review have not yet expired.
GOVERNMENTAL APPROVAL DEADLINE TO SEEK REHEARING TIME TO FILE APPEAL OR TO PROTEST PREAPPROVALS - ----------------------------- ----------------------------- -------------------------------- 1. 203 Order (issued Novem- December 8, 1999 60 days after order on rehear- ber 8, 1999) ing 2. EWG order (issued No- no rehearing provided for in no statutory deadline to file an vember 9, 1999) PUHCA appeal under PUHCA 3. Acceptance for filing of 30 days after order 60 days after order on rehear- transition Power Purchase ing Agreements under Section 205 of the Federal Power Act: to be filed within 30 days of commencement
PART C: Possible Appeals of Governmental Approvals No approval listed in Part C above is the subject of any pending, or threatened judicial or administrative proceeding. SCHEDULE 4.22 TO PARTICIPATION AGREEMENT RECORDINGS AND FILINGS LESSOR SECURITY PACKAGE - Mortgage (T1), dated as of December 15, 1999, by Collins Trust I, to Citibank, N.A., filed for record in the Grundy County Recording Offices. - Illinois Real Property Transfer Affidavit executed by Collins Trust I, filed for record in the Grundy County Recording Offices. - Memorandum of Site Lease (T1), dated as of December 15, 1999 between Midwest Generation, LLC, as Ground Lessor and Collins Trust I, as Ground Lessee, filed for record in the Grundy County Recording Offices. - Memorandum of Site Sublease (T1), dated as of December 15, 1999, between Collins Trust I, as Ground Sublessor, and Collins Holdings EME, LLC, as Ground Sublessee, filed for record in the Grundy County Recording Offices. - Memorandum of Site Sub-Sublease (T1), dated as of December 15, 1999, between Collins Holdings EME, LLC, as Ground Sub-Sublessor and Midwest Generation, LLC, as Ground Sub-Sublessee, filed for record in the Grundy County Recording Offices. - Facility Sublease Agreement (T1), dated as of December 15, 1999, among Collins Holdings EME, LLC, as Facility Sublessor, Midwest Generation, LLC, as Facility Sublessee and Collins Trust I, as Owner Trustee, filed for record in the Grundy County Recording Offices. - UCC-1 filed in Grundy County, Illinois and with the Secretary of State of the State of Delaware under the Lessor Loan Agreement (T1). HOLDINGS SECURITY PACKAGE - UCC-1 filed with the Secretary of State of California under the EMOC Pledge Agreement. - UCC-1 to be filed with the Secretary of State of California under the Holdings Pledge Agreement. - UCC-1 to be filed with the Secretaries of State of California and Illinois under the MGE Pledge Agreement. - UCC-1 to be filed with the Secretary of State of California under the Intercreditor Agreement. PAGE APPENDIX A TO PARTICIPATION AGREEMENT DEFINITIONS APPENDIX A - DEFINITIONS (T1) GENERAL PROVISIONS In this Appendix A and each Operative Document (as hereinafter defined), unless, otherwise provided herein or therein: - the terms set forth in this Appendix A or in any such Operative Document shall have the meanings herein provided for and any term used in an Operative Document and not defined therein or in this Appendix A but in another Operative Document shall have the meaning, herein or therein provided for in such other Operative Document; - any term defined in this Appendix A by reference to another document, instrument or agreement shall continue to have the meaning ascribed thereto whether or not such other document, instrument or agreement remains in effect; - words importing the singular include the plural and vice versa; - words importing a gender include any gender; - a reference to a part, clause, section, paragraph, article, party, annex, appendix, exhibit, schedule or other attachment to or in respect of an Operative Document is a reference to a part, clause, section, paragraph, or article of, or a party, annex, appendix, exhibit, schedule or other attachment to, such Operative Document unless, in any such case, otherwise expressly provided in any such Operative Document; DEFINITIONS TO PARTICIPATION AGREEMENT (T1) 1 - a reference to any statute, regulation, proclamation, ordinance or law includes all statutes, regulations, proclamations, ordinances or laws varying, consolidating or replacing the same from time to time, and a reference to a statute includes all regulations, policies, protocols, codes, proclamations and ordinances issued or otherwise applicable under that statute unless, in any such case, otherwise expressly provided in any such statute or in such Operative Document; - a definition of or reference to any document, instrument or agreement includes an amendment or supplement to, or restatement, replacement, modification or novation of, any such document, instrument or agreement unless otherwise specified in such definition or in the context in which such reference is used; - a reference to a particular section, paragraph or other part of a particular statute shall be deemed to be a reference to any other section, paragraph or other part substituted therefor from time to time; - if a capitalized term describes, or shall be defined by reference to, a document, instrument or agreement that has not as of any particular date been executed and delivered and such document, instrument or agreement is attached as an exhibit to the Participation Agreement (as hereinafter defined), such reference shall be deemed to be to such form and, following such execution and delivery and subject to paragraph (vii) above, to the document, instrument or agreement as so executed and delivered; - a reference to any Person (as hereinafter defined) includes such Person's successors and permitted assigns; - any reference to "days" shall mean calendar days unless "Business Days" (as hereinafter defined) are expressly specified; - if the date as of which any right, option or election is exercisable, or the date upon which any amount is due and payable, is stated to be on a day that is not a Business Day, such right, option or election may be 2 exercised, and such amount shall be deemed due and payable, on the next succeeding Business Day with the same effect as if the same was exercised or made on such date or day and interest shall accrue and be payable with respect to such payment; - words such as "hereunder", "hereto", "hereof" and "herein" and other words of similar import shall, unless the context requires otherwise, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof; and - a reference to "including" means including without limiting the generality of any description preceding such term, and for purposes hereof and of each Operative Document the rule of EJUSDEM GENERIS shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. 3 DEFINED TERMS "ACCESS ROUTES" shall have the meaning set forth in the recitals to the Facility Site Lease. "ADDITIONAL COVERED DOCUMENTS" shall mean the Insurance Agreement among the Surety, the Insured Parties party thereto and Citicorp North America, Inc., as agent thereunder, the Management Agreement between the Lender and Lord Securities Corporation and the Servicing Agreement between the Lender, Citicorp North America, Inc. and Lord Securities Corporation, in each case dated as of the date hereof, and the Limited Liability Company Agreement of the Lender and the By-Laws of Midwest Funding, Inc., as any of the foregoing agreements, instruments and other documents may be amended, supplemented and otherwise modified and in effect from time to time. "ADDITIONAL EQUITY INVESTMENT" shall mean the amount, if any, the Owner Participant shall provide (in its sole and absolute discretion) to finance all or a portion of the Owner Lessor's Percentage of the cost of any Required Improvement or Non-Severable Improvement financed pursuant to SECTION 16.1 of the Participation Agreement. "ADDITIONAL FUNDING LLC NOTES" shall mean any additional notes issued by Funding LLC in connection with the issuance of Additional Lessor Notes relating thereto. "ADDITIONAL INSUREDS" shall have the meaning specified in SECTION 11.3 of the Facility Lease. "ADDITIONAL LESSOR NOTES" shall have the meaning specified in SECTION 2.03 of the Lessor Loan Agreement. "ADDITIONAL RENT PAYMENT DATE" shall have the meaning specified in SECTION 3.2 of the Facility Lease. "ADMINISTRATIVE AGENT" shall mean The Chase Manhattan Bank, a banking institution organized under the laws of the State of New York, in its capacity as administrative agent for the Holdings Lenders, together with its successors and assigns in such capacity. "AFFILIATE" of any particular Person shall mean 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 4 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; PROVIDED, HOWEVER, that under no circumstances shall the Trust Company be considered to be an Affiliate of any of the Owner Lessor, the Owner Trustee, or the Owner Participant, nor shall any of the Owner Lessor, the Owner Trustee, or the Owner Participant be considered to be an Affiliate of the Trust Company. "AFTER-TAX BASIS" shall mean, in the context of determining the amount of a payment to be made on such basis, the payment of an amount which, after reduction by the net increase in Taxes of the recipient (actual or constructive) of such payment, which net increase shall be calculated by taking into account any reduction in such Taxes resulting from any tax benefits realized or to be realized by the recipient as a result of such payment, shall be equal to the amount required to be paid. In calculating the amount payable by reason of this provision in the case of any person that is a U.S. Person, all income taxes payable and tax benefits realized or to be realized shall be determined on the assumptions that (i) the recipient is subject to (a) U.S. Federal income taxes at the highest marginal rate then applicable to corporations for the relevant period or periods, and (b) state and local income taxes at the highest marginal rates then applicable to corporations for the relevant period or periods, and (ii) all related tax benefits are utilized (a) with regard to U.S. Federal income taxes, at the highest marginal rates then applicable to corporations for the relevant period or periods, and (b) with regard to state and local income taxes, at the highest marginal rate then applicable to corporations for the relevant period or periods. "APA" shall mean the Asset Purchase Agreement dated as of December 15, 1999 among Funding LLC, the Securitization Company, each APA Purchaser party thereto, the APA Agent, and Citicorp North America, Inc. as operating agent for the Securitization Company and as RCE Agent, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "APA AGENT" shall mean Citibank, N.A., a national banking association, in its capacity as APA Agent under the APA, together with its successors and assigns in such capacity. "APA PURCHASERS" shall mean each financial institution party to the APA as a "Purchaser". 5 "APPRAISAL PROCEDURE" shall mean (except with respect to the Closing Date Appraisal), an appraisal conducted by an appraiser or appraisers in accordance with the following procedures. The Owner Participant and the Facility Lessee will consult with the intent of selecting a mutually acceptable Independent Appraiser. If a mutually acceptable Independent Appraiser is selected, the Fair Market Sales Value, the Fair Market Rental Value, the remaining useful life or other determination that is the subject of the appraisal shall be determined by such Independent Appraiser. If the Facility Lessee and the Owner Participant are unable to agree upon a single Independent Appraiser within a 15-day period, one shall be appointed by the Owner Participant, and one shall be appointed by the Facility Lessee (or its designee), which Independent Appraisers shall attempt to agree upon the value, period, amount or other determination that is the subject of the appraisal. If either the Owner Participant or the Facility Lessee or its designee does not appoint its Independent Appraiser, the determination of the other Independent Appraiser shall be conclusive and binding on the Owner Participant and the Facility Lessee. If the Independent Appraisers appointed by the Owner Participant and the Facility Lessee are unable to agree upon the value, period, amount or other determination that is the subject of the appraisal, such Independent Appraisers shall jointly appoint a third Independent Appraiser or, if such Independent Appraisers do not appoint a third Independent Appraiser, the Owner Participant and the Facility Lessee shall jointly appoint the third Independent Appraiser. In such case, the average of the determinations of the three Independent Appraisers shall be conclusive and binding on the Owner Participant and the Facility Lessee, unless the determination of one such Independent Appraiser is disparate from the middle determination by more than twice the amount by which the third determination is disparate from the middle determination, in which case the determination of the most disparate Independent Appraiser shall be excluded, and the average of the remaining two determinations shall be conclusive and binding on the Owner Participant and the Facility Lessee. "APPRAISER" shall mean Deloitte and Touche LLP Valuation Group. "ASA" shall mean the Asset Sale Agreement, dated as of March 22, 1999, by and between ComEd and EME. "ASSET DISPOSITION" shall have the meaning assigned to it in SECTION 6.2 of the Participation Agreement. 6 "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean an assignment and assumption agreement in form and substance substantially in the form of EXHIBIT RR to the Participation Agreement. "AUTHORIZED OFFICER" shall mean, with respect to any Person, (i) its Chairman of the Board, its President, any Senior Vice President, the Chief Financial Officer, any Vice President, the Treasurer or any other person authorized by or pursuant to the Organic Documents or any resolution of the board of directors or managers (or managing members) of such Person, and (ii) with respect to the Owner Trustee, an officer in its corporate trust department. "BANKRUPTCY CODE" shall mean the United States Bankruptcy Code of 1978, as amended from time to time, 11 U.S.C. Section 101 ET SEQ. "BASIC LEASE RENT" shall have the meaning specified in SECTION 3.2 of the Facility Lease. "BASIC LEASE TERM" shall have the meaning specified in SECTION 3.1 of the Facility Lease. "BENEFICIAL INTEREST" shall mean the interest of the Owner Participant in the Owner Lessor. "BILL OF SALE AND INSTRUMENT OF ASSIGNMENT" shall mean the Bill of Sale and Instrument of Assignment, dated as of December 15, 1999, executed by ComEd, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "BILL OF SALE" shall mean the Bill of Sale (Collins Trust I), dated as of December 15, 1999, executed by Unicom Investments Inc. in favor of the Owner Lessor, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "BURDENSOME BUYOUT EVENT" shall mean any event giving rise to the Facility Lessee's Burdensome Buyout Option under the Facility Lease. "BURDENSOME BUYOUT OPTION" shall have the meaning specified in SECTION 13.3 of the Facility Lease. 7 "BURDENSOME BUYOUT PERIOD" shall have the meaning specified in SECTION 13.3 of the Facility Lease. "BUSINESS DAY" shall mean: (i) any day which is neither a Saturday or Sunday nor a legal holiday on which commercial banking institutions are authorized or required by law, regulation or executive order to be closed in New York, New York and Wilmington, Delaware; and (ii) 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. "CAPEX LIMITATION GRID" shall mean the CAPEX Limitation Grid attached as ANNEX II to the Holdings Credit Agreement. "CAPITAL EXPENDITURES" shall mean expenditures made or liabilities incurred for the acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto that have a useful life of more than one year. "CAPITAL LEASE" shall mean, with respect to any Person, a lease of (or other Indebtedness arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability set forth on the balance sheet of such Person or such Person's Subsidiaries in accordance with GAAP. "CAPITALIZED LEASE LIABILITIES" of any Person shall mean all monetary obligations of such Person under any Capital Lease, and, for purposes of each Operative Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "CASH EQUIVALENT INVESTMENTS" shall mean, at any time: (i) 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; 8 (ii) 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 (iii) other securities as to which the Person incurring such Indebtedness has demonstrated adequate liquidity through secondary markets or deposit agreements. "CASH FLOW AVAILABLE FOR FIXED CHARGES" shall mean, in respect of any period, the excess, if any, of Revenues (excluding proceeds of permitted asset sales and amounts available in the Cash Flow Recapture Fund) during such period OVER Operating Expenses during such period. "CASHFLOW RECAPTURE FUND" shall have the meaning set forth in SECTION 5.1 of the Holdings Credit Agreement. "CERCLIS" shall mean the Comprehensive Environmental Response, Compensation and Liability Information System list. "CLAIM" shall mean any liability (including, without limitation, in respect of negligence (whether passive or active or other torts), strict or absolute liability in tort or otherwise, warranty, latent or other defects (regardless of whether or not discoverable), statutory liability, property damage, bodily injury or death), obligation, loss, settlement, damage, penalty, claim, Environmental Claim, action, suit, proceeding (whether civil or criminal), judgment, penalty, fine and other legal or administrative sanction, judicial or administrative proceeding, cost, expense or disbursement, including reasonable legal, investigation and expert fees, expenses and related charges, of whatsoever kind and nature. "CLOSING" shall have the meaning specified in SECTION 2.2(a) of the Participation Agreement. "CLOSING DATE" shall mean the Scheduled Closing Date or such later date on which the Closing shall occur. "CLOSING DATE APPRAISAL" shall mean the appraisal, dated the Closing Date, addressed to the Equity Investor prepared by the Appraiser with respect to the Facility. "CODE" shall mean the Internal Revenue Code of 1986, as amended. 9 "COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT" shall mean the Collateral Agency and Intercreditor Agreement dated as of December 15, 1999, among MGE, Holdings, EMOC, Midwest, Collins Holdings, the Owner Lessor, the Other Owner Lessors, Funding LLC, the Administrative Agent, each Holder Representative (as defined therein), each Other Representative (as defined therein), the Depositary Bank (as defined therein), the Depositary Agent (as defined therein), the Midwest LC Issuer and the Holdings Collateral Agent (as defined therein), as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "COLLINS FACILITY OPERATING AGREEMENTS" shall mean, collectively, the Power Purchase Agreement, the Interconnection Agreements and the Operation Agreement. "COLLINS HOLDINGS" shall mean Collins Holdings EME, LLC, a wholly-owned Subsidiary of MGE and a special purpose, bankruptcy-remote limited liability company organized under the laws of the State of Delaware. "COLLINS IMPROVEMENTS" shall have the meaning set forth in the recitals to the Facility Site Lease. "COLLINS LAND" shall have the meaning set forth in the recitals to the Facility Site Lease. "COLLINS OPERATING AGREEMENT" shall mean the operating agreement of Collins Holdings EME, LLC. "COMED" shall mean the Commonwealth Edison Company, an Illinois corporation or its successors or assigns. "COMED ASSETS" shall mean certain electric generation and related assets subject to the ASA. "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "COMPETITOR" shall have the meaning specified in SECTION 12.1(b) of the Participation Agreement. 10 "COMPONENT" shall mean any appliance, part, instrument, appurtenance, accessory, furnishing, equipment or other property of whatever nature that may from time to time be incorporated in the Facility, except to the extent constituting Improvements. "CONSOLIDATED SUBSIDIARY" shall mean, at any date, any Subsidiary or other entity the accounts of which would be consolidated with those of Holdings in its consolidated financial statements if its consolidated financial statements were prepared as of such date. "CONSOLIDATED TANGIBLE NET ASSETS" shall mean, as of the date of any determination thereof, the total amount of all assets of Holdings and its Subsidiaries (determined on a consolidated basis in accordance with GAAP), less the sum of (a) the consolidated liabilities of Holdings and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) and (b) assets properly classified as "intangible assets" in accordance with GAAP. "CONTINGENT LIABILITY" shall mean 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. "CONTINGENT PREPAID RENT" shall have the meaning specified in SECTION 16(t) of the Facility Lease. "CONTRACTUAL OBLIGATION" shall mean, 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. 11 "CONTROLLED GROUP" shall mean all corporations which are members of a controlled group of corporations within the meaning of Section 1563(a) of the Code determined without regard to Sections 1563(a)(4) and 1563(e)(3)(C) and all trades or businesses (whether or not incorporated) under common control which, together with Holdings and its Consolidated Subsidiaries, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "DEBT RATING" shall mean a rating by each of Moody's and S&P of each of the Tranche A Loans, the Tranche B Loans, the Tranche C Loans or the Funding LLC Loans. If Moody's or S&P shall have changed its system of classifications after the date hereof, a 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 COVERAGE RATIO" shall mean, for any period, the ratio of (a) Cashflow Available for Fixed Charges for such period to (b) Fixed Charges for such period. "DEBT TO CAPITAL RATIO" shall mean, with respect to Holdings and its Consolidated Subsidiaries, the ratio as of the end of the last Fiscal Quarter for which financial statements are available of (i) the aggregate principal amount of Indebtedness of Holdings and its Consolidated Subsidiaries then outstanding to (ii) Total Capitalization. "DISCOUNT RATE" shall mean 8.33% per annum. "DOLLARS" and the sign "$" shall mean lawful money of the United States. "EDISON MISSION ENERGY" or "EME" shall mean Edison Mission Energy, a California corporation. "EMOC" shall mean Edison Mission Overseas Co., a subsidiary of Holdings and a corporation organized under the laws of Delaware. "EMOC ACQUISITION NOTES" shall mean the one or more promissory notes dated the Closing Date by Midwest payable to EMOC in an aggregate principal amount of at least $3,380,000,000. "EMOC LOAN DOCUMENTS" shall mean each of (i) the Intercompany Loan Subordination Agreement, (ii) the Subordinated Loan Agreement dated as of December 15, 1999 entered 12 into by and among EMOC and Midwest as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time, (iii) the Subordinated Revolving Loan Agreement dated as of December 15, 1999 entered into by and among EMOC and Midwest as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time and (iv) the EMOC Acquisition Notes. "ENGINEERING CONSULTANT" shall mean Stone & Webster Management Consultants, Inc. "ENGINEERING REPORT" shall mean the report of the Engineering Consultant, dated September 27, 1999 and the bring-down of such report. "ENSR" shall mean ENSR Corporation. "ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory or judicial action, fee, cause of action, obligation, suit, liability, loss, damage, proceeding, decree, judgment, penalty, fine, demand, demand letter, order, directive, claim (including any claim involving liability in tort, strict, absolute or otherwise), lien, sanction, notice of noncompliance or violation, legal or consultant fee or expense, or cost of investigation or proceeding, relating in any way to any Environmental Law, or arising from the actual or alleged presence or Release of any Hazardous Material (hereinafter "LIABILITIES") including, without limitation, and regardless of the merit of such Liability, any and all Liabilities for (i) investigation, assessment, abatement, correction, enforcement, mitigation, cleanup, removal, response, remediation or other activities related to the actual or alleged presence or Release of Hazardous Materials, (ii) damages, contribution, indemnification, cost recovery, compensation or injunctive or declaratory relief related to violations of Environmental Law or the actual or alleged presence or Release of Hazardous Materials, or (iii) any alleged or actual injury or threat of injury to human health, safety, natural resources or the environment in connection with a violation of Environmental Law or the actual or alleged presence or Release of Hazardous Materials. "ENVIRONMENTAL CONDITION" shall mean the presence or Release of any Hazardous Material at, into, on or under any land, water, air or otherwise into the environment, which does or reasonably could (i) require assessment, investigation, abatement, correction, clean-up, mitigation, removal, remediation or any other response action, (ii) give rise to an Environmental Claim or any obligation or liability of any nature (whether civil or criminal, arising under a theory of negligence or strict liability, or otherwise) under any Environmen- 13 tal Law, (iii) create or constitute a public or private nuisance or trespass, (iv) constitute a violation of or non-compliance with any Environmental Law or (v) result in or contribute to the actual or threatened loss of or damage to any property, natural resource or environmental media, or the death of or injury to any Person. "ENVIRONMENTAL CONSULTANT" shall mean Stone & Webster Management Consultants, Inc. "ENVIRONMENTAL LAWS" shall mean all federal, state and local statutes, laws, ordinances, codes, rules, regulations, consent decrees, administrative orders, administrative directives, injunctions, deed restrictions, applicable judgments and any other legally enforceable requirements of any Governmental Authority relating to, regulating or imposing liability or standards of conduct concerning Hazardous Materials, public health, safety or the environment or natural resources, as have been, are now, or may at any time hereafter be in effect. "ENVIRONMENTAL REPORT" shall mean the Phase I and Phase II environmental surveys concerning the Facility, prepared by ENSR, dated November 1998 and December 1998, respectively, and the reliance letter issued by ENSR to the Owner Participant Parent. "EQUITY INVESTMENT" shall mean $29,172,990.67. "EQUITY INVESTOR" shall mean PSEG Collins Generation, LLC, a Delaware limited liability company. "EQUITY INVESTOR'S ADVISOR" shall mean Cornerstone Financial Advisors Limited Partnership. "EQUITY PORTION OF BASIC LEASE RENT" shall mean the amounts set forth as Component A of Basic Lease Rent (Column A) as set forth on SCHEDULE 1-1 to the Facility Lease. "EQUITY PORTION OF TERMINATION VALUE" shall mean the amounts under the column titled "Equity Portion of Termination Value" in SCHEDULE 2 to the Facility Lease. "ERISA" shall mean 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. 14 "EVENT OF LOSS" shall mean any of the following events: (i) the loss of the Facility or use thereof, due to destruction or damage to the Facility or the Facility Site that renders repair uneconomic or that renders the Facility permanently unfit for normal use; or (ii) any damage to the Facility that results in an insurance settlement with respect thereto on the basis of a total loss or an agreed constructive or a compromised total loss of the Facility; or (iii) seizure, condemnation, confiscation or taking of, or requisition of title to or use of, the Facility or the Facility Site by any Governmental Authority (a "REQUISITION") that shall have resulted in loss by the Owner Lessor of title to or use of the Undivided Interest or the Ground Interest following exhaustion of all permitted appeals or an election by the Facility Lessee not to pursue such appeals; PROVIDED, that (i) no such contest may be conducted if a Material Lease Default or a Lease Event of Default shall have occurred and be continuing and (ii) no such contest shall extend beyond the earlier of (x) the date which is one year after the loss of such title, or (y) the date which is 36 months prior to the end of the Basic Lease Term or any Renewal Term then in effect or already elected by the Facility Lessee; PROVIDED, FURTHER, that in any case involving Requisition of use of the Facility or the Facility Site, but not of the Owner Lessor's title to the Undivided Interest or interest in the Facility Lease, such event shall be an Event of Loss only if such Requisition of use continues beyond the Basic Lease Term or any Renewal Lease Term then in effect or already elected by the Facility Lessee; or (iv) if elected by the Owner Participant, and only in circumstances where the termination of the Facility Lease and transfer of the Facility to the Facility Lessee (or its designee) shall remove the basis of the regulation described below, subjection of the Owner Participant's interest in the Facility, the Facility Lease or the Trust Estate to any rate of return regulation by any Governmental Authority, or subjection of the Owner Participant or the Owner Lessor to any public utility regulation of any Governmental Authority (other than Requirements of Law in effect on the Closing Date) or law which in the reasonable opinion of the Owner Participant is burdensome, in either case by reason of the participation of the Owner Lessor or the Owner Participant in the transactions contemplated by the Operative Documents and not, in any event, as a result of (a) investments, loans or other business activities of the Owner Participant or any of its Affiliates in respect of equipment or facilities similar in nature to the Facility or any part thereof or in any other electrical, steam, 15 cogeneration or other energy or utility related equipment or facilities or the general business or other activities of the Owner Participant or any of its Affiliates or the nature of any of the properties or assets from time to time owned, leased, operated, managed or otherwise used or made available for use by the Owner Participant or any of its Affiliates or (b) a failure of the Owner Participant or any of its Affiliates to perform routine, administrative or ministerial actions the performance of which would not subject the Owner Participant or such Affiliate to any adverse consequence (in the reasonable opinion of the Owner Participant acting in good faith), PROVIDED THAT the Facility Lessee, the Owner Lessor and the Owner Participant agree to cooperate and to take reasonable measures to alleviate the source or consequence of any regulation constituting an Event of Loss under this paragraph (iv), at the cost and expense of the party requesting such cooperation and so long as there shall be no adverse consequences to the Owner Lessor or Owner Participant as a result of such cooperation or the taking of such reasonable measures. "EVENT OF LOSS PAYMENT" shall have the meaning specified in SECTION 10.2(a) of the Facility Lease. "EXCEPTED PAYMENTS" shall mean and include (i)(A) any indemnity (whether or not constituting Supplemental Lease Rent and whether or not a Lease Event of Default exists) payable to either the Trust Company, the Owner Trustee or the Owner Participant or to their respective Indemnitees and successors and permitted assigns (other than the Holder Representative) pursuant to SECTION 2.3, 14.1, 14.2, 16.1 OR 16.2 of the Participation Agreement, SECTION 5.03, 7.01 OR 7.05 of the Trust Agreement or SECTION 18 of the Collateral Agency and Intercreditor Agreement, and any payments under the Tax Indemnity Agreement or (B) any amount payable by the Facility Lessee or Midwest to the Owner Lessor or the Owner Participant to reimburse any such Person for its costs and expenses in exercising its rights or comply with its obligations under the Operative Documents, (ii)(A) insurance proceeds, if any, payable to the Owner Lessor or the Owner Participant under insurance separately maintained by the Owner Lessor or the Owner Participant with respect to the Facility as permitted by SECTION 11.5 of the Facility Lease or (B) proceeds of personal injury, property damage liability or other liability insurance maintained under any Operative Document for the benefit of the Owner Lessor or the Owner Participant, (iii) any amount payable to the Owner Participant as the purchase price for the Beneficial Interest or to any OP Member as the purchase price for such OP Member's membership interest in the Owner Participant, (iv) any amounts payable to the Owner Participant upon exercise by the Facility Lessee (or its designee) of the rights pursuant to SECTION 19 of the Participation Agreement, (v) all other fees expressly payable to the Owner Participant, the Owner Trustee or the Trust 16 Company under the Operative Documents, (vi) any payments made pursuant to the Midwest Letter of Credit and (vii) any payments in respect of interest, or any payments made on an After-Tax Basis, to the extent attributable to payments referred to in clause (i) through (vi) above that constitute Excepted Payments. "EXCESS AMOUNT" shall have the meaning specified in SECTION 19.3 of the Participation Agreement. "EXCESS CASHFLOW" shall mean, for any period, the excess, if any, of Cashflow Available for Fixed Charges during such period OVER Fixed Charges for such period. "EXISTING INDEBTEDNESS" shall mean, with respect to any Person, Indebtedness of such Person in existence at the time of the Closing. "FACILITY" shall mean the Collins Station, a 2,698 Megawatt Fossil Fuel Fired Electric Generating Plant located near the town of Morris, Grundy County, Illinois and more fully described in Exhibit B to the Facility Lease. "FACILITY DEED" shall mean the Facility Deed, dated as of December 15, 1999, between ComEd and the Owner Lessor duly completed, executed and delivered on the Closing Date pursuant to which ComEd will transfer the Undivided Interest to the Owner Lessor. "FACILITY LAND" shall have the meaning set forth in the recitals to the Facility Site Lease. "FACILITY LEASE" shall mean the Facility Lease Agreement (T1), dated as of December 15, 1999, between the Owner Lessor and the Facility Lessee. "FACILITY LEASE TERM" shall mean the term of the Facility Lease, including the Basic Lease Term and all Renewal Lease Terms. "FACILITY LESSEE" shall mean Collins Holdings, as lessee of the Undivided Interest under the Facility Lease. "FACILITY LESSEE'S INTEREST" shall mean the Facility Lessee's right, title and interest in and to the Undivided Interest under the Facility Lease and the Ground Interest under the Facility Site Sublease. 17 "FACILITY LESSOR" shall mean the Owner Lessor, as lessor of the Undivided Interest under the Facility Lease. "FACILITY SITE" shall have the meaning specified in the recitals to the Facility Site Lease. "FACILITY SITE LEASE" shall mean the Facility Site Lease Agreement (T1), dated as of December 15, 1999, between Midwest as Ground Lessor and the Owner Lessor as Ground Lessee. "FACILITY SITE SUBLEASE" shall mean the Facility Site Sublease Agreement (T1), dated as of December 15, 1999, between the Owner Lessor as Ground Sublessor and Collins Holdings as Ground Sublessee. "FACILITY SITE SUB-SUBLEASE" shall mean the Facility Site Sub-Sublease Agreement (T1), dated as of December 15, 1999, between Collins Holdings as Ground Sub-Sublessor and Midwest as Ground Sub-Sublessee. "FACILITY SUBLEASE" shall mean the Facility Sublease Agreement (T1), dated as of December 15, 1999, between Collins Holdings and Midwest. "FACILITY SUBLESSOR" shall mean Collins Holdings, as sublessor of the Undivided Interest under the Facility Sublease. "FACILITY SUBLESSEE" shall mean Midwest or any other Person which shall have become a sublessee of the Facility from the Facility Lessee in accordance with the Facility Lease. "FAIR MARKET RENTAL VALUE" or "FAIR MARKET SALES VALUE" shall mean with respect to any property or service as of any date, the cash rent or cash price obtainable in an arm's length lease, sale or supply, respectively, between an informed and willing lessee or purchaser under no compulsion to lease or purchase and an informed and willing lessor or seller or supplier under no compulsion to lease or sell or supply the property or service in question, and shall, in the case of the Undivided Interest or the Owner Lessor's Interest, be determined (except pursuant to SECTION 17 of the Facility Lease or as otherwise provided below or in the Operative Documents) on the basis that (i) the conditions contained in SECTIONS 7 and 8 of the Facility Lease shall have been complied with in all respects, (ii) the lessee or buyer shall have rights in, or an assignment of, the Operative Documents to which the Owner Lessor is a party and the obligations relating thereto, (iii) the Undivided Interest 18 or the Owner Lessor's Interest, as the case may be, is free and clear of all Liens (other than Owner Lessor's Liens, Owner Participant's Liens and Security Document Liens), (iv) taking into account the remaining term of the Facility Site Lease, and (v) in the case the Fair Market Rental Value, taking into account the terms of the Facility Lease and the other Operative Documents. If the Fair Market Sales Value of the Owner Lessor's Interest is to be determined during the continuance of a Lease Event of Default or in connection with the exercise of remedies by the Owner Lessor pursuant to SECTION 17 of the Facility Lease, such value shall be determined by an appraiser appointed solely by the Owner Lessor on an "as-is", "where-is" and "with all faults" basis and shall take into account all Liens (other than Owner Lessor's Liens, Owner Participant's Liens and Security Document Liens); PROVIDED, HOWEVER, in any such case where the Owner Lessor shall be unable to obtain constructive possession sufficient to realize the economic benefit of the Owner Lessor's Interest, Fair Market Sales Value of the Owner Lessor's Interest shall be deemed equal to $0. If in any case other than in the preceding sentence the parties are unable to agree upon a Fair Market Sales Value of the Owner Lessor's Interest within 30 days after a request therefor has been made, the Fair Market Sales Value of the Owner Lessor's Interest shall be determined by appraisal pursuant to the Appraisal Procedure. Any fair market value determination of a Severable Improvement shall take into consideration any liens or encumbrances to which the Severable Improvement being appraised is subject and which are being assumed by the transferee. "FAS 13" shall mean Statement of Financial Accounting Standards (SFAS) No. 13, as amended and interpreted from time to time. "FEDERAL POWER ACT" shall mean the Federal Power Act, 16 USC Sections 791a-825r (1994), as amended. "FERC" shall mean the Federal Energy Regulatory Commission of the United States or any successor or predecessor agency thereto. "FERC EWG ORDERS" shall mean each of the orders issued by the FERC on November 9, 1999, in Docket Nos. EG99-224-000, EG99-225-000, EG99-226-000, EG99-227-000 and EG99-228-000, granting to Midwest, the Owner Lessor and each of the Other Owner Lessors "exempt wholesale generator" status under the Holding Company Act. "FERC NOTICE" shall mean the Notice of Issuance of Order issued by the FERC on September 21, 1999, in Docket No. ER99-3693-000, allowing any person until October 21, 19 1999 to protest the FERC's blanket preapproval for all future issuances of securities and assumptions of liabilities by Midwest. "FERC ORDERS" shall mean, collectively, the FERC EWG Orders, the FERC Section 203 Order, the FERC Section 205 Orders and the FERC Notice. "FERC SECTION 203 ORDER" shall mean the order issued by the FERC on November 8, 1999, in Docket No. EC99-96-000, granting approval under Section 203 of the Federal Power Act for the transfer of the Facility's transmission facilities to Midwest, transfer of the facilities for financing purposes to the Owner Lessor and the Other Owner Lessors, lease of the facilities by the Owner Lessor and the Other Owner Lessors to an affiliate of Midwest, and sublease of the facilities to Midwest. "FERC SECTION 205 ORDERS" shall mean (i) the order issued by the FERC on September 15, 1999, in Docket No. ER99-3693-000, granting approval under Section 205 of the Federal Power Act for Midwest to sell power at market based rates and granting blanket preapproval under Section 204 of the Federal Power Act for all future issuances of securities and assumptions of liabilities by Midwest, and (ii) the order issued by the FERC on September 3, 1999, in Docket No. ER99-3691-000, accepting for filing three Facilities and Interconnection Agreements. "FINAL DETERMINATION" shall have the meaning specified in SECTION 1 of the Tax Indemnity Agreement. "FINANCE FACILITY" shall mean the Uncommitted Finance Facility dated December 15, 1999 among Funding LLC and the Securitization Company, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "FIRST WINTERGREEN RENEWAL LEASE TERM" shall have the meaning specified in SECTION 15.1(a) of the Facility Lease. "FISCAL QUARTER" shall mean any quarter of a Fiscal Year. "FISCAL YEAR" shall mean any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year 20 (E.G. the "1999 Fiscal Year") shall refer to the Fiscal Year ending on December 31 occurring during such calendar year. "FIXED CHARGES"shall mean, in respect to Holdings for any period, an amount equal to the aggregate of, without duplication, (i) all interest due and payable on the Holdings Loans plus or minus any net amount due and payable in respect of Interest Rate Hedging Transactions during such period, including (A) all capitalized interest and (B) the interest portion of any deferred payment obligation, (ii) amounts due and payable under SECTIONS 3.3.1 and 3.3.2 of the Holdings Credit Agreement during such period, (iii) amounts due and payable to the Holdings Lenders with respect to the deduction of withholding tax on such payments pursuant to SECTION 4.7 of the Holdings Credit Agreement during such period, (iv) the interest portion of any deferred payment obligation due and payable during such period, (v) the aggregate amount of the Lease Obligations due and payable during such period, and (vi) all other amounts due and payable by the Holdings Loan Parties with respect to Indebtedness permitted under the Operative Documents during such period. "FMV RENEWAL LEASE TERM" shall have the meaning specified in SECTION 15.2 of the Facility Lease. "467 FIXED RENT" shall mean the amount specified as 467 Fixed Rent as set forth in Schedule 1-3 to the Facility Lease. "FUEL CONSULTANT" shall mean PHB Hagler Bailly, Inc. "FUEL REPORT" shall mean the report of the Fuel Consultant, dated September 21, 1999 and the bring-down of such report. "FUNDING AGREEMENT" shall mean the Funding Agreement, dated as of December 13, 1999 by and among The Chase Manhattan Bank, EME, Holdings, MGE, Midwest, the Owner Participant, the Other Owner Participants, the Owner Lessor, the Other Owner Lessors, Funding LLC, The Chase Manhattan Bank, as administrative agent for the lenders under the EME Credit Agreement, The Chase Manhattan Bank, as Administrative Agent, the Equity Investor, Citibank, N.A. as Holder Representative and as "Holder Representative" under the Other Collins Lease Transactions, the Securitization Company and Citicorp North America Inc., as Operating Agent (as such term is defined therein) for the Securitization Company. 21 "FUNDING DATE" shall have the meaning specified in SECTION 2.2(b) of the Participation Agreement. "FUNDING LLC" or "LENDER" shall mean Midwest Funding LLC, a special purpose bankruptcy remote Delaware limited liability company. "FUNDING LLC FINANCE PARTY" shall mean, individually and collectively, as the context may require, any bank, financial institution or other institutional investor providing financing under or credit enhancement with respect to a Funding LLC Financing Document and any agent, trustee or other representative acting on behalf of such person. "FUNDING LLC FINANCING DOCUMENTS" shall mean (a) initially, the APA, the Finance Facility and the RCE Agreement and (b) any credit agreement, bond indenture, note purchase agreement or similar document or documents pursuant to which Funding LLC obtains financing to refinance, refund or otherwise replace its indebtedness under the Funding LLC Notes. "FUNDING LLC LOANS" shall mean the loans made to the Funding LLC pursuant to the Funding LLC Financing Documents. "FUNDING LLC NOTE HOLDER" shall mean each of the Persons holding a percentage interest in the Funding LLC Notes or any advance in respect thereof, and each of such holder's successors and permitted assigns. "FUNDING LLC NOTES" shall have the meaning given to the term Midwest Funding Note in the APA. "FUNDING RATE" shall mean, with respect to any Initial Lessor Note, the rate specified as such in such Initial Lessor Note. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time, consistently applied. "GENERATING ASSETS" shall mean (i) the ComEd Assets and (ii) any other electric generation facilities and other related assets associated therewith and ancillary thereto (or interests therein) owned, directly or indirectly, by Midwest from time to time. 22 "GOVERNMENTAL APPROVAL" shall mean any authorization, consent, approval, license, permit, order, certificate, waiver, variance, filing or registration with or issued by any Governmental Authority. "GOVERNMENTAL AUTHORITY" shall mean 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. "GROUND INTEREST" shall have the meaning specified in the recitals to the Facility Site Lease. "GROUND LESSEE" shall mean the Owner Lessor as lessee of the Ground Interest under the Facility Site Lease. "GROUND LESSOR" shall mean Midwest as lessor of the Ground Interest under the Facility Site Lease. "GROUND SUBLESSEE" shall mean Collins Holdings as sublessee of the Ground Interest under the Facility Site Sublease. "GROUND SUBLESSOR" shall mean the Owner Lessor as sublessor of the Ground Interest under the Facility Site Sublease. "GROUND SUB-SUBLESSEE" shall mean Midwest as sub-sublessee of the Ground Interest under the Facility Site Sub-Sublease. "GROUND SUB-SUBLESSOR" shall mean Collins Holdings as sub-sublessor of the Ground Interest under the Facility Site Sub-Sublease. "HAZARDOUS MATERIAL" shall mean: (i) any "hazardous substance", as defined by any Environmental Law: (ii) any "hazardous waste", as defined by any Environmental Law, (iii) any petroleum product (including crude oil or any fraction thereof); or 23 (iv) 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, prohibited or restricted pursuant to any Environmental Laws or that could give rise to an Environmental Claim. "HOLDER" shall mean the Initial Holder and each holder from time to time of Lessor Notes. "HOLDER REPRESENTATIVE" shall mean Citibank, N.A., a national banking association, in its capacity as Holder Representative under the Lessor Loan Agreement together with its successors and assigns in such capacity. "HOLDER REPRESENTATIVE'S ACCOUNT" shall mean an account at Citibank, N.A., for the account of the Owner Lessor as the Holder Representative may from time to time specify in a notice to the other parties to the Participation Agreement. "HOLDER REPRESENTATIVE'S LIEN" shall mean any Lien on the Trust Estate or any part thereof arising as a result of (i) Taxes against or affecting the Holder Representative, or any Affiliate thereof that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby, (ii) Claims against or any act or omission of the Holder Representative, or Affiliate thereof that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of the Holder Representative specified therein, (iii) Taxes imposed upon the Holder Representative, or any Affiliate thereof that are not indemnified against by Midwest pursuant to any Operative Document or (iv) Claims against or affecting the Holder Representative, or any Affiliate thereof arising out of the voluntary or involuntary transfer by the Holder Representative of any portion of the interest of the Holder Representative in the Trust Estate, other than pursuant to the Operative Documents. "HOLDING COMPANY ACT" or "PUHCA" shall mean the Public Utility Holding Company Act of 1935, as amended. "HOLDINGS" shall mean Edison Mission Midwest Holdings Co., a Delaware corporation. "HOLDINGS COLLATERAL AGENT" shall mean Citibank, N.A., a national banking association, in its capacity as collateral agent under the Collateral Agency and Intercreditor Agreement together with its successors and assigns in such capacity. 24 "HOLDINGS COMMITMENTS" shall mean "Commitments" as defined in the Holdings Credit Agreement. "HOLDINGS CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of December 15, 1999, by and among Holdings, the Holdings Lenders and The Chase Manhattan Bank, as the Administrative Agent. "HOLDINGS FACILITY" shall mean the senior secured credit facilities established by Holdings pursuant to the Holdings Credit Agreement. "HOLDINGS GUARANTEE" shall mean the Guarantee, dated December 15, 1999, issued by Holdings in favor of the Owner Lessor, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "HOLDINGS LENDERS" shall mean The Chase Manhattan Bank, Citicorp USA, Inc., Societe Generale and Westdeutsche Landesbank Girozentrale, New York Branch and such other institutions that become lenders in accordance with the Holdings Credit Agreement. "HOLDINGS LOAN PARTIES"shall mean Holdings and each of Holdings' direct and indirect Subsidiaries. "HOLDINGS LOANS" shall mean the loans made to Holdings pursuant to the Holdings Credit Agreement. "HOLDINGS REQUIRED LENDERS" shall mean, at any time, Holdings Lenders holding at least 50.1% of the Holdings Commitments. "IMPROVEMENT" shall mean a modification, alteration, addition or improvement to the Facility. "INCIDENTAL COSTS" shall have the meaning specified in the Lessor Loan Agreement. "INDEBTEDNESS" of any Person shall mean, without duplication: (i) all indebtedness for borrowed money; 25 (ii) 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; (iii) 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); (iv) 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; (v) 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); (vi) all Capitalized Lease Liabilities and Operating Lease Liabilities; (vii) 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; (viii) all indebtedness referred to in clauses (i) through (vii) 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 (ix) all Contingent Liabilities. 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. 26 "INDEMNITEE" shall have the meaning specified in SECTION 14.1(a) of the Participation Agreement. "INDEPENDENT APPRAISER" shall mean a disinterested, licensed professional appraiser of industrial property who (a) meets the personal property qualifications criteria established by the Appraisal Foundation; (b) is a member of the Appraisal Institute or holds the senior accreditation of the American Society of Appraisers; (c) is in the regular employ, or is a principal of, a nationally recognized appraisal firm; and (d) has substantial experience in the business of appraising facilities similar to the Facility. "INITIAL HOLDER" shall mean Funding LLC as holder of the Initial Lessor Notes. "INITIAL LESSOR NOTES" shall have the meaning specified in SECTION 2.02 of the Lessor Loan Agreement. "INSOLVENCY" shall mean, with respect to any Multiemployer Plan, the condition that such plan is insolvent within the meaning of Section 4245 of ERISA. "INSURANCE CONSULTANT" shall mean Marsh Inc. "INTERCOMPANY LOAN SUBORDINATION AGREEMENT" shall mean the Subordination Agreement, dated as of December15, 1999, among EMOC, Midwest and the Holdings Collateral Agent. "INTERCONNECTION AGREEMENTS" shall mean each of the Facilities, Interconnection and Easement Agreements dated as of December 15, 1999 between Midwest and ComEd, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "INTEREST ON 467 FIXED RENT" shall mean the amount set forth on Schedule 1-3 to the Facility Lease. "INTEREST PAYMENT DATE" shall mean, with respect to any Initial Lessor Note, each Interest Payment Date as specified in such Initial Lessor Note. "INTEREST RATE HEDGING TRANSACTIONS" shall mean, as to any Holdings Loan Party, all interest rate swaps, caps or collar agreements or similar arrangements entered into by such 27 Person (i) 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 and (ii) either (A) with a counterparty who is also then a Holdings Lender, or (B) with the prior approval of the Holdings Required Lenders or an affiliate of a Holdings Lender, such approval to be based on the Holdings Required Lenders' reasonable judgement. "INVESTMENT" shall mean, relative to any person: (i) 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); (ii) any Contingent Liability of such Person; and (iii) any ownership or similar interest held by such person in any other Person. "ISSUER DOWNGRADE EVENT" shall have the meaning specified in SECTION 5.9 of the Participation Agreement. "LAND DEED" shall mean the deed dated as of December 15, 1999, by ComEd in favor of Midwest duly completed, executed and delivered on the Closing Date pursuant to which Midwest will acquire the Facility Site from ComEd. "LEASE EVENT OF DEFAULT" shall have the meaning set forth in the Facility Lease. "LEASE FINANCE DOCUMENTS" shall mean the Lessor Loan Agreement, the Lessor Notes, the Holdings Guarantee and the other agreements, documents and instruments delivered in connection with the Lessor Loan Agreement and the Lessor Notes. "LEASE FINANCING PARTY" shall mean, individually or collectively, as the context shall require, all or any of the parties to the Operative Documents, including the Trust Company, the RCE Agent, the APA Agent, each APA Purchaser, Citicorp North America, Inc., Lord Securities Corporation, the Surety, Midwest Funding, Inc. and the Holder Representative (but not including ComEd). "LEASE OBLIGATIONS" shall mean the obligations of Midwest and Collins Holdings to make Basic Lease Rent, Renewal Lease Rent, Supplemental Lease Rent and other payments under the Subleases and the Leases, respectively. "LEASE PERMITTED LIENS" shall mean (i) any Lien created by any Operative Document; (ii) the Owner Lessor's Liens and the Owner Participant's Liens; (iii) Liens for Taxes, water, sewage, license, permit or inspection fees either not yet due and payable or being contested 28 in good faith by appropriate proceedings so long as such proceedings do not involve a material danger of the sale, forfeiture or loss of the Facility; (iv) construction materialmen's, mechanics', workers', repairmen's, employees' or other like Liens arising in the ordinary course of business for amounts either not overdue for a period of not more than 45 days or being contested in good faith by appropriate proceedings so long as such proceedings do not involve a material danger of the sale, forfeiture or loss of the Facility or are bonded for the amount required under Requirements of Law to release any such Lien; (v) Liens arising out of judgments or awards against the Facility Lessee which at the time are being contested in good faith by appropriate proceedings so long as such proceedings do not involve a material danger of the sale, forfeiture or loss of the Facility but in any event not to exceed $1,000,000 in the aggregate at any one time unless the full amount in dispute is bonded in a manner reasonably acceptable to the Owner Lessor; (vi) applicable zoning and building regulations and ordinances from time to time in effect which do not affect the use or operation of the Facility (or the Undivided Interest therein) except to an insignificant extent; (vii) the interest of a sublessee in the Undivided Interest in the Facility under a permitted sublease; and (viii) Liens, easements, encumbrances, restrictions, defects or irregularity of title and in the aggregate are not substantial in amount, do not materially detract from the value of the Facility or the Facility Site (or the Undivided Interest therein) and do not materially impair the use of the Facility or the Facility Site (or the Undivided Interest therein) in the ordinary course of business. "LEASES" shall mean, collectively, the Facility Lease and the Other Facility Leases. "LENDER" shall mean Midwest Funding LLC. "LENDER'S COMMITMENT" shall mean $185,827,009.33. "LESSOR COLLATERAL" shall have the meaning specified in the Granting Clause of the Lessor Loan Agreement. "LESSOR LOAN AGREEMENT" shall mean the Lessor Loan Agreement (TI), dated as of December 15, 1999, among the Owner Lessor, the Funding LLC and Citibank, N.A., as Holder Representative. "LESSOR LOAN EVENT OF DEFAULT" shall have the meaning specified in SECTION 4.02 of the Lessor Loan Agreement. "LESSOR LOAN RATE" shall mean the interest rate under applicable Lessor Notes. 29 "LESSOR LOANS" shall mean the loans evidenced by the Lessor Notes. "LESSOR NOTEHOLDERS" shall mean any holder from time to time of the Lessor Notes. "LESSOR NOTES" shall mean any Initial Lessor Notes, Additional Lessor Notes or New Lessor Notes issued pursuant to the Lessor Loan Agreement. "LESSOR SECURITY DOCUMENTS" shall mean the Lessor Loan Agreement and the Mortgage. "LETTER OF CREDIT GUARANTEE" means the Guarantee (T1) dated as of December 15, 1999 by Holdings in favor of the Midwest LC Issuer as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "LEVEL 7 EVENT" shall mean, at any time, the Funding LLC Loans shall have reached maturity and shall not have been repaid or refinanced in full. "LIBO RATE" shall have the meaning set forth in SECTION 3.2.1. of the Holdings Credit Agreement. "LIBO RATE LOAN" shall mean a Holdings Loan bearing interest, at all times during an interest period applicable to such Holdings Loan, at a fixed rate of interest determined by reference to the LIBO Rate. "LIEN" shall mean 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. "LIST OF COMPETITORS" shall mean the initial list attached to the Participation Agreement as EXHIBIT SS, as amended from time to time pursuant to SECTION 12.1(b) of the Participation Agreement, which list shall not exceed six unaffiliated entities at any one time. "LOAN DOCUMENTS" shall mean the Holdings Credit Agreement, the Notes, the Security Documents and the other agreements, documents and instruments delivered in connection with the Holdings Credit Agreement and the Notes. "MARKET CONSULTANT" shall mean PHB Hagler Bailly, Inc. "MARKET REPORT" shall mean the report of the Market Consultant, dated September 24, 30 1999, addressed to the Equity Investor and the bring-down of such report. "MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person, 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 such Person and its Subsidiaries since the Closing Date, (ii) the ability of such Person to perform or comply with its obligations under any of the Operative Documents or (iii) the validity and enforceability of the Operative Documents, the liens granted thereunder or the rights and remedies thereto. "MATERIAL LEASE DEFAULT" shall mean any event which, with notice, lapse of time or both notice and lapse of time, would become a Lease Event of Default described in clause (a), (b), (f) or (g) of the definition thereof set forth in SECTION 16 of the Facility Sublease. "MATERIAL SUBLEASE DEFAULT" shall mean a Material Lease Default as such term is incorporated by reference into the Facility Sublease pursuant to paragraph 1 of the Facility Sublease. "MAXIMUM TRANSACTION COST" shall mean 2.0% of the Purchase Price. "MEMBERSHIP INTEREST" shall mean the membership interest in the Owner Participant. "MEMBER TRANSFEREE" shall have the meaning specified in SECTION 22.18(a) of the Participation Agreement. "MEMORANDUM OF THE FACILITY LEASE" shall mean the Memorandum of the Facility Lease (T1), dated as of December 15, 1999, between the Owner Lessor and the Facility Lessee and filed with the Registries of Deeds, Grundy County, Illinois. "MEMORANDUM OF THE FACILITY SITE LEASE" shall mean the Memorandum of the Facility Site Lease (T1), dated as of December 15, 1999, between the Ground Lessor and the Ground Lessee and filed with the Registries of Deeds, Grundy County, Illinois. "MEMORANDUM OF THE FACILITY SITE SUBLEASE" shall mean the Memorandum of the Facility Site Sublease (T1), dated as of December 15, 1999, between the Ground Sublessor and the Ground Sublessee and filed with the Registries of Deeds, Grundy County, Illinois. "MEMORANDUM OF THE FACILITY SITE SUB-SUBLEASE" shall mean the Memorandum of the 31 Facility Site Sub-Sublease (T1), dated as of December 15, 1999, between the Ground Sub-Sublessor and the Ground Sub-Sublessee and filed with the Registries of Deeds, Grundy County, Illinois. "MGE" shall mean Midwest Generation EME LLC, a Subsidiary of Edison Mission Energy and a limited liability company organized under the laws of the State of Delaware. "MIDWEST" shall mean Midwest Generation LLC, a Subsidiary of Holdings and a limited liability company organized under the laws of the State of Delaware. "MIDWEST ADVISOR" shall mean Babcock & Brown Inc. "MIDWEST GUARANTEE" shall mean the Guarantee made by Midwest in favor of the Administrative Agent, dated as of December 15, 1999, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "MIDWEST INTEREST" shall mean Midwest's right, title and interest in, to and under, (i) the Undivided Interest under the Facility Sublease, (ii) the Ground Interest under the Facility Site Sublease and (iii) in the Facility Site Sub-Sublease. "MIDWEST LC DOCUMENTS" shall mean the Midwest Letter of Credit, the Midwest Reimbursement Agreement and the other documents, agreements and instruments delivered in connection with the Midwest Letter of Credit and the Midwest Reimbursement Agreement. "MIDWEST LC ISSUER" shall mean Bayerische Landesbank International S.A. as issuer of the Midwest Letter of Credit. "MIDWEST LC REIMBURSEMENT OBLIGATIONS" shall mean the undrawn face amount of the Midwest Letter of Credit together with the aggregate principal amount of all reimbursement obligations of Midwest in respect of all drawings made under the Midwest Letter of Credit. "MIDWEST LESSOR LEASE GUARANTY" shall mean a guaranty by Midwest in favor of the Owner Lessor, guaranteeing the obligations of Collins Holdings under the Operative Documents. "MIDWEST LETTER OF CREDIT" shall mean the letter of credit issued by the Midwest LC Issuer under the Midwest Reimbursement Agreement for the account of Midwest and for the 32 benefit of the Owner Lessor. "MIDWEST LETTERS OF CREDIT" shall mean the Midwest Letter of Credit and the other letters of credit issued by the Midwest LC Issuer under the Other Midwest Reimbursement Agreements for the account of Midwest and for the benefit of the Other Owner Lessors. "MIDWEST OP LEASE GUARANTY" shall mean a guaranty by Midwest in favor of the Owner Participant, guaranteeing the obligations of Collins Holdings under the Operative Documents. "MIDWEST REIMBURSEMENT AGREEMENT" shall mean the Reimbursement Agreement (TI) dated as of December 15, 1999 between Midwest and the Midwest LC Issuer as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "MOODY'S" shall mean Moody's Investors Service, Inc., a division of Dun & Bradstreet Corporation, and its successors and assigns. "MORTGAGE" shall mean the Mortgage (T1) dated as of December 15, 1999 executed by the Owner Lessor in favor of the Holder Representative. "MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as such term is defined in Section 4001(a)(3) of ERISA. "NECESSARY CAPITAL EXPENDITURES" shall mean any Capital Expenditures that, in the exercise of Prudent Industry Practices, is reasonably necessary for the continued operation or maintenance of the Generating Assets or is required by applicable law. "NECESSARY CAPITAL EXPENDITURE" does not include any Capital Expenditure undertaken primarily to increase the efficiency of, expand or re-power the Generating Assets or Capital Expenditures for environmental purposes which are not required by applicable law. "NET CASH PROCEEDS" shall mean (i) 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 Operative 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 33 the case of Recovery Events relating to property or casualty insurance claims, the amount of such proceeds exceeds $10,000,000 with respect to any asset of any Holdings Loan Party, (ii) 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 and (iii) in connection with any sale, transfer, lease, contribution, conveyance, grant of options, warrants or other rights with respect to all or substantially all of Holdings' or its Subsidiaries' assets (including accounts receivable and capital stock of other ownership interests in Subsidiaries), the cash proceeds received from such asset disposition, net of attorney's fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith. "NEW LESSOR NOTES" shall have the meaning specified in SECTION 2.03 of the Lessor Loan Agreement. "NON-SEVERABLE IMPROVEMENTS" shall mean any Improvement to the Facility that is not a Severable Improvement. "NOTES" shall mean, as the context may require, a Tranche A Note, a Tranche B Note or a Tranche C Note. "OBSOLESCENCE TERMINATION DATE" shall have the meaning specified in SECTION 14.1 of the Facility Lease. "OFFICER'S CERTIFICATE" shall mean with respect to any Person, a certificate signed by any Authorized Officer of such Person. "OPERATING EXPENSES" shall mean, in respect of any period, all cash amounts paid by the Holdings 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, Necessary Capital Expenditures and all other fees and expenses necessary for the continued operation and maintenance of the Generating Assets and the conduct of the business of the Holdings Loan Parties. 34 "OPERATING LEASE" shall mean any lease other than a Capital Lease (and, solely by virtue of the intended classification under GAAP, shall include the Leases and Subleases). "OPERATING LEASE LIABILITY" of any Person shall mean all monetary obligations of such Person under any Operating Lease, and, for purposes of each Loan Document, the amount of such obligations shall be the termination value under and as defined in such Operating Lease. "OPERATION AGREEMENT" shall mean the Operation Agreement, dated as of December 15, 1999, among Midwest and each of the entities identified in Annex A thereto as a "Trust". "OPERATIVE DOCUMENTS" shall mean the Participation Agreement, the Land Deed, the Facility Deed, the Facility Lease, the Memorandum of the Facility Lease, the Facility Sublease, the Facility Site Lease, the Memorandum of the Facility Site Lease, the Facility Site Sublease, the Memorandum of the Facility Site Sublease, the Facility Site Sub-Sublease, the Memorandum of the Facility Site Sub-Sublease, the Lessor Loan Agreement, the Lessor Notes, the Mortgage, the Security Documents, the Funding LLC Financing Documents, the Funding LLC Notes, the Trust Agreement, the OP LLC Agreement, the Tax Indemnity Agreement, the Purchase Agreement, the Assignment and Assumption Agreement (as attached to the Purchase Agreement as Exhibit A), the Owner Participant Guaranty, the Holdings Guarantee, the Midwest Lessor Lease Guaranty, the Midwest OP Lease Guaranty, the Collins Operating Agreement, the Midwest Letter of Credit, the RCE Letter of Credit, the Midwest Reimbursement Agreement, the RCE Reimbursement Agreement, the RCE Agreement, the Letter of Credit Guarantee and the Operation Agreement. "OP GUARANTOR" shall mean PSEG Resources Inc. or any other Person that shall guarantee the obligations of the Owner Participant or a Member Transferee under the Operative Documents pursuant to the Owner Participant Guaranty. "OP LLC AGREEMENT" shall mean the Limited Liability Company Agreement of Collins Generation I, LLC, dated as of December 15, 1999. "OP MEMBER" shall mean any Person holding a membership interest in the Owner Participant pursuant to the OP LLC Agreement. "OPTIONAL IMPROVEMENT" shall have the meaning specified in SECTION 8.2 of the Facility Lease. "ORGANIC DOCUMENT" shall mean, with respect to any Person that is a corporation, its 35 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; with respect to any Person that is a limited partnership, its certificate of limited partnership and partnership agreement; and with respect to any Person that is a limited liability company, its certificate of formation and its limited liability company agreement, in each case, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "OTHER COLLINS LEASE TRANSACTIONS" shall mean the transactions involving the transfer of the Other Undivided Interests and the lease of the Other Ground Interests to the Other Owner Lessors, and the simultaneous lease and sublease of the Other Undivided Interests to Collins Holdings and Midwest, respectively, and the simultaneous sublease and sub-sublease of the Other Ground Interests to Collins Holdings and Midwest, respectively, on substantially the same terms and conditions as under, and dated the same date as, the Overall Transaction. "OTHER FACILITIES" shall mean the ComEd Assets, but shall exclude the Facility. "OTHER FACILITY LEASES" shall mean the other Facility Lease Agreements, each dated as of December 15, 1999, by and between Collins Holdings and the Other Owner Lessors relating to the Other Collins Lease Transactions, pursuant to which Collins Holdings will lease the Other Undivided Interests from the Other Owner Lessors. "OTHER FACILITY LESSEES" shall mean the Facility Lessees under the Other Facility Leases. "OTHER FACILITY SITE LEASES" shall mean the other Facility Site Leases, each dated as of December 15, 1999 by and between Midwest and the Other Owner Lessors, pursuant to which Midwest will lease the Other Ground Interests to the Other Owner Lessors. "OTHER FACILITY SUBLEASES" shall mean the other Facility Sublease Agreements, each dated as of December 15, 1999 by and between Collins Holdings and Midwest, pursuant to which Midwest will sublease the Other Undivided Interests from Collins Holdings. "OTHER FACILITY SITE SUBLEASES" shall mean the other Facility Site Subleases, each dated as of December 15, 1999 by and between the Other Owner Lessors and Collins Holdings, pursuant to which the Other Owner Lessors will sublease the Other Ground Interests to Collins Holdings. "OTHER FACILITY SITE SUB-SUBLEASES" shall mean the other Facility Site Sub-Subleases, 36 each dated as of December 15, 1999 by and between Midwest and the Collins Holdings, pursuant to which Collins Holdings will lease the Other Ground Interests to the Midwest. "OTHER GROUND INTERESTS" shall mean the undivided leasehold interests in the Facility Site not conveyed to the Owner Lessor under the Facility Site Lease. "OTHER MIDWEST REIMBURSEMENT AGREEMENTS" shall mean the other Midwest Reimbursement Agreements, each dated as of December 15, 1999 between Midwest and the Midwest LC Issuer as each is from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "OTHER OWNER LESSORS" shall mean Collins Trust II, Collins Trust III and Collins Trust IV. "OTHER OWNER PARTICIPANTS" shall mean Collins Generation II, LLC, Collins Generation III, LLC and Collins Generation IV, LLC. "OTHER RCE REIMBURSEMENT AGREEMENTS" shall mean the other RCE Reimbursement Agreements, each dated as of December 15, 1999 between the Other Owner Lessors and the RCE LC Issuer as each is from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "OTHER UNDIVIDED INTERESTS" shall mean the undivided ownership interest in the Facility Site not conveyed to the Owner Lessor under the Facility Deed and the Land Deed. "OVERALL TRANSACTION" shall mean the transactions contemplated by the Operative Documents. "OVERDUE RATE" shall mean the Applicable Rate as such term is defined in Schedule 1-1 to the Facility Lease plus 2% per annum. "OWNER LESSOR" shall mean Collins Trust I, a Delaware business trust created for the benefit of the Owner Participant. "OWNER LESSOR'S INTEREST" shall mean the Owner Lessor's right, title and interest in and to (i) the Undivided Interest and (ii) the Ground Interest under the Facility Site Lease. "OWNER LESSOR'S LIEN" shall mean any Lien on the Trust Estate or any part thereof arising as a result of (i) Claims against or any act or omission of the Trust Company or the Owner Trustee, or Affiliate thereof that is not related to, or that is in violation of, any Operative 37 Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of the Trust Company or the Owner Trustee specified therein, (ii) Taxes imposed upon the Trust Company or the Owner Trustee, or any Affiliate thereof that are not indemnified against by Midwest or the Facility Lessee pursuant to any Operative Document or are not related to, or that are in violation of any Operative Document or the transactions contemplated thereby, (iii) Claims against or affecting, the Trust Company or the Owner Trustee, or any Affiliate thereof arising out of the voluntary or involuntary transfer by the Trust Company or the Owner Trustee of any portion of the interest of the Trust Company or the Owner Trustee in the Owner Lessor's Interest, other than as contemplated or permitted by the Operative Documents. "OWNER LESSOR'S PERCENTAGE" shall mean 25%. "OWNER PARTICIPANT" shall mean Collins Generation I, LLC, a Delaware limited liability company. "OWNER PARTICIPANT GUARANTY" shall mean the guaranty provided by the OP Guarantor pursuant to SECTION 4.26 or SECTION 12.1 of the Participation Agreement. "OWNER PARTICIPANT'S BENEFICIAL INTEREST" shall mean the Owner Participant's interest in the Owner Lessor. "OWNER PARTICIPANT'S COMMITMENT" shall mean the Owner Participant's investment in the Owner Lessor contemplated by SECTION 2.1 of the Participation Agreement. "OWNER PARTICIPANT'S EXPECTED RETURN," with respect to the Owner Participant's Commitment, shall mean the Owner Participant's anticipated (1) net after-tax yield, calculated according to the multiple investment sinking fund method of analysis (as described in FAS 13), and (ii) aggregate GAAP income, general pattern of after-tax earnings and after-tax cash flow. "OWNER PARTICIPANT'S LIEN" shall mean any Lien on the Trust Estate or any part thereof arising as a result of (i) Claims against or any act or omission of the Owner Participant that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of the Owner Participant set forth therein, (ii) Taxes against the Owner Participant that are not indemnified against by Midwest pursuant to the Operative Documents or (iii) Claims against or affecting the Owner Participant arising out of the voluntary or involuntary transfer by the Owner Participant (except as contemplated or permitted by the Operative Documents) of 38 any portion of the interest of the Owner Participant in the Beneficial Interest. "OWNER TRUST" shall mean the Owner Lessor. "OWNER TRUSTEE" shall mean Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement and each other Person which may from time to time be acting as Owner Trustee in accordance with the provisions of the Trust Agreement. "PARENT" shall mean any Person, any corporation, partnership, limited liability company or other entity which, directly or indirectly, owns 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 any 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 controls the management of any partnership, limited liability company or other entity. "PARTICIPATION AGREEMENT" shall mean the Participation Agreement (T1), dated as of December 15, 1999, among Collins Holdings, the Owner Lessor, Owner Trustee, Owner Participant, Holdings, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative. "PAYMENT DATES" shall have the meaning specified in SECTION 2.02(b) of the Lessor Loan Agreement. "PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "PENSION PLAN" shall mean a "pension plan", as such term is defined in Section 3(2) of ERISA (other than a Multiemployer Plan), and to which 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 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. "PERMITTED ENCUMBRANCES" shall mean all matters shown as exceptions on Schedule B to each of the Title Policies as in effect on the Closing Date. 39 "PERMITTED INVESTMENTS" shall mean: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; and (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above. "PERMITTED LIENS" shall mean the Liens permitted under SECTION 8.2 of the Participation Agreement. "PERMITTED PERCENTAGE" shall mean 15% of the Consolidated Tangible Net Assets of Holdings as of the beginning of the most recently ended Fiscal Quarter. "PERSON" shall mean 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. "PHASE I ENVIRONMENTAL SURVEY" shall mean a study, conducted in accordance with standards promulgated by the American Society for Testing and Materials or an equivalent environmental site assessment conducted pursuant to current good customary and commercial practice, that (i) evaluates the potential for Environmental Conditions to exist at the property that is the subject of the study as a result of historical or current operations or activities at said property and (ii) evaluates whether the subject property is in substantial 40 compliance with applicable Environmental Laws. "PHASE II ENVIRONMENTAL SURVEY" shall mean a study, conducted pursuant to current good customary and commercial practice, to evaluate potential Environmental Conditions identified as a result of a Phase I Environmental Survey through the collection and analysis of samples of environmental media (including, in the reasonable judgment of the consultant performing the study, samples of soils, subsurface soils, groundwater, surface water, sediments, air or other environmental media) at the site which is the subject of the study. Such study shall be designed to confirm the existence (or nonexistence) of Environmental Conditions at the subject property that may require further investigation, abatement, removal, monitoring, clean-up, remediation or other response actions in accordance with applicable Environmental Laws and, consistent with customary and commercial practice, determine the nature, scope and extent of such Environmental Conditions. "PLAN" shall mean any "employee benefit plan" (as defined in Section 3(3) of ERISA) that is subject to ERISA, any "plan" (as defined in Section 4975(e)(1) of the Code) that is subject to Section 4975 of the Code, any trust created under any such plan or any "governmental plan" (as defined in Section 3(32) of ERISA or Section 414(d) of the Code) that is organized in a jurisdiction having prohibitions on transactions with government plans similar to those contained in Section 406 of ERISA or Section 4975 of the Code. "PLEDGE AGREEMENTS" shall mean each of (i) the Pledge Agreement, dated as of December 15, 1999, between EMOC and the Holdings Collateral Agent, (ii) the Pledge Agreement, dated as of December 15, 1999, between MGE and the Holdings Collateral Agent and (iii) the Pledge Agreement, dated as of December 15, 1999, between Holdings and the Holdings Collateral Agent, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "POWER PURCHASE AGREEMENT" shall mean the Power Purchase Agreement dated as of December 15, 1999 between Midwest and ComEd, as the same may from time to time be amended, amended and restated, supplemented or otherwise modified in accordance with the terms thereof. "PRICING ASSUMPTIONS" shall mean the "Pricing Assumptions" attached as Schedule 12.1(c) to the Participation Agreement. "PRUDENT INDUSTRY PRACTICE" shall mean, at a particular time, (i) any of the practices, methods and acts engaged in or approved by a significant portion of the competitive electric generating industry operating in the United States at such time, or (ii) with respect to any 41 matter to which clause (i) 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. "PUHCA" see "Holding Company Act." "PURCHASE AGREEMENT" shall mean the Purchase and Sale Agreement (T1), dated as of December 15, 1999, between Midwest and the Equity Investor. "PURCHASE PRICE" shall mean the Owner Lessor's Percentage of $860,000,000. "QUARTERLY PAYMENT DATE" shall mean the first Business Day of each January, April, July and October. "RATING AGENCIES" shall mean S&P and Moody's. "RATING EVENT" shall mean, at any time, any Debt Rating is below (a) with respect to long-term debt, BBB- or Baa3 by S&P and Moody's respectively or (b) with respect to short-term debt, A-2 or P-2 by S&P and Moody's respectively. "RCE AGENT" shall mean Citicorp North America Inc., in its capacity as RCE Agent under the APA, together with its successors and assigns in such capacity. "RCE AGREEMENT" shall mean the Residual Credit Enhancement Agreement, dated as of December 15, 1999 between Bayerische Landesbank Girozentrale and Funding LLC, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "RCE LC DOCUMENTS" shall mean the RCE Letter of Credit, the RCE Reimbursement Agreement and the other documents, agreements and instruments delivered in connection with the RCE Letter of Credit and the RCE Reimbursement Agreement. "RCE LC ISSUER" shall mean Bayerische Landesbank Girozentrale as issuer of the RCE Letter of Credit. 42 "RCE LC REIMBURSEMENT OBLIGATIONS" shall mean the undrawn face amount of the RCE Letter of Credit together with the aggregate principal amount of all reimbursement obligations (or related loans under the RCE Reimbursement Agreement) of the Owner Lessor in respect of all drawings made under the RCE Letter of Credit. "RCE LETTER OF CREDIT" means the letter of credit issued by the RCE LC Issuer under the RCE Reimbursement Agreement for the account of the Owner Lessor and for the benefit of the RCE Agent (as defined in the Lessor Loan Agreement). "RCE LETTERS OF CREDIT" shall mean the RCE Letter of Credit and the other letters of credit issued by the RCE LC Issuer under the Other RCE Reimbursement Agreements for the account of the Other Owner Lessors and each for the benefit of the RCE Agent. "RCE REIMBURSEMENT AGREEMENT" means the Reimbursement Agreement (TI) dated as of December 15, 1999 between Owner Lessor and the RCE LC Issuer as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "REASONABLE BASIS" for a position shall exist if tax counsel may properly advise reporting such position on a tax return in accordance with Formal Opinion 85-352 issued by the Standing Committee on Ethics and Professional Responsibility of the American Bar Association (or any successor to such opinion). "REBUILDING CLOSING DATE" shall have the meaning specified in of SECTION 10.4(f) of the Facility Lease. "RECOVERY EVENT" shall mean any settlement of or payment of $10,000,000 or more in respect of (i) any property or casualty insurance claim relating to any asset of any Holdings Loan Party or (ii) any seizure, condemnation, confiscation or taking of, or requisition of title or use of, the Generating Assets or any part thereof by any Governmental Authority. "REGULATIONS T, U AND X" shall mean Regulations T, U and X of the Federal Reserve System of the United States (or any successors thereto). "REGULATORY EVENT OF LOSS" shall mean an Event of Loss specified in clause (iv) of the definition of "Event of Loss". "REGULATORY VIOLATION" shall mean (i) any Holdings Loan Party (A) becoming subject to regulation as a "holding company" or a "subsidiary company" or an "affiliate" of a "holding 43 company" required to register under PUHCA or (B) becoming subject to public utility regulation under the laws of the State of Illinois or (ii) the failure of Midwest to (A) be an "exempt wholesale generator" under PUHCA, (B) be interconnected with the high voltage network or to have access to transmission services and ancillary services to sell wholesale electric power or (C) have the authority to sell wholesale electric power at market-based rates and, in the case of clause (i) or (ii), such circumstance could reasonably be expected to result in a Material Adverse Effect on any Holdings Loan Party. "RELATED PARTY" shall mean, with respect to any Person or its successors and assigns, an Affiliate of such Person or its successors and assigns and any director, officer, servant, employee or agent of that Person or any such Affiliate or their respective successors and assigns; PROVIDED, THAT the Trust Company shall not be treated as a Related Party to any other party, the Owner Trustee and the Owner Lessor shall not be treated as Related Parties to each other and neither Owner Lessor nor Owner Trustee shall be treated as a Related Party to any Owner Participant except that, for purposes of SECTION 14.1 of the Participation Agreement, the Owner Lessor will be treated as a Related Party to an Owner Participant to the extent that the Owner Lessor acts on the express written direction or with the express written consent of an Owner Participant. "RELEASE" shall mean the actual or threatened release, deposit, disposal or leakage of any Hazardous Material at, into, upon or under any land, water or air, or otherwise into the environment, including, without limitation, by means of burial, disposal, discharge, emission, injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring, escaping, emptying and placement, except as expressly authorized by a Governmental Approval. "RENEWAL LEASE RENT" shall mean the scheduled Rent payable on each Rent Payment Date during any First Wintergreen Renewal Lease Term, Second Wintergreen Renewal Lease Term or FMV Renewal Lease Term, in each case as determined in accordance with SECTION 15.3 of the Facility Lease. "RENEWAL LEASE TERM" shall mean the First Wintergreen Renewal Lease Term, the Second Wintergreen Renewal Lease Term or any FMV Renewal Lease Term. "RENT" shall mean Basic Lease Rent, Renewal Lease Rent, if any, and Supplemental Lease Rent. "RENT PAYMENT ACCOUNT" shall mean an account at Bank of America for the account of the Facility Lessee or such other account of the Facility Lessee as the Facility Lessee may from 44 time to time specify in a notice to the other parties to the Participation Agreement. "RENT PAYMENT DATE" shall mean the January 6th, April 6th, July 6th and October 6th of each year during the Facility Lease Term and September 15, 2033. "REPLACEMENT LETTER OF CREDIT" shall have the meaning specified in SECTION 5.9 of the Participation Agreement. "REPLACEMENT COMPONENT" shall have the meaning specified in SECTION 7.2 of the Facility Lease. "REPORT OF ENVIRONMENTAL CONSULTANT" shall mean SECTION 5 of the Engineering Report and the bring-down of such report. "REPORTABLE EVENT" shall mean 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 IMPROVEMENT' shall have the meaning specified in SECTION 8.1 of the Facility Lease. "REQUIRED HOLDERS" shall mean Lessor Noteholders holding at least 50.1% of the principal amount of the Lessor Notes outstanding (disregarding for such computation any Lessor Notes held directly or beneficially by the Facility Lessee, the Facility Sublessee, the Owner Lessor, the Owner Participant, the Equity Investor, any OP Guarantor or any Affiliate of any of them, unless such Person owns all of the Lessor Notes in accordance with the provisions of the Lessor Loan Agreement). "REQUIREMENT OF LAW" shall mean, as to any person, the Organic Documents of such Person, and any law (including any Environmental 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. "REQUISITION" shall have the meaning specified in clause (iii) of the definition of "Event of Loss". "RESTRICTED PAYMENT" shall have the meaning set forth in SECTION 8.2.7 of the Holdings Credit Agreement. 45 "RETURN ACCEPTANCE TESTS" shall mean the testing procedures set forth in Appendix C to the Power Purchase Agreement. "REVENUES" shall mean, in respect of any period, all cash amounts received by the Holdings 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 Cashflow Recapture Fund. "S&P" shall mean Standard & Poor's Ratings Services (a division of McGraw-Hill Companies, Inc.) and its successors and assigns. "SASM&F" shall mean Skadden, Arps, Slate, Meagher & Flom LLP. "SCHEDULED CLOSING DATE" shall mean December 15, 1999, and any date set for Closing in a notice of postponement pursuant to SECTION 2.2(c) of the Participation Agreement. "SECOND WINTERGREEN RENEWAL LEASE TERM" shall have the meaning specified in SECTION 15.1(b) of the Facility Lease. "SECURITIES ACT" shall mean the Securities Act of 1933, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "SECURITIZATION COMPANY" shall mean CXC Incorporated, a Delaware corporation. "SECURITY DOCUMENTS" shall mean (i) the Collateral Agency and Intercreditor Agreement, (ii) the Holdings Guarantee, (iii) each Pledge Agreement and (iv) any other agreement or instrument hereafter entered into by Holdings or any other Person which guarantees or secures payment of the indebtedness evidenced by the Notes or payment or performance of any other obligation. "SEVERABLE IMPROVEMENT" shall mean any Improvement that is removable without, other than in an immaterial respect, causing irreparable damage to the Facility. "SPECIAL LESSEE TRANSFER AMOUNT" shall mean for any date the Equity Portion of Termination Value on such date; PLUS (i) any unpaid Basic Lease Rent or Renewal Lease Rent, as the case may be, due on or before the date of such determination, PLUS (ii) if the determination date is a Rent Payment Date or an Additional Rent Payment Date, the Basic Lease Rent or Renewal Lease Rent due on such Rent Payment Date, PLUS (iii) any other Rent payment under the Facility Lease or the Other Operative Documents due and unpaid on such date. 46 "SUBLEASE EVENT OF DEFAULT" shall mean Lease Event of Default as such term is incorporated by reference into the Facility Sublease pursuant to paragraph 1 of the Facility Sublease. "SUBLEASE GROUND INTEREST" shall mean Ground Interest as such term is incorporated by reference into the Facility Site Sublease pursuant to SECTION 3 of the Facility Site Sublease. "SUBLEASE RENT" shall mean Rent as such term is incorporated by reference into the Facility Sublease pursuant to paragraph 1 of the Facility Sublease. "SUBLEASES" shall mean, collectively, the Facility Sublease and the Other Facility Subleases. "SUBSIDIARY" shall mean, 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. "SUB-SUBLEASE GROUND INTEREST" shall mean Ground Interest as such term is incorporated by reference into the Facility Site Sub-Sublease pursuant to SECTION 3 of the Facility Site Sub-Sublease. "SUPPLEMENTAL FINANCING" shall have the meaning specified in SECTION 16.1 of the Participation Agreement. "SUPPLEMENTAL LEASE RENT" shall mean any and all amounts, liabilities, indemnities and obligations (other than Basic Lease Rent) which Collins Holdings assumes or agrees to pay under the Operative Documents (whether or not identified as "Supplemental Lease Rent") to the Owner Lessor or any other Person, including, but not limited to, Termination Value, Incidental Costs and Transaction Costs (other than costs, fees and expenses associated with or resulting from a Lessor Loan Event of Default which is not a Lease Event of Default). "SUPPORT SERVICES" shall mean all services and rights necessary for the Facility Lessor (or any of its successors or permitted assigns) to own, operate, use and maintain (and to transmit the power generated from) the Facility during and after expiration or termination of the 47 Facility Lease in addition to and together with those services or rights provided pursuant to the conveyance of the Ground Interest by the Ground Lessor to the Ground Lessee under the Facility Site Lease. "SURETY" shall mean MBIA Insurance Company, a New York domiciled stock insurance company and its successors. "SURVEY" shall mean the survey of the Collins Generating Station Lease Parcel (as such term is defined therein) prepared by SDI Consultants, Ltd. for Edison Mission Energy, dated as of October 13, 1999, including revisions thereto. "TAX" or "TAXES" shall mean all fees (including, without limitation, license, documentation and registration fees), taxes (including, without limitation, income, gross receipt, franchise, rental, turn over, excise, sales taxes, use taxes, stamp taxes, value-added taxes, ad valorem taxes and property taxes (personal and real, tangible and intangible), license, levies, exports, duties, recording charges or fees, assessments, withholdings and other charges and impositions of any nature, plus all related interest, penalties, fines and additions to tax, now or hereafter imposed by any federal, state, local or foreign government or other taxing authority. "TAX INDEMNITY AGREEMENT" shall mean the Tax Indemnity Agreement (T1), dated as of December 15, 1999 between Collins Holdings, Midwest and the Owner Participant. "TAX LAW CHANGE" shall have the meaning specified in SECTION 17 of the Participation Agreement. "TERMINATION DATE" shall mean each of the monthly dates during the Facility Lease Term identified as a "Termination Date" on Schedule 2 of the Facility Lease, which dates shall be the same days on which Basic Lease Rent and Renewal Lease Rent, if any, are payable under the Facility Lease. "TERMINATION VALUE" shall mean for any Termination Date shall mean the Termination Values set forth in Column D on Schedule 2 of the Facility Lease for such Termination Date. "TITLE POLICIES" shall mean the following title policies, issued by Chicago Title Insurance Company: (a) that certain Owner's Policy No. 17572-O issued to Midwest Generation, LLC, dated as of December 15, 1999, insuring Midwest Generation, LLC's (i) fee interest in the Facility Site, (ii) sub-subleasehold interest in the Facility Site as sub-sublessee under the Facility Site Sub-Sublease and the Other Facility Site Sub-Subleases, and (iii) subleasehold 48 interest in the Facility as sublessee under the Facility Sublease and the Other Facility Subleases; (b) that certain Leasehold Owner's Policy No. 17572-L1 issued to the Owner Lessor dated as of December 15, 1999, insuring the Owner Lessor's (i) 25% undivided leasehold interest in the Facility Site as lessee under the Facility Site Lease, and (ii) 25% undivided fee interest in the Facility; (c) that certain Leasehold Owner's Policy No. 17572-BL, issued to Collins Holdings, dated as of December 15, 1999, insuring Collins Holdings' (i) subleasehold interest in the Facility Site as sublessee under the Facility Site Sublease and the Other Facility Site Subleases, and (ii) leasehold interest in the Facility as lessee under the Facility Lease; and (d) that certain Leasehold Mortgagee's Policy No. 17572-MTG, issued to Citibank, N.A., as Holder Representative and mortgagee, dated as of December 15, 1999, insuring Citibank, N.A.'s security interest in the Owner Lessor's and the Other Owner Lessors' (i) leasehold interests in the Facility Site Lease, and (ii) fee interests in the Facility. "TOTAL CAPITALIZATION" shall mean, with respect to any Person, the sum, without duplication, of (i) total common stock equity or analogous ownership interests of such Person and its Consolidated Subsidiaries, (ii) preferred stock and preferred securities of such Person and its Consolidated Subsidiaries, (iii) additional paid in capital or analogous interests of such Person and its Consolidated Subsidiaries, (iv) retained earnings of such Person and its Consolidated Subsidiaries, (v) the aggregate principal amount of Indebtedness of such Person and its Consolidated Subsidiaries then outstanding and (vi) the total equity contributed to such Person and its Subsidiaries on the Closing Date. "TRANCHE A LOAN" shall have the meaning set forth in SECTION 2.1.1 of the Holdings Credit Agreement. "TRANCHE A NOTE" shall mean a promissory note of Holdings payable to any Holdings Lender, evidencing the aggregate Indebtedness of Holdings to such Holdings Lender resulting from outstanding Tranche A Loans and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "TRANCHE B LOAN"shall have the meaning set forth in SECTION 2.1.3 to the Holdings Credit Agreement. "TRANCHE B NOTE" shall mean a promissory note of Holdings payable to any Holdings Lender, evidencing the aggregate Indebtedness of Holdings to such Holdings Lender resulting from outstanding Tranche B Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "TRANCHE C LOAN" shall have the meaning set forth in SECTION 2.1.5 of the Holdings Credit Agreement. 49 "TRANCHE C NOTE" shall mean a promissory note of Holdings payable to any Holdings Lender, evidencing the aggregate Indebtedness of Holdings to such Holdings Lender resulting from outstanding Tranche C Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "TRANSACTION COSTS" shall mean the following costs and expenses incurred in connection with the negotiation, due diligence and consummation of the Overall Transaction: (a) the cost of the Closing Date Appraisal, the cost of title insurance, filing and recording fees, the fees and expenses of the Engineering Consultant, the Fuel Consultant, the Environmental Consultant, the Market Consultant, the Insurance Consultant, and any other consultants retained by the Owner Participant (excluding any fees or compensation to its advisors) and approved by EME, which approval may not be unreasonably withheld; (b) the reasonable legal fees, expenses and disbursements of the Equity Investor, the Owner Participant and the Owner Trustee and out-of-pocket expenses of the Equity Investor's Advisor; (c) the reasonable legal fees, expenses and disbursements of the other Lease Financing Parties associated with the Lessor Loan and the Funding LLC Loans; (d) the Midwest Advisor's fee and its reasonable out-of-pocket costs and expenses; (e) at EME's option, all or a portion of EME's, Midwest's and the Facility Lessee's legal fees and reasonable out-of-pocket cost and expenses related thereto; (f) the fees of the Rating Agencies in connection with rating the Funding LLC Financing Documents; and (g) other reasonable, documented out-of-pocket expenses of the Lease Financing Parties. "TRANSACTION WITH AN AFFILIATE" shall mean, with respect to any Person (i) any agreement or contract with any Affiliate or Subsidiary of such Person and any amendment, modification or supplement thereof or thereto or (ii) any other transaction or business arrangement with an Affiliate or Subsidiary of such Person not otherwise expressly permitted by the Operative Documents. "TRANSCO PARTNERSHIP" shall mean a partnership or joint venture in which Midwest is a partner or joint venturer formed solely to facilitate the Transco Transaction. 50 "TRANSCO TRANSACTION" shall mean a transaction involving (i) the contribution to the Transco Partnership by Midwest of certain railcars or rights to rail cars, (ii) the Transco Partnership engaging in certain coal supply and coal transportation activities in connection with the operation by Midwest of its generating assets and (iii) the sharing by the partners or the joint venturers of the Transco Partnership of certain cost savings achieved by the Transco Partnership in such coal supply and coal transportation activities. "TRANSFEREE" shall have the meaning specified in SECTION 12.1(a) of the Participation Agreement. "TREASURY REGULATIONS" shall mean regulations, including temporary regulations, promulgated under the Code. "TRUST AGREEMENT" shall mean the Amended and Restated Trust Agreement (T1), dated as of December 15, 1999, between the Owner Participant and the Trust Company relating to Collins Trust I. "TRUST COMPANY" shall mean the Wilmington Trust Company. "TRUST ESTATE" shall have the meaning specified in SECTION 2.03 of the Trust Agreement. "UNDIVIDED INTEREST" shall have the meaning specified in the Recitals to the Facility Lease. "UNIFORM COMMERCIAL CODE" or "UCC" shall mean the Uniform Commercial Code as in effect in the applicable jurisdiction. "UNITED STATES" or "U.S." shall mean the United States of America. "UNRELATED MEMBERS" shall mean any members of the Owner Participant or the Other Owner Participants which are not Affiliates of the other members of either the Owner Participant or the Other Owner Participants; PROVIDED, HOWEVER, that for purposes of this definition, if any two or more members are Affiliates, such members, together, shall be considered as one Unrelated Member. "VERIFIER" shall mean Warren & Selbert, Inc. or a nationally recognized firm of accountants or lease advisors chosen by the Owner Participant and reasonably acceptable to the Facility Lessee. "WELFARE PLAN" shall mean a "welfare plan", as such term is defined in Section 3(1) of ERISA. 51 "WILMINGTON TRUST COMPANY" shall mean Wilmington Trust Company, a Delaware banking corporation. "YEAR 2000 READY" shall mean that the individual systems will be compliant or their characteristics which are non-compliant have been evaluated and determined to be suitable for use into the year 2000. 52 EX-10.98-1 41 a2031364zex-10_981.txt EXHIBIT 10.98.1 Exhibit 10.98.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 10.98 - --------------------------------------------------------------------------- Participation Agreement (T2), dated as of December 15, 1999, among Midwest Generation, LLC, Collins Holdings EME, LLC, Collins Trust II, Wilmington Trust Company, Collins Generation II, LLC, Edison Mission Midwest Holdings Co., Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A. This Participation Agreement differs from Exhibit 10.98 in the following respects: In the Exhibit RR and Schedule 4.22 to the Participation Agreement, "T1" is replaced by "T2" and "I" is replaced by "II." The statement "Illinois Real Property Transfer Affidavit executed by Collins Trust I, filed for record in the Grundy County Recording Offices" is removed from Schedule 4.22 to the Participation Agreement. Participation Agreement (T3), dated as of December 15, 1999, among Midwest Generation, LLC, Collins Holdings EME, LLC, Collins Trust III, Wilmington Trust Company, Collins Generation III, LLC, Edison Mission Midwest Holdings Co., Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A. This Participation Agreement differs from Exhibit 10.98 in the following respects: In the Exhibit RR and Schedule 4.22 to the Participation Agreement, "T1" is replaced by "T3" and "I" is replaced by "III." The statement "Illinois Real Property Transfer Affidavit executed by Collins Trust I, filed for record in the Grundy County Recording Offices" is removed from Schedule 4.22 to the Participation Agreement. Participation Agreement (T4), dated as of December 15, 1999, among Midwest Generation, LLC, Collins Holdings EME, LLC, Collins Trust IV, Wilmington Trust Company, Collins Generation IV, LLC, Edison Mission Midwest Holdings Co., Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A. This Participation Agreement differs from Exhibit 10.98 in the following respects: In the Exhibit RR and Schedule 4.22 to the Participation Agreement, "T1" is replaced by "T4" and "I" is replaced by "IV." The statement "Illinois Real Property Transfer Affidavit executed by Collins Trust I, filed for record in the Grundy County Recording Offices" is removed from Schedule 4.22 to the Participation Agreement. 2 EX-10.99 42 a2031364zex-10_99.txt EXHIBIT 10.99 Exhibit 10.99 EXECUTION COUNTERPART AMENDMENT ONE AMENDMENT ONE (this "AMENDMENT") dated as of May 9, 2000 by and among, (i) COLLINS HOLDINGS EME, LLC ("COLLINS HOLDINGS"), (ii) COLLINS TRUST I, as the Owner Lessor, (iii) WILMINGTON TRUST COMPANY, as the Owner Trustee, (iv) COLLINS GENERATION I, LLC, as the Owner Participant, (v) EDISON MISSION MIDWEST HOLDING CO. ("HOLDINGS"), (vi) MIDWEST GENERATION, LLC ("MIDWEST"), (vii) MIDWEST FUNDING LLC ("FUNDING LLC") (viii) BAYERISCHE LANDESBANK INTERNATIONAL S.A., as the Midwest LC Issuer, (ix) BAYERISCHE LANDESBANK GIROZENTRALE, as the RCE LC Issuer and (x) CITIBANK, N.A., as Holder Representative. WHEREAS, Collins Holdings, the Owner Lessor, Owner Trustee, Owner Participant, Holdings, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative have entered into that certain Participation Agreement (T1), dated as of December 15, 1999 (the "PARTICIPATION AGREEMENT"), which set forth, INTER ALIA, certain covenants of Holdings; WHEREAS, Holdings is permitted to incur Indebtedness pursuant to Section 8.1(d) of the Participation Agreement to finance the acquisition, construction or improvement of any fixed or capital assets in accordance with and subject to SCHEDULE 8.2.1(d) to the Holdings Credit Agreement; WHEREAS, Holdings desires to secure the financing referred to above with the Holdings Collateral (as such term is defined in the Holdings Credit Agreement) on a ratable basis with the other Secured Obligations (as such term is defined in the Holdings Credit Agreement); and WHEREAS, Holdings has requested that Collins Holdings, the Owner Lessor, Owner Trustee, Owner Participant, Holdings, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative amend, and such parties have agreed to amend, certain provisions of the Participation Agreement. AMENDMENT ONE TO PARTICIPATION AGREEMENT (T1) 1 ACCORDINGLY, the parties hereto agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment, terms defined in the Participation Agreement are used herein (and in the introductions and recitals hereto) as defined therein. Section 2. AMENDMENT TO THE PARTICIPATION AGREEMENT. Subject to the satisfaction of the conditions precedent specified in Section 3 below, but effective as of the Amendment Effective Date, the Participation Agreement shall be amended as follows: (a) APPENDIX A to the Participation Agreement shall be amended by adding the following definitions: ""2000 CAPEX CREDIT AGREEMENT" shall mean the Credit Agreement dated as of May 9, 2000 by and among Holdings, Societe Generale and Bayerische Landesbank Girozentrale. "2000 CAPEX LOANS" shall mean loans made to Holdings pursuant to the 2000 Capex Credit Agreement.". (b) SECTION 7.1(d) of the Participation Agreement shall be amended by inserting the following phrase after the phrase "within 120 days after the end of each calendar year,": " commencing with the 2000 Fiscal Year,". (c) SECTION 8.1(d) of the Participation Agreement shall be amended by inserting after, "Subject to SECTION 8.11," at the beginning of SECTION 8.1(d) of the Participation Agreement, the following phrase: "the 2000 Capex Credit Agreement and other". (d) SECTION 8.1(f) of the Participation Agreement shall be amended by inserting the following phrase at the beginning of clause (y) of SECTION 8.1(f) of the Participation Agreement and before the phrase "any other Existing Indebtedness": "2000 Capex Loans and". (e) SECTION 8.1(g) of the Participation Agreement shall be amended by deleting it in its entirety and replacing it with the following: "(g) Indebtedness (including guarantees thereof by Midwest) in the form of commercial paper in an amount which, when added to the sum of (x) the aggregate outstanding principal amount of Holdings Loans (other than Holdings Loans borrowed for working capital) and the 2000 Capex Loans and (y) the outstanding principal amount of any Indebtedness incurred pursuant to Section 8.1(f) (or subsequent refinancings of such Indebtedness) does not exceed the sum of (A) $1,750,000,000 PLUS (B) the aggregate principal amount of Funding LLC Refinancings by Holdings;". (f) SECTION 8.1(l) of the Participation Agreement shall be amended by deleting clause (A) in its entirety and replacing it with the following clause: "(A) Holdings shall have delivered 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 Closing Date, for such shorter period of not less than six months) indicating that, had such Indebtedness been outstanding, had the maximum amount of Indebtedness available to be drawn under the tranche of the Holdings Facility available for working capital been outstanding during such period and, if the sum of (x) the aggregate principal amount of the Tranche A Loans, the Tranche B Loans and the 2000 Capex Loans, (y) the outstanding principal amount of any Indebtedness incurred pursuant to SECTION 8.1(f)(x) PLUS (z) all Indebtedness of Holdings in the form of commercial paper is less than $1,750,000,000, had an additional amount been drawn under the Tranche A Loan commitments, the Tranche B Loan commitments and commitments under the 2000 Capex Credit Agreement such that the sum of subclauses (x), (y) PLUS (z) above equals $1,750,000,000, the Debt -3- Service Coverage Ratio for such period would have been equal to or greater than 2.50 to 1.00,". (g) SECTION 8.2(k) of the Participation Agreement shall be amended by deleting SECTION 8.2(k) of the Participation Agreement in its entirety and replacing it with the following clause: "(k) Liens to secure Indebtedness permitted by SECTION 8.1(c), (d), (f), (g) or (l); provided that such Indebtedness shall be secured on a pro rata basis with the Holdings Loans and Holdings' Guarantee.". (h) SECTION 8.2(l) of the Participation Agreement shall be amended by deleting a reference to "clause 8.1(e)" and replacing it with a reference to "SECTION 8.1(d)". Section 3. CONDITIONS PRECEDENT. This Amendment shall not become effective until the date (the "AMENDMENT EFFECTIVE DATE") on which each of the following condition precedents have been satisfied: (a) Delivery to the parties hereto of (i) this Amendment duly executed and delivered by each other party hereto and (ii) Amendment One To The Intercreditor Agreement duly executed and delivered by each party thereto. (b) The representations and warranties of Midwest, Holdings and Collins Holdings as set forth in the Participation Agreement, shall be true and correct as of the Amendment Effective Date after giving effect to the amendments contemplated hereby (unless stated to be given as of an earlier date, in which case such representation and warranty shall be true and correct only as of such earlier date); and (c) As of the Amendment Effective Date, no Lease Event of Default, or Event of Loss or event that, with passage of time or giving of notice or both, would constitute a Lease Event of Default or an Event of Loss shall have occurred and be continuing. -4- Section 4. MISCELLANEOUS. Except as expressly amended hereby, all of the terms and provisions of the Participation Agreement are and shall remain in full force and effect. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. -5- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective officers thereunto duly authorized. COLLINS HOLDINGS EME, LLC By: /s/ John P. Finneran -------------------- Name: John P. Finneran Title: Vice President Date: May __, 2000 COLLINS TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ James P. Lawler ------------------- Name: James P. Lawler Title: Vice President Date: May __, 2000 WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee By: /s/ James P. Lawler ------------------- Name: James P. Lawler Title: Vice President Date: May __, 2000 COLLINS GENERATION I, LLC By: /s/ Eileen A. Moran -------------------------- Name: Eileen A. Moran Title: President Date: May __, 2000 EDISON MISSION MIDWEST HOLDINGS CO., By: /s/ John P. Finneran -------------------------- Name: John P. Finneran Title: Vice President Date: May __, 2000 MIDWEST GENERATION, LLC By: /s/ John P. Finneran -------------------------- Name: John P. Finneran Title: Vice President Date: May __, 2000 CITIBANK, N.A. not in its individual capacity, but solely as Holder Representative By: /s/ Jenny Cheng -------------------------- Name: Jenny Cheng Title: Vice President Date: May 9, 2000 MIDWEST FUNDING LLC By: /s/ Dwight Jenkins -------------------------- Name: Dwight Jenkins Title: Vice President Date: May 9, 2000 BAYERISCHE LANDESBANK INTERNATIONAL S.A., a banking institution organized under the laws of Luxembourg, as issuer of the Midwest Letter of Credit By: /s/ Herbert Weynand --------------------------------------- Name: Herbert Weynand ---------------------------------- Title: Head of Department --------------------------------- Date: May 3, 2000 By: /s/ Peter Lang --------------------------------------- Name: Peter Lang ---------------------------------- Title: Senior Manager Corporate Finance --------------------------------- Date: May 3 , 2000 BAYERISCHE LANDESBANK GIROZENTRALE, as issuer of the RCE Letter of Credit By: /s/ C. Stolarski --------------------------------------- Name: C. Stolarski ---------------------------------- Title: Vice President --------------------------------- Date: May 2, 2000 By: /s/ Dietmar Rieg --------------------------------------- Name: Dietmar Rieg ---------------------------------- Title: First Vice President --------------------------------- Date: May 2, 2000 EX-10.99-1 43 a2031364zex-10_991.txt EXHIBIT 10.99.1 Exhibit 10.99.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 10.99 - --------------------------------------------------------------------------- Amendment One, dated as of May 9, 2000, by and among Collins Holdings EME, LLC, Collins Trust II, Wilmington Trust Company, Collins Generation II, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A. Amendment One, dated as of May 9, 2000, by and among Collins Holdings EME, LLC, Collins Trust III, Wilmington Trust Company, Collins Generation III, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A. Amendment One, dated as of May 9, 2000, by and among Collins Holdings EME, LLC, Collins Trust IV, Wilmington Trust Company, Collins Generation IV, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A. EX-10.100 44 a2031364zex-10_100.txt EXHIBIT 10.100 EXHIBIT 10.100 EXECUTION COPY AMENDMENT TWO AMENDMENT TWO (this "AMENDMENT") dated as of June 23, 2000 by and among, (i) COLLINS HOLDINGS EME, LLC ("COLLINS HOLDINGS"), (ii) COLLINS TRUST I, as the Owner Lessor, (iii) WILMINGTON TRUST COMPANY, as the Owner Trustee, (iv) COLLINS GENERATION I, LLC, as the Owner Participant, (v) EDISON MISSION MIDWEST HOLDING CO. ("HOLDINGS"), (vi) MIDWEST GENERATION, LLC ("MIDWEST"), (vii) MIDWEST FUNDING LLC ("FUNDING LLC"), (viii) BAYERISCHE LANDESBANK INTERNATIONAL S.A., as the Midwest LC Issuer, (ix) BAYERISCHE LANDESBANK GIROZENTRALE, as the RCE LC Issuer and (x) CITIBANK, N.A., as Holder Representative. WHEREAS, Collins Holdings, the Owner Lessor, Owner Trustee, the Owner Participant, Holdings, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative have entered into that certain Participation Agreement (T1), dated as of December 15, 1999 (as heretofore amended, modified and supplemented, the "PARTICIPATION AGREEMENT"), which set forth, INTER ALIA, certain covenants of Holdings; WHEREAS, Holdings desires to enter into the Synthetic Lease Transaction (as defined herein); and WHEREAS, Holdings has requested, and Collins Holdings, the Owner Lessor, Owner Trustee, Owner Participant, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative have agreed, to amend and waive certain provisions of the Participation Agreement so as to permit the Synthetic Lease Transaction; WHEREAS, Holdings has requested, and Collins Holdings, the Owner Lessor, Owner Trustee, Owner Participant, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative have agreed, to clarify the definitions of Fixed Charges and Operating Expenses; AMENDMENT TWO TO PARTICIPATION AGREEMENT (T1) NOW, THEREFORE, the parties hereto agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment, terms defined in the Participation Agreement are used herein (and in the introductions and recitals hereto) as defined therein. Section 2. AMENDMENT TO THE PARTICIPATION AGREEMENT. Subject to the satisfaction of the conditions precedent specified in Section 4 below, but effective as of the Amendment Effective Date, the Participation Agreement shall be amended as follows: (a) APPENDIX A to the Participation Agreement shall be amended by adding the following definitions: ""COMED SYNTHETIC LEASE CONSENT" shall mean the Consent to Sale of Assets between Midwest and ComEd referred to in the Synthetic Lease Basic Documents. "INCREMENTAL SYNTHETIC LEASE ENVIRONMENTAL INDEMNITY PAYMENTS" shall mean Synthetic Lease Environmental Indemnity Obligations paid to Indemnitees that would not otherwise have been borne by Midwest had the Synthetic Lease Transaction not been consummated and Midwest been both the owner and the operator of Synthetic Lease Assets. "SYNTHETIC LEASE" shall mean the Lease Agreement dated as of June 23, 2000 between Midwest and Synthetic Lease Trust. "SYNTHETIC LEASE ASSETS" shall mean certain electric generating turbines further described in the Synthetic Lease Participation Agreement as the "Leased Equipment". "SYNTHETIC LEASE BASIC DOCUMENTS" shall mean the Basic Documents as defined in the Synthetic Lease Participation Agreement. "SYNTHETIC LEASE ENVIRONMENTAL INDEMNITY OBLIGATIONS" shall mean Synthetic Lease Liabilities consisting of liabilities or obligations with respect to Section 6.2 or 6.7 of the Synthetic Lease Participation Agreement that by virtue of Section 6.8 of the Synthetic Lease Participation Agreement and the Synthetic Lease Guarantee are not liabilities or obligations of Edison Mission Energy. "SYNTHETIC LEASE GUARANTEE" shall mean the Guaranty Agreement dated as of June 23, 2000 made by Edison Mission Energy in favor of the Synthetic Lease Trust that, among other things, guarantees the payment by Midwest of all Synthetic Lease Liabilities other than Synthetic Lease Environmental Indemnity Obligations. "SYNTHETIC LEASE INTERCOMPANY NOTE" shall mean the Intercompany Note dated the Closing Date (as defined in the Synthetic Lease Participation Agreement) evidencing the loan by Midwest to Edison Mission Energy of the proceeds of the Synthetic Lease Transaction (net of transaction expenses paid by Midwest in connection with the Synthetic Lease Transaction). "SYNTHETIC LEASE INTERCOMPANY NOTE PAYMENTS" shall mean the payments by Edison Mission Energy to Midwest under or in respect of the Synthetic Lease Intercompany Note. "SYNTHETIC LEASE LIABILITIES" shall mean the basic rent, the supplemental rent or any other amount, liability or obligation that Midwest is obligated to pay under the Synthetic Lease or the other Synthetic Lease Basic Documents, including, without limitation, Synthetic Lease Environmental Indemnity Obligations. "SYNTHETIC LEASE PARTICIPATION AGREEMENT" shall mean the Participation Agreement dated as of June 23, 2000 by and among Midwest, Edison Mission Energy, the Synthetic Lease Trust, investors party thereto, noteholders party thereto, Wilmington Trust Company, and [Citicorp North America, Inc.], as Agent. "SYNTHETIC LEASE TRANSACTION" shall mean the transaction pursuant to the Synthetic Lease Participation Agreement and the Synthetic Lease Basic Documents whereby Midwest sells the Synthetic Lease Assets -3- to the Synthetic Lease Trust and the Synthetic Lease Trust leases the Synthetic Lease Assets to Midwest under the Synthetic Lease. "SYNTHETIC LEASE TRUST" shall mean EME/CDL Trust, a Delaware statutory business trust.". (b) APPENDIX A of the Participation Agreement shall be further amended by deleting the definitions of "CASH FLOW AVAILABLE FOR FIXED CHARGES", "DEBT TO CAPITAL RATIO", "FIXED CHARGES" and "OPERATING EXPENSES" in their entirety and replacing them with the following definitions: ""CASH FLOW AVAILABLE FOR FIXED CHARGES" shall mean, in respect of any period, the excess, if any, of Revenues (excluding (i) proceeds of any permitted asset sale, (ii) amounts available in the Cashflow Recapture Fund and (iii) Synthetic Lease Intercompany Note Payments) during such period OVER Operating Expenses during such period. "DEBT TO CAPITAL RATIO" shall mean, with respect to Holdings and its Consolidated Subsidiaries, the ratio as of the end of the last Fiscal Quarter for which financial statements are available of (i) the aggregate principal amount of Indebtedness of Holdings and its Consolidated Subsidiaries (other than Indebtedness of Holdings incurred pursuant to SECTION 8.1(b)(iii) and SECTION 8.1(i)) then outstanding to (ii) Total Capitalization (excluding, to the extent included, the Synthetic Lease Intercompany Note and payments by Edison Mission Energy pursuant to the Synthetic Lease Guarantee). "FIXED CHARGES" shall mean, 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, including (A) all capitalized interest and (B) the interest portion of any deferred payment obligation, (ii) amounts due and payable under SECTIONS 3.3.1 and 3.3.2 of the Holdings Credit Agreement 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 of the Holdings Credit Agreement during such period, (iv) -4- the interest portion of any deferred payment obligation due and payable during such period, (v) the aggregate amount of the Lease Obligations due and payable during such period, and (vi) all other amounts due and payable by the Loan Parties with respect to Indebtedness (other than (x) Capital Lease Liabilities and Operating Lease Liabilities permitted under SECTION 8.1(b)(i) hereof and (y) Synthetic Lease Liabilities) permitted under SECTION 8.1 hereof during such period. "OPERATING EXPENSES" shall mean, 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, Necessary Capital Expenditures and all other fees and expenses necessary for the continued operation and maintenance of the Generating Assets and the conduct of the business of Holdings, Midwest or Collins Holdings. Operating Expenses shall exclude (to the extent included) Lease Obligations and Synthetic Lease Liabilities (other than payments of Synthetic Lease Environmental Indemnity Obligations) and shall include (to the extent excluded) Capital Lease Liabilities and Operating Lease Liabilities permitted under SECTION 8.1(B)(i) hereof (other than Lease Obligations).". (c) SECTION 8.1(b) of the Participation Agreement shall be deleted and replaced in its entirety with the following: "(b)(i) Capitalized Lease Liabilities and Operating Lease Liabilities outstanding (or anticipated to be outstanding) on the Closing Date and set forth on SCHEDULE 8.2.1(a) to the Holdings Credit Agreement, (ii) Capitalized Lease Liabilities and Operating Lease Liabilities entered into after the Closing Date in the ordinary course of business not to exceed at any time an aggregate principal amount equal to $50,000,000 and (iii) Synthetic Lease Liabilities;". -5- (d) SECTION 8.2 of the Participation Agreement shall be amended by (i) deleting the period at the end of SECTION 8.2(m) of the Participation Agreement and replacing it with the following: "; and"; and (ii) adding SUBSECTION 8.2(n) to SECTION 8.2 of the Participation Agreement as follows: "(n) Liens created pursuant to the Synthetic Lease Basic Documents.". (e) SECTION 8.4 of the Participation Agreement shall be amended by deleting SECTION 8.4(iv) of the Participation Agreement and replacing it in its entirety with the following subsections: "(iv) transfer certain railcars or rights to railcars as part of the Transco Transaction and (v) sell Synthetic Lease Assets to Synthetic Lease Trust pursuant to the Synthetic Lease Basic Documents; PROVIDED, FURTHER, that any Asset Disposition pursuant to CLAUSES (i), (ii), (iii), (iv) and (v) of this proviso shall not be included in the calculation of the aggregate net book value of assets sold pursuant to this SECTION 8.4.". (f) SECTION 8.5 of the Participation Agreement shall be amended by (i) deleting the period at the end of SECTION 8.5(iv) of the Participation Agreement and replacing it with the following: "; and"; and (ii) adding SUBSECTION 8.5(v) to SECTION 8.5 of the Participation Agreement as follows: "(v) Investments evidenced by the Synthetic Lease Intercompany Note.". (g) SECTION 8.6 of the Participation Agreement shall be amended by adding the following sentence at the end of the section: "Notwithstanding the foregoing, the Synthetic Lease Transaction and the transactions contemplated by the Synthetic Lease Basic Documents shall be deemed not to be a Transaction with an Affiliate for the purposes of this SECTION 8.6.". -6- (h) SECTION 8.12 of the Participation Agreement shall be amended by adding the following sentence at the end of Section 8.12 of the Participation Agreement: "Notwithstanding the foregoing, so long as no Event of Loss or Lease Event of Default shall have occurred and be continuing, Holdings or its Subsidiaries may make a Restricted Payment to Edison Mission Energy on or within 30 days after the date any Synthetic Lease Intercompany Note Payment is received by Midwest in an amount not exceeding such Synthetic Lease Intercompany Note Payment (to the extent that the same was not included in any Restricted Payment theretofore made in accordance with this Section 8.12); PROVIDED that, in the event that Midwest pays Incremental Synthetic Lease Environ- mental Indemnity Payments, the aggregate amount of Restricted Payments payable in accordance with this sentence (but not otherwise in accordance with this Section 8.12) shall be reduced by a like amount.". (i) SECTION 8 of the Participation Agreement shall be amended by adding SECTION 8.13 to the Participation Agreement as follows: "SECTION 8.13 SYNTHETIC LEASE BASIC DOCUMENTS. Holdings shall not, and shall not permit any of its Subsidiaries, to agree or consent to any termination, amendment, modification or waiver of (a) Section 6.8 or 7.2 of the Synthetic Lease Participation Agreement, (b) the definition of "Free Cashflow" set forth in the Synthetic Lease Basic Documents or (c) or any other provision of the Synthetic Lease Basic Documents that increases or is reasonably likely to increase the liability, or the obligations, of Midwest (or decreases or is reasonably likely to decrease the liability, or the obligations, of Edison Mission Energy) with respect to the Synthetic Lease Basic Documents in any material respect.". Section 3. AUTHORIZATION OF AMENDMENT OF FACILITY LEASE AND FACILITY SUBLEASE. (a) Collins Holdings, the Owner Lessor, the Owner Participant and the Holder Representative hereby authorize amendments to that certain Facility Lease Agreement (T1), dated as of December 15, 1999, by and among the Owner Lessor, -7- the Owner Participant and Collins Holdings (as heretofore amended, modified and supplemented, the "FACILITY LEASE"), substantially in the form of Exhibit A hereto. (b) The Holder Representative, Collins Holdings, the Owner Participant, the Owner Lessor and Midwest hereby authorize that the amendments to the Facility Lease authorized by paragraph (a) of this Section 3 will effect corresponding amendments to the terms of that certain Facility Sublease Agreement (T1), dated as of December 15, 1999, by and among Collins Holdings, Midwest and the Owner Lessor (as heretofore amended, modified and supplemented, the "FACILITY SUBLEASE"). Section 4. CONDITIONS PRECEDENT. This Amendment shall not become effective until the date (the "AMENDMENT EFFECTIVE DATE") on which each of the following conditions precedent have been satisfied: (a) Delivery to the parties hereto of this Amendment duly executed and delivered by each other party hereto; (b) Delivery to Owner Lessor, Owner Trustee, Owner Participant, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative of the Synthetic Lease Basic Documents in form and substance satisfactory to the recipients; (c) All conditions precedent to effectuate the Synthetic Lease Transaction have been satisfied (including delivery of the ComEd Synthetic Lease Consent) or waived; (d) The Owner Lessor, Owner Trustee, Owner Participant, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative shall have received opinions, dated the Amendment Effective Date and addressed to the recipients from (i) the general counsel to Holdings, Midwest and Collins Holdings, (ii) the special New York counsel to Holdings, Midwest and Collins Holdings and (iii) Federal Energy Regulatory Commission counsel to the Holdings, Midwest and Collins Holdings. Each such opinion shall be in form and substance reasonably satisfactory to the recipients; (e) The representations and warranties of Holdings, Midwest and Collins Holdings as set forth in the Participation Agreement, shall be true and correct as of the Amendment Effective Date after giving effect to the -8- amendments contemplated hereby (unless stated to be given as of an earlier date, in which case such representation and warranty shall be true and correct only as of such earlier date); and (f) As of the Amendment Effective Date, no Lease Event of Default, or Event of Loss or event that, with passage of time or giving of notice or both, would constitute a Lease Event of Default or an Event of Loss, shall have occurred and be continuing. Section 5. MISCELLANEOUS. Except as expressly amended hereby, all of the terms and provisions of the Participation Agreement are and shall remain in full force and effect. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. -9- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective officers thereunto duly authorized. COLLINS HOLDINGS EME, LLC By: /s/ John P. Finneran, Jr. ------------------------- Name: John P. Finneran, Jr. Title: Vice President Date: July 10, 2000 COLLINS TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ Anita Dallago ----------------- Name: Anita Dallago Title: Financial Services Officer Date: July 10, 2000 WILMINGTON TRUST COMPANY, not in its individual capacity, except as ex pressly provided herein, but solely as Owner Trustee By: /s/ Anita Dallago ----------------- Name: Anita Dallago Title: Financial Services Officer Date: July 10, 2000 COLLINS GENERATION I, LLC By: /s/ Eileen A. Moran ------------------- Name: Eileen A. Moran Title: President Date: July 10, 2000 EDISON MISSION MIDWEST HOLDINGS CO., By: /s/ John P. Finneran -------------------- Name: John P. Finneran Title: Vice President Date: July 10, 2000 MIDWEST GENERATION, LLC By: /s/ John P. Finneran -------------------- Name: John P. Finneran Title: Vice President Date: July 10, 2000 CITIBANK, N.A. not in its individual capacity, but solely as Holder Representative By: /s/ Jenny Cheng --------------- Name: Jenny Cheng Title: Vice President Date: July 10, 2000 MIDWEST FUNDING LLC By: /s/ Dwight Jenkins ------------------ Name: Dwight Jenkins Title: Vice President Date: July __, 2000 BAYERISCHE LANDESBANK INTERNATIONAL S.A., a banking institution organized under the laws of Luxembourg, as issuer of the Midwest Letter of Credit By: /s/ Peter Lang -------------- Name: Peter Lang ---------------------- Title: Senior Manager ----------------- Date: June 27, 2000 By: /s/ Klaus Ense ---------------------- Name: Klaus Ense Title: Manager ------------------ Date: June 27, 2000 BAYERISCHE LANDESBANK GIROZENTRALE, as issuer of the RCE Letter of Credit By: /s/ C. Stolarski --------------------------------- Name: C. Stolarski --------------------------- Title: Vice President -------------------------- Date: June 27, 2000 By: /s/ D. Rieg --------------------------------- Name: D. Rieg --------------------------- Title: First Vice President -------------------------- Date: June 27, 2000 EXHIBIT A FORM OF AMENDMENT TO FACILITY LEASE AGREEMENT AMENDMENT ONE AMENDMENT ONE (this "AMENDMENT") dated as of July [__], 2000 by and between Collins Trust I (the "OWNER LESSOR") and Collins Holdings EME, LLC (the "FACILITY LESSEE"). WHEREAS, the Owner Lessor and the Facility Lessee have entered into that certain Facility Lease Agreement (T1), dated as of December 15, 1999 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions thereof, the "FACILITY LEASE"). WHEREAS, the Owner Lessor, the Facility Lessee, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A. have entered into that certain Participation Agreement, dated as of December 15, 1999 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions thereof, the "PARTICIPATION AGREEMENT"). WHEREAS, Midwest desires to enter into the Synthetic Lease Transaction; WHEREAS, Midwest has requested, and the Owner Lessor and the Facility Lessee have agreed, to amend and waive certain provisions of the Facility Lease so as to permit the Synthetic Lease Transaction; and WHEREAS, Midwest has requested, and the other parties to the Participation Agreement have agreed, in that certain Amendment Two, dated as of June 23, 2000, by and among the parties to the Participation Agreement, ("AMENDMENT TWO TO THE PARTICIPATION AGREEMENT"), to amend and waive certain provisions of the Participation Agreement so as to permit the Synthetic Lease Transaction; NOW, THEREFORE, the parties hereto agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment, terms defined in the Facility Lease are used herein (and in the introductions and recitals hereto) as defined therein. Section 2. AMENDMENT TO THE FACILITY LEASE. Subject to the satisfaction of the conditions precedent specified in Section 3 below, but effective as of the Amendment Effective Date, the Facility Lease shall be amended as follows: (a) SECTION 16(h) of the Facility Lease shall be amended by inserting the following phrase immediately after the phrase "but excluding obligations arising under the Operative Documents" in the second line of SECTION 16(h) of the Facility Lease: ", Synthetic Lease Liabilities". (b) SECTION 16 of the Facility Lease shall be amended by adding Section 16(u) to the Facility Lease as follows: "(u) The Synthetic Lease Trust shall have commenced to exercise remedies in accordance with Section 15 of the Synthetic Lease to terminate the Synthetic Lease and repossess any of the Synthetic Lease Assets.". Section 3. CONDITIONS PRECEDENT. This Amendment shall not become effective until the date (the "AMENDMENT EFFECTIVE DATE") on which each of the following conditions precedent has been satisfied: (a) Delivery to the parties hereto of this Amendment duly executed and delivered by each other party hereto; (b) All conditions precedent contained in Section 4 of Amendment Two to the Participa tion Agreement have been satisfied. Section 4. MISCELLANEOUS. Except as expressly amended hereby, all of the terms and provisions of the Facility Lease are and shall remain in full force and effect. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective officers thereunto duly authorized. COLLINS HOLDINGS EME, LLC By: --------------------------- Name: Title: Date: COLLINS TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: --------------------------- Title: Date: WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee By: --------------------------- Name: Title: Date: EX-10.100-1 45 a2031364zex-10_1001.txt EXHIBIT 10.100.1 Exhibit 10.100.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 10.100 - --------------------------------------------------------------------------- Amendment Two, dated as of June 23, 2000, by and among Collins Holdings EME, LLC, Collins Trust II, Wilmington Trust Company, Collins Generation II, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A. This Amendment Two differs from Exhibit 10.100 in the following respects: In Section 3(a), "Facility Lease Agreement (T1)" is replaced by "Facility Lease Agreement (T2)." In Section 3(b), "Facility Sublease Agreement (T1)" is replaced by "Facility Sublease Agreement (T2)." Amendment Two, dated as of June 23, 2000, by and among Collins Holdings EME, LLC, Collins Trust III, Wilmington Trust Company, Collins Generation III, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A. This Amendment Two differs from Exhibit 10.100 in the following respects: In Section 3(a), "Facility Lease Agreement (T1)" is replaced by "Facility Lease Agreement (T3)." In Section 3(b), "Facility Sublease Agreement (T1)" is replaced by "Facility Sublease Agreement (T3)." Amendment Two, dated as of June 23, 2000, by and among Collins Holdings EME, LLC, Collins Trust IV, Wilmington Trust Company, Collins Generation IV, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A. This Amendment Two differs from Exhibit 10.100 in the following respects: In Section 3(a), "Facility Lease Agreement (T1)" is replaced by "Facility Lease Agreement (T4)." In Section 3(b), "Facility Sublease Agreement (T1)" is replaced by "Facility Sublease Agreement (T4)." EX-10.101 46 a2031364zex-10_101.txt EXHIBIT 10.101 Exhibit 10.101 AMENDMENT THREE AMENDMENT THREE (this "AMENDMENT") dated as of August 17, 2000 by and among, (i) COLLINS HOLDINGS EME, LLC ("COLLINS HOLDINGS"), (ii) COLLINS TRUST I, as the Owner Lessor, (iii) WILMINGTON TRUST COMPANY, as the Owner Trustee, (iv) COLLINS GENERATION I, LLC, as the Owner Participant, (v) EDISON MISSION MIDWEST HOLDING CO. ("HOLDINGS"), (vi) MIDWEST GENERATION, LLC ("MIDWEST"), (vii) MIDWEST FUNDING LLC ("FUNDING LLC"), (viii) BAYERISCHE LANDESBANK INTERNATIONAL S.A., as the Midwest LC Issuer, (ix) BAYERISCHE LANDESBANK GIROZENTRALE, as the RCE LC Issuer and (x) CITIBANK, N.A., as Holder Representative. WHEREAS, Collins Holdings, the Owner Lessor, Owner Trustee, the Owner Participant, Holdings, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative have entered into that certain Participation Agreement (T1), dated as of December 15, 1999 (as heretofore amended, modified and supplemented, the "PARTICIPATION AGREEMENT"), which set forth, INTER ALIA, certain covenants of Holdings; WHEREAS, Midwest desires to enter into the Powerton/Joliet Lease Transaction (as defined herein); and WHEREAS, Midwest has requested, and Collins Holdings, the Owner Lessor, Owner Trustee, Owner Participant, Holdings, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative have agreed, to amend and waive certain provisions of the Participation Agreement so as to permit the Powerton/Joliet Lease Transaction; WHEREAS, the parties hereto are willing to permit Midwest to enter into the Powerton/Joliet Lease Transaction on the terms and conditions of this Amendment; WHEREAS, Midwest and ComEd have entered into Amendment No. 1 To The Power Purchase Agreement dated as of December 15, 1999 attached as Exhibit C, (the "Amendment No.1 to the Collins PPA") in order to provide gas price AMENDMENT THREE TO PARTICIPATION AGREEMENT (T1) protection to Midwest and an adjustment to the maximum power purchase require- ment of ComEd in connection with Midwest's sale of energy from the Facility; WHEREAS, the consent of the Owner Lessor, Funding LLC and the Holder Representative is a condition to the execution and delivery of the Amendment No.1 to the Collins PPA, Midwest has requested and the Lenders party hereto consent to Midwest's execution and delivery of Amendment No.1 to the Collins PPA; NOW, THEREFORE, the parties hereto agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment, terms defined in the Participation Agreement are used herein (and in the introductions and recitals hereto) as defined therein. Section 2. AMENDMENT TO THE PARTICIPATION AGREEMENT. Subject to the satisfaction of the conditions precedent specified in Section 5 below, but effective as of the Amendment Effective Date, the Participation Agreement shall be amended as follows: (a) APPENDIX A to the Participation Agreement shall be amended by adding the following definitions: ""COMED JOLIET LEASE CONSENT I" means the Consent to Sale of Assets between Midwest, ComEd and Joliet Trust I referred to in the Joliet Lease Operative Documents. "COMED JOLIET LEASE CONSENT II" means the Consent to Sale of Assets between Midwest, ComEd and Joliet Trust II referred to in the Joliet Lease Operative Documents. "COMED POWERTON LEASE CONSENT I" means the Consent to Sale of Assets between Midwest, ComEd and Powerton Trust I referred to in the Powerton Lease Operative Documents. "COMED POWERTON LEASE CONSENT II" means the Consent to Sale of Assets between Midwest, ComEd and Powerton Trust II referred to in the Powerton Lease Operative Documents. -2- "COMED POWERTON/JOLIET LEASE CONSENTS" means, collectively, ComEd Joliet Lease Consent I, ComEd Joliet Lease Consent II, ComEd Powerton Lease Consent I and ComEd Powerton Lease Consent II. "JOLIET EQUITY FINANCING PARTIES I" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each defined in the Joliet Lease Participation Agreement (T1)). "JOLIET EQUITY FINANCING PARTIES II" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each as defined in the Joliet Lease Participation Agreement (T2)). "JOLIET FACILITY" means the Joliet Station, Units 7 and 8, 1044 megawatts of the 1358 megawatt coal-fired electric generating facility and certain related assets located in Will County, Illinois and more fully described in Exhibit B to each of Joliet Leases. "JOLIET GUARANTEE (T1)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of Joliet Trust I that, among other things, guarantees the payment by Midwest of all Joliet Lease Liabilities (T1) payable to Joliet Trust I. "JOLIET GUARANTEE (T2)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of Joliet Trust II that, among other things, guarantees the payment by Midwest of all Joliet Lease Liabilities (T2) payable to Joliet Trust II. "JOLIET GUARANTEE (T1: EQUITY FINANCING PARTIES)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of the Joliet Equity Financing Parties I that, among other things, guarantees the payment by Midwest of certain Joliet Lease Liabilities (T1) payable to Joliet Lease Financing Parties I. "JOLIET GUARANTEE (T2: EQUITY FINANCING PARTIES)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of the Joliet Equity Financing Parties II that, among -3- other things, guarantees the payment by Midwest of certain Joliet Lease Liabilities (T2) payable to Joliet Lease Financing Parties II. "JOLIET GUARANTEES" means, collectively, the Joliet Guarantee (T1), the Joliet Guarantee (T2), the Joliet Guarantee (T1: Equity Financing Parties), the Joliet Guarantee (T2: Equity Financing Parties), the Joliet Reimbursement Agreement (T1) and the Joliet Reimbursement Agreement (T2). "JOLIET INTERCOMPANY NOTE PLEDGE AGREEMENT (T1)" means the Pledge Agreement (T1) dated as of August 17, 2000 between Midwest and the Holdings Collateral Agent relating to the pledge of the Joliet Lease Intercompany Note (T1). "JOLIET INTERCOMPANY NOTE PLEDGE AGREEMENT (T2)" means the Pledge Agreement (T2) dated as of August 17, 2000 between Midwest and the Holdings Collateral Agent relating to the pledge of the Joliet Lease Intercompany Note (T2). "JOLIET LEASE (T1)" means the Facility Lease Agreement (T1) dated as of August 17, 2000 between Midwest and Joliet Trust I. "JOLIET LEASE (T2)" means the Facility Lease Agreement (T2) dated as of August 17, 2000 between Midwest and Joliet Trust II. "JOLIET LEASE INTERCOMPANY NOTE (T1)" means the EME Note (as defined in the Joliet Lease Participation Agreement (T1)) dated the Closing Date (as defined in the Joliet Lease Participation Agreement (T1)) evidencing the loan by Midwest to Edison Mission Energy of the proceeds of the Joliet Lease Transaction (T1). "JOLIET LEASE INTERCOMPANY NOTE (T2)" means the EME Note (as defined in the Joliet Lease Participation Agreement (T2)) dated the Closing Date (as defined in the Joliet Lease Participation Agreement (T2)) evidencing the loan by Midwest to Edison Mission Energy of the proceeds of the Joliet Lease Transaction (T2). -4- "JOLIET LEASE INTERCOMPANY NOTES" means, collectively, the Joliet Lease Intercompany Note (T1) and the Joliet Intercompany Note (T2). "JOLIET LEASE LIABILITIES" means, collectively, the Joliet Lease Liabilities (T1) and the Joliet Lease Liabilities (T2). "JOLIET LEASE LIABILITIES (T1)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Joliet Lease (T1) or the other Joliet Lease Operative Documents (T1). "JOLIET LEASE LIABILITIES (T2)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Joliet Leases (T2) or the other Joliet Lease Operative Documents (T2). "JOLIET LEASE OPERATIVE DOCUMENTS" means, collectively, the Joliet Lease Operative Documents (T1) and the Joliet Lease Operative Documents (T2). "JOLIET LEASE OPERATIVE DOCUMENTS (T1)" means, collectively, the Operative Documents as defined in the Joliet Lease Participation Agreement (T1). "JOLIET LEASE OPERATIVE DOCUMENTS (T2)" means, collectively, the Operative Documents as defined in the Joliet Lease Participation Agreement (T2). "JOLIET LEASE PARTICIPATION AGREEMENT (T1)" means the Participation Agreement (T1) dated as of August 17, 2000 by and among Midwest, Edison Mission Energy, Joliet Trust I, Wilmington Trust Company, Joliet Generation I, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. "JOLIET LEASE PARTICIPATION AGREEMENT (T2)" means the Participation Agreement (T2) dated as of August 17, 2000 by and among Midwest, Edison Mission Energy, Joliet Trust II, Wilmington Trust Company, -5- Joliet Generation II, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. "JOLIET LEASE PARTICIPATION AGREEMENTS" means, collectively, the Joliet Lease Participation Agreement (T1) and the Joliet Lease Participation Agreement (T2). "JOLIET LEASE TRANSACTION (T1)" means the transactions pursuant to the Joliet Lease Participation Agreement (T1) and the Joliet Lease Operative Documents (T1) whereby Midwest sells a 63.6% undivided interest in the Joliet Facility to Joliet Trust I and Joliet Trust I leases such undivided interest to Midwest pursuant to the Joliet Lease (T1). "JOLIET LEASE TRANSACTION (T2)" means the transactions pursuant to the Joliet Lease Participation Agreement (T2) and the Joliet Lease Operative Documents (T2) whereby Midwest sells a 36.4% undivided interest in the Joliet Facility to Joliet Trust II and Joliet Trust II leases such undivided interest to Midwest pursuant to the Joliet Lease (T2). "JOLIET LEASE TRANSACTIONS" means, collectively, the Joliet Lease Transaction (T1) and the Joliet Lease Transaction (T2). "JOLIET LEASE TRUSTS" means, collectively, Joliet Trust I and Joliet Trust II. "JOLIET LEASES" means, collectively, the Joliet Lease (T1) and Joliet Lease (T2). "JOLIET REIMBURSEMENT AGREEMENT (T1)" means the Reimbursement Agreement (T1) dated as of August 17, 2000 between Edison Mission Energy and Midwest. "JOLIET REIMBURSEMENT AGREEMENT (T2)" means the Reimbursement Agreement (T2) dated as of August 17, 2000 between Edison Mission Energy and Midwest. "JOLIET SUBORDINATION AGREEMENT (T1)" means the Subordination Agreement dated as of August 17, 2000 between Joliet Trust I, the -6- Owner Participant (as defined in the Joliet Participation Agreement (T1)), the Lease Indenture Trustee (as defined in the Joliet Participation Agreement (T1)) and the Holdings Collateral Agent. "JOLIET SUBORDINATION AGREEMENT (T2)" means the Subordination Agreement dated as of August 17, 2000 between Joliet Trust II, the Owner Participant (as defined in the Joliet Participation Agreement (T2)), the Lease Indenture Trustee (as defined in the Joliet Participation Agreement (T2)) and the Holdings Collateral Agent. "JOLIET TRUST I" means Joliet Trust I, a Delaware business trust. "JOLIET TRUST II" means Joliet Trust II, a Delaware business trust. "POWERTON EQUITY FINANCING PARTIES I" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each as defined in the Powerton Lease Participation Agreement (T1)). "POWERTON EQUITY FINANCING PARTIES II" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each as defined in the Powerton Lease Participation Agreement (T2)) "POWERTON FACILITY" means the Powerton Station, 1,538 Megawatt Coal Fired Electric Generating Plant and certain related assets located in Tazewell County, Illinois and more fully described in Exhibit B to each of Powerton Leases. "POWERTON GUARANTEE (T1)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of Powerton Trust I that, among other things, guarantees the payment by Midwest of all Powerton Lease Liabilities (T1) payable to Powerton Trust I. "POWERTON GUARANTEE (T2)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of Powerton Trust II that, among other things, guarantees the payment by Midwest of all Powerton Lease Liabilities (T2) payable to Powerton Trust II. -7- "POWERTON GUARANTEE (T1: EQUITY FINANCING PARTIES)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of the Powerton Equity Financing Parties I that, among other things, guarantees the payment by Midwest of certain Powerton Lease Liabilities (T1) payable to Powerton Equity Financing Parties I. "POWERTON GUARANTEE (T2: EQUITY FINANCING PARTIES)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of the Powerton Equity Financing Parties II that, among other things, guarantees the payment by Midwest of certain Powerton Lease Liabilities (T2) payable to Powerton Equity Financing Parties II. "POWERTON GUARANTEES" means, collectively, the Powerton Guarantee (T1), the Powerton Guarantee (T2), the Powerton Guarantee (T1: Equity Financing Parties), the Powerton Guarantee (T2: Equity Financing Parties), the Powerton Reimbursement Agreement (T1) and the Powerton Reimbursement Agreement (T2). "POWERTON INTERCOMPANY NOTE PLEDGE AGREEMENT (T1)" means the Pledge Agreement (T1) dated as of August 17, 2000 among Midwest and the Holdings Collateral Agent relating to the pledge of the Powerton Lease Intercompany Note (T1). "POWERTON INTERCOMPANY NOTE PLEDGE AGREEMENT (T2)" means the Pledge Agreement (T2) dated as of August 17, 2000 among Midwest and the Holdings Collateral Agent relating to the pledge of the Powerton Lease Intercompany Note (T2). "POWERTON LEASE (T1)" means the Facility Lease Agreement (T1) dated as of August 17, 2000 between Midwest and Powerton Trust I. "POWERTON LEASE (T2)" means the Facility Lease Agreement (T2) dated as of August 17, 2000 between Midwest and Powerton Trust II. "POWERTON LEASE INTERCOMPANY NOTE (T1)" means the EME Note (as defined in the Powerton Lease Participation Agreement (T1)) dated -8- the Closing Date (as defined in the Powerton Lease Participation Agreement (T1)) evidencing the loan by Midwest to Edison Mission Energy of the proceeds of the Powerton Lease Transaction (T1). "POWERTON LEASE INTERCOMPANY NOTE (T2)" means the EME Note (as defined in the Powerton Lease Participation Agreement (T2)) dated the Closing Date (as defined in the Powerton Lease Participation Agreement (T2)) evidencing the loan by Midwest to Edison Mission Energy of the proceeds of the Powerton Lease Transaction (T2). "POWERTON LEASE INTERCOMPANY NOTES" means, collectively, the Powerton Lease Intercompany Note (T1) and the Powerton Lease Intercompany Note (T2). "POWERTON LEASE LIABILITIES" means, collectively, the Powerton Lease Liabilities (T1) and the Powerton Lease Liabilities (T2). "POWERTON LEASE LIABILITIES (T1)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Powerton Lease (T1) or the other Powerton Lease Operative Documents (T1). "POWERTON LEASE LIABILITIES(T2)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Powerton Leases (T2) or the other Powerton Lease Operative Documents (T2). "POWERTON LEASE OPERATIVE DOCUMENTS" means, collectively, the Powerton Lease Operative Documents (T1) and the Powerton Lease Operative Documents (T2). "POWERTON LEASE OPERATIVE DOCUMENTS (T1)" means, collectively, the Operative Documents as defined in the Powerton Lease Participation Agreement (T1). "POWERTON LEASE OPERATIVE DOCUMENTS (T2)" means, collectively, the Operative Documents as defined in the Powerton Lease Participation Agreement (T2). -9- "POWERTON LEASE PARTICIPATION AGREEMENT (T1)" means the Participation Agreement (T1) dated as of August 17, 2000 by and among Midwest, Edison Mission Energy, Powerton Trust I, Wilmington Trust Company, Powerton Generation I, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. "POWERTON LEASE PARTICIPATION AGREEMENT (T2)" means the Participation Agreement (T2) dated as of August 17, 2000 by and among Midwest, Edison Mission Energy, Powerton Trust II, Wilmington Trust Company, Powerton Generation II, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. "POWERTON LEASE PARTICIPATION AGREEMENTS" means, collectively, the Powerton Lease Participation Agreement (T1) and the Powerton Lease Participation Agreement (T2). "POWERTON LEASE TRANSACTION (T1)" means the transactions pursuant to the Powerton Lease Participation Agreement (T1) and the Powerton Lease Operative Documents (T1) whereby Midwest sells a 63.6% undivided interest in the Powerton Facility to Powerton Trust I and Powerton Trust I leases such undivided interest to Midwest pursuant to the Powerton Lease (T1). "POWERTON LEASE TRANSACTION (T2)" means the transactions pursuant to the Powerton Lease Participation Agreement (T2) and the Powerton Lease Operative Documents (T2) whereby Midwest sells a 36.4% undivided interest in the Powerton Facility to Powerton Trust II and Powerton Trust II leases such undivided interest to Midwest pursuant to the Powerton Lease (T2). "POWERTON LEASE TRANSACTIONS" means, collectively, the Powerton Lease Transaction (T1) and the Powerton Lease Transaction (T2). "POWERTON LEASE TRUSTS" means, collectively, Powerton Trust I and Powerton Trust II. "POWERTON LEASES" means, collectively, the Powerton Lease (T1) and Powerton Lease (T2). -10- "POWERTON REIMBURSEMENT AGREEMENT (T1)" means the Reimbursement Agreement (T1) dated as of August 17, 2000 between Edison Mission Energy and Midwest. "POWERTON REIMBURSEMENT AGREEMENT (T2)" means the Reimbursement Agreement (T2) dated as of August 17, 2000 between Edison Mission Energy and Midwest. "POWERTON SUBORDINATION AGREEMENT (T1)" means the Subordination Agreement dated as of August 17, 2000 between Powerton Trust I, the Owner Participant (as defined in the Powerton Participation Agreement (T1)), the Lease Indenture Trustee (as defined in the Powerton Participation Agreement (T1)) and the Holdings Collateral Agent. "POWERTON SUBORDINATION AGREEMENT (T2)" means the Subordination Agreement dated as of August 17, 2000 between Powerton Trust II, the Owner Participant (as defined in the Powerton Participation Agreement (T2)), the Lease Indenture Trustee (as defined in the Powerton Participation Agreement (T2)) and the Holdings Collateral Agent. "POWERTON TRUST I" means Powerton Trust I, a Delaware business trust. "POWERTON TRUST II" means Powerton Trust II, a Delaware business trust. "POWERTON/JOLIET INTERCOMPANY NOTE PLEDGE AGREEMENT" means, collectively, the Powerton Intercompany Note Pledge Agreement (T1), the Powerton Intercompany Note Pledge Agreement (T2), the Joliet Intercompany Note Pledge Agreement (T1) and the Joliet Intercompany Note Pledge Agreement (T2). "POWERTON/JOLIET LEASE ASSETS" means, collectively, the Powerton Facility and the Joliet Facility. -11- "POWERTON/JOLIET LEASE GUARANTEES" means, collectively, the Powerton Guarantees and the Joliet Guarantees. "POWERTON/JOLIET LEASE INTERCOMPANY NOTES" means, collectively, the Powerton Lease Intercompany Notes and the Joliet Lease Intercompany Notes. "POWERTON/JOLIET LEASE INTERCOMPANY NOTE PAYMENTS" mean the payments by Edison Mission Energy to Midwest under or in respect of the Powerton/Joliet Lease Intercompany Notes. "POWERTON/JOLIET LEASE LIABILITIES" means, collectively, the Powerton Lease Liabilities and the Joliet Lease Liabilities. "POWERTON/JOLIET LEASE OPERATIVE DOCUMENTS" means, collectively, the Powerton Lease Operative Documents and the Joliet Lease Operative Documents. "POWERTON/JOLIET LEASE PARTICIPATION AGREEMENTS" means, collectively, the Powerton Lease Participation Agreement (T1), Powerton Lease Participation Agreement (T2), Joliet Lease Participation Agreement (T1) and Joliet Lease Participation Agreement (T2). "POWERTON/JOLIET LEASE TRANSACTION" means, collectively, the Powerton Lease Transaction and the Joliet Lease Transaction. "POWERTON/JOLIET LEASES" means, collectively, Powerton Leases and Joliet Leases. "POWERTON/JOLIET SUBORDINATION AGREEMENTS" means, collectively, the Powerton Subordination Agreement (T1), the Powerton Subordination Agreement (T2), the Joliet Subordination Agreement (T1) and the Joliet Subordination Agreement (T2). "POWERTON/JOLIET LEASE TRUSTS" means, collectively, the Powerton Lease Trusts and the Joliet Lease Trusts.". -12- (b) APPENDIX A of the Participation Agreement shall be further amended by deleting the definitions of "CASH FLOW AVAILABLE FOR FIXED CHARGES", "DEBT TO CAPITAL RATIO", "FIXED CHARGES", "OPERATING EXPENSES" and "SECURITY DOCUMENTS" in their entirety and replacing them with the following definitions: ""CASHFLOW AVAILABLE FOR FIXED CHARGES" means, in respect of any period, the excess, if any, of Revenues (excluding (i) proceeds of any permitted asset sale, (ii) amounts available in the Cashflow Recapture Fund, (iii) Synthetic Lease Intercompany Note Payments and (iv) Powerton/Joliet Intercompany Note Payments) during such period OVER Operating Expenses during such period. "DEBT TO CAPITAL RATIO" means, with respect to Holdings and its Consolidated Subsidiaries, the ratio as of the end of the last Fiscal Quarter for which financial statements referred to in SECTION 7.1 are available of (i) the aggregate principal amount of Indebtedness of Holdings and its Consolidated Subsidiaries (other than Indebtedness of Holdings incurred pursuant to SECTION 8.1(b)(iii), SECTION 8.1(b)(iv) and SECTION 8.1(i) then outstanding to (ii) Total Capitalization (excluding, to the extent included, the Synthetic Lease Intercompany Note, payments by Edison Mission Energy pursuant to the Synthetic Lease Guarantee, the Powerton/Joliet Intercompany Notes and payments by Edison Mission Energy pursuant to the Powerton/Joliet Guarantees). "FIXED CHARGES" 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, including (A) all capitalized interest and (B) the interest portion of any deferred payment obligation, (ii) amounts due and payable under SECTIONS 3.3.1 and 3.3.2 of the Holdings Credit Agreement 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 of the Holdings Credit Agreement during such period, (iv) the interest portion of any deferred payment obligation due and payable during such period, (v) the aggregate amount of the Lease Obligations due and payable during such period, and (vi) all other amounts due -13- and payable by the Loan Parties with respect to Indebtedness (other than Designated Lease Liabilities, Synthetic Lease Liabilities and Powerton/Joliet Lease Liabilities) permitted under SECTION 8.1 during such period. "OPERATING EXPENSES" means, in respect of any period, all cash amounts paid by the Holdings 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, Necessary Capital Expenditures and all other fees and expenses necessary for the continued operation and maintenance of the Generating Assets and the conduct of the business of the Holdings Loan Parties. Operating Expenses shall exclude (to the extent included) Lease Obligations, Synthetic Lease Liabilities (other than payments of Synthetic Lease Environmental Indemnity Obligations) and Powerton/Joliet Lease Liabilities and shall include (to the extent excluded) Designated Lease Liabilities (other than Lease Obligations). "SECURITY DOCUMENTS" means (i) the Collateral Agency and Intercreditor Agreement, (ii) the Holdings Guarantee, (iii) each Pledge Agreement, (iv) the Powerton/Joliet Intercompany Note Pledge Agreements, (v) the Powerton/Joliet Subordination Agreements and (vi) any other agreement or instrument hereafter entered into by Holdings or any other Person which, directly or indirectly, guarantees or secures payment of the indebtedness evidenced by the Notes or payment or performance of any other obligation.". (c) SECTION 7 of the Participation Agreement shall be amended by adding Section 7.7 as follows: "SECTION 7.7 POWERTON/JOLIET INTERCOMPANY NOTES. As soon as possible after the end of each Fiscal Quarter, Holdings shall provide -14- to the Holder Representative an Officer's Certificate stating the outstanding principal amounts of each of the Powerton/Joliet Intercompany Notes and a statement of transactions reconciling such amounts to the previous Fiscal Quarter end.". (d) SECTION 8.1(b) of the Participation Agreement shall be amended by deleting Section 8.1(b) of the Participation Agreement and replacing it in its entirety with the following: "(b)(i) Capitalized Lease Liabilities and Operating Lease Liabilities outstanding (or anticipated to be outstanding) on the Closing Date and set forth on SCHEDULE 8.2.1(a) to the Holdings Credit Agreement, (ii) Capitalized Lease Liabilities and Operating Lease Liabilities entered into after the Closing Date in the ordinary course of business not to exceed at any time an aggregate principal amount equal to $50,000,000, (iii) Synthetic Lease Liabilities and (iv) Powerton/Joliet Lease Liabilities;". (e) SECTION 8.2 of the Participation Agreement shall be amended by (i) deleting SECTION 8.2(n) of the Participation Agreement and replacing it in its entirety with the following: "(n) Liens created pursuant to the Synthetic Lease Basic Documents, Powerton/Joliet Lease Operative Documents and the Powerton/Joliet Intercompany Note Pledge Agreement.". (f) SECTION 8.4 of the Participation Agreement shall be amended by deleting SECTION 8.4(iv) and SECTION 8.4(v) of the Participation Agreement and replacing them in their entirety with the following subsections: "(iv) transfer certain railcars or rights to railcars as part of the Transco Transaction, (v) sell Synthetic Lease Assets to Synthetic Lease Trust pursuant to the Synthetic Lease Basic Documents and (vi) sell the Powerton/Joliet Assets and lease the associated Ground Interests (as defined in the Powerton/Joliet Operative Documents) to the Powerton/Joliet Lease Trusts pursuant to the Powerton/Joliet Lease Operative Documents; PROVIDED, FURTHER, that any Asset Disposition pursuant to CLAUSES (i), (ii), (iii), (iv), (v) and (vi) of this proviso shall -15- not be included in the calculation of the aggregate net book value of assets sold pursuant to this SECTION 8.4.". (g) SECTION 8.5 of the Participation Agreement shall be amended by deleting SECTION 8.5(v) of the Participation Agreement and replacing it in its entirety with the following: "(v) Investments evidenced by the Synthetic Lease Intercompany Note and the Powerton/Joliet Lease Intercompany Notes.". (h) SECTION 8.6 of the Participation Agreement shall be amended by deleting the last sentence and replacing it with the following sentence: "Notwithstanding the foregoing, the Synthetic Lease Transaction, the transactions contemplated by the Synthetic Lease Basic Documents, the Powerton/Joliet Lease Transaction and the transactions contemplated by the Powerton/Joliet Lease Operative Documents shall be deemed not to be a Transaction with an Affiliate for the purposes of this SECTION 8.6.". (i) SECTION 8.12 of the Participation Agreement shall be amended by deleting the last sentence and replacing it with the following sentence: "Notwithstanding the foregoing, so long as no Event of Loss or Lease Event of Default shall have occurred and be continuing, Holdings or its Subsidiaries may make a Restricted Payment to Edison Mission Energy on or within 30 days after the date (A) any Powerton/Joliet Lease Intercompany Note Payment is received by Midwest in an amount not exceeding such Powerton/Joliet Lease Intercompany Note Payment (to the extent that the same was not included in any Restricted Payment theretofore made in accordance with this SECTION 8.12 or used to pay Powerton/Joliet Lease Liabilities) and (B) any Synthetic Lease Intercompany Note Payment is received by Midwest in an amount not exceeding such Synthetic Lease Intercompany Note Payment (to the extent that the same was not included in any Restricted Payment theretofore made in accordance with this SECTION 8.12); PROVIDED that, in the event that Midwest pays Incremental Synthetic Lease Environmental Indemnity Payments, the aggregate -16- amount of Restricted Payments payable in accordance with this sentence (but not otherwise in accordance with this SECTION 8.12) shall be reduced by a like amount.". (j) SECTION 8 of the Participation Agreement shall be amended by adding SECTION 8.14 to the Participation Agreement as follows: "SECTION 8.14 POWERTON/JOLIET LEASE OPERATIVE DOCUMENTS. Holdings shall not, and shall not permit any of its Sub- sidiaries, to agree or consent to any termination, amendment, modification or waiver of (a) Section 18.19 of each of the Powerton/Joliet Lease Participation Agreements, (b) the definition of "Free Cashflow" set forth in the Powerton/Joliet Lease Operative Documents, (c) the Powerton/Joliet Lease Intercompany Notes or (d) or any other provision of the Powerton/Joliet Lease Operative Documents that increases or is reasonably likely to increase the liability, or the obligations, of Midwest (or decreases or is reasonably likely to decrease the liability, or the obligations, of Edison Mission Energy) with respect to the Powerton/Joliet Lease Operative Documents in any material respect.". Section 3. AUTHORIZATION OF AMENDMENT OF FACILITY LEASE AND FACILITY SUBLEASE. (a) Collins Holdings, the Owner Lessor, the Owner Participant and the Holder Representative hereby authorize amendments to that certain Facility Lease Agreement (T1), dated as of December 15, 1999, by and among the Owner Lessor, the Owner Participant and Collins Holdings (as heretofore amended, modified and supplemented, the "FACILITY LEASE"), substantially in the form of Exhibit A hereto. (b) The Holder Representative, Collins Holdings, the Owner Participant, the Owner Lessor and Midwest hereby authorize that the amendments to the Facility Lease authorized by paragraph (a) of this Section 3 will effect corresponding amendments to the terms of that certain Facility Sublease Agreement (T1), dated as of December 15, 1999, by and among Collins Holdings, Midwest and the Owner Lessor (as heretofore amended, modified and supplemented, the "FACILITY SUBLEASE"). -17- Section 4. CONSENT/WAIVER. The Owner Lessor, Funding LLC and the Holder Representative hereby consent to the execution and delivery by Midwest and ComEd of Amendment No.1 to Collins PPA. Section 5. CONDITIONS PRECEDENT. This Amendment shall not become effective until the date (the "AMENDMENT EFFECTIVE DATE") on which each of the following conditions precedent have been satisfied or will be satisfied contemporaneously with this Amendment becoming effective: (a) Delivery to the parties hereto of this Amendment duly executed and delivered by each other party hereto; (b) Delivery to Owner Lessor, Owner Trustee, Owner Participant, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative of the Powerton/Joliet Lease Operative Documents in form and substance satisfactory to the recipients; (c) All conditions precedent to effectuate the Powerton/Joliet Lease Transaction have been satisfied (including delivery of the ComEd Powerton/Joliet Lease Consents) or waived; (d) Delivery to the Holdings Collateral Agent of (i) the Powerton/Joliet Intercompany Note Pledge Agreement and (ii) the Powerton/Joliet Subordination Agreements, each in form and substance satisfactory to the recipient; (e) The Owner Lessor, Owner Trustee, Owner Participant, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative shall have received opinions, dated the Amendment Effective Date and addressed to the recipients from (i) the general counsel to Holdings, Midwest and Collins Holdings, (ii) the special New York counsel to Holdings, Midwest and Collins Holdings and (iii) the special Illinois counsel to the Loan Parties, and (iv) Federal Energy Regulatory Commission counsel to the Holdings, Midwest and Collins Holdings. Each such opinion shall be in form and substance reasonably satisfactory to the recipients; (f) Holdings shall have received written confirmation that after giving effect to the Powerton/Joliet Lease Transaction, no Debt Rating shall fall below the -18- Debt Rating in effect prior to giving effect to the Powerton/Joliet Lease Transaction; (g) The representations and warranties of Holdings, Midwest and Collins Holdings as set forth in the Participation Agreement, shall be true and correct as of the Amendment Effective Date after giving effect to the amendments contemplated hereby (unless stated to be given as of an earlier date, in which case such representation and warranty shall be true and correct only as of such earlier date); (h) As of the Amendment Effective Date, no Lease Event of Default, or Event of Loss or event that, with passage of time or giving of notice or both, would constitute a Lease Event of Default or an Event of Loss, shall have occurred and be continuing; and (i) Contemporaneously with this Amendment becoming effective, the Holder Representative shall have received confirmation that Edison Mission Energy has used the proceeds of the Powerton/Joliet Intercompany Notes to repay in full Indebtedness of Edison Mission Energy (including, without limitation, the repayment in full of its obligations under the Credit Agreement dated as of December 15, 1999 among Edison Mission Energy, the commercial lending institutions party thereto and The Chase Manhattan Bank, as Administrative Agent and the termination of related commitments). Section 6. MISCELLANEOUS. Except as expressly amended hereby, all of the terms and provisions of the Participation Agreement are and shall remain in full force and effect. This Amendment may be executed in any number of counter parts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counter part. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. -19- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective officers thereunto duly authorized. COLLINS HOLDINGS EME, LLC By: /s/ John P. Finneran, Jr. ------------------------- Name: John P. Finneran Title: Vice President Date: August 24, 2000 COLLINS TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ James P. Lawler ------------------- Name: James P. Lawler Title: Vice President Date: August 24, 2000 WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee By: /s/ James P. Lawler ------------------- Name: James P. Lawler Title: Vice President Date: August 24, 2000 COLLINS GENERATION I, LLC By: /s/ Christopher P. Kelleher --------------------------- Name: Christopher P. Kelleher Title: Manager Date: August 24, 2000 EDISON MISSION MIDWEST HOLDINGS CO., By: /s/ Gary Garcia ------------------------- Name: Gary Garcia Title: Vice President Date: August 24, 2000 MIDWEST GENERATION, LLC By: /s/ Gary Garcia ------------------------- Name: Gary Garcia Title: Vice President Date: August 24, 2000 CITIBANK, N.A. not in its individual capacity, but solely as Holder Representative By: /s/ Jenny Cheng ------------------------- Name: Jenny Cheng Title: Vice President Date: August 24, 2000 MIDWEST FUNDING LLC By: /s/ Peter H. Sorensen ------------------------- Name: Peter H. Sorensen Title: President Date: August 24, 2000 BAYERISCHE LANDESBANK INTERNATIONAL S.A., a banking institution organized under the laws of Luxembourg, as issuer of the Midwest Letter of Credit By: /s/ Herbert Weynand -------------------------------- Name: Herbert Weynand Title: Head of Corporate Banking Date: August 11, 2000 By: /s/ Peter Lang -------------------------------- Name: Peter Lang Title: Group Head of Corporate Finance Date: August 11, 2000 BAYERISCHE LANDESBANK GIROZENTRALE, as issuer of the RCE Letter of Credit By: /s/ Dietmar Rieg ---------------- Name: Dietmar Rieg Title: First Vice President Date: August 11, 2000 By: /s/ Cornelia Wintergerst ------------------------ Name: Cornelia Wintergerst Title: Vice President Date: August 11, 2000 EXHIBIT A FORM OF AMENDMENT TO FACILITY LEASE AGREEMENT AMENDMENT TWO AMENDMENT TWO (this "AMENDMENT") dated as of August __, 2000 by and between Collins Trust I (the "OWNER LESSOR") and Collins Holdings EME, LLC (the "FACILITY LESSEE"). WHEREAS, the Owner Lessor and the Facility Lessee have entered into that certain Facility Lease Agreement (T1), dated as of December 15, 1999 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions thereof, the "FACILITY LEASE"). WHEREAS, the Owner Lessor, the Facility Lessee, Wilmington Trust Company, Collins Generation I, LLC, Edison Mission Midwest Holdings Co., Midwest, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale and Citibank, N.A. have entered into that certain Participation Agreement, dated as of December 15, 1999 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions thereof, the "PARTICIPATION AGREEMENT"). WHEREAS, Midwest desires to enter into the Leveraged Lease Transaction; WHEREAS, Midwest has requested, and the Owner Lessor and the Facility Lessee have agreed, to amend and waive certain provisions of the Facility Lease so as to permit the Leveraged Lease Transaction; and WHEREAS, Midwest has requested, and the other parties to the Participation Agreement have agreed, in that certain Amendment Three, dated as of August __, 2000, by and among the parties to the Participation Agreement, ("AMENDMENT THREE TO THE PARTICIPATION AGREEMENT"), to amend and waive certain provisions of the Participation Agreement so as to permit the Leveraged Lease Transaction; NOW, THEREFORE, the parties hereto agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment, terms defined in the Facility Lease are used herein (and in the introductions and recitals hereto) as defined therein. Section 2. AMENDMENT TO THE FACILITY LEASE. Subject to the satisfaction of the conditions precedent specified in Section 3 below, but effective as of the Amendment Effective Date, the Facility Lease shall be amended as follows: (a) SECTION 16(h) of the Facility Lease shall be amended by inserting the following phrase immediately after the phrase "but excluding obligations arising under the Operative Documents" in the second line of SECTION 16(h) of the Facility Lease: ", Synthetic Lease Liabilities, Powerton/Joliet Lease Liabilities". (b) SECTION 16 of the Facility Lease shall be amended by adding SECTIONS 16(v), 16(w) and 16(x) to the Facility Lease as follows: "(v) any of the Powerton/Joliet Lease Trusts (or the related Lease Indenture Trustee (under, and as defined in the related, Powerton/Joliet Lease Operative Documents) should have commenced to exercise remedies in accordance with Section 17 of the Powerton/Joliet Leases to terminate any of the Powerton/Joliet Leases and repossess any of the Powerton/Joliet Lease Assets. (w) Edison Mission Energy shall fail to make payment or fail to perform its obligations under any Powerton/Joliet Lease Guarantee or any Powerton/Joliet Lease Intercompany Note within five Business Days after any such payment becomes due in accordance with the terms thereof or hereof. (x) any of the Powerton/Joliet Lease Guarantees or the Powerton/Joliet Lease Intercompany Notes is declared unenforceable or is terminated, or Edison Mission Energy or any Powerton/Joliet Trust shall assert that any of the Powerton/Joliet Lease Guarantees or the Powerton/Joliet Lease Intercompany Notes to which it is a party shall no longer be in full force and effect.". Section 3. CONDITIONS PRECEDENT. This Amendment shall not become effective until the date (the "AMENDMENT EFFECTIVE DATE") on which each of the following conditions precedent has been satisfied or will be satisfied contemporaneously with this Amendment becoming effective: (a) Delivery to the parties hereto of this Amendment duly executed and delivered by each other party hereto; (b) All conditions precedent contained in Section 4 of Amendment Three to the Participation Agreement have been satisfied. Section 4. MISCELLANEOUS. Except as expressly amended hereby, all of the terms and provisions of the Facility Lease are and shall remain in full force and effect. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. This Amend ment shall be governed by, and construed in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective officers thereunto duly authorized. COLLINS HOLDINGS EME, LLC By: ---------------------------------- Name: Title: Date: August , 2000 COLLINS TRUST I By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: ---------------------------------- Name: Title: Date: August , 2000 EX-10.101-1 47 a2031364zex-10_1011.txt EXHIBIT 10.101.1 Exhibit 10.101.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 10.101 - ---------------------------------------------------------------------------- Amendment Three, dated as of August 17, 2000, by and among Collins Holdings EME, LLC, Collins Trust II, Wilmington Trust Company, Collins Generation II, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A. This Amendment Three differs from Exhibit 10.101 in the following respects: In Section 3(a), "Facility Lease Agreement (T1)" is replaced by "Facility Lease Agreement (T2)." In Section 3(b), "Facility Sublease Agreement (T1)" is replaced by "Facility Sublease Agreement (T2)." Amendment Three, dated as of August 17, 2000, by and among Collins Holdings EME, LLC, Collins Trust III, Wilmington Trust Company, Collins Generation III, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A. This Amendment Three differs from Exhibit 10.101 in the following respects: In Section 3(a), "Facility Lease Agreement (T1)" is replaced by "Facility Lease Agreement (T3)." In Section 3(b), "Facility Sublease Agreement (T1)" is replaced by "Facility Sublease Agreement (T3)." Amendment Three, dated as of August 17, 2000, by and among Collins Holdings EME, LLC, Collins Trust IV, Wilmington Trust Company, Collins Generation IV, LLC, Edison Mission Midwest Holdings Co., Midwest Generation, LLC, Midwest Funding LLC, Bayerische Landesbank International S.A., Bayerische Landesbank Girozentrale, and Citibank, N.A. This Amendment Three differs from Exhibit 10.101 in the following respects: In Section 3(a), "Facility Lease Agreement (T1)" is replaced by "Facility Lease Agreement (T4)." In Section 3(b), "Facility Sublease Agreement (T1)" is replaced by "Facility Sublease Agreement (T4)." EX-10.102 48 a2031364zex-10_102.txt EXHIBIT 10.102 Exhibit 10.102 EXHIBIT F TO CREDIT AGREEMENT - -------------------------------------------------------------------------------- GUARANTEE Dated as of December 15, 1999 in favor of THE CHASE MANHATTAN BANK, as Administrative Agent made by MIDWEST GENERATION, LLC, as Guarantor - -------------------------------------------------------------------------------- GUARANTEE dated as of December 15, made by MIDWEST GENERATION, LLC (the "GUARANTOR") in favor of THE CHASE MANHATTAN BANK, as Administrative Agent. Edison Mission Midwest Holdings Co. ("Holdings"), certain lenders and The Chase Manhattan Bank as Administrative Agent for said lenders are parties to a Credit Agreement (as amended, modified and supplemented and in effect from time to time, the "CREDIT AGREEMENT") dated as of December 15, 1999, providing, subject to the terms and conditions thereof, for loans to be made by said lenders to Holdings in an aggregate principal amount not exceeding $1,829,000,000. The Guarantor, a 100% directly owned subsidiary of Holdings, has agreed to make this Guarantee in accordance with Section 6.1.1 of the Credit Agreement, to induce the Lenders to enter into the Credit Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS. 1.01 DEFINED TERMS. Each capitalized term used herein (including in the preamble and recitals hereto) and not otherwise defined herein shall have the definition assigned to that term in the Credit Agreement 1.02 INTERPRETATION. The rules of interpretation set forth in Section 1.2 of the Credit Agreement shall apply MUTATIS MUTANDIS to this Guarantee as if set forth in full in this Section 1.02. ARTICLE 2. GUARANTEE. 2.01 THE GUARANTEE. The Guarantor hereby irrevocably guarantees to the Administrative Agent for the benefit of the Lenders and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Loans made by the Lenders to Holdings and all indebtedness of Holdings to any of the Lenders in respect of any Interest Rate Hedging Transactions entered into by Hold ings pursuant to Section 8.2.1 of the Credit Agreement and all other amounts from time to time owing to the Lenders or the Administrative Agent under the Credit Agreement, in each case strictly in accordance with the terms thereof (such obliga tions being herein collectively called the "GUARANTEED OBLIGATIONS"). The Guarantor hereby further agrees that if Holdings shall full to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantor will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. 2.02 OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantor under Section 2.01 are absolute and unconditional, irrespective of the value, genuine ness, validity, regularity or enforceability of the obligations of Holdings under the Credit Agreement or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 2.02 that the obligations of the Guarantor hereunder shall be absolute and unconditional, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantor hereunder, which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Guarantor, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of the Credit Agreement or any other agreement or instrument referred to therein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under the Credit Agreement or any other agreement or assignment referred to therein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or (iv) any lien or security interest granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Guaranteed Obligations shall fail to be perfected. The Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against Holdings under the Credit Agreement or any other agreement or instrument referred to therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. 2.03 REINSTATEMENT. The obligations of the Guarantor under this Article 2 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of Holdings in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed 2 Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and the Guarantor agrees that it will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including fees of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 2.04 SUBROGATION. The Guarantor hereby agrees that until the payment and satisfaction in full of all Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under the Credit Agreement it shall not exercise any right or remedy arising by reason of any performance by it of its guarantee in Section 2.01, whether by subrogation or otherwise, against Holdings or any other guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. 2.05 REMEDIES. The Guarantor agrees that, as between the Guarantor and the Lenders, the obligations of Holdings under the Credit Agreement may be declared to be forthwith due and payable as provided in Article 9 of the Credit Agreement (and shall be deemed to have become automatically due and payable in the circumstances provided in said Article 9) for purposes of Section 2.01 notwith standing any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against Holdings and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by Holdings) shall forthwith become due and payable by the Guarantor for purposes of Section 2.01. 2.06 INSTRUMENT FOR THE PAYMENT OF MONEY. The Guarantor hereby acknowledges that the guarantee in this Article 2 constitutes an instrument for the payment of money, and consents and agrees that the Administrative Agent, at its sole option, in the event of a dispute by the Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. 2.07 CONTINUING GUARANTEE. The guarantee in this Article is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. ARTICLE 3. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and warrants to the Lenders that: 3.01 ORGANIZATION; QUALIFICATION. It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite corporate power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could 3 not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualifica tion is required. 3.02 AUTHORITY. The entering into and performance of this Guarantee is within its corporate powers and have been duly authorized by all necessary company and other action. This Guarantee has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against the Guarantor in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity or as indicated in the legal opinions delivered pursuant to Section 6.1.13(ii) of the Credit Agreement. 3.03 GOVERNMENTAL APPROVALS. It has received or has the benefit of all Governmental Approvals which are necessary for the execution, delivery and performance of its obligations under this Guarantee. The entering into and performance of this Guarantee (i) will not violate any applicable law or regulation or its charter, limited liability company agreement or other organizational documents or any order of any Governmental Authority, (ii) will not violate or result in a default under any material indenture, agreement or other instrument binding upon it or its assets, or give rise to a right thereunder to require any payment to be made by any it, and (iii) will not result in the creation or imposition of any Lien on any of its assets. 3.04 LEGAL PROCEEDINGS. There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority now pending against or, to its knowledge, threatened against it (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Guarantee. ARTICLE 4. MISCELLANEOUS. 4.01 NO WAIVER. No failure on the part of the Administrative Agent or the Guarantor to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege hereunder shall operate as a waiver thereof, and no single or partial exercise by the Administrative Agent or the Guarantor 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. The remedies provided herein axe cumulative and are not exclusive of any remedies provided by applicable law. 4.02 NOTICES. All notices, requests and other communications provided for herein (including, without limitation, any modifications of, or waivers under, this Guarantee) shall be given or made in writing (including, without limita tion, by telecopy) delivered to the intended recipient at the "Address for 4 Notices" specified below its name on the signature pages hereof, or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Guarantee, all such communications shall be deemed to have been duly given (a) when received by certified mail or by an interna tional courier, such as Federal Express, by such Person, at said address of such Person or (b) when transmitted by facsimile to the number specified below and the receipt confirmed telephonically by recipient, PROVIDED that such facsimile is promptly followed by a copy of such notice delivered to such Person by postage-prepaid certified mail, or by an international courier, such as Federal Express. 4.03 EXPENSES. The Guarantor agrees to pay to the Administrative Agent all reasonable out-of-pocket expenses (including reasonable expenses for legal services of every kind) of, or incident to, the enforcement of any of the provisions of this Guarantee, and for the defending or asserting of rights and claims of the Admin istrative Agent in respect thereof, by litigation or otherwise. 4.04 WAIVERS, ETC. The terms of this Guarantee maybe waived, altered or amended only by an assignment in writing duly executed by the Administrative Agent and the Guarantor. Any such amendment or waiver shall be binding upon each Lender, the Administrative Agent and the Guarantor 4.05 SUCCESSORS AND ASSIGNS. This Guarantee shall be binding upon and inure to the benefit of the respective successors and assigns of each of the Administrative Agent and the Guarantor. 4.06 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Guarantee may be executed in any number of counterparts, all of which when taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Guarantee by signing any such counterpart. This Guarantee constitutes the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, written or oral, relating to the subject matter hereof 4.07 SEVERABILITY. If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by applicable law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be construed in order to carry out the intentions of the parties hereto as nearly as may be possible and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. 4.08 HEADINGS. Headings appearing herein are used solely for convenience of reference and are not intended to affect the interpretation of any provision of this Guarantee. 4.09 SPECIAL EXCULPATION. NO CLAIM MAY BE MADE BY ANY PARTY HERETO OR ANY OTHER PERSON AGAINST THE OTHER PARTY HERETO, THE 5 ADMINISTRATIVE AGENT OR ANY LENDER OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF ANY OF THEM FOR ANY SPECIAL, INDIRECT CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATING TO THIS GUARANTEE OR THE TRANSACTIONS, OR ANY ACT, OMISSION OR EVENT OCCUR RING IN CONNECTION THERE WITH AND EACH PARTY HERETO HEREBY WAIVES, RELEASES AND AGREES, FOR ITSELF AND THOSE WHO CLAIM THROUGH IT, NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR 4.10 WAIVER OF JURY TRIAL. EACH OF THE ADMINISTRATIVE AGENT (FOR ITSELF AND ON BEHALF OF EACH LENDER) AND THE GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTEE OR THE TRANSACTIONS CONTEMPLATED HEREBY. 4.11 NO THIRD PARTY BENEFICIARIES. THE AGREEMENTS OF THE PARTIES HERETO ARE SOLELY FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS, AND NO PERSON (OTHER THAN THE PARTIES HERETO AND THEIR SUCCES SORS AND ASSIGNS PERMITTED HEREUNDER) SHALL HAVE ANY RIGHTS HEREUNDER. 4.12 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Guarantee shall be governed by, and construed in accordance with, the law of the state of New York, without regard to the conflict of laws rules thereof other than Section 5-1401 of the New York General Obligations Law. The Guarantor hereby submits to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York and of the Supreme Court of the State of New York sitting in New York County (including its Appellate Division) and of any other appellate court in the State of New York for the purposes of all legal proceedings arising out of or relating to this Guarantee or the transactions contemplated hereby. The Guarantor hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 6 IN WITNESS WHEREOF, the parties hereto have caused this Guarantee to be duly executed and delivered as of the day and year first above written. THE CHASE MANHATTAN BANK, as Administrative Agent By: /s/ Thomas L. Casey ---------------------------------- Name: Thomas L. Casey Title: Vice President Address for Notices: Loan & Agency Services Group The Chase Manhattan Bank Eighth Floor New York, New York 10005 Attention: Michael Cerniglia Telephone No.: (212) 270-5777 With a copy to: 270 Park Avenue New York, New York 10017 Attention: Thomas Casey Telephone No.: (212) 270-3089 MIDWEST GENERATION, LLC, as Guarantor By: /s/ John P. Finneran, Jr. ---------------------------------- Name: John P. Finneran, Jr. Title: Vice President Address for Notices: One Financial Place 440 South LaSalle Street Suite 3500 Chicago, IL 60605 Attention: Georgia R. Nelson 7 EX-10.103 49 a2031364zex-10_103.txt EXHIBIT 10.103 Exhibit 10.103 MIDWEST OP LEASE GUARANTY - ------------------------------------------------------------------------------- MIDWEST OP LEASE GUARANTY (T1) Dated as of December 15, 1999 made by MIDWEST GENERATION, LLC as Guarantor Collins Station Fossil Fuel-Fired Electric Generating Facility - ------------------------------------------------------------------------------- MIDWEST OP LEASE GUARANTY(T1) MIDWEST OP LEASE GUARANTY (T1) This MIDWEST OP LEASE GUARANTY (this "Guaranty"), dated as of December 15, 1999, is issued by MIDWEST GENERATION, LLC, a Delaware limited liability company, as guarantor (the "Guarantor") in favor of the Beneficiary (as defined in Section 4 below). WITNESSETH: WHEREAS, the Guarantor is an affiliate of Collins Holdings EME, LLC, a Delaware limited liability company ("Collins Holdings"). WHEREAS, simultaneously herewith Collins Holdings is entering into a Participation Agreement (T1), dated as of December 15, 1999 (the "PARTICIPATION AGREEMENT"), with Collins Trust I, (the "OWNER LESSOR"), Collins Generation I, LLC (the "OWNER PARTICIPANT"), Wilmington Trust Company, not in its individual capacity, except as expressly provided therein, but only as owner trustee (the "OWNER TRUSTEE"), Edison Mission Midwest Holdings Co., the Guarantor, Midwest Funding LLC, as lender, Bayerische Landesbank International S.A., as issuer of the Midwest Letter of Credit, Bayerische Landesbank Girozentrale, as issuer of the RCE Letter of Credit and Citibank, N.A., as Holder Representative; WHEREAS, the Beneficiary is the owner of the beneficial interest in the Owner Lessor; WHEREAS, Collins Holdings intends to enter into a Facility Lease Agreement (T1) dated as of December 15, 1999 (the "Facility Lease") with the Owner Lessor; WHEREAS, Collins Holdings intends to enter into a Facility Site Sublease Agreement (T1), dated as of December 15, 1999 (the "Facility Site Sublease") with the Owner Lessor; WHEREAS, Collins Holdings intends to enter into a Facility Site Sub-Sub-Lease Agreement (T1), dated as of December 15, 1999 (the "Facility Site Sub-Sublease) with the Guarantor; 2 WHEREAS, it is a condition precedent to the parties' obligations under the Participation Agreement that the Guarantor enter into and deliver this Guaranty; and WHEREAS, the Guarantor anticipates benefitting directly and indirectly from the transactions contemplated by the Participation Agreement, the Facility Lease, the Facility Site Sublease and the Facility Site Sub-Sublease and is executing and delivering this Guaranty to induce the Beneficiary to enter into the Participation Agreement, and to induce the Owner Lessor to enter into the Facility Lease, the Facility Site Sublease and the Facility Site Sub-Sublease. NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to the Guarantor, the receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees as follows: SECTION 1. DEFINITIONS For purposes of this Guaranty, capitalized terms used but not otherwise defined herein shall have the respective meanings specified in Appendix A to the Participation Agreement. The general provisions of Appendix A shall apply to terms used in this Guaranty and specifically defined herein. Any term defined by reference to an agreement, instrument or other document shall have the meaning so assigned to it whether or not such document is in effect. SECTION 2. COVENANTS SECTION 2.1 Subject to the terms hereof, the Guarantor hereby unconditionally and irrevocably guarantees, as primary obligor and not merely as a surety, to the Beneficiary (a) the due, complete and punctual performance and observance by Collins Holdings of each term, provision and condition binding upon Collins Holdings pursuant to any of the Operative Documents to which Collins Holdings is or becomes a party (the "CHE OPERATIVE DOCUMENTS") and (b) the due, punctual and full payment (when and as the same may become due and payable) of each amount that Collins Holdings is or may become obligated to pay under or pursuant to any of the CHE Operative Documents, in accordance with the terms thereof, by acceleration or otherwise without offset or deduction. SECTION 2.2 In the case of any failure by Collins Holdings to perform and observe any such term, provision or condition after notice thereof by the Beneficiary, 3 the Guarantor agrees to cause such performance or observance to be done, and in the case of any failure by Collins Holdings to make such payment as and when the same shall become due and payable (by acceleration or otherwise), the Guarantor hereby agrees to make such payment (and, in addition, such further amounts, if any, as shall be sufficient to cover the costs and expenses of collection hereunder); PROVIDED, nothing herein shall expand the aforesaid obligations of the Guarantor beyond those of Collins Holdings under any of the CHE Operative Documents. All such obligations and indebtedness set forth in Section 2.1 hereof and this Section 2.2 are referred to in this Guaranty as the "OBLIGATIONS." SECTION 2.3 This Guaranty is a direct, independent and primary obligation of the Guarantor and is an irrevocable, absolute, present, unconditional and continuing obligation and guarantee of payment and performance (and not merely of collection) and the validity and enforceability of this Guaranty shall be absolute and is not conditioned in any way upon (a) the institution of suit or the taking of any other action or any attempt to enforce performance of or compliance with the obligations, covenants or undertakings (including any payment obligations) of Collins Holdings, other than providing notice to Collins Holdings, (b) the genuineness, validity, legality or enforceability of any of the CHE Operative Documents or the lack of power or authority of Collins Holdings to enter into any of the CHE Operative Documents or any substitution, release or exchange of any other guaranty or any other security for any of the Obligations or any other circumstance whatsoever (other than payment or performance) that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, (c) any right of set-off, recoupment or counterclaim, (d) any attempt to collect from Collins Holdings or any other entity or to perfect or enforce any security or any other condition or contingency or (e) any other action, occurrence or circumstance whatsoever. SECTION 2.4 Without limiting the generality of the foregoing, the Guarantor shall have no right to terminate this Guaranty, or to be released, relieved or discharged from its obligations hereunder, and such obligations shall be neither affected nor diminished for any reason whatsoever, including: (i) any amendment or supplement to or modification of any of the CHE Operative Documents, any extension or renewal of Collins Holdings' obligations under any CHE Operative Document, or any 4 subletting, assignment or transfer of Collins Holdings' or the Beneficiary's interest in the CHE Operative Documents; (ii) any bankruptcy, insolvency, readjustment, composition, liquidation or any other change in the legal status of Collins Holdings or any rejection or modification of the Obligations of Collins Holdings or the Beneficiary as a result of any bankruptcy, reorganization, insolvency or similar proceeding; (iii) any furnishing or acceptance of additional security or any exchange, substitution, surrender or release of any security; (iv) any waiver, consent or other action or inaction or any exercise or nonexercise of any right, remedy or power with respect to the Obligations or any of the CHE Operative Documents; (v) the unenforceability, lack of genuineness or invalidity of the Obligations or any part thereof or the unenforceability, lack of genuineness or invalidity of any agreement relating thereto; (vi) (A) any merger or consolidation of Collins Holdings or the Guarantor into or with any other Person, (B) any change in the structure of Collins Holdings, (C) any change in the ownership of Collins Holdings or the Guarantor or (D) any sale, lease or transfer of any or all of the assets of Collins Holdings or the Guarantor to any other Person; (vii) any default, misrepresentation, negligence, misconduct or other action or inaction of any kind by the Beneficiary under or in connection with any CHE Operative Document or any other agreement relating to this Guaranty, except to the extent that any such default, misrepresentation, negligence, misconduct or other action or inaction would limit the Obligations; or (viii) any other circumstance whatsoever (except the complete payment and performance of the Obligations), including, without limitation, any act or omission of Collins Holdings or the Beneficiary which changes the scope of the Guarantor's risk. 5 SECTION 2.5 The Guarantor hereby unconditionally waives and releases, to the extent permitted by law promptness, diligence and notice as to the Obligations guaranteed hereby and acceptance of this Guaranty, and waives any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Guarantor, including, without limitation, notice of default or any failure on the part of Collins Holdings to perform and comply with any Obligation and agrees that, except as otherwise provided herein, it shall not be required to consent to or receive any notice of any amendment or modification of, or waiver, consent or extension with respect to, the CHE Operative Documents. No failure to exercise and no delay in exercising, on the part of the Beneficiary, any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other power or right. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. SECTION 2.6 The Guarantor agrees to pay any costs and expenses incurred by the other parties to the Participation Agreement in connection with the enforcement of this Guaranty. SECTION 3. GUARANTOR'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS In order to induce the Beneficiary to enter into the Participation Agreement, and to induce the Owner Lessor to enter into the Facility Lease, the Facility Site Sub-lease, the Facility Site Sub-Sublease, the Guarantor represents and warrants unto the Beneficiary as set forth in this Section III. SECTION 3.1 The Guarantor is duly organized, validly existing and in good standing under the laws of its state of incorporation and has full power, authority and legal right to execute, deliver and perform this Guaranty. SECTION 3.2 The execution, delivery and performance by the Guarantor of this Guaranty has been duly authorized by all necessary corporate action. This Guaranty constitutes a legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except as such enforcement may be affected by applicable bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights generally. 6 SECTION 4. BENEFICIARY The Owner Participant, together with its affiliates, successors, assigns, agents, members, partners, directors, officers or employees, is the beneficiary of this Guaranty, but excluding in all cases the Owner Lessor (the "BENEFICIARY"). SECTION 5. SURVIVAL OF GUARANTY Notwithstanding anything to the contrary herein, this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any of the amounts paid to the Beneficiary, in whole or in part, is required to be repaid upon the insolvency, bankruptcy, dissolution, liquidation, or reorganization of the Guarantor, Collins Holdings or any other Person, or as a result of the appointment of a custodian, interviewer, receiver, trustee, or other officer with similar powers with respect to the Guarantor, Collins Holdings or any other Person or with respect to any substantial part of the property of the Guarantor, Collins Holdings or such other Person, all as if such payments had not been made. SECTION 6. REMEDIES; SUBROGATION SECTION 6.1 REMEDIES. In the event the Guarantor shall fail to pay immediately any amounts due under this Guaranty, or to comply with any other term of this Guaranty, the Beneficiary shall be entitled to all rights and remedies to which it may be entitled hereunder or at law, in equity or by statute. SECTION 6.2 SUBROGATION. The Guarantor will not exercise any rights that it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until all of the Obligations shall have been paid in full. 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, such amount shall be held in trust for the benefit of the Beneficiary to whom such Obligation is payable and shall forthwith be paid to such Beneficiary to be credited and applied to such Obligation, whether matured or unmatured, in accordance with the terms of the Operative Document under which such Obligation arose. If (i) the Guarantor shall make payment to the Beneficiary of all or any part of the Obligations and (ii) all the Obligations shall be paid in full, such Beneficiary will, at the Guarantor's request and expense, execute and deliver to the Guarantor appropriate documents, without recourse and with representation or warranty, necessary to evidence the transfer by 7 subrogation to the Guarantor of an interest in the Obligations resulting from such payment by the Guarantor. SECTION 6.3 SURVIVAL OF REMEDIES AND SUBROGATION RIGHTS. The provisions of this Section 6 shall survive the termination of this Guaranty and the payment in full of the Obligations and the termination of the CHE Operative Documents. SECTION 7. MISCELLANEOUS SECTION 7.1 AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition of this Guaranty may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by the Guarantor and consented to by the Beneficiary. SECTION 7.2 NOTICES. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to the Guarantor hereto at its address set forth below or at such other address as such party may from time to time designate by written notice. If to the Guarantor: Midwest Generation, LLC One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Facsimile No.: (312) 583-6111 Attention: Georgia R. Nelson 8 SECTION 7.3 SURVIVAL. Except as expressly set forth herein, the warranties and covenants made by the Guarantor shall not survive the expiration or termination of this Guaranty. SECTION 7.4 ASSIGNMENT AND ASSUMPTION. This Guaranty may not be assigned by the Guarantor to, or assumed by, any successor to, or assignee of, the Guarantor without the prior written consent of the Beneficiary. SECTION 7.5 GOVERNING LAW. This Guaranty shall be in all respects governed by and construed in accordance with the laws of the State of New York, including all matters of construction, validity and performance (without giving effect to the conflicts of laws provisions, other than New York General Obligations Law Section 5-1401). SECTION 7.6 SEVERABILITY. Any provision of this Guaranty that 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. SECTION 7.7 MERGER. This Guaranty constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral between or among the Guarantor, Collins Holdings and the Beneficiary with respect to the subject matter hereof. SECTION 7.8 HEADINGS. The headings of the sections of this Guaranty are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. SECTION 7.9 FURTHER ASSURANCES. The Guarantor will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by the Beneficiary referred to in Section 4 hereof to whom the Guarantor is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Guaranty. SECTION 7.10 EFFECTIVENESS OF GUARANTY. This Guaranty shall be effective on the date of execution and delivery by the Guarantor. 9 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized. MIDWEST GENERATION, LLC as Guarantor By: /s/ Fred W. McCluskey -------------------------- Name: Fred W. McCluskey Title: Vice President 10 EX-10.103-1 50 a2031364zex-10_1031.txt EXHIBIT 10.103.1 Exhibit 10.103.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 10.103 Midwest OP Lease Guaranty (T2), dated as of December15, 1999, made by Midwest Generation, LLC. Midwest OP Lease Guaranty (T3), dated as of December15, 1999, made by Midwest Generation, LLC. Midwest OP Lease Guaranty (T4), dated as of December15, 1999, made by Midwest Generation, LLC. EX-10.104 51 a2031364zex-10_104.txt EXHIBIT 10.104 Exhibit 10.104 MIDWEST LESSOR LEASE GUARANTY - -------------------------------------------------------------------------------- MIDWEST LESSOR LEASE GUARANTY (T1) Dated as of December 15, 1999 made by MIDWEST GENERATION, LLC as Guarantor Collins Station Fossil Fuel-Fired Electric Generating Facility - -------------------------------------------------------------------------------- MIDWEST LESSOR LEASE GUARANTY (T1) This MIDWEST LESSOR LEASE GUARANTY (this "Guaranty"), dated as of December 15, 1999, is issued by MIDWEST GENERATION, LLC, a Delaware limited liability company, as guarantor (the "Guarantor") in favor of the Beneficiary (as defined in Section 4 below). WITNESSETH: WHEREAS, the Guarantor is an affiliate of Collins Holdings EME, LLC, a Delaware Limited liability company ("Collins Holdings"). WHEREAS, simultaneously herewith Collins Holdings is entering into a Participation Agreement (T1), dated as of December 15, 1999 (the "PARTICIPATION AGREEMENT"), with the Collins Trust I (the "Owner Lessor"), Collins Generation I, LLC (the "OWNER PARTICIPANT") Wilmington Trust Company, not in its individual capacity, except as expressly provided therein, but only as owner trustee (the "OWNER TRUSTEE"), Edison Mission Midwest Holdings Co., the Guarantor, Midwest Funding LLC, as lender, Bayerische Landesbank International S.A., as issuer of the Midwest Letter of Credit, Bayerische Landesbank Girozentrale, as issuer of the RCE Letter of Credit and Citibank, N.A., as Holder Representative; WHEREAS, Collins Holdings intends to enter into a Facility Lease Agreement (T1) dated as of December 15, 1999 (the "Facility Lease") with the Beneficiary; WHEREAS, Collins Holdings intends to enter into a Facility Site Sublease Agreement (T1), dated as of December 15, 1999 (the "Facility Site Sublease") with the Beneficiary; WHEREAS, Collins Holdings intends to enter into a Facility Site Sub-Sub-Lease Agreement (T1), dated as of December 15, 1999 (the "Facility Site Sub-Sublease) with the Guarantor and the Beneficiary; WHEREAS, it is a condition precedent to the parties' obligations under the Participation Agreement that the Guarantor enter into and deliver this Guaranty; and 2 WHEREAS, the Guarantor anticipates benefitting directly and indirectly from the transactions contemplated by the Participation Agreement, the Facility Lease, the Facility Site Sublease and the Facility Site Sub-Sublease and is executing and delivering this Guaranty to induce the Beneficiary to enter into the Participation Agreement, the Facility Lease, the Facility Site Sublease and the Facility Site Sub-Sublease. NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to the Guarantor, the receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees as follows: SECTION 1. DEFINITIONS For purposes of this Guaranty, capitalized terms used but not otherwise defined herein shall have the respective meanings specified in Appendix A to the Participation Agreement. The general provisions of Appendix A shall apply to terms used in this Guaranty and specifically defined herein. Any term defined by reference to an agreement, instrument or other document shall have the meaning so assigned to it whether or not such document is in effect. SECTION 2. COVENANTS SECTION 2.1 Subject to the terms hereof, the Guarantor hereby unconditionally and irrevocably guarantees, as primary obligor and not merely as a surety, to the Beneficiary (a) the due, complete and punctual performance and observance by Collins Holdings of each term, provision and condition binding upon Collins Holdings pursuant to any of the Operative Documents to which Collins Holdings is or becomes a party (the "CHE OPERATIVE DOCUMENTS") and (b) the due, punctual and full payment (when and as the same may become due and payable) of each amount that Collins Holdings is or may become obligated to pay under or pursuant to any of the CHE Operative Documents, in accordance with the terms thereof, by acceleration or otherwise without offset or deduction. SECTION 2.2 In the case of any failure by Collins Holdings to perform and observe any such term, provision or condition after notice thereof by the Beneficiary, the Guarantor agrees to cause such performance or observance to be done, and in the case of any failure by Collins Holdings to make such payment as and when the same shall become due and payable (by acceleration or otherwise), the Guarantor hereby 3 agrees to make such payment (and, in addition, such further amounts, if any, as shall be sufficient to cover the costs and expenses of collection hereunder); PROVIDED, nothing herein shall expand the aforesaid obligations of the Guarantor beyond those of Collins Holdings under any of the CHE Operative Documents. All such obligations and indebtedness set forth in Section 2.1 hereof and this Section 2.2 are referred to in this Guaranty as the "OBLIGATIONS." SECTION 2.3 This Guaranty is a direct, independent and primary obligation of the Guarantor and is an irrevocable, absolute, present, unconditional and continuing obligation and guarantee of payment and performance (and not merely of collection) and the validity and enforceability of this Guaranty shall be absolute and is not conditioned in any way upon (a) the institution of suit or the taking of any other action or any attempt to enforce performance of or compliance with the obligations, covenants or undertakings (including any payment obligations) of Collins Holdings, other than providing notice to Collins Holdings, (b) the genuineness, validity, legality or enforceability of any of the CHE Operative Documents or the lack of power or authority of Collins Holdings to enter into any of the CHE Operative Documents or any substitution, release or exchange of any other guaranty or any other security for any of the Obligations or any other circumstance whatsoever (other than payment or performance) that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, (c) any right of set-off, recoupment or counterclaim, (d) any attempt to collect from Collins Holdings or any other entity or to perfect or enforce any security or any other condition or contingency or (e) any other action, occurrence or circumstance whatsoever. SECTION 2.4 Without limiting the generality of the foregoing, the Guarantor shall have no right to terminate this Guaranty, or to be released, relieved or discharged from its obligations hereunder, and such obligations shall be neither affected nor diminished for any reason whatsoever, including: (i) any amendment or supplement to or modification of any of the CHE Operative Documents, any extension or renewal of Collins Holdings' obligations under any CHE Operative Document, or any subletting, assignment or transfer of Collins Holdings' or the Beneficiary's interest in the CHE Operative Documents; (ii) any bankruptcy, insolvency, readjustment, composition, liquidation or any other change in the legal status of Collins Holdings or any 4 rejection or modification of the Obligations of Collins Holdings or the Beneficiary as a result of any bankruptcy, reorganization, insolvency or similar proceeding; (iii) any furnishing or acceptance of additional security or any exchange, substitution, surrender or release of any security; (iv) any waiver, consent or other action or inaction or any exercise or nonexercise of any right, remedy or power with respect to the Obligations or any of the CHE Operative Documents; (v) the unenforceability, lack of genuineness or invalidity of the Obligations or any part thereof or the unenforceability, lack of genuineness or invalidity of any agreement relating thereto; (vi) (A) any merger or consolidation of Collins Holdings or the Guarantor into or with any other Person, (B) any change in the structure of Collins Holdings, (C) any change in the ownership of Collins Holdings or the Guarantor or (D) any sale, lease or transfer of any or all of the assets of Collins Holdings or the Guarantor to any other Person; (vii) any default, misrepresentation, negligence, misconduct or other action or inaction of any kind by the Beneficiary under or in connection with any CHE Operative Document or any other agreement relating to this Guaranty, except to the extent that any such default, misrepresentation, negligence, misconduct or other action or inaction would limit the Obligations; or (viii) any other circumstance whatsoever (except the complete payment and performance of the Obligations), including, without limitation, any act or omission of Collins Holdings or the Beneficiary which changes the scope of the Guarantor's risk. SECTION 2.5 The Guarantor hereby unconditionally waives and releases, to the extent permitted by law promptness, diligence and notice as to the Obligations guaranteed hereby and acceptance of this Guaranty, and waives any other circumstance which might otherwise constitute a defense available to, or a discharge of, the 5 Guarantor, including, without limitation, notice of default or any failure on the part of Collins Holdings to perform and comply with any Obligation and agrees that, except as otherwise provided herein, it shall not be required to consent to or receive any notice of any amendment or modification of, or waiver, consent or extension with respect to, the CHE Operative Documents. No failure to exercise and no delay in exercising, on the part of the Beneficiary, any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other power or right. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. SECTION 2.6 The Guarantor agrees to pay any costs and expenses incurred by the other parties to the Participation Agreement in connection with the enforcement of this Guaranty. SECTION 3. GUARANTOR'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS In order to induce the Beneficiary to enter into the Participation Agreement, the Facility Lease, the Facility Site Sub-lease, the Facility Site Sub-Sublease, the Guarantor represents and warrants unto the Beneficiary as set forth in this Section III. SECTION 3.1 The Guarantor is duly organized, validly existing and in good standing under the laws of the state of incorporation and has full power, authority and legal right to execute, deliver and perform this Guaranty. SECTION 3.2 The execution, delivery and performance by the Guarantor of this Guaranty has been duly authorized by all necessary corporate action. This Guaranty constitutes a legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except as such enforcement may be affected by applicable bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights generally. 6 SECTION 4. BENEFICIARY The Owner Lessor, together with its affiliates, successors, assigns, agents, members, partners, directors, officers or employees, is the beneficiary of this Guaranty (the "BENEFICIARY"). The Guarantor acknowledges and consents to the assignment of this Guaranty by the Owner Lessor to the Holder Representative (for the benefit of the Holders). The Guarantor further acknowledges and consents to any subsequent assignments of this Guaranty by the Holders or the Holder Representative. The Owner Lessor hereby irrevocably directs (it being understood and agreed that such direction shall be deemed to have been revoked after the Lien over the Lessor Collateral created under the Lessor Security Documents shall have been fully discharged in accordance with its terms) the Guarantor, and the Guarantor agrees, to make all payments to be made to the Owner Lessor pursuant to Section 2.1 or 2.2 to the Holder Representative for deposit in the Holder Representative's Account. The Guarantor agrees that the Holder Representative (acting for the benefit of the Holders) and any assignee thereof shall be entitled to exercise any and all rights of the Owner Lessor under this Guaranty in accordance with the terms hereof (in its name or in the name of the Owner Lessor), and the Guarantor shall comply in all respects with such exercise. Without limiting the generality of the foregoing, the Holder Representative and any assignee thereof shall have the full right and power to enforce directly against the Guarantor all obligations of the Guarantor hereunder and otherwise exercise all remedies hereunder and to make all demands and give all notices and make all requests required or permitted to be made by the Owner Lessor (in its own name or in the name of the Owner Lessor) under this Guaranty. If the Guarantor shall receive inconsistent directions from the Owner Lessor and the Holder Representative, the Guarantor shall follow the directions of the Holder Representative. SECTION 5. SURVIVAL OF GUARANTY Notwithstanding anything to the contrary herein, this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any of the amounts paid to the Beneficiary, in whole or in part, is required to be repaid upon the insolvency, bankruptcy, dissolution, liquidation, or reorganization of the Guarantor, Collins Holdings or any other Person, or as a result of the appointment of a custodian, interviewer, receiver, trustee, or other officer with similar powers with respect to the Guarantor, Collins Holdings or any other Person or with respect to any 7 substantial part of the property of the Guarantor, Collins Holdings or such other Person, all as if such payments had not been made. SECTION 6. REMEDIES; SUBROGATION SECTION 6.1 REMEDIES. In the event the Guarantor shall fail to pay immediately any amounts due under this Guaranty, or to comply with any other term of this Guaranty, the Beneficiary shall be entitled to all rights and remedies to which it may be entitled hereunder or at law, in equity or by statute. SECTION 6.2 SUBROGATION. The Guarantor will not exercise any rights that it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until all of the Obligations shall have been paid in full. 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, such amount shall be held in trust for the benefit of the Beneficiary to whom such Obligation is payable and shall forthwith be paid to such Beneficiary to be credited and applied to such Obligation, whether matured or unmatured, in accordance with the terms of the Operative Document under which such Obligation arose. If (i) the Guarantor shall make payment to the Beneficiary of all or any part of the Obligations and (ii) all the Obligations shall be paid in full, such Beneficiary will, at the Guarantor's request and expense, execute and deliver to the Guarantor appropriate documents, without recourse and with representation or warranty, necessary to evidence the transfer by subrogation to the Guarantor of an interest in the Obligations resulting from such payment by the Guarantor. SECTION 6.3 SURVIVAL OF REMEDIES AND SUBROGATION RIGHTS. The provisions of this Section 6 shall survive the termination of this Guaranty and the payment in full of the Obligations and the termination of the CHE Operative Documents. SECTION 7. MISCELLANEOUS SECTION 7.1 AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition of this Guaranty may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by the Guarantor and consented to by the Beneficiary. 8 SECTION 7.2 NOTICES. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to the Guarantor hereto at its address set forth below or at such other address as such party may from time to time designate by written notice. If to the Guarantor: Midwest Generation, LLC One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Facsimile No.: (312) 583-6111 Attention: Georgia R. Nelson SECTION 7.3 SURVIVAL. Except as expressly set forth herein, the warranties and covenants made by the Guarantor shall not survive the expiration or termination of this Guaranty. SECTION 7.4 ASSIGNMENT AND ASSUMPTION. This Guaranty may not be assigned by the Guarantor to, or assumed by, any successor to, or assignee of, the Guarantor without the prior written consent of the Beneficiary. SECTION 7.5 GOVERNING LAW. This Guaranty shall be in all respects governed by and construed in accordance with the laws of the State of New York, including all matters of construction, validity and performance (without giving effect to the conflicts of laws provisions, other than New York General Obligations Law Section 5-1401). SECTION 7.6 SEVERABILITY. Any provision of this Guaranty that 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 9 provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 7.7 MERGER. This Guaranty constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral between or among the Guarantor, Collins Holdings and the Beneficiary with respect to the subject matter hereof. SECTION 7.8 HEADINGS. The headings of the sections of this Guaranty are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. SECTION 7.9 FURTHER ASSURANCES. The Guarantor will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by the Beneficiary referred to in Section 4 hereof to whom the Guarantor is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Guaranty. SECTION 7.10 EFFECTIVENESS OF GUARANTY. This Guaranty shall be effective on the date of execution and delivery by the Guarantor. 10 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized. MIDWEST GENERATION, LLC as Guarantor By: /s/ Fred W. McCluskey ---------------------- Name: Fred W. McCluskey Title: Vice President 11 EX-10.104-1 52 a2031364zex-10_1041.txt EXHIBIT 10.104.1 Exhibit 10.104.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 10.104 Midwest Lessor Lease Guaranty (T2), dated as of December15, 1999, made by Midwest Generation, LLC. Midwest Lessor Lease Guaranty (T3), dated as of December15, 1999, made by Midwest Generation, LLC. Midwest Lessor Lease Guaranty (T4), dated as of December15, 1999, made by Midwest Generation, LLC. EX-10.105 53 a2031364zex-10_105.txt EXHIBIT 10.105 Exhibit 10.105 ================================================================================ PLEDGE AGREEMENT between MIDWEST GENERATION, LLC and CITIBANK, N.A. as Holdings Collateral Agent Dated as of August 17, 2000 ================================================================================ PLEDGE AGREEMENT TABLE OF CONTENTS
PAGE ---- Section 1. Definitions............................................... 1 Section 2. Representations and Warranties............................ 2 Section 3. The Pledge................................................ 2 Section 4. Further Assurances; Remedies.............................. 3 4.1. Delivery and Other Perfection............................. 3 4.2. Other Financing Statements and Liens...................... 3 4.3. Preservation of Rights.................................... 4 4.4. Special Provisions Relating to the Collateral............. 4 4.5. Intercreditor Agreement Events of Default, Etc............ 4 4.6. Deficiency................................................ 6 4.7. Removals, Etc............................................. 6 4.8. Private Sale.............................................. 6 4.9. Application of Proceeds................................... 6 4.10. Attorney-in-Fact.......................................... 7 4.11. Perfection................................................ 7 4.12. Termination............................................... 7 4.13. Further Assurances........................................ 7 Section 5. Miscellaneous............................................. 7 5.1. Notices................................................... 8 5.2. No Waiver................................................. 8 5.3. Amendments, Etc........................................... 8 5.4. Expenses.................................................. 8 5.5. Successors and Assigns.................................... 9 5.6. Counterparts.............................................. 9 5.7. Governing Law............................................. 9 5.8. Captions.................................................. 9 5.9. Agents and Attorneys-in-Fact.............................. 9 5.10. Severability.............................................. 9 5.11. Indemnification........................................... 9
PLEDGE AGREEMENT PLEDGE AGREEMENT (this "AGREEMENT") dated as of August 17, 2000, between MIDWEST GENERATION, LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (the "OBLIGOR") and CITIBANK, N.A., a national banking association, as collateral agent for the Secured Parties under the Intercreditor Agreement referred to below (in such capacity, together with its successors in such capacity, the "HOLDINGS COLLATERAL AGENT"). Midwest Generation EME, LLC, Edison Mission Midwest Holdings Co. ("HOLDINGS"), Edison Mission Overseas Co., the Obligor, Collins Holdings EME, LLC, each Owner Lessor referred to therein, Midwest Funding LLC, the Holdings Administrative Agent referred to therein, each Holder Representative referred to therein, each Other Representative referred to therein, the Depositary Bank referred to therein, the Depositary Agent referred to therein, the Midwest LC Issuer referred to therein and the Holdings Collateral Agent have entered into that certain Collateral Agency and Intercreditor Agreement (as amended, modified and supplemented and in effect from time to time, the "INTERCREDITOR AGREEMENT") dated as of December 15, 1999. The Obligor has extended loans to Edison Mission Energy ("EME") in exchange for the Intercompany Note (defined herein) and has, subject to the terms and conditions of this Agreement, agreed to grant a Lien and Security Interest in the Collateral referred to herein. NOW, THEREFORE, in consideration of the premises and covenants contained herein and for other good and valuable consideration, the receipt and the adequacy of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings set forth in, and the interpretations applicable thereto under, the Intercreditor Agreement (including, without limitation, APPENDIX A thereto). In addition, as used herein: "COLLATERAL" has the meaning assigned to such term in Section 3. 1 "INTERCOMPANY NOTE" means the promissory note dated August 24, 2000 by EME payable to the Obligor in a principal amount of $499,450,800. "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 Obligor and its consolidated subsidiaries taken as a whole, since the Effective Date, (ii) the ability of the Obligor to perform its obligations under any of the Financing Documents to which it is a party or (iii) the validity and enforceability of any of the Financing Documents to which the Obligor is a party, the liens granted thereunder or the rights and remedies thereto. "SPECIFIED EVENT" means (i) an Intercreditor Agreement Event of Default shall have occurred and be continuing or (ii) the maturity of the Intercompany Note shall have been (or shall have become) accelerated in accordance with the terms thereof. "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in effect from time to time in the State of New York. SECTION 2. REPRESENTATIONS AND WARRANTIES. The Obligor represents and warrants to the Holdings Collateral Agent and the other Secured Parties that as of the date hereof: The Obligor is duly organized, validly existing and in good standing under the laws of Delaware, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, would not result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 3. THE PLEDGE. As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, the Obligor hereby pledges and grants to the Holdings Collateral Agent, for the benefit of the Secured Parties, a security interest in all of the Obligor's right, title and 2 interest in the following property, whether now owned by the Obligor or hereafter acquired and whether now existing or hereafter coming into existence (all being collectively referred to herein as "COLLATERAL"): (a) the Intercompany Note; and (b) all proceeds, rents, profits, income, benefits, substitutions and replacements of, and to any of the property of the Obligor described in clause (a) of this Section 3 (including, without limitation, all causes of action, claims and warranties now or hereafter held by the Obligor in respect of any of the items listed above) and, to the extent related to any property described in clause (a) of this Section or such proceeds, all books, correspondence, credit files, records, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of the Obligor or any computer bureau or service company from time to time acting for the Obligor. SECTION 4. FURTHER ASSURANCES; REMEDIES. In furtherance of the grant of the pledge and security interest pursuant to Section 3, the Obligor hereby agrees with the Holdings Collateral Agent and each of the other Secured Parties as follows: Section 4.1 DELIVERY AND OTHER PERFECTION. The Obligor shall: (a) if the Intercompany Note required to be pledged by the Obligor under clause (a) of Section 3 is received by the Obligor, forthwith either (x) transfer and deliver to the Holdings Collateral Agent such Intercompany Note so received by the Obligor (accompanied by undated bond power in blank), which thereafter shall be held by the Holdings Collateral Agent, pursuant to the terms of this Agreement, as part of the Collateral or (y) take such other action as the Holdings Collateral Agent shall request, at the direction of the Required Creditors, to duly record the Lien created hereunder in such Intercompany Note; (b) give, execute, deliver, file and/or record any financing statement, notice, instrument, document, agreement or other papers that may be necessary or reasonably requested by the Holdings Collateral Agent, at the direction of the Required Creditors, to create, preserve, perfect or validate the 3 security interest granted pursuant hereto or to enable the Holdings Collateral Agent, at any time following the occurrence and continuance of an Intercreditor Agreement Event of Default, to exercise and enforce its rights hereunder with respect to such pledge and security interest; (c) keep full and accurate books and records relating to the Collateral, and stamp or otherwise mark such books and records in order to reflect the security interests granted by this Agreement; and (d) pertmit representatives or agents of the Holdings Collateral Agent, upon reasonable notice, at any time during normal business hours to inspect and make abstracts from its books and records pertaining to the Collateral, and, upon the occurrence and during the continuation of an Intercreditor Agreement Event of Default, permit representatives or agents of the Holdings Collateral Agent to be present at the Obligor's place of business to receive copies of all communications and remittances relating to the Collateral, and forward copies of any notices or communications received by the Obligor with respect to the Collateral, all in such manner as the Holdings Collateral Agent may require. Section 4.2 OTHER FINANCING STATEMENTS AND LIENS. Except as otherwise permitted under Section 8.2.2 of the Holdings Credit Agreement, without the prior written consent of the Holdings Collateral Agent (acting upon the instruction of the Required Creditors), the Obligor shall not file or suffer to be on file, or authorize or permit to be filed or to be on file, in any jurisdiction, any financing statement or like instrument with respect to the Collateral in which the Holdings Collateral Agent is not named as the sole secured party for the benefit of the Secured Parties. Section 4.3 PRESERVATION OF RIGHTS. The Holdings Collateral Agent is not required to take any steps necessary to preserve any rights against prior parties to any of the Collateral. Section 4.4 SPECIAL PROVISIONS RELATING TO THE COLLATERAL. 4 (1) Unless and until an Intercreditor Agreement Event of Default has occurred and is continuing, the Obligor shall be entitled to receive and retain any and all payments on the Collateral. (2) Notwithstanding Section 3(b) hereof, the Lien on and Security Interest in any amounts constituting Collateral or the proceeds thereof which have been distributed to Holdings and subsequently deposited into the Cashflow Recapture Fund, in accordance with the Holdings Credit Agreement, shall, contemporaneously with such deposit, automatically terminate and be released and upon such deposit and at all times thereafter such amounts shall not constitute Collateral. (3) The Holdings Collateral Agent (acting upon the instructions of the Required Creditors) shall be entitled to exercise all rights of the "Lender" under the Intercompany Note to the exclusion of the Obligor (including, without limitation, (x) the right to accelerate the maturity of the Intercompany Note in accordance with Section 8 thereof and (y) the right to consent to any assignment of the obligations of the "Borrower" under the Intercompany Note in accordance with Section 11 thereof). Section 4.5 INTERCREDITOR AGREEMENT EVENTS OF DEFAULT, ETC. Upon the occurrence and during the continuance of an Intercreditor Agreement Event of Default: (a) the Holdings Collateral Agent shall have the rights, benefits and protections under this Agreement as more particularly provided in the Intercreditor Agreement; (b) the Obligor shall, at the request of the Holdings Collateral Agent, assemble the Collateral owned by it at such place or places, reasonably convenient to both the Holdings Collateral Agent and the Obligor, designated in its request; (c) the Holdings Collateral Agent may make any reasonable compromise or settlement at the direction of the Required Creditors deemed desirable with respect to any of the Collateral and may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, any of the Collateral at the direction of the Required Creditors; 5 (d) the Holdings Collateral Agent shall have all of the rights and remedies with respect to the Collateral of a secured party under the Uniform Commercial Code (whether or not said Code is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted, including, without limitation, the right, to the maximum extent permitted by law, to exercise all voting, consensual and other powers of ownership pertaining to the Collateral as if the Holdings Collateral Agent were the sole and absolute owner thereof (and the Obligor agrees to take all such action as may be appropriate to give effect to such right); (e) the Holdings Collateral Agent may, at the direction of the Required Creditors, in its name or in the name of the Obligor or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Collateral, but shall be under no obligation to do so; and (f) the Holdings Collateral Agent may, with respect to the Collateral or any part thereof that shall then be or shall thereafter come into the possession, custody or control of the Holdings Collateral Agent, any other Secured Party or any of their respective agents, upon ten (10) Business Days prior written notice to the Obligor of the time and place, sell, lease, assign or otherwise dispose of all or any part of such Collateral, at such place or places as the Holdings Collateral Agent deems best, and for cash or for credit or for future delivery (without thereby assuming any credit risk or liability), at public or private sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except as provided above and such notice as is required above or by applicable statute that cannot be waived), and upon such other terms as the Holdings Collateral Agent, at the direction of the Required Creditors, may reasonably deem commercially reasonable, and the Holdings Collateral Agent or any other Secured Party or anyone else may be the purchaser, lessee, assignee or recipient of any or all of the Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of the Obligor, any such demand, notice and right or equity being hereby expressly waived and released. The Holdings Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned 6 from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned. The proceeds of each collection, sale or other disposition under this Section 4.5 shall be applied in accordance with Section 4.9 hereto. The Obligor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws, the Holdings Collateral Agent may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Obligor acknowledges that any such private sales may be at prices and on terms less favorable to the Holdings Collateral Agent than those obtainable through a public sale without such restrictions. The parties hereto agree that any such private sale shall be made in a commercially reasonable manner and that the Holdings Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to permit the respective issuer or issuers thereof to register it for public sale. Section 4.6 DEFICIENCY. If the proceeds of sale, collection or other realization of or upon the Collateral pursuant to Section 4.5 are insufficient to cover the costs and expenses of such realization and the payment in full of the Secured Obligations, the Obligor shall remain liable for any deficiency to the extent the Obligor is obligated under this Agreement. Section 4.7 REMOVALS, ETC. Without at least 30 days' prior written notice to the Holdings Collateral Agent, the Obligor shall not (i) maintain any of its books and records with respect to the Collateral at any office, or maintain its principal place of business at any place other than at the address indicated beneath the signature of Holdings to the Credit Agreement or (ii) change its name, or the name under which it does business, from the name shown on the signature pages hereto. Section 4.8 PRIVATE SALE. The Holdings Collateral Agent and the other Secured Parties shall incur no liability as a result of the sale of the Collateral, or any part thereof, at any private sale pursuant to Section 4.5 conducted in a commercially reasonable manner. The Obligor hereby waives any claims against the 7 Holdings Collateral Agent or any other Secured Party arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the Holdings Collateral Agent accepts the first offer received and does not offer the Collateral to more than one offeree. Section 4.9 APPLICATION OF PROCEEDS. Except as otherwise herein expressly provided, the proceeds of any collection, sale or other realization of all or any part of the Collateral pursuant hereto, and any other cash at the time held by the Holdings Collateral Agent under this Section 4, shall be applied by the Holdings Collateral Agent in accordance with Section 16 of the Intercreditor Agreement. Section 4.10 ATTORNEY-IN-FACT. Without limiting any rights or powers granted by this Agreement to the Holdings Collateral Agent while no Intercreditor Agreement Event of Default has occurred and is continuing, upon the occurrence and during the continuance of any Intercreditor Agreement Event of Default, the Holdings Collateral Agent is hereby appointed the attorney-in-fact of the Obligor for the purpose of carrying out the provisions of this Section 4 and taking any action and executing any instruments that the Holdings Collateral Agent may at the direction of the Required Creditors deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, so long as the Holdings Collateral Agent shall be entitled under this Section 4 to make collections in respect of the Collateral, the Holdings Collateral Agent shall have the right and power to receive, endorse and collect all checks made payable to the order of the Obligor representing any dividend, payment or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same. Section 4.11. PERFECTION. Prior to or concurrently with the execution and delivery of this Agreement, the Obligor shall (i) file such financing statements and other documents in such offices as the Holdings Collateral Agent may request to perfect the security interests granted by Section 3 of this Agreement, (ii) deliver to the Holdings Collateral Agent the Intercompany Note, accompanied by undated bond power duly executed in blank and (iii) shall deliver to the Holdings Collateral Agent a UCC-1 financing statement for filing, in each jurisdiction requested by the Hold- 8 ings Collateral Agent, at the direction of the Required Creditors, naming the Obligor as debtor and duly signed by the Obligor. Section 4.12 TERMINATION. When the Intercreditor Agreement Termination Date shall have occurred, this Agreement shall terminate, and the Holdings Collateral Agent shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Collateral and money received in respect thereof, to or on the order of the Obligor. Upon the request, and at the expense of the Obligor, the Holdings Collateral Agent shall execute and deliver all such documentation necessary to release the pledge created pursuant to this Agreement. Section 4.13 FURTHER ASSURANCES. The Obligor agrees that, from time to time upon the written request of the Holdings Collateral Agent, the Obligor will execute and deliver such further documents and do such other acts and things as the Holdings Collateral Agent may, at the direction of the Required Creditors, request in order to fully effect the purposes of this Agreement. SECTION 5. MISCELLANEOUS. Section 5.1. NOTICES. All notices, requests and other communications provided for herein shall be given or made in writing in the manner set forth in Section 24 of the Intercreditor Agreement. Unless otherwise changed in accordance with the Intercreditor Agreement by the respective parties hereto, all notices, requests and other communications to each party hereto shall be sent to the address for notices of such party set forth on the signature pages hereto. Section 5.2. NO WAIVER. No failure on the part of the Holdings Collateral Agent or any other Secured Party to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Holdings Collateral Agent or any other Secured Party of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law. 9 Section 5.3. AMENDMENTS, ETC. The terms of this Agreement may be waived, altered or amended only by an instrument in writing duly executed by the Obligor and the Holdings Collateral Agent (with the consent of the Required Creditors in accordance with the Intercreditor Agreement). Any such amendment or waiver shall be binding upon the Holdings Collateral Agent and each other Secured Party, each holder of any of the Secured Obligations and the Obligor. Section 5.4. EXPENSES. The Obligor agrees to reimburse upon demand to the Holdings Collateral Agent and each of the other Secured Parties for all reasonable costs and expenses (including disbursements) of the Holdings Collateral Agent and such other Secured Parties (including, without limitation, the reasonable fees and expenses of legal counsel) incurred in connection with (i) the preparation, delivery, administration, execution and amendment of this Agreement, (ii) any Default and any enforcement, collection proceeding or sale resulting therefrom, including, without limitation, all manner of participation in or other involvement with (w) performance by the Holdings Collateral Agent of any obligations of the Obligor in respect of the Collateral that the Obligor has failed or refused to perform, (x) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings, or any actual or attempted sale, or any exchange, enforcement, collection, compromise or settlement in respect of any of the Collateral, and for the care of the Collateral and defending or asserting rights and claims of the Holdings Collateral Agent in respect thereof, by litigation or otherwise, including expenses of insurance, (y) judicial or regulatory proceedings and (z) workout, restructuring or other negotiations or proceedings (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (iii) the enforcement of this Section 5.4, and all such costs and expenses shall be Secured Obligations entitled to the benefits of the collateral security provided pursuant to Section 3. Section 5.5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Obligor, the Holdings Collateral Agent, each of the other Secured Parties and each holder of any of the Secured Obligations (provided, however, that the Obligor shall not assign or transfer its rights hereunder without the prior written consent of the Holdings Collateral Agent). Section 5.6. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same 10 instrument and any of the parties hereto may execute this Agreement by signing any such counterpart. Section 5.7. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, without regard to the conflict of law rules thereof other than Section 5-1401 of the New York General Obligations Law. Section 5.8. CAPTIONS. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 5.9. AGENTS AND ATTORNEYS-IN-FACT. The Holdings Collateral Agent may employ agents and attorneys-in-fact in connection herewith and shall not be responsible or liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. Section 5.10. SEVERABILITY. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be construed so as to carry out the intentions of the parties hereto as nearly as may be possible and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. Section 5.11. INDEMNIFICATION. The Obligor also agrees to indemnify the Holdings Collateral Agent for, and to hold it harmless against, any loss, liability, damages, judgment, fine, penalty, claim, demand, settlement, cost or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Holdings Collateral Agent, as determined by a court of competent jurisdiction, for any action taken, suffered or omitted by the Holdings Collateral Agent in connection with the acceptance, administration and amendment of this Agreement, including, without limitation, the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly. The indemnity provided herein shall survive the termination of this Agreement or the resignation or removal of the Holdings Collateral Agent. The costs and expenses incurred in enforcing this right of indemnification shall be paid by the Obligor. The Holdings Collateral Agent shall be liable 11 hereunder to the Obligor and any other Person only for its own gross negligence, bad faith or willful misconduct, as determined by a court of competent jurisdiction. Anything to the contrary notwithstanding, in no event shall the Holdings Collateral Agent be liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including, but not limited to, lost profits), even if the Holdings Collateral Agent has been advised of the likelihood of such loss or damage. 12 IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed and delivered as of the day and year first above Written. MIDWEST GENERATION, LLC By: /s/ Gary Garcia --------------------------------- Name: Gary Garcia Title: Vice President Address for Notices: One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Attention: President Telecopier No.: (312) 583-6111 with copy to: Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: General Counsel Telecopier No.: (949) 752-1420 CITIBANK, N.A., not in its individual capacity but solely as Holding Collateral Agent By: /s/ Jenny Cheng --------------------------------- Name: Jenny Cheng Title: Vice President Address for Notices: Attn: Citibank Global Agency & Trust Services 111 Wall Street, 5th Floor, Zone 2 New York, NY 10005 Telecopier No.: (212) 657-3866 EX-10.105-1 54 a2031364zex-10_1051.txt EXHIBIT 10.105.1 Exhibit 10.105.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 10.105 Pledge Agreement, dated as of August 17, 2000, between Midwest Generation, LLC and Citibank, N.A. This Pledge Agreement differs from Exhibit 10.105 in the following respects: In Section 1 - Definitions, under the definition of "Intercompany Note" "$499,450,800" is replaced by "$369,961,200." Pledge Agreement, dated as of August 17, 2000, between Midwest Generation, LLC and Citibank, N.A. This Pledge Agreement differs from Exhibit 10.105 in the following respects: In Section 1 - Definitions, under the definition of "Intercompany Note" "$499,450,800" is replaced by "$285,849,200." Pledge Agreement, dated as of August 17, 2000, between Midwest Generation, LLC and Citibank, N.A. This Pledge Agreement differs from Exhibit 10.105 in the following respects: In Section 1 - Definitions, under the definition of "Intercompany Note" "$499,450,800" is replaced by "$211,738,800." EX-10.106 55 a2031364zex-10_106.txt EXHIBIT 10.106 Exhibit 10.106 EXECUTION COPY THIS DOCUMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS, ONE OF WHICH HAS BEEN MARKED "THE LESSOR'S COPY" AND ONE OR MORE OF WHICH HAVE BEEN MARKED "THE LESSEE'S COPY" OR "COPY." TO THE EXTENT THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN THE COUNTERPART MARKED "THE LESSOR'S COPY." LEASE AGREEMENT dated as of June 23, 2000 between MIDWEST GENERATION, LLC as the Lessee, and EME/CDL TRUST as the Lessor CONTENTS
Page ---- SECTION 1. DEFINITIONS...............................................................1 SECTION 2. LEASE OF EQUIPMENT........................................................1 SECTION 3. LEASE TERM................................................................1 SECTION 4. RENTS.....................................................................2 4.1 Rent Payments......................................................2 4.2 Place and Manner of Payment........................................2 4.3 Net Lease..........................................................3 SECTION 5. REPRESENTATIONS AND WARRANTIES............................................4 5.1 Disclaimer of Warranties...........................................4 5.2 Assignment of Warranties...........................................4 SECTION 6. LIENS.....................................................................4 SECTION 7. USE AND MAINTENANCE OF EQUIPMENT..........................................5 7.1 Possession and Use of Equipment; Compliance with Laws..............5 7.2 Maintenance........................................................5 7.3 Removal of Components..............................................5 SECTION 8. MODIFICATIONS AND IMPROVEMENTS............................................6 SECTION 9. RIGHT TO SUBLEASE.........................................................6 SECTION 10. INSPECTION AND RIGHT TO ENTER.............................................7 10.1 ...................................................................7 10.2 ...................................................................7 SECTION 11. EVENTS OF LOSS; INSURANCE.................................................7 11.1 Risk of Loss.......................................................7 11.2 Insurance..........................................................7 SECTION 12. LEASE TERMINATION.........................................................8 12.1 Early Termination..................................................8 i Page ---- 12.2 Renewal Lease Terms................................................8 12.3 Lessee Purchase Option.............................................8 12.4 Sale Option........................................................9 12.5 Sale Option Procedures.............................................9 12.6 Reconveyance; Release of Lien of the Lessor........................11 SECTION 13. REDELIVERY OF EQUIPMENT..................................................11 SECTION 14. EVENTS OF DEFAULT........................................................12 14.1 Payment Default...................................................12 14.2 Misrepresentation.................................................12 14.3 Covenant Defaults.................................................12 14.4 Bankruptcy, etc...................................................12 14.5 ERISA.............................................................13 14.6 Cross-Defaults....................................................13 14.7 Judgments.........................................................13 SECTION 15. REMEDIES.................................................................14 15.1 Payment of Termination Value; Assumption Option...................14 15.2 Lease Remedies....................................................14 15.3 Lessor's Right to Perform Obligations.............................15 15.4 Limitation on Liability for Rent..................................15 15.5 Assumption Option.................................................15 SECTION 16. ASSIGNMENT OF LEASE......................................................15 SECTION 17. OWNERSHIP AND GRANT OF SECURITY INTEREST.................................16 SECTION 18. MISCELLANEOUS............................................................16 18.1 Applicable Law....................................................16 18.2 Quiet Enjoyment...................................................16 18.3 Notices...........................................................16 18.4 Counterparts......................................................16 18.5 Severability......................................................17 18.6 Successors and Assigns............................................17 18.7 Third-Party Beneficiaries.........................................17 18.8 Jury Trial........................................................17 18.9 Headings; Table of Contents.......................................17 ii Page ---- 18.10 Schedules and Exhibits............................................17 18.11 No Joint Venture..................................................17 18.12 References to Sections, Exhibits and Schedules....................18 18.13 Limitations of Liability of Trustee...............................18 SCHEDULE 1.............................................................................S-1 SCHEDULE 2.............................................................................S-2 SCHEDULE 3 ............................................................................S-3 SCHEDULE 4.............................................................................S-4
iii LEASE AGREEMENT (this "LEASE") dated as of June 23, 2000 between MIDWEST GENERATION, LLC, a Delaware limited liability company, as the lessee hereunder (the "LESSEE") and EME/CDL TRUST, a statutory business trust created under the laws of the State of Delaware, as the lessor hereunder (the "LESSOR"). RECITALS A. On the Closing Date, the Lessee wishes the Lessor to acquire the Leased Equipment and to lease it to the Lessee on the terms and conditions set forth in the Participation Agreement (as amended, supplemented or otherwise modified from time to time, the "PARTICIPATION AGREEMENT"), dated as of the date hereof, among the Lessee, the Lessor, the Guarantor, the Noteholders, the Investors, the Trustee, the Agent and the Collateral Agent and the other Basic Documents. B. Pursuant to the terms and conditions set forth herein and in the Participation Agreement, on the Closing Date, the Lessee will transfer to the Lessor, and the Lessor will purchase and receive from the Lessee, all of the Lessee's right, title and interest in and to the Leased Equipment and the Lessor shall simultaneously lease the Leased Equipment to the Lessee and the Lessee will lease the Leased Equipment from the Lessor, pursuant to this Lease. C. To secure the Lessee's obligations under this Lease and the other Basic Documents, the Lessee will grant to the Lessor a security interest in the Lessee Collateral. NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used but not defined herein shall have the meanings set forth in Appendix 1 to the Participation Agreement. SECTION 2. LEASE OF EQUIPMENT. Subject to satisfaction of the conditions set forth in SECTION 5 of the Participation Agreement, on the Closing Date the Lessor shall lease to the Lessee, and the Lessee shall accept under an Acceptance Certificate and lease from the Lessor the Leased LEASE AGREEMENT Equipment to be financed under the Participation Agreement and the other Basic Documents. SECTION 3. LEASE TERM. Unless earlier terminated, the term of this Lease (the "LEASE TERM") shall commence on (and include) the Closing Date and end on (but exclude) the Lease Expiration Date. SECTION 4. RENTS. 4.1 RENT PAYMENTS. (a) BASIC RENT. During the Lease Term, the Lessee shall pay the Basic Rent to the Lessor on each Rent Payment Date, on the date required under SECTION 12.6(a) in connection with the Lessee's exercise of the Sale Option and on any date on which this Lease shall terminate with respect to the Leased Equipment; PROVIDED, HOWEVER, that (i) the amount of Basic Rent payable on the first Rent Payment Date following the Closing Date will be reduced by one thousand Dollars ($1,000), which amount will be capitalized into the Certificates, raising the aggregate Investor Amount by such amount; (ii) the amount of Basic Rent payable on the second Rent Payment Date following the Closing Date will be increased by one thousand Dollars ($1,000), which amount will be applied ratably to the Investors to reduce the aggregate Investor Amount; (iii) the amount of Basic Rent payable on the third Rent Payment Date following the Closing Date will be reduced by one thousand Dollars ($1,000), which amount will be capitalized into the Certificates, raising the aggregate Investor Amount by such amount; and (iv) the amount of Basic Rent payable on the fourth Rent Payment Date following the Closing Date will be increased by one thousand Dollars ($1,000), which amount will be applied ratably to the Investors to reduce the aggregate Investor Amount. (b) SUPPLEMENTAL RENT. The Lessee shall pay to the Lessor any and all Supplemental Rent on the date on which the same shall become due and payable and if the Lessee fails to pay any Supplemental Rent on the date when due, and such failure shall continue beyond the cure period provided in SECTION 14.1(c), the Lessor shall have the same rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee shall pay to the Lessor, as Supplemental Rent, among other things, on demand, to the extent permitted by 2 Applicable Law, interest at the applicable Overdue Rate on any installment of Basic Rent not paid when due for the period for which the same shall be overdue and on any payment of Supplemental Rent not paid when due or demanded by the Lessor for the period from the due date or the date of any such demand, as the case may be, until the same shall be paid. The expiration or other termination of the Lease Term and/or the Lessee's obligation to pay Basic Rent hereunder shall not limit or modify the obligations of the Lessee with respect to Supplemental Rent. Unless expressly provided otherwise in this Lease, in the event of any failure on the part of the Lessee to pay and discharge any Supplemental Rent as and when the same shall be due and payable, the Lessee shall also promptly pay and discharge any fine, penalty, interest or cost which may be assessed or added for nonpayment or late payment of such Supplemental Rent, all of which shall also constitute Supplemental Rent. 4.2 PLACE AND MANNER OF PAYMENT. (a) Each payment of Rent payable by the Lessee to the Lessor under this Lease or any other Basic Document shall be made by the Lessee to the Collateral Agent as assignee of the Lessor under the Assignment Agreement (or, following the termination of the Assignment Agreement in accordance with SECTION 8.11 thereof, to the Lessor) in immediately available funds consisting of Dollars on the date when such payment shall be due by wire transfer to the Lessor Account or such other account or accounts at such bank or banks or to such other Person or in such other manner as the Lessor shall from time to time direct. (b) Neither the Lessee's inability or failure to take possession of all, or any portion, of the Leased Equipment when delivered by the Lessor, nor the Lessor's inability or failure to deliver all or any portion of the Leased Equipment to the Lessee, whether or not attributable to any act or omission of the Lessee or any act or omission of the Lessor, or for any other reason whatsoever, shall delay or otherwise affect the Lessee's obligation to pay Rent in accordance with the terms of this Lease. (c) Rent shall be paid absolutely net to each Person entitled thereto, so that this Lease shall yield to such Person the full amount thereof, without setoff, deduction or reduction. 4.3 NET LEASE. THIS LEASE IS A NET LEASE AND THE LESSEE'S OBLIGATION TO PAY ALL BASIC RENT AND SUPPLEMENTAL RENT SHALL BE ABSOLUTE AND UNCONDITIONAL UNDER ANY AND ALL 3 CIRCUMSTANCES AND, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE LESSEE SHALL NOT BE ENTITLED TO ANY ABATEMENT OR REDUCTION OF RENT OR ANY SETOFF AGAINST RENT, INDEMNITY OR OTHER AMOUNT, WHETHER ARISING BY REASON OF ANY PAST, PRESENT OR FUTURE CLAIMS OF ANY NATURE BY THE LESSEE AGAINST THE LESSOR OR ANY NOTEHOLDER, OR OTHERWISE. Except as otherwise expressly provided herein, this Lease shall not terminate, nor shall the obligations of the Lessee be otherwise affected: (a) by reason of any defect in, damage to, or loss of possession or use, obsolescence or destruction, of any or all of the Leased Equipment, however caused; (b) by the taking or requisitioning of any or all of the Leased Equipment by condemnation or otherwise; (c) by the invalidity or unenforceability or lack of due authorization by the Lessor, any Noteholder, any Investor or the Lessee or other infirmity of this Lease or any other Basic Document; (d) by the attachment of any Lien of any third party to any or all of the Leased Equipment; (e) by any prohibition or restriction of or interference with the Lessee's use of any or all of the Leased Equipment by any Person; (f) by the insolvency of or the commencement by or against the Lessor or any Participant of any bankruptcy, reorganization or similar proceeding; or (g) by any other cause, whether similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding. It is the intention of the parties that all Rent payable by the Lessee hereunder shall be payable in all events in the manner and at the times herein provided unless the Lessee's obligations in respect thereof shall have been terminated or modified pursuant to the express provisions of this Lease. To the extent permitted by Applicable Law, the Lessee hereby waives any and all rights which it may now have or which may at any time be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Lease, in whole or in part, except strictly in accordance with the express terms hereof. Each Rent payment, indemnity or other payment made by the Lessee hereunder shall be final, and the Lessee shall not seek to recover all or any part of such payment from the Lessor except as expressly provided in this Lease. Without affecting the Lessee's obligation to pay Rent and any other amounts hereunder, the Lessee may seek damages for a breach by the Lessor or any Investor of its respective obligations under this Lease or any of the other Basic Documents. The Lessor shall be under no obligation to marshal any assets in favor of the Lessee or against or in payment of any or all Rent. SECTION 5. REPRESENTATIONS AND WARRANTIES. 5.1 DISCLAIMER OF WARRANTIES. THE LESSEE ACKNOWLEDGES AND AGREES THAT (a) THE LEASED EQUIPMENT IS OF A SIZE, DESIGN, 4 CAPACITY AND MANUFACTURE SELECTED BY THE LESSEE, (b) THE LESSEE IS SATISFIED THAT THE SAME IS SUITABLE FOR ITS PURPOSES, (c) THE LESSOR IS NOT A MANUFACTURER THEREOF OR A DEALER IN OR VENDOR OF PROPERTY OF SUCH KIND, AND (d) NEITHER THE LESSOR, ANY INVESTOR, ANY NOTEHOLDER, THE AGENT NOR THE TRUSTEE HAS MADE, OR DOES OR WILL MAKE, (i) ANY REPRESENTATION OR WARRANTY OR COVENANT WITH RESPECT TO THE TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, CONDITION, QUALITY, DESCRIPTION, DURABILITY OR SUITABILITY OF ANY OR ALL OF THE LEASED EQUIPMENT IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES AND USES OF THE LESSEE, OR (ii) ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OR ALL OF THE LEASED EQUIPMENT, IT BEING AGREED THAT, EXCEPT AS SPECIFIED HEREIN OR IN THE OTHER BASIC DOCUMENTS, ALL RISKS ASSOCIATED WITH THE LEASED EQUIPMENT, AS BETWEEN THE LESSOR, THE INVESTORS, THE NOTEHOLDERS, THE AGENT NOR THE TRUSTEE ON THE ONE HAND, AND THE LESSEE, ON THE OTHER HAND, SHALL BE BORNE BY THE LESSEE. 5.2 ASSIGNMENT OF WARRANTIES . The Lessor assigns to the Lessee, to the extent assignable, all of its right, title and interest, if any, in any warranties, covenants and representations of any manufacturer or vendor of the Leased Equipment or any component thereof. SECTION 6. LIENS. The Lessee will not directly or indirectly create, incur, assume or suffer to exist any Lien (other than Permitted Liens) on or with respect to the Leased Equipment or any part thereof, or its leasehold interest hereunder or any of the Lessor's, any Investor's or any Noteholder's interests hereunder or in any other Lessee Collateral. SECTION 7. USE AND MAINTENANCE OF EQUIPMENT. 7.1 POSSESSION AND USE OF EQUIPMENT; COMPLIANCE WITH LAWS. The Lessee shall use and operate the Leased Equipment in compliance with any and all Applicable Law, except to the extent the failure so to comply could not reasonably be expected to 5 have a Material Adverse Effect with respect to the Lessee or the Lessor, and PROVIDED THAT the Lessee may at its own expense, in good faith, contest the validity or application of any such Applicable Law pursuant to a Permitted Contest and continue to use and operate the Leased Equipment during such contest. The Lessee shall procure and maintain in effect all Permits, except to the extent the failure to procure and maintain any such Permit could not reasonably be expected to have a Material Adverse Effect with respect to the Lessee or the Lessor. The Leased Equipment will at all times be and remain in the possession and control of the Lessee, subject to SECTION 7.3 and SECTION 9. 7.2 MAINTENANCE. (a) At all times during the term of this Lease, the Lessee shall, at its own cost and expense, keep, repair, maintain and preserve the Leased Equipment (i) in good condition (ordinary wear and tear excepted), repair and working order, without discrimination as compared to other assets of a similar type owned or operated by the Lessee or any of its Affiliates, (ii) in any event in accordance with Prudent Industry Practice, (iii) in accordance with all insurance policies required to be maintained by the Lessee under this Lease and (iv) in compliance in all material respects with Applicable Law, including, without limitation, all applicable Environmental Laws. (b) At all times during the Lease Term, the Lessee shall, as is necessary in the Lessee's own reasonable judgment for the Leased Equipment to be operated in accordance with this Lease and at its own cost and expense, cause all repairs, renewals, replacements and improvements to the Leased Equipment to be made. 7.3 REMOVAL OF COMPONENTS. In the ordinary course of maintaining, servicing, repairing or testing the Leased Equipment, or any component thereof, the Lessee shall have the right, at its own cost and expense, to remove or cause to be removed any component of such Leased Equipment; PROVIDED, HOWEVER, that (i) the Lessee shall cause any such component to be replaced by a replacement component, (ii) the Lessee shall cause such replacement component to be free and clear of all Liens (other than Permitted Liens) and (iii) the use of such replacement component as part of the Leased Equipment shall not, other than in an immaterial respect, diminish the residual value, utility or remaining useful life of such Leased Equipment; PROVIDED, FURTHER, that the Lessee shall not be required to replace a particular component in accordance with this SECTION 7.3 if such component is obsolete and its removal without 6 replacement would not reasonably be expected to diminish, other than in an immaterial respect, the residual value, utility or remaining useful life of the Leased Equipment. SECTION 8. MODIFICATIONS AND IMPROVEMENTS If the Leased Equipment or any individual component thereof is required to be altered, added to, replaced or modified in order to comply with (a) any Applicable Law, (b) any insurance policies required to be maintained by the Lessee under this Lease or (c) to meet the requirements of any Return Acceptance Conditions (collectively, "REQUIRED IMPROVEMENTS"), the Lessee agrees to make, or cause to be made, such Required Improvement at its own expense. The Lessee shall have the right, but no obligation, without the consent of any Lease Financing Party, to make any modification, alteration, addition or improvement to the Leased Equipment (together with Required Improvements, the "IMPROVEMENTS"), if such action could not reasonably be expected to diminish, other than in an immaterial respect, the residual value, utility or remaining useful life of the Leased Equipment. If any Improvement that is not a Required Improvement is readily removable without impairing, other than in an immaterial respect, the value, use or remaining useful life which the Leased Equipment would have had at such time if such Improvement had not occurred (such Improvement, a "SEVERABLE IMPROVEMENT"), any such Severable Improvement shall be, and shall remain, the property of the Lessee. To the extent such Improvement is not a Severable Improvement, or is a Required Improvement, the same shall immediately and automatically be and become the property of the Lessor, and subject to the terms of this Lease. Any Required Improvements and non-Severable Improvements shall be considered in each case accessions to the Leased Equipment, and record title thereto or security interest therein shall be immediately and automatically vested in the Lessor. SECTION 9. RIGHT TO SUBLEASE. The Lessee shall not, without the prior written consent of the Lessor, assign, transfer or sublease all or any portion of its rights under this Lease, except as set forth in this SECTION 9. The Lessee shall have the right to sublease all or a portion of the Leased Equipment, without the consent of the Lessor or any other Lease Financing Party, upon at least ten (10) Business Days' advance written notice to the Lessor, to any Affiliate of the Lessee; PROVIDED, HOWEVER that (i) all obligations of such Affiliate under such sublease shall be unconditionally guaranteed by the Guarantor pursuant to a guarantee agreement, executed and delivered to the Lessor prior to the effective date of the such sublease, containing substantially the same provisions as the Guaranty, (ii) any 7 sublease shall expressly provide for the immediate surrender of the Leased Equipment to the Lessor after notice from the Lessor to such sublessee of the occurrence of a Lease Event of Default and a request for such surrender and (iii) any such sublease shall expressly provide for automatic termination at or prior to the earlier of (a) the Lease Expiration Date and (b) the occurrence of a Lease Event of Default. SECTION 10. INSPECTION AND RIGHT TO ENTER 10.1 INSPECTION. Upon at least 5 days' written notice by the Lessor, the Required Noteholders or the Required Investors and at the expense of such Person giving notice, the Lessee shall make the Leased Equipment available to the Lessor or any agent or agents appointed by the Required Noteholders or the Required Investors for inspection at reasonable times and under conditions reasonably acceptable to the Lessee (including, but not limited to, the execution and delivery, by such Persons to the Lessee, of appropriate confidentiality agreements and adherence to the Lessee's safety procedures at the site upon which such Leased Equipment is located). 10.2 RIGHT TO ENTER. Upon a Lease Event of Default and the exercise of remedies pursuant to SECTION 15.2, the Lessor shall have the right to enter, at reasonable times and upon reasonable notice, upon the site on which the Leased Equipment subject to reposession is located for the purpose of repossessing such Leased Equipment. The Lessor shall be liable for any and all damage to the Lessee's property caused by the repossession of the Leased Equipment pursuant to the preceding sentence. SECTION 11. EVENTS OF LOSS; INSURANCE. 11.1 RISK OF LOSS. (a) If an Event of Loss occurs with respect to the Leased Equipment, the Lessee shall, on a Rent Payment Date occurring not later than ninety (90) days following the Lessee's knowledge of such Event of Loss, but in no event later than the Final Maturity Date, either (i) pay to the Lessor an amount equal to the Termination Value determined as of such Termination Date or (ii) assume the Tranche A Notes and repay the Tranche B Notes and the Certificates pursuant to SECTION 15.5. (b) If the Leased Equipment suffers any loss, damage, seizure, condemnation, confiscation or taking that is not an Event of Loss, the Lessee shall repair 8 the Leased Equipment, or shall replace a component of such Leased Equipment, as applicable, in compliance with the standards set forth in SECTION 7.3. (c) All proceeds (including insurance proceeds) payable by a third-party to the Lessee or the Lessor in respect of an Event of Loss, or any other loss, damage, seizure, condemnation, confiscation or taking set forth in SECTION 11.1(b), shall be paid to the Lessee, unless a Lease Event of Default shall have occurred and be continuing, in which case such amounts shall be paid to the Collateral Agent for application in accordance with SECTION 3.10(d) of the Participation Agreement. 11.2 INSURANCE. So long as the Holdings Credit Agreement remains in full force and effect, the Lessee shall maintain insurance with respect to the Leased Equipment throughout the Lease Term as set forth in SECTION 8.1.5 of the Holdings Credit Agreement; thereafter, the Lessee shall be required to maintain insurance with respect to the Leased Equipment throughout the Lease Term as set forth on SCHEDULE 2 hereto. SECTION 12. LEASE TERMINATION. 12.1 EARLY TERMINATION. At any time from and after the Closing Date and prior to the Final Maturity Date, the Lessee may, at its sole discretion and option, upon at least 30 days' advance written notice to the Lessor, terminate this Lease on any Rent Payment Date by either (i) paying to the Lessor the Termination Value determined as of such Rent Payment Date or (ii) assuming all of the Lessor's obligations under the Tranche A Notes and repaying the Tranche B Notes and the Certificates pursuant to SECTION 15.5. Upon payment of the Termination Value by the Lessee or assumption of the Lessor's obligations under the Tranche A Notes and repayment of the Tranche B Notes and the Certificates in accordance with the provisions of the preceding sentence, the Lessor shall transfer to the Lessee all the Lessor's right, title and interest in and to the Leased Equipment (without representations or warranties, except that the Leased Equipment is free and clear of Lessor Liens) and shall execute and deliver to the Lessee such documents as may be reasonably required to release the Leased Equipment from the terms and scope of this Lease in such form as may be reasonably requested by the Lessee. 12.2 RENEWAL LEASE TERMS. The Lessee may renew this Lease subject to, and in accordance with, the terms and conditions of SECTION 7.1 of the Participation Agreement. In the event that the Lessee shall have elected not to renew this Lease in 9 accordance with such terms and conditions, the Lessee shall, not less than 270 days prior to the Lease Expiration Date (the "PURCHASE DECISION DATE"), notify the Lessor of the Lessee's intention either (i) to exercise the Lessee Purchase Option (as defined below) in respect of one or more Categories of Leased Equipment and/or (ii) to exercise the Sale Option (as defined below) in respect of one or more Categories of Leased Equipment; PROVIDED, HOWEVER, that if the Lessee does not elect the Lessee Purchase Option in respect of one or more Categories of Leased Equipment or the Sale Option in respect of one or more Categories of Leased Equipment on, or prior to, the Purchase Decision Date, the Lessee shall be deemed to have elected to exercise the Lessee Purchase Option in respect of such Category or Categories of Leased Equipment. 12.3 LESSEE PURCHASE OPTION. If the Lessee has elected (or is deemed to have elected) to exercise the Lessee Purchase Option in respect of one or more Categories of Leased Equipment, and provided that no Lease Event of Default shall have occurred and be continuing, the Lessee shall have the right to purchase on the Final Maturity Date such Categories of Leased Equipment (the "LESSEE PURCHASE OPTION"). If the Lessee exercises the Lessee Purchase Option in respect of any Category of Leased Equipment, the Lessee shall pay on the Final Maturity Date, in immediately available funds, the aggregate purchase price applicable to each such Category of Leased Equipment as set forth on SCHEDULE 4 hereto (the "LESSEE PURCHASE FIXED PRICE") to the Lessor. Upon payment of the Lessee Purchase Fixed Price by the Lessee, the Lessor shall transfer to the Lessee all the Lessor's right, title and interest in and to the Leased Equipment purchased by Lessee pursuant to this SECTION 12.3 (without representations or warranties, except that such Category of Leased Equipment is free and clear of Lessor Liens) and shall execute and deliver to the Lessee such documents as may be reasonably required to release such Category of Leased Equipment from the terms and scope of this Lease in such form as may be reasonably requested by the Lessee. To the extent the Lessee elects to exercise the Lessee Purchase Option with respect to some, but not all of the Categories of Leased Equipment, the Leased Equipment not purchased by the Lessee shall be subject to the Sale Option as set forth in SECTION 12.4. 12.4 SALE OPTION. In the event that the Lessee elects neither to enter into a Renewal Lease, nor to exercise the Lessee Purchase Option with respect to all of the Leased Equipment, the Lessee may provide notice to the Lessor on, or prior to, the Purchase Decision Date, that it will cause the Leased Equipment, or such Categories of Leased Equipment not subject to the Lessee Purchase Option, as the case may be, to be sold on the Final Maturity Date in an auction (the "AUCTION") to a purchaser or purchasers not affiliated in any way with the Lessee (the "SALE OPTION"). 10 12.5 SALE OPTION PROCEDURES. (a) If the Lessee elects to exercise the Sale Option in respect of one or more Categories of Leased Equipment in accordance with SECTION 12.4, the Lessee shall act as the Lessor's non-exclusive agent and shall use commercially reasonable efforts to obtain the highest available cash purchase price for any such Category of Leased Equipment and, in the event that the Lessee receives any bid for any such Category of Leased Equipment, the Lessee shall, within five (5) Business Days after receipt thereof and at least sixty (60) days before the Final Maturity Date, notify the Lessor in writing of the amount and terms of such bid or bids, and the name and address of the bidding party or parties (who shall not be the Lessee or any Affiliate of the Lessee or any Person with whom the Lessee has an understanding or arrangement regarding the future use of such Category of Leased Equipment by the Lessee or any Affiliate of the Lessee). The Lessor may reject any and all bids and may assume responsibility for obtaining bids by giving the Lessee written notice to that effect; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Lessor may not reject a bid if (i) such bid, together with the Residual Deficiency Payment for such Category or Categories of Leased Equipment, is greater than or equal to the Lessee Purchase Fixed Price for such Category or Categories of Leased Equipment and (ii) such bid is a bona fide offer from a third party purchaser. (b) Neither the Lessor nor any Participant shall have any responsibility for procuring any purchaser; if, however, the Lessor, at the direction of the Required Investors or Required Noteholders, undertakes any sales efforts, the Lessee shall promptly reimburse the Lessor for any reasonable charges, costs and expenses incurred in such effort, including any reasonable allocated time charges, costs and expenses of internal counsel or other attorneys' fees. Further, all reasonable costs related to any sale and delivery pursuant to the exercise of the Sale Option, including the reasonable cost of sale agents, removal of any such Category of Leased Equipment, delivery of documents and such Category of Leased Equipment, certification and testing of such Category of Leased Equipment in any reasonable location chosen by the buyer or prospective buyer, all reasonable costs associated with any repairs, modifications or improvements desired by the purchaser or prospective purchaser, reasonable legal costs, costs of notices, any reasonable advertisement or other similar costs shall be borne entirely by the Lessee. (c) Prior to the exercise of the Sale Option in respect of one or more Categories of Leased Equipment, and on the Final Maturity Date, the Lessee shall 11 ensure that such Category or Categories of Leased Equipment (i) are in the condition required to satisfy the Return Acceptance Conditions and (ii) are free and clear of all Liens except Lessor Liens. (d) Notwithstanding anything contained in this SECTION 12.5 to the contrary, if the Lessee elects to exercise its Sale Option in respect of one or more Categories of Leased Equipment, any Investor shall have the option (the "INVESTOR PURCHASE OPTION") to purchase one or more of such Categories of Leased Equipment for the aggregate purchase price applicable to each such Category of Leased Equipment as set forth on SCHEDULE 4 hereto (the "INVESTOR PURCHASE PRICE"), PROVIDED THAT such Investor shall, not less than 240 days prior to the Final Maturity Date, have paid in immediately available funds to the Lessor an amount equal to the Investor Purchase Price. (e) In the event that the Lessee has elected to exercise the Sale Option in respect of one or more Categories of Leased Equipment and, at least five (5) days prior to the Final Maturity Date, the sale of any such Category of Leased Equipment has not been consummated, (i) at the sole option and discretion of the Lessor, either (y) the Lessor shall retain all of its right, title and interest in and to such Category of Leased Equipment or (z) such Category of Leased Equipment shall be deemed to have been sold to the Lessee for one (1) Dollar and (ii) the Lessee shall, in either case, on or prior to the Final Maturity Date, pay to the Lessor, in immediately available funds, the Maximum Deficiency Amount for such Category of Leased Equipment. If any Category of Leased Equipment is deemed to be sold to the Lessee and, upon payment of the Maximum Deficiency Amount for such Category of Leased Equipment by the Lessee, in accordance with the provisions of the preceding sentence, the Lessor shall transfer to the Lessee all the Lessor's right, title and interest in and to such Category of Leased Equipment (without representations or warranties, except that such Category of Leased Equipment is free and clear of the Lessor Liens) and shall execute and deliver to the Lessee such documents as may be reasonably required to release such Category of Leased Equipment from the terms and scope of this Lease in such form as may be reasonably requested by the Lessee. If the Lessor elects to retain title to any Category of Leased Equipment, the Lessee shall, on the Final Maturity Date, (i) return such Category of Leased Equipment (together with all Required Improvements and each Improvement that is not a Severable Improvement made to such Category of Leased Equipment) to the Lessor free and clear of all Liens other than Lessor Liens and in the condition required to satisfy the Return Acceptance Conditions, as determined by an independent engineer retained by the Lessor and acceptable to the Required 12 Participants and (ii) at the Lessor's request, sell to the Lessor each Severable Improvement made to such Category of Leased Equipment at the then Fair Market Value, determined, if necessary, by an independent appraiser. If the condition of such Category of Leased Equipment does not meet the Return Acceptance Conditions, the Lessee shall have the option of making the repairs, performing such maintenance, or paying to the Lessor on the Final Maturity Date the amount required for a third party to make such repairs or perform such maintenance, as is required to cause the condition of such Category of Leased Equipment to satisfy the Return Acceptance Conditions. 12.6 RECONVEYANCE; RELEASE OF LIEN OF THE LESSOR. (a) In the event that any Category of Leased Equipment is sold to a purchaser at an Auction (an "AUCTION PURCHASER") or purchased by an Investor (in either case, the purchaser shall be the "OWNER"), (i) the Lessor shall transfer to the Owner all the Lessor's right, title and interest in and to such Category of Leased Equipment (without representations or warranties, except that such Category of Leased Equipment is free and clear of Lessor Liens) and shall execute and deliver to the Owner such documents as may be reasonably required to release such Category of Leased Equipment from the terms and scope of this Lease in such form as may be reasonably requested by the Owner, (ii) the Lessee shall sell to the Owner, at the Owner's option and request and at the then Fair Market Value, each Severable Improvement made to such Category of Leased Equipment and (iii) in the case of a sale to the Auction Purchaser, the Lessee shall, no less than five (5) days prior to the Lease Expiration Date, pay, or cause to be paid, in immediately available funds to the Lessor (y) the sale price at Auction for such Category of Leased Equipment (the "AUCTION SALE PRICE") and (z) the difference, if any, between the Lessee Purchase Fixed Price in respect of such Category of Leased Equipment and the Auction Sale Price for such Category of Leased Equipment (the "RESIDUAL DEFICIENCY PAYMENT"); PROVIDED, HOWEVER, that the Residual Deficiency Payment for such Category of Leased Equipment shall, in no event, exceed the Maximum Deficiency Amount for such Category of Leased Equipment. (b) In the event that any Category of Leased Equipment is retained by the Lessor in accordance with SECTION 12.5(e)(i)(y), the Lessee shall sell to the Lessor at the end of the Lease Term, at the Lessor's option and request and at the then Fair Market Value, each Severable Improvement made to such Category of Leased Equipment. SECTION 13. REDELIVERY OF EQUIPMENT. 13 Upon a Lease Event of Default or as otherwise required pursuant to the Basic Documents, the Lessee shall, upon demand of the Lessor, at the Lessee's expense, forthwith dismantle and deliver the Leased Equipment to the Lessor to a location designated by the Lessor, together with a copy of an inventory list of the Leased Equipment, all then current plans, specifications and operating, maintenance and repair manuals relating to the Leased Equipment that have been received or prepared by the Lessee, appropriately protected and in the condition required by SECTION 7.2. This SECTION 13 shall survive termination of this Lease. SECTION 14. EVENTS OF DEFAULT. The following shall constitute events of default (each, a "LEASE EVENT OF DEFAULT") hereunder: 14.1 PAYMENT DEFAULT. (a) Any payment of Basic Rent shall not have been paid within five (5) Business Days of the applicable Rent Payment Date, (b) the Residual Deficiency Payment shall not have been paid when due or (c) any other amount due and payable under this Lease or the Basic Documents, including Supplemental Rent, shall not have been paid within five (5) Business Days of its respective due date. 14.2 MISREPRESENTATION. Any representation or warranty of the Lessee or Guarantor contained herein or in any other Basic Document is incorrect, incomplete or misleading in any material respect when made, deemed made or reaffirmed, as the case may be. 14.3 COVENANT DEFAULTS. The Lessee or Guarantor defaults in any material respect in the performance or observance of any term, covenant, condition or agreement on its part to be performed or observed hereunder or under any other Basic Document (and not constituting a Lease Event of Default under any other clause of this SECTION 14), and such default continues unremedied for a period of thirty (30) days after written notice thereof by the Lessor to the Lessee or Guarantor, as the case may be. 14.4 BANKRUPTCY, ETC. (a) The Lessee or the Guarantor shall (i) commence a voluntary case or other proceeding seeking relief under Title 11 of the Bankruptcy Code or liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, 14 insolvency or other similar law now or hereafter in effect, or apply for or consent to the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) consent to, or fail to controvert in a timely manner, any such relief or the appointment of or taking possession by any such official in any voluntary case or other proceeding commenced against it, or (iii) file an answer admitting the material allegations of a petition filed against it in any such proceeding, or (iv) make a general assignment for the benefit of creditors; or (b) An involuntary case or other proceeding shall be commenced against the Lessee or Guarantor seeking (i) liquidation, reorganization or other relief with respect to it or its debts under Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other similar law now or hereafter in effect, or (ii) the appointment of a trustee, receiver, liquidator, custodian or other similar official with respect to it or any substantial part of its property, or (iii) the winding-up or liquidation of the Lessee or Guarantor, as the case may be, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days. 14.5 ERISA. Any one or more of the following shall occur and the liability of the Guarantor and its Subsidiaries on a consolidated basis shall exceed, individually or in the aggregate, $10,000,000: (a) a contribution failure occurs with respect to any Plan (other than a Multiemployer Plan) sufficient to give rise to a lien under Section 302(f) of ERISA or Section 412(n) of the Code with respect to any Plan (other than a Multiemployer Plan) as to which the Guarantor or any ERISA Affiliate to the Guarantor may have any liability, (b) there shall exist an unfunded current liability (as defined in 302(d)(8) of the Code) with respect to any Plan, (c) steps are undertaken to terminate any Plan, (d) any Reportable Event occurs with respect to a Plan for which notice to the PBGC has not been waived, (e) any action is taken with respect to a Plan which could result in the requirement that the Guarantor or any ERISA Affiliate to the Guarantor furnish a bond or other security to the PBGC or such Plan, (f) the occurrence of any event which could cause the Guarantor or any ERISA Affiliate to the Guarantor to incur any liability, fine or penalty with respect to any Plan or any increase in liability with respect to any Plan, or (g) the occurrence of any event that could result in any increase in the liability (or contingent liability) of the Guarantor or any ERISA Affiliate to the Guarantor with respect to post-retirement benefits under any Welfare Plan. 14.6 CROSS-DEFAULTS. The Guarantor fails to pay any amount of principal of or premium or interest on any outstanding Indebtedness of the Guarantor having a principal amount individually or in the aggregate of at least $100,000,000, when the 15 same becomes due and payable (whether by scheduled maturity, acceleration, required prepayment, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or any other default under any agreement or instrument relating to any outstanding Indebtedness of the Guarantor having a principal amount individually or in the aggregate of at least $100,000,000, or any other event or default exists after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to permit the acceleration of the maturity of such Indebtedness; or at least $100,000,000 in the aggregate of Indebtedness of the Guarantor shall be accelerated or shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof. 14.7 JUDGMENTS. A final judgment or judgments shall be rendered by a court or courts for the payment of money in excess of $100,000,000 in the aggregate against the Guarantor and the same is not discharged (or provision is not made for such discharge to the satisfaction of the Lessor and the Required Noteholders), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and the Guarantor shall not, within said period of 30 days, or such longer period during which execution of the same is stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal. SECTION 15. REMEDIES. 15.1 PAYMENT OF TERMINATION VALUE; ASSUMPTION OPTION. If a Lease Event of Default shall have occurred and be continuing, the Lessor shall have the right, at its own election, to demand that the Lessee pay to the Lessor, as and for final liquidated damages, but exclusive of the indemnities payable under SECTION 6 of the Participation Agreement and other amounts payable by Lessee under SECTION 20 of the Participation Agreement, and in lieu of all damages beyond the date of such demand, the sum of (a) all amounts owing in respect of Rent theretofore accruing under this Lease, subject in all respects to SECTION 15.4 PLUS (b) the Termination Value; PROVIDED, HOWEVER, that the Lessee may, at its election, assume all of the Lessor's obligations under the Tranche A Notes and repay the Tranche B Notes and the Certificates pursuant to SECTION 15.5 in lieu of paying Termination Value pursuant to CLAUSE (b). Upon payment by the Lessee of the amounts specified pursuant to the first sentence of this SECTION 15.1 (and the fulfillment of the requirements of SECTION 15.5 if 16 the Lessee chooses the Assumption Option), the Lessor shall transfer to the Lessee all the Lessor's right, title and interest in and to the Leased Equipment (without representations or warranties, except that the Leased Equipment is free and clear of Lessor Liens) and shall execute and deliver to the Lessee such documents as may be reasonably required to release the Leased Equipment from the terms and scope of this Lease in such form as may be reasonably requested by the Lessee. 15.2 LEASE REMEDIES. The Lessor and the Lessee intend that for commercial law and bankruptcy law purposes, this Lease will be treated as a financing arrangement, as set forth in SECTION 2.3 of the Participation Agreement. The Lessor shall be entitled to all rights and remedies accorded a secured party under Applicable Law. If, as a result of any applicable state law that cannot be waived, this Lease is deemed to be a lease of the Leased Equipment, rather than a financing arrangement, and the Lessor is unable to enforce the remedies set forth in SECTION 15.1, the following remedies shall be available to the Lessor, subject in each case as applicable to SECTION 15.4 and subject further, in each case, to the ComEd Consent: (a) if a Lease Event of Default shall have occurred and be continuing, the Lessor may, in addition to the other rights and remedies provided for in this SECTION 15.2, (i) terminate the Lease by giving the Lessee ten (10) Business Days written notice of such termination and (ii) declare the entire balance of Rent to be due and payable together with accrued unpaid Rent and any other amounts payable under the Basic Documents, (b) if a Lease Event of Default shall have occurred and be continuing, the Lessee shall, upon the Lessor's written demand, surrender to the Lessor possession of the Leased Equipment and the Lessee shall quit the same. The Lessor may act to repossess the Leased Equipment by such means as are available at Law or in equity. The Lessor shall have no liability by reason of any such repossession performed in accordance with Applicable Law, except as specifically set forth in SECTION 10.2, (c) if a Lease Event of Default shall have occurred and be continuing, the Lessor may sell all or any part of the Leased Equipment at public or private sale, as the Lessor may determine, 17 (d) if a Lease Event of Default shall have occurred and be continuing, the Lessor may relet all, or any portion, of the Leased Equipment, for the account of the Lessee, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Lease Term) and on such conditions and for such purposes as the Lessor may determine. The Lessor may collect, receive and retain the rents resulting from such reletting and the amount of such rents shall be applied to the Lessee's obligations hereunder. If the amount of such rents during any period are less than the Rent to be paid during that period by the Lessee hereunder, the Lessee shall pay any deficiency, as calculated by the Lessor, to the Lessor on the next Rent Payment Date, and (e) the Lessor may exercise any other right or remedy that may be available to it under Applicable Law, or proceed by appropriate court action (legal or equitable) to enforce the terms hereof, to recover damages for the breach hereof. 15.3 LESSOR'S RIGHT TO PERFORM OBLIGATIONS. If the Lessee fails to perform any of its obligations contained herein, and a Lease Event of Default has occurred and is continuing, the Lessor may (but shall not be obligated to) perform such obligation, and the fees and expenses incurred by the Lessor in connection with such performance together with interest thereon shall be payable by the Lessee upon demand. Interest on fees and expenses so incurred by the Lessor shall accrue as provided in SECTION 4.1(b) from the date such expense is incurred until paid in full. 15.4 LIMITATION ON LIABILITY FOR RENT. Notwithstanding any provisions to the contrary contained in this Lease, claims against the Lessee for Rent due on any Rent Payment Date shall be limited as set forth in SECTION 7.2 of the Participation Agreement; PROVIDED that the Guarantor shall be liable under the Guaranty for all amounts owing by the Lessee hereunder, other than in connection with the Lessee's obligations pursuant to SECTION 6.7 of the Participation Agreement. 15.5 ASSUMPTION OPTION. Whenever the Lessee shall be liable for the payment of Termination Value hereunder, in lieu of making such payment, the Lessee shall have the option to assume all of the Lessor's obligations under the Tranche A Notes and repay the Tranche B Notes and Certificates (the "ASSUMPTION OPTION"). 18 SECTION 16. ASSIGNMENT OF LEASE. All or any of the right, title or interest and obligations of the Lessor in and to this Lease and the rights, benefits, advantages and obligations of the Lessor hereunder, including the rights to receive payment of Rent or any other payment hereunder, and the rights, titles and interests in and to the Leased Equipment, may be assigned or transferred by the Lessor only in accordance with the provisions set forth in the Participation Agreement. The Lessee may not assign any of its rights and obligations under this Lease except pursuant to a sublease in accordance with the terms and conditions of SECTION 9. SECTION 17. OWNERSHIP AND GRANT OF SECURITY INTEREST. Record title to the Leased Equipment is held by the Lessor as collateral security for the obligations of the Lessee under the Basic Documents. As collateral security for the prompt payment and performance in full when due (whether at stated maturity, by acceleration or otherwise) of the Lessee's Obligations to the Lessor under the Lease and each of the other Basic Documents (the "LESSEE SECURED OBLIGATIONS"), the Lessee hereby assigns, transfers, sets over and conveys to the Lessor, a continuing security interest of first priority in all of the Lessee's right, title and interest in, to and under all the following described property, whether now owned or held or hereafter acquired and whether now existing or hereafter coming into existence and wherever located: all estate, right, title and interest of the Lessee in, to and under the Leased Equipment and all replacements thereof and substitutions therefor, including all Required Improvements and non-Severable Improvements. SECTION 18. MISCELLANEOUS. 18.1 APPLICABLE LAW. THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). 18.2 QUIET ENJOYMENT. So long as no Lease Event of Default shall have occurred and be continuing, the Lessee shall peaceably and quietly have, hold and enjoy the Leased Equipment for the Lease Term or Renewal Lease Term, as applicable, free 19 of any claim or other action by the Lessor or anyone rightfully claiming by, through or under the Lessor. Such right of quiet enjoyment is independent of, and shall not affect the rights of the Lessor (or anyone claiming by, through or under the Lessor) otherwise to initiate legal action to enforce, the obligations of the Lessee under this Lease. 18.3 NOTICES. Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be in writing and shall be delivered in accordance with SECTION 21.5 of the Participation Agreement. 18.4 COUNTERPARTS. This Lease has been executed in several counterparts. One counterpart has been prominently marked "the Lessor's Copy" and the other counterparts have been prominently marked "the Lessee's Copy" or "Copy." Only the counterpart marked "the Lessor's Copy" shall evidence a monetary obligation of the Lessee or shall be deemed to be an original or to be chattel paper for purposes of the UCC, and such copy shall be held by the Lessor. 18.5 SEVERABILITY. Whenever possible, each provision of this Lease shall be interpreted in such manner as to be effective and valid under Applicable Law; but if any provision of this Lease shall be prohibited by or invalid under Applicable Law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Lease. 18.6 SUCCESSORS AND ASSIGNS. This Lease shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 18.7 THIRD-PARTY BENEFICIARIES. Except as expressly provided herein, none of the provisions of this Lease is intended for the benefit of any Person except the parties hereto, their successors and permitted assigns; PROVIDED THAT each of the Lessor and the Lessee agrees that the Investors shall benefit from all of the provisions of this Lease applicable to them. 18.8 JURY TRIAL. EACH OF THE LESSEE AND THE LESSOR WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS LEASE OR ANY OTHER BASIC DOCUMENT OR UNDER ANY AMENDMENT, INSTRU- 20 MENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS LEASE OR ANY OTHER BASIC DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 18.9 HEADINGS; TABLE OF CONTENTS. Section headings and the table of contents used in this Lease (including the Schedules, Exhibits and Annexes hereto) are for convenience of reference only and shall not affect the construction of this Lease. 18.10 SCHEDULES AND EXHIBITS. The Schedules and Exhibits hereto, along with all attachments referenced in any of such items, are incorporated herein by reference and made a part hereof. 18.11 NO JOINT VENTURE. Any intention to create a joint venture or partnership relation between the Lessor and the Lessee is hereby expressly disclaimed. 18.12 REFERENCES TO SECTIONS, EXHIBITS AND SCHEDULES. Any reference to a section, exhibit or schedule in this Agreement shall be to a section, exhibit or schedule of this Agreement unless otherwise specified. 18.13 LIMITATIONS OF LIABILITY OF TRUSTEE. It is expressly understood and agreed by the parties hereto that this Lease is executed by Wilmington Trust Company, not individually or personally, but solely as Trustee under the Trust Agreement in the exercise of the power and authority conferred and vested in it as such Trustee, that each and all of the representations, undertakings and agreements herein made on the part of the Trustee or the Lessor are intended not as personal representations, undertakings and agreements by Wilmington Trust Company, or for the purpose or with the intention of binding Wilmington Trust Company, personally, but are made and intended for the purpose of binding only the Trust Estate, that nothing herein contained shall be construed as creating any liability of Wilmington Trust Company, or any incorporator or any past, present or future subscriber to the capital stock of, or stockholder, officer or director of Wilmington Trust Company, to perform any covenant either express or implied contained herein or in the other Basic Documents to which the Trustee or the Lessor is a party, and that so far as Wilmington Trust Company is concerned, any Person shall look solely to the Trust Estate for the performance of any obligation hereunder or thereunder or under any of the instruments referred to herein or therein; 21 PROVIDED, that nothing contained in this SECTION shall be construed to limit in scope or substance any general corporate liability of Wilmington Trust Company as expressly provided in the Trust Agreement or in the Participation Agreement. 22 IN WITNESS WHEREOF, the parties hereto have executed this LEASE AGREEMENT as of the day and year first above written. MIDWEST GENERATION, LLC /s/ John P. Finneran, Jr. --------------------------- Name: John P. Finneran, Jr. Title: Vice President EME/CDL TRUST By: Wilmington Trust Company, not in its individual capacity, but solely as Trustee /s/ Kathleen A. Pedelini ---------------------------- Name: Kathleen A. Pedelini Title: Administrative Account Manager SCHEDULE 1 TO THE LEASE DESCRIPTION OF THE LEASED EQUIPMENT [to come] S-1 SCHEDULE 2 TO THE LEASE INSURANCE (a) Lessee shall 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 Leased Equipment, subject to the availability of such coverage on commercially reasonable terms, all on terms and conditions which are in accordance with Prudent Industry Practice and shall include business interruption insurance with a deductible not to exceed 60 days and a tenor no shorter than one year; (b) All such policies of casualty, third party liability and business interruption insurance shall: (i) provide that, with respect to third party liability insurance, the Lessor, the Noteholders and the Investors shall be named as additional insureds; (ii) provide that (A) no cancellation or termination of such insurance and (B) no reduction in the limits of liability of such insurance shall be effective until 30 days after written notice is given by the insurers to the Agent of such cancellation, termination, reduction or change; (iii) waive all claims for insurance premiums or commissions or additional premiums or assessments against the Lessor, the Noteholders and the Investors; and (iv) 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 Lessor, the Noteholders and the Investors. S-2 SCHEDULE 3 TO THE LEASE TERMINATION VALUE TERMINATION DATE [to come] S-3 SCHEDULE 4 TO THE LEASE CATEGORIES OF LEASED EQUIPMENT
Category Lessee Purchase Investor Maximum -------- Fixed Price Purchase Price Deficiency Amount --------------- -------------- -----------------
[to come] S-4 EX-10.107 56 a2031364zex-10_107.txt EXHIBIT 10.107 Exhibit 10.107 EXECUTION COPY REIMBURSEMENT AGREEMENT I (this "AGREEMENT") dated as of December 15, 1999 entered into between Bayerische Landesbank International S.A., a banking institution organized under the laws of Luxembourg (the "BANK") and Midwest Generation, LLC ("MIDWEST"). WHEREAS, the Collins Trust I (the "OWNER LESSOR") and Collins Holdings EME, LLC ("COLLINS HOLDINGS") are party to the Facility Lease Agreement (as the same may be amended, supplemented or otherwise modified from time to time, the "FACILITY LEASE") dated as of December 15, 1999; WHEREAS, Collins Holdings and Midwest are party to the Facility Sublease Agreement (as the same may be amended, supplemented or otherwise modified from time to time, the "FACILITY SUBLEASE") dated as of December 15, 1999; WHEREAS, the Owner Lessor wishes to obtain additional credit enhancement from Midwest in order to support the obligations of Midwest to Collins Holdings under the Facility Sublease and, concomitantly, the obligations of Collins Holdings to the Owner Lessor under the Facility Lease; In consideration of the issuance by the Bank on the Closing Date of an irrevocable standby letter of credit in the form attached hereto as Exhibit A (including any substitutions or replacements thereof in accordance with this Agreement, as the same may be amended, supplemented or otherwise modified from time to time, the "LETTER OF CREDIT"), in the amount of U.S.$3,870,000.00 and in favor of the Beneficiary referred to therein (the "BENEFICIARY"), Midwest and the Bank hereby agree as follows: 1. DEFINITIONS. Capitalized terms used in this Agreement, including the foregoing Recitals, and not otherwise defined herein shall have the respective meanings specified in Annex A hereto. 2. PAYMENTS: Midwest agrees to reimburse the Bank on demand, in immediately available funds by transferring such amounts to First Union National Bank (Swift ID: PNBPU S3NNYC), Account No.: 200019 3574483 in favor of Bayerische Landesbank International S.A. Luxembourg (SWIFT ID BYLAULL), for each payment made by the Bank pursuant to a drawing in accordance with the terms and conditions of the Letter of Credit together with interest on such amount in accordance with Section 5 hereof (the "REIMBURSEMENT OBLIGATIONS") until payment in full hereunder. Each payment by Midwest to the Bank shall be made in lawful currency of the United States, shall be directed to the attention of Patricia Sanchez, and shall be identified by the number assigned to the Letter of Credit by the Bank. 3. CANCELLATION: The Letter of Credit may be canceled in accordance with the terms and conditions of the Letter of Credit. 4. FEES: Midwest will pay the Bank a per annum fee equal to 0.30% of the daily average of the amount available for drawing under each Letter of Credit, calculated on the basis of a 365 or 366 day year, in each case for the actual number of days occurring in the period for which such fee is payable, payable in United States currency at the location designated herein, quarterly in arrears on the sixth day of each January, April, July and October (but if such day is not a Business Day, on the next succeeding Business Day), (each, a "QUARTERLY PAYMENT DATE") and on the expiration or termination date of such Letter of Credit. For each amendment to any Letter of Credit, Midwest will immediately pay the Bank a charge of $200 in connection therewith. Midwest agrees to pay all fees and charges which are due pursuant to the terms of this Agreement by transferring such amounts to First Union Bank International, New York, FED ABA No. 026.00509.2, Account No. 2000 19353009 0 in favor of Bayerische Landesbank International S.A. Luxembourg. 5. INTEREST ON PAYMENTS: The Reimbursement Obligations shall accrue interest at the Alternate Base Rate plus the Applicable Margin PLUS 2% per annum until the Reimbursement Obligations have been paid in full; PROVIDED that, upon the occurrence and during the continuance of any Maturity Event, Midwest shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on the Reimbursement Obligations at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin plus 5% per annum until such Maturity Event is cured; PROVIDED FURTHER that, in addition to the interest then payable on amounts paid under the Letter of Credit pursuant to this Section 5, if after each three month period following the occurrence of the Maturity Event such Maturity Event shall not have been cured, Midwest shall pay, but only to the extent permitted by law, interest on the Reimbursement Obligations at an additional 1% per annum until such Maturity Event is cured. Interest will be calculated based on the actual days outstanding and a 365 or, if appropriate, 366 day year. Actual days outstanding means the period from and including the day of payment by the Bank to and excluding the day of the Bank's receipt of funds from Midwest. Interest under this Section 5 shall be paid on demand (or, if no demand is made, on each Quarterly Payment Date) and on the date that the Reimbursement Obligations are paid in full. 6. INDEMNITY: Midwest will absolutely, irrevocably and, except as otherwise provided herein, unconditionally indemnify and hold the Bank harmless against all loss, cost or expense suffered or incurred by the Bank howsoever arising from or in connection with the Letter of Credit, EXCEPT for any loss, cost or expense suffered or incurred as a result of the gross negligence or willful misconduct of the Bank. Neither the Bank nor any of the Bank's correspondents or agents shall be responsible for any of the following contingencies, including, but not limited to: (a) any acts or omissions of the Beneficiary; (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of documents specified in the Letter of Credit, even if it should in fact be proven to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged, provided that all the documents appear on their face to be in accordance with the terms and conditions of the Letter of Credit; (c) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they may be indecipherable or errors in translation or errors in interpretation of technical terms; (d) any loss or delay in the transmission or otherwise of any such document or draft; (e) 2 consequences of compliance with applicable laws, orders, regulations, or directives in effect in places of negotiation or payment of the Letter of Credit; or (f) without limiting the foregoing, any consequences arising from causes beyond the Bank's control or any act or omission by the Bank or any of its correspondents, except to the extent that the occurrence of any of the contingencies specified in subparagraphs (a) through (f) above is attributable to the gross negligence or willful misconduct of the Bank or any of its correspondents. The occurrence of any one or more of the above contingencies shall not affect or impair the Bank's rights and powers hereunder or the obligations of Midwest to the Bank of payment, indemnity or reimbursement hereunder. If payment is not made within 5 Business Days of the date demanded, interest will be charged based on the calculation in Section 5. This Section 6 shall survive any payment of the Bank's obligations and liabilities hereunder and any termination of this Agreement. 7. CHANGE IN CIRCUMSTANCES: If the Bank determines that any change in any law, regulation, guideline or order or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof shall either (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against the Letter of Credit or require the inclusion of the Letter of Credit in calculations related to the Bank's capitalization or (ii) impose any other condition regarding this Agreement or the Letter of Credit, including, without limitation, any requirement that the Bank pay assessments for deposit insurance with respect to the Letter of Credit, and the result of any event referred to in clause (i) or (ii) above shall be to increase the cost to the Bank of issuing or maintaining the Letter of Credit or the reimbursement obligations of Midwest or to reduce the amounts receivable by the Bank upon such reimbursement, then, upon demand by the Bank, Midwest shall promptly pay to the Bank from time to time as specified by the Bank additional amounts which shall be sufficient to compensate the Bank for such increased cost or reduced receivables. A certificate as to such amounts submitted by the Bank to Midwest, stating in reasonable detail the basis of computation, shall be presumptive evidence of additional amounts payable under this Section 7. Midwest acknowledges that there may be various methods of allocating to the Letter of Credit reserve, assessment, capitalization or similar costs referred to above and agrees that the allocation of the Bank, for purposes of determining such costs, shall be conclusive and binding upon Midwest, provided that such allocations are made in good faith by a reasonable method and are absent manifest error. If payment is not made within 5 Business Days of the date demanded, interest will be charged based on the calculation in Section 5. 8. LIABILITY OF THE BANK: The Bank shall not be responsible for verifying the existence of any act, condition or statement made by the Beneficiary in relation to any drawing or presentment under the Letter of Credit, for the validity or genuineness of certificates or other documents delivered under or in connection with the Letter of Credit, even if such certificates or other documents should in fact prove to be invalid, fraudulent or forged, for any breach of contract between the Beneficiary and Midwest, or for any other consequences beyond the Bank's control, so long as the Bank acts in good faith and in accordance with applicable law and customary banking procedures. The Bank may 3 accept certificates or other documents that appear on their face to be in order without responsibility for further investigation, regardless of any notice or information to the contrary, unless otherwise ordered by a court of competent jurisdiction. In furtherance of and not in limitation of the foregoing, Midwest agrees that any action, inaction or omission taken or suffered by the Bank in good faith and in accordance with applicable law and customary banking procedures in connection with any Letter of Credit or related drafts shall be binding on Midwest and shall not result in any liability of the Bank to Midwest. 9. OBLIGATION ABSOLUTE: Midwest's obligation to make each payment under this Agreement shall be absolute and unconditional and shall not be subject to any defense or be affected by any right of setoff, counterclaim or recoupment which Midwest may now or hereafter have against the Beneficiary, the Bank or any other person for any reason whatsoever. 10. CONDITIONS PRECEDENT: This Agreement shall become effective upon the satisfaction of each of the conditions precedent set forth below: (a) Midwest agrees to deliver to the Bank, a certificate of its Secretary or an Assistant Secretary as to resolutions of its Board of Directors authorizing Midwest to enter into and perform this Agreement and the names and signatures of the officers or other officials of Midwest who are authorized to sign this Agreement, together with certified copies of Midwest's organizational documents and an opinion of counsel to Midwest in form and substance satisfactory to the Bank. (b) The Participation Agreement shall have been duly authorized, executed and delivered by the parties thereto. (c) Each of the conditions precedent contained in Section 4 of the Participation Agreement shall have been satisfied in the opinion of the Bank or waived by the Bank. (d) The Bank shall have received any other certificates, documents or information regarding Midwest as the Bank may reasonably request. 11. RIGHT OF SETOFF: At any time when any Reimbursement Obligation has not been paid (after demand for payment has been made), the Bank is hereby authorized at any time and from time to time, without notice to Midwest (any such notice being expressly waived by Midwest) to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Bank to or for the credit or the account of Midwest against any and all of the obligations of Midwest now or thereafter existing under this Agreement, irrespective of whether or not the Bank shall have made any demand under this Agreement and although such obligations may be contingent and unmatured. The Bank agrees promptly to notify Midwest after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Bank under this Section 11 are in addition to other rights and remedies which the Bank may have including, without limitation, other rights of setoff. 4 12. NOTICES: Notices and demands under this Agreement shall be in writing and will be sufficient if delivered by hand, by United States registered or certified mail or personal delivery by overnight mail or courier service or by facsimile receipt of which is confirmed by telephone. Notices and demands shall be effective when received and shall be addressed if to Midwest to: One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Attn: Georgia R. Nelson Fax No.: (312) 583-6111 if to the Bank to: Bayerische Landesbank International S.A. Corporate Finance Department 3, Rue Jean Monnet L-2180 Luxembourg Attn.: Nadja Bamberg/Serge Dollendorf Fax No.: (00352) 42434-3399 13. NO WAIVERS, REMEDIES: This Agreement may not be amended, waived or modified except in writing duly signed by the Bank and Midwest. The Bank may elect in its sole discretion not to renew the Letter of Credit for additional periods. This Agreement and the terms, covenants and conditions hereof shall be binding upon and inure to the benefit of the Bank and Midwest and their respective successors. No failure on the Bank's part to exercise, and no delay on the Bank's part in exercising, any rights, powers or remedies hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such rights, powers or remedies by the Bank preclude any other or further exercising thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and not exclusive of any other remedies provided by law. 14. SEVERABILITY: Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent required by law without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. 15. JURISDICTION/WAIVER OF JURY TRIAL: (a) Any legal action or proceeding against Midwest or the Bank with respect to this Agreement, the Letter of Credit or any of the agreements, documents or instruments delivered in connection herewith or therewith may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York as the party commencing such action or proceeding may elect. By execution and delivery hereof, each party accepts and consents to, for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Nothing herein shall limit the right of Midwest or the Bank to bring proceedings against the other party in the courts of any other jurisdiction. 5 (b) Midwest and the Bank knowingly, voluntarily and intentionally waive any and all rights Midwest or the Bank, as the case may be, may have to a trial by jury in respect of any litigation based on, or arising out of, under or in connection with, this Agreement, the Letter of Credit or any other documents and instruments executed in connection herewith. 16. CONSTRUCTION AND INTERPRETATION: This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Each Letter of Credit shall be subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce, Paris, France, Publication No. 500 (and any successor publication). 17. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. 6 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered on the date set forth above by the undersigned thereunto authorized. BAYERISCHE LANDESBANK INTERNATIONAL S.A. By: /s/ H. PETER RADERMACHER -------------------------------- Name: H. Peter Radermacher Title: Directeur - Adjoint By: /s/ PETER LANG -------------------------------- Name: Peter Lang Title: Mandataire Commercial MIDWEST GENERATION, LLC, By: /s/ JOHN P. FINNERAN, JR. -------------------------------- Name: John P. Finneran, Jr. Title: Vice President ANNEX A TO REIMBURSEMENT AGREEMENT ARTICLE 1 DEFINITIONS 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): "AGREEMENT" means, on any date, this Agreement together with all Annexes, Appendices and Exhibits 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, 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 Citibank, N.A. at its principal office in New York, New York, as its "base rate." The "base rate" is a rate set by the Citibank, N.A. based upon various factors including the Bank'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 Bank plus 1/2 of 1%. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by the Bank in connection with extensions of credit. Changes in the rate of interest on amounts payable under the Agreement will take effect simultaneously with each change in the Alternate Base Rate. The Bank will give notice promptly to Midwest of changes in the Alternate Base Rate. "APA" means the Asset Purchase Agreement dated as of December 15, 1999 (as the same may be amended, supplemented or otherwise modified from time to time) among Funding LLC, the Securitization Company, Citibank, N.A., as agent, each of the financial institutions party thereto as "Purchasers" and Citicorp North America, Inc., as operating agent for the Securitization Company and as agent for the Purchasers and the Securitization Company with respect to the residual credit enhancement. "APPLICABLE MARGIN" means, for any day, the rate per annum in effect for such day based on the Debt Rating which applies for such day determined as provided in the Pricing Grid. "BANK" has the meaning set forth in the Recitals. "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 or Luxembourg. "CLOSING DATE" means the Closing Date, as defined in the Participation Agreement. "COLLINS HOLDINGS" has the meaning set forth in the Recitals. "DEBT RATING" means a rating by each of Moody's and S&P of each of (a) the Funding LLC Loans, (b) the Holdings Tranche A Loans and (c) the Holdings Tranche B Loans. If Moody's or S&P shall have changed its system of classifications after the date hereof, a 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. "EFFECTIVE DATE" means the date this Agreement becomes effective pursuant to SECTION 10. "EME" means Edison Mission Energy, a California corporation. "FACILITY LEASE " has the meaning set forth in the Recitals. "FACILITY SUBLEASE " has the meaning set forth in the Recitals. "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 Bank from up to three federal funds brokers of recognized standing selected by the Bank. "FUNDING LLC" means Midwest Funding LLC. "FUNDING LLC LOANS" means the Advances under and as defined in Asset Purchase Agreement dated as of December 15, 1999 among Funding LLC, the Securitization Company, Citibank, N.A., as agent, each of the financial institutions party thereto as "Purchasers" and Citicorp North America, Inc., as operating agent for the Securitization Company and as agent for the Purchasers and the Securitization Company. "HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms contained in this Agreement, any Annex, any Appendix, any Schedule or any Exhibit refer to this Agreement as a whole and not to any particular Section, paragraph or provision of this Agreement. 2 "HOLDINGS" means Edison Mission Midwest Holdings Co., a subsidiary of EME and a corporation organized under the laws of the State of Delaware. "HOLDINGS CREDIT AGREEMENT" means the Credit Agreement dated as of December 15, 1999 among Holdings, The Chase Manhattan Bank, as administrative agent thereunder and the financial institutions who are or may become parties thereto as "Lenders", as from time to time amended, supplemented, amended and restated or otherwise, modified and in effect from time to time. "HOLDINGS TRANCHE A LOANS" has the meaning assigned to the term "Tranche A Loans" in the Holdings Credit Agreement. "HOLDINGS TRANCHE B LOANS" has the meaning assigned to the term "Tranche B Loans" in the Holdings Credit Agreement. "INCLUDING" means including without limiting the generality of any description preceding such term, and, for purposes of this Agreement, the parties hereto 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. "MATURITY EVENT" means, at any time, the amounts of drawings under the Letter of Credit shall not have been repaid or refinanced in full on or before the date five years after the Effective Date. "MIDWEST" has the meaning set forth in the Recitals. "MOODY'S" means Moody's Investors Service, a division of Dun & Bradstreet Corporation, and its successors and assigns. "OWNER LESSOR" has the meaning set forth in the Recitals. "PARTICIPATION AGREEMENT" means the Participation Agreement [(T1)] dated as of December 15, 1999 among Collins Holdings EME, LLC, Wilmington Trust Company, as Owner Trustee of the Owner Lessor, the Owner Lessor, the Owner Participant named therein, Edison Mission Midwest Holdings Co., Midwest, the Bank, Bayerische Landesbank Girozentrale, Funding LLC and Citibank, N.A., as Holder Representative, as the same may be amended, supplemented or otherwise modified from time to time. "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 B. "REIMBURSEMENT OBLIGATIONS" has the meaning set forth in Section 2 of the Agreement. 3 "SECURITIZATION COMPANY" means CXC Incorporated. "S&P" means Standard & Poor's Ratings Services and its successors and assigns. "UNITED STATES" or "U.S." means the United States of America. Section 1.2 USE OF DEFINED TERMS. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Annex A shall have such meanings when used in each other Annex, the Agreement and any other notice and other communication delivered from time to time in connection with this Agreement. 4 ANNEX B TO REIMBURSEMENT AGREEMENT PRICING GRID
- ----------------------------------------------------------------------------------------------------------------------------------- BASIS FOR PRICING(1) LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 LEVEL 6 DEBT RATING DEBT RATING DEBT RATING DEBT RATING DEBT RATING DEBT RATING AT LEAST: LESS THAN LESS THAN LESS THAN LESS THAN LOWER THAN BBB+ BY S&P AND LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 Baa1 BY MOODY'S BUT AT LEAST: BUT AT LEAST: BUT AT LEAST: BUT AT LEAST: BBB BY S&P AND BBB- BY S&P AND BB+ BY S&P AND BB BY S&P AND Baa2 BY MOODY'S Baa3 BY MOODY'S Ba1 BY MOODY'S Ba2 BY MOODY'S - ----------------------------------------------------------------------------------------------------------------------------------- BASE RATE APPLICABLE 0 bps 0 bps 15 bps 62.5 bps 87.5 bps 100 bps MARGIN - ----------------------------------------------------------------------------------------------------------------------------------- LIBOR APPLICABLE MARGIN 100 bps 125 bps 150 bps 225 bps 275 bps 325 bps - -----------------------------------------------------------------------------------------------------------------------------------
bps = basis points per annum (1) At any time the Debt Ratings are split between S&P and Moody's, the Pricing Level in which the lower rating falls should govern. EXHIBIT A TO REIMBURSEMENT AGREEMENT FORM OF IRREVOCABLE LETTER OF CREDIT No. [______] BAYERISCHE LANDESBANK INTERNATIONAL S.A. December 15, 1999 Collins Trust I as Owner Lessor c/o Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Attn: Corporate Trust Administration Ladies and Gentlemen: 1. The Bank hereby establishes, at the request and for the account of the Account Party, in favor of the Beneficiary to support the certain obligations of the Account Party to Collins Holdings under the Facility Sublease and the correlative obligations of Collins Holdings to Owner Lessor under the Facility Lease, this Irrevocable Letter of Credit in the maximum amount of three million eight hundred seventy thousand U.S. Dollars and zero Cents (U.S.$3,870,000.00), effective immediately and expiring on the Expiration Date. 2. As used herein, the following terms have the following meanings: A. "ACCOUNT PARTY" means Midwest Generation, LLC. B. "APA" means the Asset Purchase Agreement dated as of December 15, 1999 (as the same may be amended, supplemented or otherwise modified from time to time) among Midwest Funding LLC, CXC Incorporated (the "SECURITIZATION COMPANY"), Citibank, N.A., as agent, each of the financial institutions party thereto as "Purchasers" (the "PURCHASERS") and Citicorp North America, Inc., as operating agent for the Securitization Company and as RCE Agent. C. "BANK" means Bayerische Landesbank International S.A. D. "BENEFICIARY" means (i) initially, the Owner Lessor and (ii) after giving effect to the transfer and assignment by the Owner Lessor of all of its right, title and interest in, to and under this Letter of Credit as collateral security for the obligations of the Owner Lessor under, and as provided in, the RCE Reimbursement Agreement on the 2 date hereof to Bayerische Landesbank Girozentrale, Bayerische Landesbank Girozentrale. E. "BUSINESS DAY" means any day except a Saturday, Sunday or legal holiday in New York City, New York or a day on which banks in New York City, New York, Wilmington, Delaware or Luxembourg are authorized or required by law or executive order to close. F. "COLLINS HOLDINGS" means Collins Holdings EME, LLC. G. "EXPIRATION DATE" means December 15, 2004. H. "FACILITY LEASE" means the Facility Lease Agreement (TI), dated as of December 15, 1999, between the Owner Lessor and Collins Holdings, as the same may be from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. I. "FACILITY SUBLEASE" means, the Facility Sublease Agreement (TI), dated as of December 15, 1999 between Collins Holdings and the Account Party, as the same may be from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. J. "LEASE DEFAULT" means, with respect to the Facility Lease, any event which with the passage of time or the giving of notice would become a Lease Event of Default thereunder. K. "LEASE EVENT OF DEFAULT" means, with respect to the Facility Lease, a Lease Event of Default as such term is defined thereunder. L. "LETTER OF CREDIT" means this Irrevocable Letter of Credit No. [_________] issued by the Bank. M. "MAXIMUM AMOUNT" means three million eight hundred seventy thousand U.S. Dollars and zero Cents (U.S.$3,870,000.00). N. "OWNER LESSOR" means Collins Trust (I), a Delaware business trust, together with its successor and assigns. O. "RATING AGENCY" means each of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. P. "RCE AGENT" means Citicorp North America, Inc., a Delaware corporation, in its capacity as agent for the Purchasers and the Securitization Company. Q. "RCE REIMBURSEMENT AGREEMENT" means the Reimbursement Agreement dated as of December 15, 1999 between the Owner Lessor and Bayerische Landesbank Girozentrale. R. "RCE LETTER OF CREDIT" shall mean that certain Irrevocable Letter of Credit issued by Bayerische Landesbank Girozentrale in favor of the RCE Agent for the account of the Owner Lessor. 3. Partial drawings are permitted hereunder. The Bank hereby irrevocably authorizes the Beneficiary to draw on the Bank, from time to time, in accordance with the terms 3 and conditions hereinafter set forth, in amounts not exceeding, in the aggregate, the Maximum Amount. The Bank shall pay such drawings with its own funds. Except as expressly stated herein, this undertaking is not subject to any agreement, condition or qualification. 4. Only the Beneficiary may make drawings under this Letter of Credit. Upon payment by the Bank of one or more drawings that, in the aggregate, are equal to the Maximum Amount, the Bank shall be fully discharged from its obligations under this Letter of Credit, and the Bank shall not thereafter be obligated to make any further payment under this Letter of Credit to the Beneficiary or to any other person. 5. Funds under this Letter of Credit will be made available to the Beneficiary against the Beneficiary's certificate or certificates signed by the Owner Lessor in the form of Annex 1 hereto, appropriately completed, and may be delivered by telecopy transmission to telecopy number (00352) 42434-3399, or delivered in person or by mail or courier to the Bank's offices located at 3, Rue Jean Monnet, L-2180 Luxembourg or at any other office in New York City that may be designated by the Bank in a written notice delivered to the Beneficiary. 6. Each such certificate referred to in paragraph 5 above shall be dated on or within three Business Days prior to the date of presentation. Upon receipt by the Bank of an appropriately completed certificate in conformity with the terms and conditions of this Letter of Credit, at or before 5:00 p.m., New York City time, on or before the Expiration Date, the Bank will honor the same (to the extent required by this Letter of Credit) in accordance with the payment instructions of the Beneficiary to the Bank by 4:00 p.m., New York City time, on the Business Day following receipt of such certificate by the Bank; PROVIDED that if such certificate is received prior to 11:00 a.m., New York City time, on a Business Day, the Bank shall make its payment in immediately available funds by 4:00 p.m., New York City time, on such Business Day. 7. This Letter of Credit shall automatically terminate on the Expiration Date; PROVIDED, HOWEVER, that if the Bank's business is interrupted or suspended on the Expiration Date for any reason, this Letter of Credit shall automatically terminate on the date 21 days immediately after the Bank's resumption of business. 8. THIS LETTER OF CREDIT SHALL BE SUBJECT TO AND GOVERNED BY THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), (INTERNATIONAL CHAMBER OF COMMERCE, PARIS, FRANCE PUBLICATION NO. 500) (AND ANY SUCCESSOR PUBLICATIONS). 9. The right, title and interest of the Beneficiary in, to and under this Letter of Credit are transferable and assignable in their entirety (but not in part) to any transferee or assignee designated by the Beneficiary. The Owner Lessor as original beneficiary has transferred and assigned all of its right, title and interest in, to and under this Letter of Credit to Bayerische Landesbank Girozentrale having an address at 560 Lexington Avenue, New York, NY 10022 as collateral security for the Owner Lessor's obligations under the RCE Reimbursement Agreement. 10. Communications with respect to this Letter of Credit shall be in writing and shall be addressed to the Bank at 3, Rue Jean Monnet, L-2180 Luxembourg (or any other office in New York City which may be designated by the Bank in a written notice delivered to the Beneficiary, and the Account Party), specifically referring to the number of this Letter of Credit. 4 11. This Letter of Credit sets forth in full the Bank's undertakings, and the Bank's undertakings hereunder shall not in any way be modified, amended, amplified or limited by reference to any document, instrument or agreement referred to herein except for the certificates referred to herein, and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement except for such certificates. Very truly yours, BAYERISCHE LANDESBANK INTERNATIONAL S.A. By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: ANNEX 1 TO LETTER OF CREDIT BENEFICIARY'S CERTIFICATE Re: Irrevocable Letter of Credit No. [_______________] (the "Letter of Credit") dated December 15, 1999, issued by Bayerische Landesbank International S.A. at the request and for the account of the Account Party identified therein. Reference is made to the Letter of Credit. Any capitalized term used herein and not defined herein has its respective meaning as set forth in the Letter of Credit. The Beneficiary hereby demands payment in the amount of U.S.$____________ ([insert amount in words)] U.S. Dollars. This is a drawing under the Letter of Credit. The Beneficiary hereby certifies to the Bank: (1) The Beneficiary is entitled to draw under this Letter of Credit the amount specified in this Certificate because [both (i) a drawing against the RCE Letter of Credit has been made in an amount at least equal to the amount of the drawing requested hereby and (ii) a Lease Default that is a payment or bankruptcy default has occurred and is continuing.] [or] [(A)(i) the rating of the unsecured debt securities of Bayerische Landesbank Girozentrale shall be downgraded below [P-1 by Moody's or the higher of A-1] or the then current rating of the Securitization Company's commercial paper by S&P, or (ii) Bayerische Landesbank Girozentrale has been mentioned with negative implications in "CreditWatch" by S&P or a similar publication list by S&P or Moody's and the Account Party has failed to arrange for the issuance of a substitute irrevocable letter of credit in the then available amount under this Letter of Credit by a bank whose unsecured debt securities are rated by the Rating Agencies as high as the ratings stated in clause (i) above and which is not a bank with respect to which clause (ii) above would be applicable and (B) a drawing against the RCE Letter of Credit has been made.] *Delete as applicable. (2) The amount of the drawing made by this Certificate, together with all other amounts previously drawn by the Beneficiary under the Letter of Credit, does not exceed the Maximum Amount. The Beneficiary hereby requests that payment under the Letter of Credit by the Bank be made by wire transfer of federal funds to the Beneficiary's Account No. ______ at [Name of Bank] in [Name of City and State in the United States]. IN WITNESS WHEREOF, the Beneficiary has executed and delivered this Certificate as of the ____ day of ___________, _____ [BENEFICIARY] By: ---------------------------------- Name: Title: EX-10.107-1 57 a2031364zex-10_1071.txt EXHIBIT 10.107.1 Exhibit 10.107.1 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENT(S) TO EXHIBIT 10.107 Reimbursement Agreement II, dated as of December 15, 1999, between Bayerische Landesbank International S.A. and Midwest Generation, LLC. This Reimbursement Agreement differs from Exhibit 10.107 in the following respects: In the first paragraph of the Recitals, "Collins Trust I" is replaced by "Collins Trust II.." Reimbursement Agreement III, dated as of December 15, 1999, between Bayerische Landesbank International S.A. and Midwest Generation, LLC. This Reimbursement Agreement differs from Exhibit 10.107 in the following respects: In the first paragraph of the Recitals, "Collins Trust I" is replaced by "Collins Trust III." Reimbursement Agreement IV, dated as of December 15, 1999, between Bayerische Landesbank International S.A. and Midwest Generation, LLC. This Reimbursement Agreement differs from Exhibit 10.107 in the following respects: In the first paragraph of the Recitals, "Collins Trust I" is replaced by "Collins Trust IV." EX-10.108 58 a2031364zex-10_108.txt EXHIBIT 10.108 Exhibit 10.108 As disclosed in the prospectus constituting a part of a registration statement on Form S-4 filed by Edison Mission Enrgy and Midwest Generation, this is not an agreement to which either Edison Mission Energy or Midwest Generation is a party. However, because it contains a number of tests to which Midwest Generation is bound, it is incorporated by reference. This caption does not constitute a part of the Credit Agreement. EXECUTION COUNTERPART ================================================================================ CREDIT AGREEMENT DATED AS OF DECEMBER 15, 1999 AMONG EDISON MISSION MIDWEST HOLDINGS CO., AND CERTAIN COMMERCIAL LENDING INSTITUTIONS, AND THE CHASE MANHATTAN BANK AS THE ADMINISTRATIVE AGENT FOR THE LENDERS ARRANGED BY CHASE SECURITIES INC., SALOMON SMITH BARNEY INC., SOCIETE GENERALE AND WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH ================================================================================ TABLE OF CONTENTS ----------------- ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS.......................................1 SECTION 1.1 DEFINED TERMS....................................................1 SECTION 1.2 USE OF DEFINED TERMS............................................20 SECTION 1.3 CROSS-REFERENCES................................................20 SECTION 1.4 ACCOUNTING AND FINANCIAL DETERMINATIONS.........................21 ARTICLE 2 COMMITMENTS AND BORROWING PROCEDURES..................................21 SECTION 2.1 COMMITMENTS.....................................................21 SECTION 2.1.1 TRANCHE A LOAN COMMITMENT..................................21 SECTION 2.1.2 PROCEDURE FOR TRANCHE A LOAN BORROWING.....................21 SECTION 2.1.3 TRANCHE B LOAN COMMITMENT..................................21 SECTION 2.1.4 PROCEDURE FOR TRANCHE B LOAN BORROWING.....................22 SECTION 2.1.5 TRANCHE C LOAN COMMITMENT..................................22 SECTION 2.1.6 PROCEDURE FOR TRANCHE C LOAN BORROWING.....................22 SECTION 2.2 LENDERS NOT REQUIRED TO MAKE LOANS..............................23 SECTION 2.3 REDUCTION OF THE COMMITMENTS....................................23 SECTION 2.4 CONTINUATION AND CONVERSION ELECTIONS...........................24 SECTION 2.5 FUNDING.........................................................24 SECTION 2.6 RENEWAL OF TRANCHE A LOAN COMMITMENTS...........................24 ARTICLE 3 REPAYMENTS, PREPAYMENTS, INTEREST AND FEES............................25 SECTION 3.1 REPAYMENTS AND PREPAYMENTS......................................25 SECTION 3.1.1 OPTIONAL PREPAYMENTS AND COMMITMENT REDUCTIONS.............26 SECTION 3.1.2 MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS............26 SECTION 3.2 INTEREST PROVISIONS.............................................27 SECTION 3.2.1 RATES......................................................27 SECTION 3.2.2 POST-MATURITY RATES; DEFAULT RATES.........................28 SECTION 3.2.3 PAYMENT DATES..............................................28 SECTION 3.2.4 INTEREST RATE DETERMINATION................................29 SECTION 3.3 FEES............................................................29 SECTION 3.3.1 FACILITY FEE...............................................29 SECTION 3.3.2 ADMINISTRATIVE AGENT'S FEE AND MISCELLANEOUS FEES..........29 ARTICLE 4 CERTAIN LIBO RATE AND OTHER PROVISIONS................................29 SECTION 4.1 LIBO RATE LENDING UNLAWFUL......................................29 SECTION 4.2 INABILITY TO DETERMINE RATES....................................29 SECTION 4.3 INCREASED LIBO RATE LOAN COSTS..................................30 SECTION 4.4 OBLIGATION TO MITIGATE..........................................30 SECTION 4.5 FUNDING LOSSES..................................................31 SECTION 4.6 INCREASED CAPITAL COSTS.........................................31 SECTION 4.7 TAXES...........................................................32 SECTION 4.8 PAYMENTS, COMPUTATIONS..........................................33 SECTION 4.9 SHARING OF PAYMENTS.............................................33 SECTION 4.10 SET-OFF........................................................34 SECTION 4.11 REPLACEMENT OF LENDER..........................................34 ARTICLE 5 CASH FLOW RECAPTURE FUND..............................................35 SECTION 5.1 CASHFLOW RECAPTURE FUND.........................................35 ARTICLE 6 CONDITIONS TO EFFECTIVENESS AND LOANS.................................35 SECTION 6.1 CONDITIONS TO EFFECTIVENESS.....................................35 SECTION 6.1.1 LOAN DOCUMENTS.............................................35 CREDIT AGREEMENT SECTION 6.1.2 ACQUISITION................................................35 SECTION 6.1.3 THE FACILITY LEASES........................................35 SECTION 6.1.4 ENVIRONMENTAL REPORTS......................................35 SECTION 6.1.5 FINANCIAL STATEMENTS.......................................35 SECTION 6.1.6 PROJECTIONS; RATING AGENCY PRESENTATIONS...................36 SECTION 6.1.7 CLOSING FEES, EXPENSES.....................................36 SECTION 6.1.8 APPROVALS..................................................36 SECTION 6.1.9 CONSULTANTS' REPORTS.......................................36 SECTION 6.1.10 LIEN SEARCH; RECORDINGS AND FILINGS.......................36 SECTION 6.1.11 RESOLUTIONS...............................................37 SECTION 6.1.12 OFFICER'S CERTIFICATE.....................................37 SECTION 6.1.13 OPINIONS OF COUNSEL.......................................37 SECTION 6.1.14 ASSET APPRAISAL...........................................37 SECTION 6.1.15 NO MATERIAL ADVERSE CHANGE................................37 SECTION 6.2 ALL LOANS.......................................................37 SECTION 6.2.1 REPRESENTATIONS AND WARRANTIES; NO DEFAULT.................37 SECTION 6.2.2 BORROWING REQUEST..........................................38 SECTION 6.2.3 SATISFACTORY LEGAL FORM....................................38 ARTICLE 7 REPRESENTATIONS AND WARRANTIES........................................38 SECTION 7.1 FINANCIAL INFORMATION...........................................38 SECTION 7.2 ORGANIZATION; POWER.............................................38 SECTION 7.3 DUE AUTHORIZATION; NON-CONTRAVENTION............................38 SECTION 7.4 APPROVALS.......................................................38 SECTION 7.5 ACCURACY OF INFORMATION.........................................39 SECTION 7.6 VALIDITY........................................................39 SECTION 7.7 COMPLIANCE WITH LAW AND CONTRACTUAL OBLIGATIONS.................39 SECTION 7.8 REGULATIONS T, U AND X..........................................39 SECTION 7.9 LITIGATION......................................................40 SECTION 7.10 OWNERSHIP OF PROPERTIES........................................40 SECTION 7.11 TAXES..........................................................40 SECTION 7.12 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT; OTHER REGULATION..........................................40 SECTION 7.13 ENVIRONMENTAL WARRANTIES.......................................40 SECTION 7.14 THE OBLIGATIONS................................................41 SECTION 7.15 YEAR 2000 MATTERS..............................................41 SECTION 7.16 PENSION AND WELFARE PLANS......................................41 ARTICLE 8 COVENANTS.............................................................42 SECTION 8.1 AFFIRMATIVE COVENANTS...........................................42 SECTION 8.1.1 FINANCIAL INFORMATION, REPORTS, NOTICES....................42 SECTION 8.1.2 CONTINUATION OF BUSINESS AND MAINTENANCE OF EXISTENCE......44 SECTION 8.1.3 COMPLIANCE WITH REQUIREMENTS OF LAW AND CONTRACTUAL OBLIGATIONS................................................44 SECTION 8.1.4 MAINTENANCE OF GENERATING ASSETS...........................45 SECTION 8.1.5 INSURANCE..................................................45 SECTION 8.1.6 BOOKS AND RECORDS..........................................45 SECTION 8.1.7 YEAR 2000 MATTERS..........................................45 SECTION 8.1.8 ENVIRONMENTAL COVENANT.....................................46 SECTION 8.1.9 FURTHER ASSURANCES.........................................46 SECTION 8.1.10 FINANCIAL COVENANTS.......................................46 SECTION 8.1.11 USE OF PROCEEDS...........................................46 SECTION 8.1.12 RECOVERY EVENTS...........................................47 SECTION 8.2 NEGATIVE COVENANTS..............................................47 SECTION 8.2.1 RESTRICTIONS ON INDEBTEDNESS...............................47 SECTION 8.2.2 LIENS......................................................49 SECTION 8.2.3 CONSOLIDATION, MERGER......................................50 SECTION 8.2.4 ASSET DISPOSITIONS.........................................50 CREDIT AGREEMENT SECTION 8.2.5 INVESTMENTS................................................50 SECTION 8.2.6 TRANSACTIONS WITH AFFILIATES...............................51 SECTION 8.2.7 RESTRICTED PAYMENTS........................................51 SECTION 8.2.8 CAPITAL EXPENDITURES.......................................52 SECTION 8.2.9 RESTRICTIVE AGREEMENTS.....................................52 SECTION 8.2.10 LIMITATION ON LINES OF BUSINESS...........................52 SECTION 8.2.11 LIMITATION ON ELECTRICITY MARKET RISK EXPOSURE............52 ARTICLE 9 EVENTS OF DEFAULT.....................................................52 SECTION 9.1 LISTING OF EVENTS OF DEFAULT....................................52 SECTION 9.1.1 NON-PAYMENT OF OBLIGATIONS.................................53 SECTION 9.1.2 BREACH OF WARRANTY.........................................53 SECTION 9.1.3 NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS.......53 SECTION 9.1.4 NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS.........53 SECTION 9.1.5 DEFAULT ON OTHER INDEBTEDNESS..............................53 SECTION 9.1.6 DEFAULT ON LEASE OBLIGATIONS...............................53 SECTION 9.1.7 BANKRUPTCY, INSOLVENCY.....................................53 SECTION 9.1.8 PENSION PLANS..............................................54 SECTION 9.1.9 JUDGMENTS..................................................54 SECTION 9.1.10 REGULATORY VIOLATION......................................54 SECTION 9.1.11 LOAN DOCUMENTATION........................................54 SECTION 9.1.12 CHANGE IN CONTROL.........................................54 SECTION 9.2 ACTION IF BANKRUPTCY............................................54 SECTION 9.3 ACTION IF OTHER EVENT OF DEFAULT................................55 SECTION 9.4 RESCISSION OF DECLARATION.......................................55 ARTICLE 10 THE AGENT............................................................55 SECTION 10.1 ACTIONS........................................................55 SECTION 10.2 FUNDING RELIANCE...............................................56 SECTION 10.3 EXCULPATION....................................................56 SECTION 10.4 SUCCESSOR......................................................57 SECTION 10.5 LOANS BY CHASE.................................................57 SECTION 10.6 RELIANCE BY ADMINISTRATIVE AGENT...............................57 SECTION 10.7 NOTICE OF DEFAULT..............................................58 SECTION 10.8 CREDIT DECISIONS...............................................58 SECTION 10.9 COPIES.........................................................58 SECTION 10.10 INTEREST OF LENDERS IN HOLDINGS COLLATERAL....................58 ARTICLE 11 MISCELLANEOUS PROVISIONS.............................................58 SECTION 11.1 WAIVERS, AMENDMENTS............................................58 SECTION 11.2 NOTICES........................................................59 SECTION 11.3 PAYMENT OF COSTS AND EXPENSES..................................59 SECTION 11.4 INDEMNIFICATION................................................60 SECTION 11.5 SURVIVAL.......................................................61 SECTION 11.6 SEVERABILITY...................................................61 SECTION 11.7 HEADINGS.......................................................62 SECTION 11.8 EXECUTION IN COUNTERPARTS......................................62 SECTION 11.9 GOVERNING LAW; ENTIRE AGREEMENT................................62 SECTION 11.10 SUCCESSORS AND ASSIGNS........................................62 SECTION 11.11 SALE AND TRANSFER OF LOANS AND NOTES; PARTICIPATIONS IN LOANS AND NOTES...............................................62 SECTION 11.11.1 ASSIGNMENTS..............................................62 SECTION 11.11.2 PARTICIPATIONS...........................................63 SECTION 11.12 OTHER TRANSACTIONS............................................64 SECTION 11.13 SUBMISSION TO JURISDICTION; WAIVERS...........................64 SECTION 11.14 WAIVERS OF JURY TRIAL.........................................65 SECTION 11.15 NON-RECOURSE PERSONS..........................................65 CREDIT AGREEMENT SECTION 11.16 ACKNOWLEDGMENTS...............................................65 SECTION 11.17 RELEASES OF HOLDINGS COLLATERAL AND GUARANTEE OBLIGATIONS...................................................65 SECTION 11.18 CONFIDENTIALITY...............................................66 SECTION 11.19 EFFECTIVENESS.................................................66 ANNEXES Annex I - Pricing Grid Annex II - Cashflow Recapture Grid EXHIBITS A-1 - Form of Tranche A Note A-2 - Form of Tranche B Note A-3 - Form of Tranche C Note B - Form of Borrowing Request C - Form of Continuation/Conversion Notice D - Form of Lender Assignment Agreement E - Form of Intercreditor Agreement F - Form of Midwest Guarantee G - Form of Lease Obligations Guarantee H - Form of Opinion of New York Counsel to the Borrower SCHEDULES Schedule 1.1(a) Commitments Schedule 1.1(b) Lending Offices Schedule 7.4 Governmental Approvals Schedule 7.5 Factual Information Schedule 7.9 Litigation Schedule 8.2.1(a) Existing Lease Liabilities Schedule 8.2.1(d) Permitted Indebtedness for Acquisition and Construction
CREDIT AGREEMENT CREDIT AGREEMENT dated as of December 15, 1999 among EDISON MISSION MIDWEST HOLDINGS CO., a Delaware corporation (the "BORROWER"), the various financial institutions as are or may become parties hereto (collectively, the "LENDERS") and THE CHASE MANHATTAN BANK, as administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT"). RECITALS A. The Borrower has requested that the Lenders establish credit facilities (i) to provide additional financing required for the acquisition of certain electric generation facilities and other related assets associated therewith and ancillary thereto located in the State of Illinois (collectively, the "COMED ASSETS") pursuant to the Asset Sale Agreement dated as of March 22, 1999 (as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time, the "ASSET SALE AGREEMENT") with Commonwealth Edison Company, as seller, and Edison Mission Energy (as defined below), as purchaser, (ii) to provide liquidity support for the Borrower's proposed commercial paper program and (iii) for general corporate and 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 1 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): "ACQUISITION" means the acquisition of the ComEd Assets by Midwest (and, in the case of the Leased Assets, the Facility Lessors) pursuant to the Asset Sale Agreement. "ADMINISTRATIVE AGENT" means Chase 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 the Administrative Agent, 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: (i) 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 -2- 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 (ii) 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. "APA" means the Asset Purchase Agreement dated as of December 15, 1999 among CXC Incorporated, as the "Securitization Company", Funding LLC, as Borrower, each of the Purchasers party thereto, Citibank, N.A., as Agent and Citicorp North America, Inc., as operating agent for the Securitization Company and the RCE Agent referred to therein, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "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. "APPLICABLE PARTICIPATION AGREEMENT" means (a) as to Facility Lessor I, the Participation Agreement (T1), dated as of December 15, 1999, among Collins Holdings, Facility Lessor I, Wilmington Trust Company in its capacity as trustee of Facility Lessor I, Collins Generation I, LLC, the Borrower, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and Citibank, N.A. as the Holder Representative, (b) as to Facility Lessor II, the Participation Agreement (T2), dated as of December 15, 1999, among Collins Holdings, Facility Lessor II, Wilmington Trust Company in its capacity as trustee of Facility Lessor II, Collins Generation II, LLC, the Borrower, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and Citibank, N.A. as the Holder Representative, (c) as to Facility Lessor III, the Participation Agreement (T3), dated as of December 15, 1999, among Collins Holdings, Facility Lessor III, Wilmington Trust Company in its capacity as trustee of Facility Lessor III, Collins Generation III, LLC, the Borrower, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and Citibank, N.A. as the Holder Representative and (d) as to Facility Lessor IV, the Participation Agreement (T4), dated as of December 15, 1999, among Collins Holdings, Facility Lessor IV, Wilmington Trust Company in its capacity as trustee of Facility Lessor IV, Collins Generation IV, LLC, the Borrower, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and Citibank, N.A. as the Holder Representative, in each case, as the same may from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "ASSET SALE AGREEMENT" has the meaning set forth in the RECITALS. "ASSIGNEE" has the meaning set forth in SECTION 11.11.1. "ASSIGNOR" has the meaning set forth in SECTION 11.11.1. "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. CREDIT AGREEMENT -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. "BASIC LEASE RENT" means, with respect to each Facility Lease, Basic Lease Rent as such term is defined in such Facility Lease. "BASIC SUBLEASE RENT" means with respect to each Facility Sublease, Basic Lease Rent as such term is defined in such Facility Sublease. "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, 2.1.4 or 2.1.6. "BORROWING DATE" means any Business Day specified in a notice pursuant to Section 2.1.2, 2.1.4 or 2.1.6 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: (i) 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 (ii) 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. "CAPITAL LEASE" means, with respect to any Person, a lease of (or other Indebtedness arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability set forth on the balance sheet of such Person or such Person's Subsidiaries in accordance with GAAP. "CAPITALIZED INTEREST AMOUNT" means, on any Interest Capitalization Date, the amount of interest that is capitalized on the Funding LLC Loans on such Interest Capitalization Date. "CAPITALIZED LEASE LIABILITIES" of any Person means all monetary obligations of such Person under any Capital Lease, 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: (i) 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; (ii) 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 (iii) other securities as to which the Borrower has demonstrated, to the satisfaction of the Administrative Agent, adequate liquidity through secondary markets or deposit agreements. "CASHFLOW AVAILABLE FOR FIXED CHARGES" means, in respect of any period, the excess, if any, of Revenues (excluding proceeds of any permitted asset sale and amounts available in the Cashflow Recapture Fund) during such period OVER Operating Expenses during such period. "CASHFLOW RECAPTURE FUND" has the meaning set forth in SECTION 5.1. "CASHFLOW RECAPTURE GRID" means the cash flow recapture and ratings grid attached as ANNEX II. CREDIT AGREEMENT -4- "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "CHANGE IN CONTROL" means (i) 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 free and clear of Liens other than Permitted Liens or to maintain direct or indirect voting control of any Loan Party or (b) through one or more Subsidiaries, to be in control of the operation of the Generating Assets, (ii) the failure of MGE (a) to own directly or indirectly, at least 50% of the economic equity interests of the Borrower on a fully diluted basis free and clear of Liens other than Permitted Liens or to maintain direct or indirect voting control of the Borrower or (b) through one or more Affiliates, to be in control of the operation of the Generating Assets and (iii) the failure of the Borrower to own directly or indirectly, 100% of the economic interests in Midwest on a fully diluted basis free and clear of Liens other than Permitted Liens or to maintain 100% direct voting control in Midwest. "CHASE" means The Chase Manhattan Bank, a New York State bank. "CODE" means the Internal Revenue Code of 1986, as amended. "COLLINS FACILITY" means the fossil fuel-fired electric generating facility known as the Collins Station, consisting of two 554 megawatt (net) units three 530 megawatt (net) units, located near the town of Morris, in Grundy County, Illinois. "COLLINS HOLDINGS" means Collins Holdings EME, LLC, a wholly-owned Subsidiary of MGE and a special purpose, bankruptcy-remote limited liability company organized under the laws of the State of Delaware. "COMED" means the Commonwealth Edison Company, an Illinois corporation. "COMED AGREEMENTS" means the Power Purchase Agreements as defined in the ASSET SALE AGREEMENT, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "COMED ASSETS" has the meaning set forth in the RECITALS. "COMMITMENT" means, with respect to each Lender, its Tranche A Loan Commitment, its Tranche B Loan Commitment and its Tranche C Loan Commitment. "COMMITMENT LETTER" means the Commitment Letter dated October 1, 1999 delivered by the Lead Arrangers and the Initial Lenders and accepted by the Borrower and Edison Mission Energy. "COMMITMENT TERMINATION DATE" means the Tranche A Loan Commitment Termination Date, Tranche B Loan Commitment Termination Date or the Tranche C Loan Commitment Termination Date, as applicable. "CONSOLIDATED SUBSIDIARY" means, at any date, any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if its consolidated financial statements were prepared as of such date. "CONSOLIDATED TANGIBLE NET 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 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. "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 CREDIT AGREEMENT -5- 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. "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 Loan Parties, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "CUSA" means Citicorp USA, Inc. "DEBT RATING" means a rating by each of Moody's and S&P of each of the Tranche A Loans, the Tranche B Loans, the Tranche C Loans and the Funding LLC Loans. If Moody's or S&P shall have changed its system of classifications after the date hereof, a 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 COVERAGE RATIO" means, for any period, the ratio of (a) Cashflow Available for Fixed Charges for such period to (b) Fixed Charges for such period. "DEBT TO CAPITAL RATIO" means, with respect to the Borrower and its Consolidated Subsidiaries, the ratio as of the end of the last Fiscal Quarter for which financial statements referred to in SECTION 8.1.1 are available of (i) the aggregate principal amount of Indebtedness of the Borrower (other than Indebtedness of the Borrower incurred pursuant to SECTION 8.2.1(i)) and its Consolidated Subsidiaries then outstanding to (ii) Total Capitalization. "DECLINING LENDER" has the meaning set forth in SECTION 2.6(b). "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. "DEPOSITARY AGENT" has the meaning set forth in the Intercreditor Agreement. "DEPOSITARY BANK" has the meaning set forth in the Intercreditor Agreement. "DESIGNATED LEASE LIABILITIES" means, with respect to any Person, Capitalized Lease Liabilities or Operating Lease Liabilities of such Person outstanding (or anticipated to be outstanding) on the Effective Date and set forth on SCHEDULE 8.2.1(a). "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 pursuant to which such Lender became a Lender hereunder 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 CREDIT AGREEMENT -6- Lender may have separate Domestic Offices for purposes of making, maintaining or continuing, as the case may be, Base Rate Loans. "EDISON MISSION ENERGY" means Edison Mission Energy, a California corporation. "EFFECTIVE DATE" means the date this Agreement becomes effective, as between all parties hereto, pursuant to SECTION 6.1. "EMOC" means Edison Mission Overseas Co., a Subsidiary of the Borrower and a limited liability company organized under the laws of Delaware. "EMOC LOAN DOCUMENTS" means each of (i) the Subordination Agreement dated as of December 15, 1999 entered into by and among the Holdings Collateral Agent, EMOC, and Midwest as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time, (ii) the Subordinated Loan Agreement dated as of December 15, 1999 entered into by and among EMOC and Midwest as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time, (iii) the Subordinated Revolving Loan Agreement dated as of December 15, 1999 entered into by and among EMOC and Midwest as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time and (iv) the promissory notes related to the loans made under the agreements referred to in clauses (ii) and (iii) above. "EMOC PLEDGE AGREEMENT" means the Pledge Agreement dated December 15, 1999 between EMOC and the Holdings Collateral Agent, substantially in the form of Exhibit D to the Intercreditor Agreement, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "EMOL" means Edison Mission Overseas Limited, a Subsidiary of EMOC and a limited liability company organized under the laws of the United Kingdom. "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, public health or protection of the environment, as have been, are now, or may at any time hereafter be in effect. "ENVIRONMENTAL REPORTS" means the Phase I and Phase II environmental surveys concerning the Collins Facility prepared by ENSR Corporation dated November 1998 and December 1998, respectively. "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. "EXCESS CASHFLOW" means, for any period, the excess, if any, of Cashflow Available for Fixed Charges for such period OVER Fixed Charges for such period. "EXISTING TRANCHE A LOAN TERMINATION DATE" has the meaning set forth in SECTION 2.6(b). "FACILITY FEE" has the meaning set forth in SECTION 3.3.1. "FACILITY LEASE" means Facility Lease I, Facility Lease II, Facility Lease III or Facility Lease IV, or any combination thereof (as the context requires). CREDIT AGREEMENT -7- "FACILITY LEASE I" means the Facility Lease Agreement (TI), dated as of December 15, 1999, between Facility Lessor I and Collins Holdings, as the same may be from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "FACILITY LEASE II" means the Facility Lease Agreement (TII), dated as of December 15, 1999, between Facility Lessor II and Collins Holdings, as the same may be from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "FACILITY LEASE III" means the Facility Lease Agreement (TIII), dated as of December 15, 1999, between Facility Lessor III and Collins Holdings, as the same may be from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "FACILITY LEASE IV" means the Facility Lease Agreement (TIV), dated as of December 15, 1999, between Facility Lessor IV and Collins Holdings, as the same may be from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "FACILITY LESSOR I" means Collins Trust I, a Delaware business trust, together with its successor and assigns. "FACILITY LESSOR II" means Collins Trust II, a Delaware business trust, together with its successor and assigns. "FACILITY LESSOR III" means Collins Trust III, a Delaware business trust, together with its successor and assigns. "FACILITY LESSOR IV" means Collins Trust IV, a Delaware business trust, together with its successor and assigns. "FACILITY LESSORS" means, collectively, Facility Lessor I, Facility Lessor II, Facility Lessor III, and Facility Lessor IV. "FACILITY SUBLEASE" means (a) with respect to the Leased Assets under Facility Lease I, the Facility Sublease Agreement (TI), dated as of December 15, 1999, among Collins Holdings, Midwest and Facility Lessor I, (b) with respect to the Leased Assets under Facility Lease II, the Facility Sublease Agreement (TII), dated as of December 15, 1999, among Collins Holdings, Midwest and Facility Lessor II, (c) with respect to the Leased Assets under Facility Lease III, the Facility Sublease Agreement (TIII), dated as of December 15, 1999, among Collins Holdings, Midwest and Facility Lessor III and (d) with respect to the Leased Assets under Facility Lease IV, the Facility Sublease Agreement (TIV), dated as of December 15, 1999, among Collins Holdings, Midwest and Facility Lessor IV, in each case, as the same may be from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per annum equal for each day during such period to: (i) 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 (ii) 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 CREDIT AGREEMENT -8- 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 Holdings Collateral having a priority higher than any other Lien covering the Holdings 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. "FIXED CHARGES" 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, including (A) all capitalized interest and (B) the interest portion of any deferred payment obligation, (ii) amounts due and payable under SECTIONS 3.3.1 and 3.3.2 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, (iv) the interest portion of any deferred payment obligation due and payable during such period, (v) the aggregate amount of the Lease Obligations (other than Designated Lease Liabilities) due and payable during such period, and (vi) all other amounts due and payable by the Loan Parties with respect to Indebtedness permitted under SECTION 8.2.1 during such period. "F.R.S. BOARD" means the Board of Governors of the Federal Reserve System or any successor thereto. "FUNDING LLC" means Midwest Funding LLC, a limited liability company organized under the laws of the State of Delaware. "FUNDING LLC LOANS" has the meaning set forth in each Applicable Participation Agreement. "FUNDING LLC REFINANCING" has the meaning set forth in SECTION 8.2.1(f)(iii). "GAAP" has the meaning set forth in SECTION 1.4. "GENERATING ASSETS" means (i) the ComEd Assets and (ii) any other electric generation facilities and other related assets associated therewith and ancillary thereto (or interests therein) owned, directly or indirectly, by Midwest from time to time. "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. "GROUND LEASES" means, collectively (i) the Ground Lease, dated December 15, 1999 between Midwest and Facility Lessor I, (ii) the Ground Lease dated December 15, 1999 between Midwest and Facility Lessor II, (iii) the Ground Lease dated December 15, 1999 between Midwest and Facility Lessor III and (iv) the Ground Lease dated December 15, 1999 between Midwest and Collins Trust IV, in each case, as from time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "HAZARDOUS MATERIAL" means: (i) any "hazardous substance", as defined by any Environmental Law; (ii) any "hazardous waste", as defined by any Environmental Law; CREDIT AGREEMENT -9- (iii) any petroleum product (including crude oil or any fraction thereof); or (iv) 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. "HOLDER REPRESENTATIVES" has the meaning set forth in the Intercreditor Agreement. "HOLDINGS COLLATERAL" means all assets of the Loan Parties and MGE, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Security Document. "HOLDINGS COLLATERAL AGENT" has the meaning set forth in the Intercreditor Agreement. "HOLDINGS PLEDGE AGREEMENT" means the Pledge Agreement dated December 15, 1999 between the Borrower and the Holdings Collateral Agent, substantially in the form of Exhibit C to the Intercreditor Agreement, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "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: (i) all indebtedness for borrowed money; (ii) 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; (iii) 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); (iv) 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; (v) 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); (vi) all Capitalized Lease Liabilities and Operating Lease Liabilities; (vii) 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; (viii) all indebtedness referred to in CLAUSES (i) through (vii) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, CREDIT AGREEMENT -10- 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 (ix) 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 DEBT RATING" means, with respect to each Debt Rating, the first of each such Debt Rating obtained. "INITIAL LENDERS" means Chase, CUSA, Societe Generale and WestLB. "INSOLVENCY" means, with respect to any Multiemployer Plan, the condition that such plan is insolvent within the meaning of Section 4245 of ERISA. "INTERCREDITOR AGREEMENT" means the Collateral Agency and Intercreditor Agreement dated as of December 15, 1999, among the Administrative Agent, MGE, the Borrower, EMOC, Midwest, Collins Holdings, each Facility Lessor, Funding LLC, each Holder Representative, the Depositary Agent, the Midwest LC Issuer, the Depositary Bank, the Holdings Collateral Agent and such other parties as are or may become parties thereto, substantially in the form of EXHIBIT E hereto, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "INTEREST CAPITALIZATION DATE" means any date on which interest accrued on the Funding LLC Loans and the Lessor Notes is capitalized under and in accordance with the terms of Section 2.02(f) of each Lessor Loan Agreement. "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, 2.4 or 2.5 and ending on (but excluding) either (x) the day which numerically corresponds to such date one, two, three or six months (or such longer or shorter period as the Lenders determine is available) 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, 2.4 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, 2.4 or 2.5 and the Administrative Agent confirms is available from all affected Lenders; PROVIDED, HOWEVER, that: (i) 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; (ii) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration; (iii) 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 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); (iv) no Interest Period for Tranche A Loans may end later than the Tranche A Loan Commitment Termination Date; no Interest Period for Tranche B Loans may end later than the Tranche B Loan Commitment Termination Date; and no Interest Period for CREDIT AGREEMENT -11- the Tranche C Loans may end later than the Tranche C Loan Commitment Termination Date. "INTEREST RATE HEDGING TRANSACTIONS" means, as to any Loan Party, all interest rate swaps, caps or collar agreements or similar arrangements entered into by such Person (i) 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 and (ii) either (A) with a counterparty who is also then a Lender or an Affiliate of a Lender, or (B) with the prior approval of the Required Lenders, such approval to be based on the Required Lenders' reasonable judgment. "INVESTMENT" means, relative to any Person: (i) 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); (ii) any Contingent Liability of such Person; and (iii) 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 Chase Securities Inc., Salomon Smith Barney Inc., Societe Generale and WestLB. "LEASE DEFAULT" means, with respect to each Facility Lease, any event which with the passage of time or the giving of notice would become a Lease Event of Default thereunder. "LEASE EVENT OF DEFAULT" means, with respect to each Facility Lease, a Lease Event of Default as such term is defined in such Facility Lease. "LEASE FINANCE DOCUMENTS" means the Lessor Loan Agreements, the Lessor Notes, the Lease Obligations Guarantee and the other agreements, documents and instruments delivered in connection with the Lessor Loan Agreements and the Lessor Notes. "LEASE FINANCING" means the several leveraged lease financings of undivided interests in the Collins Facility pursuant to the Facility Leases and the other Lease Finance Documents through which the acquisition of the Leased Assets from ComEd is to be effected as part of the Acquisition. "LEASE OBLIGATIONS" means the obligations of Midwest and Collins Holdings to make Basic Lease Rent, Basic Sublease Rent, Renewal Lease Rent, Renewal Sublease Rent, Supplemental Lease Rent, Supplemental Sublease Rent and other payments under the Facility Subleases and the Facility Leases, respectively. "LEASE OBLIGATIONS GUARANTEE" means (i) the Guarantee (TI) dated as of December 15, 1999 by the Borrower in favor of Facility Lessor I; (ii) the Guarantee (TII) dated as of December 15, 1999 by the Borrower in favor of Facility Lessor II; (iii) the Guarantee (TIII) dated as of December 15, 1999 by the Borrower in favor of Facility Lessor III; and (iv) the Guarantee (TIV) dated as of December 15, 1999 by the Borrower in favor of Facility Lessor IV, in each case, substantially in the form of Exhibit G hereto, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. CREDIT AGREEMENT -12- "LEASED ASSETS" means the Collins Facility and certain related assets as described in the Facility Leases, the acquisition of which from ComEd is financed by the Lease Finance Documents. "LENDER ASSIGNMENT AGREEMENT" means a Lender Assignment Agreement, substantially in the form of EXHIBIT D. "LENDERS" has the meaning set forth in the PREAMBLE. "LESSOR LOAN AGREEMENT" means Lessor Loan Agreement I, Lessor Loan Agreement II, Lessor Loan Agreement III or Lessor Loan Agreement IV, or any combination thereof (as the context requires). "LESSOR LOAN AGREEMENT I" means the Lessor Loan Agreement (TI), dated as of December 15, 1999, between Facility Lessor I, Funding LLC and Holder Representative I, as the same may be from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "LESSOR LOAN AGREEMENT II" means the Lessor Loan Agreement (TII), dated as of December 15, 1999, between Facility Lessor II, Funding LLC and Holder Representative II, as the same may be from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "LESSOR LOAN AGREEMENT III" means the Lessor Loan Agreement (TIII), dated as of December 15, 1999, between Facility Lessor III, Funding LLC and Holder Representative III, as the same may be from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "LESSOR LOAN AGREEMENT IV" means the Lessor Loan Agreement (TIV), dated as of December 15, 1999, between Facility Lessor IV, Funding LLC and Holder Representative IV, as the same may be from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "LESSOR NOTES" means, with respect to each Facility Lessor, each Lessor Note as such term is defined in the Lessor Loan Agreement of such Facility Lessor. "LETTER OF CREDIT GUARANTEE" means the Guarantee dated as of December 15, 1999 by the Borrower in favor of the Midwest LC Issuer as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "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 CREDIT AGREEMENT -13- pursuant to which such Lender became a Lender hereunder 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. "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) Midwest and (iii) EMOC and their respective Subsidiaries. "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, (ii) the ability of any Loan Party to perform its obligations under any of the Loan Documents or (iii) the validity and enforceability of the Loan Documents, the liens granted thereunder or the rights and remedies thereto. "MATURITY DATE" has the meaning set forth in SECTION 3.1(A). "MATURITY EVENT" means, at any time, the Funding LLC Loans shall have reached maturity and shall not have been repaid or refinanced in full and the related commitments shall not have been terminated. "MGE" means Midwest Generation EME LLC, a Subsidiary of Edison Mission Energy and a limited liability company organized under the laws of the State of Delaware. "MGE PLEDGE AGREEMENT" means the Pledge Agreement dated December 15, 1999 between MGE and the Holdings Collateral Agent, substantially in the form of Exhibit B to the Intercreditor Agreement, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "MIDWEST" means Midwest Generation LLC, a Subsidiary of the Borrower and a limited liability company organized under the laws of the State of Delaware. "MIDWEST GUARANTEE" means a guarantee made by Midwest in favor of the Administrative Agent, substantially in the form of EXHIBIT F. "MIDWEST LC ISSUER" means Bayerische Landesbank International S.A., as issuer of the Midwest Letters of Credit. CREDIT AGREEMENT -14- "MIDWEST LC REIMBURSEMENT OBLIGATIONS" means the undrawn face amount of all Midwest Letters of Credit and the aggregate principal amount of all reimbursement obligations of Midwest in respect of all drawings made under the Midwest Letters of Credit. "MIDWEST LEASE GUARANTEES" means, collectively, (i) the guarantees made by Midwest, each in favor of a Facility Lessor in respect to Collins Holdings' obligations under the relevant Facility Lease, the Applicable Participation Agreement and related documentation and (ii) the guarantees made by Midwest, each in favor of an Owner Participant and the related Indemnitees (as defined in the Applicable Participation Agreement) other than the related Facility Lessor. "MIDWEST LETTERS OF CREDIT" means each letter of credit issued by the Midwest LC Issuer under a Midwest Reimbursement Agreement for the account of Midwest and for the benefit of the RCE LC Issuer as assignee of a Facility Lessor. "MIDWEST REIMBURSEMENT AGREEMENT" has the meaning set forth in the Intercreditor Agreement. "MOODY'S" means Moody's Investors Service, a division of Dun & Bradstreet Corporation, and its successors and assigns. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as such term is defined in Section 4001(a)(3) of ERISA. "NECESSARY CAPITAL EXPENDITURES" means any capital expenditures that, in the exercise of Prudent Industry Practices, is reasonably necessary for the continued operation or maintenance of the Generating Assets or is required by applicable law. "NECESSARY CAPITAL EXPENDITURE" does not include any capital expenditure undertaken primarily to increase the efficiency of, expand or re-power the Generating Assets or capital expenditures for environmental purposes which are not required by Requirement of Law. "NET CASH PROCEEDS" means (i) 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 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 $10,000,000 with respect to any asset or group of related assets of any Loan Party, (ii) 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 and (iii) in connection with any sale, transfer, lease, contribution, conveyance, grant of options, warrants or other rights with respect to all or substantially all of the Borrower's or its Subsidiaries' assets (including accounts receivable and capital stock of other ownership interests in Subsidiaries), the cash proceeds received from such asset disposition, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith. CREDIT AGREEMENT -15- "NON-RECOURSE PERSONS" means Edison Mission Energy and Southern California Edison Company, and each of their Affiliates (except as provided herein) 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 and PROVIDED FURTHER that each of MGE and EMOC shall be Non-Recourse Persons except with respect to, and to the extent, of the Holdings Collateral furnished thereby under the Security Documents to which it is a party and as otherwise provided in such Security Documents. "NON-U.S. LENDER" has the meaning set forth in Section 4.7(c). "NOTE" means, as the context may require, a Tranche A Note, a Tranche B Note or a Tranche C Note. "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, Necessary Capital Expenditures and all other fees and expenses necessary for the continued operation and maintenance of the Generating Assets and the conduct of the business of the Loan Parties. Operating Expenses shall exclude (to the extent included) Lease Obligations (other than Designated Lease Liabilities). "OPERATING LEASE" means any lease other than a Capital Lease (and, solely by virtue of the intended classification under GAAP, shall include the Facility Leases and the Facility Subleases). "OPERATING LEASE LIABILITY" of any Person means all monetary obligations of such Person under any Operating Lease, and, for purposes of each Loan Document, the amount of such obligations shall be the termination value of such Operating Lease. "ORGANIC DOCUMENTS" 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; and, with respect to any Person that is a limited liability company, its certificate of formation and its limited liability company agreement, in each case, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "OWNER PARTICIPANT" means, (i) Collins Generation I, LLC, a Delaware limited liability company as Owner Participant, (ii) Collins Generation II, LLC, a Delaware limited liability company as Owner Participant, (iii) Collins Generation III, LLC, a Delaware limited liability company as Owner Participant, or (iv) Collins Generation IV, LLC, a Delaware limited liability company as Owner Participant, as the context requires. "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. CREDIT AGREEMENT -16- "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 Tranche A Loan Commitment, the Tranche B Loan Commitment or the Tranche C 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 11.11.1. "PERMITTED LIENS" means the liens permitted under SECTION 8.2.2. "PERMITTED PERCENTAGE" means 15% of the Consolidated Tangible Net Assets of the Borrower as of the beginning of the most recently ended Fiscal Quarter. "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. "PLEDGE AGREEMENTS" means (i) the MGE Pledge Agreement, (ii) the Holdings Pledge Agreement and (iii) the EMOC Pledge Agreement. "PRICING GRID" means the pricing grid attached as ANNEX I. "PRUDENT INDUSTRY PRACTICE" means, at a particular time, (i) 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 (ii) with respect to any matter to which CLAUSE (I) 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. "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. "RATING EVENT" means, at any time, any Debt Rating is below (a) with respect to long-term debt, BBB- or Baa3 by S&P and Moody's respectively or (b) with respect to short-term debt, A-2 or P-2 by S&P and Moody's respectively. "RATING LETTERS" has the meaning set forth in SECTION 8.1.1(N). "RCE AGENT" has the meaning set forth in the APA. "RCE LC ISSUER" means Bayerische Landesbank Girozentrale, as issuer of the RCE Letters of Credit. "RCE LETTERS OF CREDIT" means each letter of credit issued by the RCE LC Issuer under an RCE Reimbursement Agreement for the account of each Facility Lessor and for the benefit of the RCE Agent. CREDIT AGREEMENT -17- "RCE REIMBURSEMENT AGREEMENT" means each Reimbursement Agreement dated as of December 15, 1999 between each Facility Lessor and the RCE LC Issuer as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time. "RECOVERY EVENT" means any settlement of or payment of $10,000,000 or more in respect of (i) any property or casualty insurance claim relating to any asset of any Loan Party or (ii) any seizure, condemnation, confiscation or taking of, or requisition of title or use of, the Generating Assets or any part thereof by any Governmental Authority. "REGISTER" has the meaning set forth in SECTION 11.11.1(B). "REGULATORY VIOLATION" means (i) any Loan Party (A) becoming subject to regulation as a "holding company" or a "subsidiary company" or an "affiliate" of a "holding company" under PUHCA or (B) becoming subject to regulation as a "public utility" under the laws of the State of Illinois, or (ii) the failure of Midwest to (A) be an "exempt wholesale generator" under PUHCA, (B) be interconnected with the high voltage network or to have access to transmission services and ancillary services to sell wholesale electric power or (C) have the authority to sell wholesale electric power at market-based rates and, in the case of CLAUSE (I) OR (II), such circumstance could reasonably be expected to result in a Material Adverse Effect. "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. "RENEWAL LEASE RENT" means, with respect to each Facility Lease, Renewal Lease Rent as such term is defined in such Facility Lease. "RENEWAL SUBLEASE RENT" means, with respect to each Facility Sublease, Renewal Lease Rent as such term is defined in such Facility Sublease. "RENEWING LENDER" has the meaning set forth in SECTION 2.6(B). "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 CREDITORS" has the meaning set forth in the Intercreditor Agreement. "REQUIRED LENDERS" means, at any time, Lenders holding at least 50.1% of the Commitments. CREDIT AGREEMENT -18- "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. "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 Cashflow Recapture Fund. "S&P" means Standard & Poor's Ratings Services (a division of McGraw-Hill, Inc.) and its successors and assigns. "SAME DAY FUNDS" means immediately available funds. "SECURED OBLIGATIONS" has the meaning set forth in the Intercreditor Agreement. "SECURED PARTIES" has the meaning set forth in the Intercreditor Agreement. "SECURITY DOCUMENTS" means (i) the Intercreditor Agreement, (ii) the Midwest Guarantee, (iii) each Pledge Agreement and (iv) any other agreement or instrument hereafter entered into by the Borrower or any other Person which, directly or indirectly, guarantees or secures payment of the indebtedness evidenced by the Notes or payment or performance of any other Obligation. "SENIOR DEBT" means, without duplication, (i) the monetary Obligations and (ii) any Indebtedness of the Borrower that is a Secured Obligation. "SOCIETE GENERALE" means Societe Generale, a banking institution organized under the laws of France. "SUBLEASE DEFAULT" means, with respect to each Facility Sublease, any event which with the passage of time or the giving of notice would become a Sublease Event of Default thereunder. "SUBLEASE EVENT OF DEFAULT" means, with respect to each Facility Sublease, Lease Event of Default as such term is defined in such Facility Sublease. "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. "SUPPLEMENTAL LEASE RENT" means, with respect to each Facility Lease, Supplemental Lease Rent as such term is defined in such Facility Lease. "SUPPLEMENTAL SUBLEASE RENT" means, with respect to each Facility Sublease, Supplemental Lease Rent as such term is defined in such Facility Sublease. "TAXES" has the meaning set forth in SECTION 4.7. "TERM-OUT DATE" has the meaning set forth in SECTION 3.1(a). "TOTAL CAPITALIZATION" means, with respect to the Borrower, the sum, without duplication, of (i) total common stock equity or analogous ownership interests of the Borrower and its Consolidated Subsidiaries, (ii) preferred stock and preferred securities of the Borrower CREDIT AGREEMENT -19- and its Consolidated Subsidiaries, (iii) additional paid in capital or analogous interests of the Borrower and its Consolidated Subsidiaries, (iv) retained earnings of the Borrower and its Consolidated Subsidiaries, (v) the aggregate principal amount of Indebtedness of the Borrower and its Consolidated Subsidiaries then outstanding and (vi) the total equity contributed to the Borrower and its Subsidiaries on the Effective Date. "TOTAL COMMITMENT AMOUNT" means, collectively, the Tranche A Loan Commitment Amount, the Tranche B Loan Commitment Amount and Tranche C Loan Commitment Amount. "TRANCHE A LOAN" has the meaning set forth in SECTION 2.1.1. "TRANCHE A LOAN COMMITMENT" means, relative to any Lender, the obligation of such Lender to make a Tranche A Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth under "Tranche A Loan Commitment" opposite such Lender's name on SCHEDULE 1.1(a). "TRANCHE A LOAN COMMITMENT AMOUNT" means $840,000,000, as such amount may be reduced from time to time pursuant to SECTION 2.3. "TRANCHE A LOAN COMMITMENT TERMINATION DATE" means the date which is 364 days after the Effective Date except for (i) Tranche A Loans that are renewed pursuant to SECTION 2.6(b) in which case the ending date for the renewed portion shall be the date that is 364 days after the most recent pre-renewal ending date or (ii) Tranche A Loans that are extended pursuant to SECTION 3.1(a) in which case the ending date is the Term-Out Date. "TRANCHE A NOTE" means a promissory note of the Borrower payable to any Lender, in the form of EXHIBIT A-1 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 Tranche A Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "TRANCHE B LOAN" has the meaning set forth in SECTION 2.1.3. "TRANCHE B LOAN COMMITMENT" means, relative to any Lender, the obligation of such Lender to make Tranche B Loans to the Borrower hereunder in an aggregate principal amount not to exceed the amount set forth under "Tranche B Loan Commitment" opposite such Lender's name on SCHEDULE 1.1(a). "TRANCHE B LOAN COMMITMENT AMOUNT" means, on any date, $839,000,000, as such amount may be reduced from time to time pursuant to SECTION 2.3. "TRANCHE B LOAN COMMITMENT TERMINATION DATE" means the fifth anniversary of the Effective Date. "TRANCHE B 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 Tranche B Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "TRANCHE C LOAN" has the meaning set forth in SECTION 2.1.5. "TRANCHE C LOAN COMMITMENT" means, relative to each Lender, the obligation of such Lender to make Tranche C Loans to the Borrower hereunder in an aggregate principal amount set forth under "Tranche C Loan Commitment" opposite such Lender's name on SCHEDULE 1.1(a). "TRANCHE C LOAN COMMITMENT AMOUNT" means, on any date, $150,000,000. "TRANCHE C LOAN COMMITMENT TERMINATION DATE" means the later of: CREDIT AGREEMENT -20- (a) the fifth anniversary of the Effective Date; and (b) in the event that a Maturity Event shall have occurred and be continuing on the fifth anniversary of the Effective Date, the Tranche C Commitment Termination Date may be extended (as to each Lender at the written election of such Lender furnished to the Administrative Agent on or prior to the fifth anniversary of the Effective Date) until a date no later than the date that such Maturity Event is no longer continuing. "TRANCHE C NOTE" means a promissory note of the Borrower payable to any Lender, in the form of EXHIBIT A-3 (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 Tranche C Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "TRANSACTION WITH AN AFFILIATE" means, with respect to any Person (i) any agreement or contract with any Affiliate or Subsidiary of such Person and any amendment, modification or supplement thereof or thereto or (ii) any other transaction or business arrangement with an Affiliate or Subsidiary of such Person not otherwise expressly permitted by the Loan Documents. "TRANSCO PARTNERSHIP" means a partnership or joint venture in which one or more Affiliates of Midwest will be a partner or joint venturer formed solely to facilitate the Transco Transaction. "TRANSCO TRANSACTION" means a transaction involving (i) the contribution to the Transco Partnership by Midwest of certain railcars or rights to rail cars, (ii) the Transco Partnership engaging in certain coal supply and coal transportation activities in connection with the operation by Midwest of its Generating Assets and (iii) the sharing by the partners or the joint venturers of the Transco Partnership of certain cost savings achieved by the Transco Partnership in such coal supply and coal transportation activities. "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. "WELFARE PLAN" means a "welfare plan", as such term is defined in Section 3(1) of ERISA. "WESTLB" means Westdeutsche Landesbank Girozentrale, a public law banking institution organized under the laws of the state of North Rhine-Westphalia, Federal Republic of Germany, acting through its New York Branch. "YEAR 2000 READY" means, with respect to any Person, that its individual systems will be compliant or their characteristics which are non-compliant have been evaluated and determined to be suitable for use into the year 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 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. CREDIT AGREEMENT -21- 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 2 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 (a) Tranche A Loans in an aggregate principal amount up to such Lender's Tranche A Loan Commitment, (b) Tranche B Loans in an aggregate principal amount up to such Lender's Tranche B Loan Commitment and (c) Tranche C Loans in an aggregate principal amount up to such Lender's Tranche C Loan Commitment, in each case as provided in this SECTION 2.1. SECTION 2.1.1 TRANCHE A LOAN COMMITMENT. From time to time on any Business Day occurring prior to the Tranche A Loan Commitment Termination Date, each Lender severally agrees to make revolving loans (each, a "TRANCHE A LOAN") to the Borrower equal to such Lender's Percentage of the Borrowing of Tranche A Loans requested by the Borrower to be made on such day. Tranche A 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 2.4. The Borrower may from time to time borrow, repay, in whole or in part, and reborrow Tranche A Loans. Tranche A Loan Commitments shall terminate automatically on the Tranche A Loan Commitment Termination Date. SECTION 2.1.2 PROCEDURE FOR TRANCHE A LOAN BORROWING. By delivering a Borrowing Request to the Administrative Agent on a Business Day on or before 12:00 Noon, New York City time, the Borrower may from time to time irrevocably request, (a) on not less than three Business Days' notice in the case of LIBO Rate Loans and (b) on the same Business Day, in the case of Base Rate Loans, that a Borrowing of Tranche A 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 Tranche A Loan Commitment Amount. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. 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 Tranche A 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 2.1.3 TRANCHE B LOAN COMMITMENT. From time to time on any Business Day occurring prior to the Tranche B Loan Commitment Termination Date, each Lender severally agrees to make revolving loans (each, a "TRANCHE B LOAN") to the Borrower equal to such Lender's Percentage of the Borrowing of Tranche B Loans requested by the CREDIT AGREEMENT -22- Borrower to be made on such day. The Tranche B 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 2.1.4 and 2.4. The Borrower may from time to time borrow, prepay, in whole or in part, and reborrow Tranche B Loans. Tranche B Loan Commitments shall terminate automatically on the Tranche B Loan Commitment Termination Date. SECTION 2.1.4 PROCEDURE FOR TRANCHE B 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, (a) on not less than three Business Days' notice, in the case of LIBO Rate Loans, and (b) on the same Business Day, in the case of Base Rate Loans, that a Borrowing of Tranche B 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 Tranche B 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 Tranche B 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 2.1.5 TRANCHE C LOAN COMMITMENT. From time to time on any Business Day occurring prior to the Tranche C Loan Commitment Termination Date, each Lender severally agrees to make revolving loans (each, a "TRANCHE C LOAN") to the Borrower equal to such Lender's Percentage of the Borrowing of Tranche C Loans requested by the Borrower to be made on such day. The Tranche C 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 2.1.6 and 2.4. The Borrower may from time to time borrow, prepay, in whole or in part, and reborrow Tranche C Loans. Tranche C Loan Commitments shall terminate automatically on the Tranche C Loan Commitment Termination Date. SECTION 2.1.6 PROCEDURE FOR TRANCHE C 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, (a) on not less than three Business Days' notice, in the case of LIBO Rate Loans, and (b) on the same Business Day, in the case of Base Rate Loans, that a Borrowing of Tranche C 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 Tranche C 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 Tranche C 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 CREDIT AGREEMENT -23- 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 LENDERS NOT REQUIRED TO MAKE LOANS. No Lender shall be required to make: (a) any Tranche A Loan if, after giving effect thereto, (i) the aggregate outstanding principal amount of all Tranche A Loans would exceed the Tranche A Loan Commitment Amount, or (ii) the aggregate outstanding principal amount of all Tranche A Loans of such Lender would exceed such Lender's Tranche A Loan Commitment; or (b) any Tranche B Loan if, after giving effect thereto, (i) the aggregate outstanding principal amount of all Tranche B Loans would exceed the Tranche B Loan Commitment Amount, or (ii) the aggregate outstanding principal amount of the Tranche B Loans of such Lender would exceed such Lender's Tranche B Loan Commitment Amount; or (c) any Tranche C Loan if, after giving effect thereto, (i) the aggregate outstanding principal amount of all Tranche C Loans would exceed the Tranche C Loan Commitment Amount, or (ii) the aggregate outstanding principal amount of all Tranche C Loans of such Lender would exceed such Lender's Tranche C Loan Commitment. SECTION 2.3 REDUCTION OF THE COMMITMENTS. (a) The Borrower may, from time to time on any Business Day occurring after the Effective Date, voluntarily reduce the Tranche A Loan Commitment Amount, the Tranche B Loan Commitment Amount or the Tranche C Loan Commitment Amount without premium or penalty (subject, however, to SECTION 4.5); PROVIDED, HOWEVER, that all such reductions shall require at least three Business Days' prior notice to the Administrative Agent and be permanent, and any partial reduction of the Tranche A Loan Commitment Amount, the Tranche B Loan Commitment Amount and the Tranche C Loan Commitment Amount shall be in a minimum amount of $10,000,000 and an integral multiple of $1,000,000 in excess thereof; and, PROVIDED, FURTHER, that (i) the Tranche A Loan Commitment Amount may not be reduced to an amount less than the aggregate amount of outstanding Tranche A Loans, (ii) the Tranche B Loan Commitment Amount may not be reduced to an amount less than the aggregate amount of outstanding Tranche B Loans, and (iii) the Tranche C Loan Commitment Amount may not be reduced to an amount less than the greater of (A) the aggregate amount of outstanding Tranche C Loans and (B) $20,000,000. (b) Reductions of the Commitments made pursuant to this SECTION 2.3 shall be applied PRO RATA among the Lenders in accordance with their respective available Commitments. (c) Unless a Rating Event shall have occurred and be continuing, any reductions of Commitments made pursuant to this SECTION 2.3 shall be applied as between Tranche A Loan Commitments and Tranche B Loan Commitments as the Borrower may direct; PROVIDED that in the event that a Rating Event shall have occurred and be continuing any such reductions shall be applied PRO RATA between the Tranche A Loan Commitments and the Tranche B Loan Commitments. (d) Prior to the Tranche C Loan Commitment Termination Date, the Tranche C Loan Commitments may not be terminated or reduced to zero without the prior written consent of the Lenders unless and until the Funding LLC Loans have been paid in full and the related commitments have been terminated. CREDIT AGREEMENT -24- 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 $5,000,000 and an integral multiple of $1,000,000 in excess thereof, of any Loans be (a) on not less than three Business Days' notice, converted into, or continued as, LIBO Rate Loans, or (b) 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 (i) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of all Lenders, (ii) a LIBO Rate Loan may not be converted at any time other than the last day of the Interest Period applicable thereto and (iii) 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 2.5 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 SECTION 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 or 4.7 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. SECTION 2.6 RENEWAL OF TRANCHE A LOAN COMMITMENTS. (a) The Borrower may request that (i) each Lender's Tranche A Loan Commitment be renewed for additional 364-day periods by providing notice of such requests to the Administrative Agent as set forth in Section 2.6(b) or (ii) the Borrower's repayment obligation with respect to the Tranche A Loans be extended until the Maturity Date by providing notice of such requests to the Administrative Agent as set forth in Section 3.1(a); PROVIDED that (x) the Borrower may elect to renew the Tranche A Loan Commitments only four times and (y) the Borrower may not elect to both renew such Tranche A Loan Commitments (or portions thereof) and extend the Borrower's repayment obligation with respect to the Tranche A Loans contemporaneously. CREDIT AGREEMENT -25- (b) In the event that the Borrower elects to renew the Tranche A Loan Commitments, then the Borrower shall provide notice to the Administrative Agent no earlier than 45 days but no later than 30 days prior to the then existing Tranche A Loan Commitment Termination Date (the "EXISTING TRANCHE A LOAN COMMITMENT TERMINATION DATE"), applicable to such Lenders. If a Lender agrees, in its individual and sole discretion, to renew its Tranche A Loan Commitment, such Lender (a "RENEWING LENDER") will notify the Administrative Agent, in writing, of its decision to do so no earlier than 30 days prior to the Existing Tranche A Loan Commitment Termination Date applicable to such Lender (but in any event no later than 20 days prior to the Existing Tranche A Loan Commitment Termination Date). Notwithstanding any provision of this Agreement to the contrary, any notice by any Lender of its willingness to renew its Tranche A Loan 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 Tranche A Loan 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 Existing Tranche A Loan Commitment Termination Date applicable to such Lender. The Renewing Lenders' Commitment under the Tranche A Facility will be renewed for an additional 364 days from the Existing Tranche A Loan Commitment Termination Date applicable to such Lenders, PROVIDED that (i) each renewal of the Tranche A Loan Commitment Termination Date pursuant to this SECTION 2.6 shall be for a period of 364 days and (ii) more than 50% of the Tranche A Loan Commitment Amount as of the Tranche A Loan Commitment Termination Date then in effect is renewed or otherwise committed to by Renewing Lenders and any new Lenders. Any Lender that declines the Borrower's request for a Tranche A Loan Commitment renewal (a "DECLINING LENDER") will have its unutilized Tranche A Loan Commitment terminated on the Existing Tranche A Loan 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 Tranche A Loan Commitments from third party financial institutions acceptable to the Administrative Agent in an amount up to the amount of the pre-termination Tranche A Loan Commitments of any Declining Lenders, PROVIDED that the Renewing Lenders will have the right to increase their Tranche A Loan Commitments up to the amount of the Declining Lenders' Tranche A Loan Commitments before the Borrower will be permitted to substitute other financial institutions for the Declining Lenders. ARTICLE 3 REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1 REPAYMENTS AND PREPAYMENTS. (a) The Tranche A Loans of each Lender shall mature, and the Borrower unconditionally promises to pay in full the unpaid principal amount of each Tranche A Loan to the Administrative Agent, for the account of such Lender, on the Tranche A Loan Commitment Termination Date applicable to such Lender; PROVIDED that the Borrower may, by providing notice to the Administrative Agent no earlier than 30 days and not less than two (2) Business Days prior to the then existing Tranche A Loan Commitment Termination Date (the "TERM-OUT DATE"), elect to repay the Tranche A Loans of all (but not less than all) of the Lenders on the date (the "MATURITY DATE") which is the earlier of (i) two years thereafter and (ii) the date five years after the Effective Date; and if the Borrower does make such election in accordance with this SECTION 3.1(a), such Tranche A Loans shall mature, and the Borrower unconditionally promises to pay in full the unpaid principal amount of each such Tranche A Loan to the Administrative Agent, for the account of the Lenders, on the Maturity Date. CREDIT AGREEMENT -26- (b) The Tranche B Loans of each Lender shall mature, and the Borrower unconditionally promises to pay in full the unpaid principal amount of each Tranche B Loan to the Administrative Agent, for the account of such Lender, on the Tranche B Loan Commitment Termination Date. (c) The Tranche C Loans of each Lender shall mature, and the Borrower unconditionally promises to pay in full the unpaid principal amount of each Tranche C Loan to the Administrative Agent, for the account of such Lender, on the Tranche C Loan Commitment Termination Date applicable to such Lender after giving effect to CLAUSE (b) of the definition of "Tranche C 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 a Rating Event shall have occurred and be continuing, any such prepayment shall be applied as between Loans, as the Borrower may direct; PROVIDED that in the event that a Rating Event shall have occurred and be continuing any such prepayment shall be applied to the Tranche A Loans, the Tranche B Loans and the Tranche C Loans on a PRO RATA basis until such Loans are paid in full; (ii) any such prepayment shall be applied PRO RATA among the Lenders in accordance with the respective unpaid principal amounts of the Loans held by them; (iii) any such prepayment shall be applied PRO RATA among Loans of the same type and, if applicable, having the same Interest Period; (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. The Borrower may designate any voluntary prepayment of Tranche A Loans and Tranche B Loans as permanent prepayments in which case such permanent prepayment shall automatically and permanently reduce the related Tranche A Loan Commitment Amount or Tranche B Loan Commitment Amount by a like amount. Amounts prepaid as permanent prepayments may not be reborrowed. 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(f)(i), an amount equal to the lesser of (i) 100% of the Net Cash Proceeds thereof and (ii) the aggregate principal amount of the Loans outstanding shall be applied within one Business Day after the issuance or incurrence of such Indebtedness to the prepayment of the Loans. CREDIT AGREEMENT -27- (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. (c) If, pursuant to SECTION 8.2.4(i), the Borrower shall receive Net Cash Proceeds from the sale, transfer, lease, contribution or conveyance of its assets in excess of the Permitted Percentage, an amount equal to the lesser of (i) 100% of such Net Cash Proceeds and (ii) the aggregate principal amount of the Loans then outstanding shall be applied within one Business Day after such sale, transfer, lease, contribution or conveyance to the prepayment of the Loans. (d) If, at any time, any Debt Rating falls into Level 4 of the Cashflow Recapture Grid, (i) until such time as such Debt Rating rises to Level 1, 2 or 3 of the Cashflow Recapture Grid, 100% of any Excess Cashflow shall be applied to prepay the Loans until the Loans are repaid in full and (ii) the lesser of (x) all amounts on deposit in the Cashflow Recapture Fund and (y) the aggregate principal amount of the Loans then outstanding shall be immediately applied to the prepayment of the Loans. (e) On each Interest Capitalization Date, the Loans shall be prepaid in an amount equal to the Capitalized Interest Amount which corresponds to such Interest Capitalization Date. (f) Each prepayment made pursuant to this SECTION 3.1.2 (i) 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, (ii) shall be applied PRO RATA among Loans of the same type and, if applicable, having the same Interest Period and (iii) shall be applied PRO RATA among the Lenders in accordance with the respective unpaid principal amounts of the Loans held by them. (g) Unless a Rating Event shall have occurred and be continuing, each such prepayment shall be applied as between Tranche A Loans, Tranche B Loans and Tranche C Loans as the Borrower may direct; PROVIDED that in the event that a Rating Event shall have occurred and be continuing each such prepayment shall be applied to the Tranche A Loans, the Tranche B Loans and the Tranche C Loans on a PRO RATA basis until such Loans are paid in full. (h) Each mandatory prepayment of the Tranche A Loans and the Tranche B Loans shall automatically and permanently reduce the Tranche A Loan Commitment Amount by a like amount and the Tranche B Loan Commitment Amount in an amount equal to the prepayment of Tranche B Loans and Tranche C Loans. Amounts of Tranche A Loans and Tranche B Loans which are mandatorily prepaid pursuant to this SECTION 3.1.2 may not be reborrowed. 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 CREDIT AGREEMENT -28- (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 Dow Jones Market 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 Dow Jones Market 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. 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 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. SECTION 3.2.3 PAYMENT DATES. Interest accrued on each Loan shall be payable, without duplication: (a) on the Commitment Termination Date therefor; (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. CREDIT AGREEMENT -29- 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 Tranche A Loan Commitment Amount, the Tranche B Loan Commitment Amount and the Tranche C Loan Commitment Amount (irrespective of usage) for each day from and after the Effective Date at the rate per annum based on the Debt Rating for the Tranche A Loans, the Tranche B Loans and the Tranche C Loans, respectively, 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 each letter dated October 1, 1999, between the Administrative Agent, the Lead Arrangers, the Initial Lenders, the Borrower and Edison Mission Energy and the letter dated November 15, 1999 between the Administrative Agent, the Borrower and Edison Mission Energy. ARTICLE 4 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; CREDIT AGREEMENT -30- 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 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 CREDIT AGREEMENT -31- 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) the Borrower's failure to borrow or prepay any LIBO Rate Loans in accordance with the Borrowing Request therefor or the notice of prepayment therefor delivered under section 3.1.1(v); 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. 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 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 CREDIT AGREEMENT -32- 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 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 for the account of 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 W-8BEN, or Form W-8ECI, 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 CREDIT AGREEMENT -33- 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 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 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 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 (iii) 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, (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 CREDIT AGREEMENT -34- 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 9.1.7 and, upon the occurrence of any Default described in CLAUSES (c) through (d) of SECTION 9.1.7 with respect to the Borrower or, with the 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 monetary 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 4.3, 4.6 or 4.7 or becomes subject to the provisions of SECTION 4.1; 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, and (viii) any such replacement shall not be CREDIT AGREEMENT -35- deemed to be a waiver of any rights which the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender. ARTICLE 5 CASH FLOW RECAPTURE FUND SECTION 5.1 CASHFLOW RECAPTURE FUND. The Borrower shall establish, for the benefit of the Lenders and the Facility Lessors, in the name of the Depositary Agent, a cash flow recapture fund (the "CASHFLOW RECAPTURE FUND"), to be maintained by the Depositary Agent in accordance with the terms hereof and the Intercreditor Agreement. ARTICLE 6 CONDITIONS TO EFFECTIVENESS AND LOANS SECTION 6.1 CONDITIONS TO EFFECTIVENESS. This Agreement shall become effective, as between all parties hereto, 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 executed and delivered by an Authorized Representative of the Borrower; (ii) the Intercreditor Agreement, executed and delivered by an Authorized Representative of each Loan Party, with a counterpart or a copy for each Lender; (iii) each Pledge Agreement and the Midwest Guarantee, each executed and delivered by an Authorized Representative of each Loan Party party thereto, with a counterpart or a copy for each Lender; and (iv) 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 Sale Agreement; and the Lenders shall have received copies of the Asset Sale 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 (i) a cash equity investment in the Borrower of at least $2,650,000,000, (ii) a cash equity investment by the Borrower in EMOC of at least $3,679,000,000, (iii) a cash investment by the Borrower in Midwest of at least $650,000,000 and (iv) loans by EMOC to Midwest in an aggregate principal amount of at least $3,679,000,000 evidenced by the EMOC Loan Documents). SECTION 6.1.3 THE FACILITY LEASES. The Administrative Agent shall have received confirmation from an Authorized Representative of the Borrower that all conditions precedent to the closing of the Lease Financings shall have been satisfied or waived and the Lenders shall have received copies of the Lease Finance Documents for each of the Lease Financings 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. SECTION 6.1.4 ENVIRONMENTAL REPORTS. The Borrower shall have delivered and the Initial Lenders shall have received certified copies of those portions of the Environmental Reports that relate to the Generating Assets and the sites on which the Generating Assets are located 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 CREDIT AGREEMENT -36- Mission Energy for the 1998 Fiscal Year and the unaudited consolidated financial statements of Edison Mission Energy for the Fiscal Quarter ended June 30, 1999. SECTION 6.1.6 PROJECTIONS; RATING AGENCY PRESENTATIONS. The Administrative Agent shall have received, with a copy for each Lender, (i) satisfactory financial projections for the Borrower for the 1999-2024 Fiscal Years, including PRO FORMA consolidated financial statements and calculations of the projected Debt Service Coverage Ratios and (ii) the financial projections and other material information provided to Moody's and S&P in connection with the issuance of the Initial Debt Ratings. 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 to have been obtained on or prior to the Effective Date 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, except as noted in PART B of SCHEDULE 7.4, 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. 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. 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, (ii) a market report prepared by PHB Hagler Bailly, Inc. and (iii) a fuel market report prepared by PHB Hagler Bailly, Inc., 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 each Lender 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) Arrangements reasonably satisfactory to the Administrative Agent shall have been made for filing, registration or recordation of all financing statements and other documents required to be filed, registered or recorded in order to create, in favor of the Holdings Collateral Agent for the benefit of the Secured Parties, a perfected, First Priority Lien 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. CREDIT AGREEMENT -37- 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 or managing members, as the case may be, 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. 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, as to the matters set forth in SECTION 6.2.1 in form and substance reasonably satisfactory to the Administrative 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 counsel to the Loan Parties substantially in the form of EXHIBIT H hereto, (iii) Federal Energy Regulatory Commission counsel to the Loan Parties, and (iv) the special Illinois counsel to the Loan Parties. Each such opinion shall be in form and substance reasonably satisfactory to the Initial Lenders. SECTION 6.1.14 ASSET APPRAISAL. The Administrative Agent shall have received, with a copy for each Lender, copies of the verification of value, useful life and estimated residual value, prepared by Deloitte and Touche LLP Valuation Group in connection with the appraisal of the Leased Assets in form and substance reasonably satisfactory to the Initial Lenders. SECTION 6.1.15 NO MATERIAL ADVERSE CHANGE. Since September 24, 1999, there shall not have occurred any event or condition having a Material Adverse Effect. 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: (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); (b) no Default or Event of Default has occurred and is continuing or would result from such Borrowing; and (c) no Maturity Event has occurred and is continuing. CREDIT AGREEMENT -38- 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 7 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. The most recent consolidated balance sheet of the Borrower and the related consolidated statements of income and cash flows of the Borrower, copies of which have been furnished to the Administrative Agent pursuant to SECTION 8.1.1(a) 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. SECTION 7.2 ORGANIZATION; POWER. Each Loan Party (a) is a corporation, limited liability company or limited partnership validly organized and existing and in good standing under the laws of the state of its incorporation or formation, as the case may be, (b) is duly qualified to do business and is in good standing as a foreign corporation, limited liability company or limited partnership in each jurisdiction where the nature of its business requires such qualification and (c) has all requisite corporate, company or partnership power and authority and holds all material requisite Governmental Approvals to enter into and perform its Obligations under this Agreement, the Notes and each other Loan Document to which it is a party and, in the case of Midwest, to conduct the business of owning and operating the Generating Assets and the sale and marketing of wholesale electric power and other products and services related thereto and, in the case of the other Loan Parties, to conduct their business as currently conducted and currently expected to be conducted, 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 do not: (a) contravene the Organic Documents of such Loan Party; (b) contravene any Requirement of Law or Contractual Obligation, binding on or affecting such Loan Party, except where such contravention would not result in a Material Adverse Effect; or (c) result in, or require the creation or imposition of, any Lien (other than Permitted Liens) on any of the properties of such Loan Party. SECTION 7.4 APPROVALS. (a) As of the Effective Date, 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, in each case, other than CREDIT AGREEMENT -39- (i) as may be required under existing Requirements of Law to be obtained, given or renewed at any time after the Effective Date or from time to time after the Effective Date in connection with the transactions contemplated by the Loan Documents and (ii) which are routine in nature and which cannot be obtained and such failure to obtain would not result in a Material Adverse Effect, or are not normally applied for, prior to the time they are required, and which Holdings has no reason to believe will not be timely obtained. Except as noted in PART B of SCHEDULE 7.4, all Governmental Approvals that have been obtained pursuant to clause (a) of this SECTION 7.4 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. 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) As of the Effective Date, 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 ACCURACY OF INFORMATION. (a) All factual information listed on SCHEDULE 7.5 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 true and materially accurate in every material respect on the date as of which such information is dated or certified, and to the knowledge of the Borrower as of the Effective Date such information is not incomplete by omitting to state any material fact necessary in order to make such information not misleading. (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 7.6 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 and as indicated in the legal opinions delivered pursuant to Section 6.1.13)(ii). SECTION 7.7 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 7.8 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. CREDIT AGREEMENT -40- SECTION 7.9 LITIGATION. There is no pending or, to the knowledge of the Borrower, threatened litigation, action, proceeding, investigation or labor controversy against 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. Certain litigation involving ComEd is listed on SCHEDULE 7.9. SECTION 7.10 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, 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 7.11 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 7.12 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT; OTHER REGULATIONS. (a) The Borrower is not subject to any regulation as an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (b) As of the Effective Date, the Borrower is not subject to regulation as (i) a "public utility company required to register under PUHCA or (ii) an alternative retail electric supplier under the laws of the State of Illinois. (c) As of the Effective Date, no Loan Party (i) is subject to regulation as a "holding company" or a "subsidiary company" or an "affiliate" of a "holding company" under PUHCA, or (ii) is or will be subject to regulation as a "public utility" under the laws of the State of Illinois. (d) As of the Effective Date, Midwest (i) is an "exempt wholesale generator" under PUHCA, (ii) is not a "public utility company" required to register under PUCHA, (iii) is not subject to regulation as an alternative retail electric supplier under the laws of the State of Illinois, (iv) is interconnected with the high voltage network and has access to transmission services and ancillary services to sell wholesale electric power and (v) has the authority to sell wholesale electric power at market-based rates. SECTION 7.13 ENVIRONMENTAL WARRANTIES. Except as could not, individually, or would not, 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, 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. CREDIT AGREEMENT -41- (c) Each Loan Party has obtained and is in compliance with all Governmental Approvals required, other than those that will be obtained in due course promptly after the Effective Date, under any Environmental Law necessary for such Loan Party's business. (d) 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. (e) 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. (f) Other than as provided in the Asset Sale 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 7.14 THE OBLIGATIONS. The monetary 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 7.15 YEAR 2000 MATTERS. The software, equipment and management information systems which are material to the business of the Borrower and its Subsidiaries, taken as a whole, are Year 2000 Ready. SECTION 7.16 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 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 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. CREDIT AGREEMENT -42- ARTICLE 8 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 (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 unqualified 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 Assets, or (ii) a report for the preceding calendar year with respect to the Generating Assets 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) significant plant activities, such as major plant overhauls, alterations, modifications and other capital expenditures, significant changes in plant operations and major operating incidents; and (E) market activities, including quantities and average price of energy and capacity delivered; (d) concurrently with the delivery of the financial statements referred to in SECTION 8.1.1(b), an operating budget for the Generating Assets 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 CREDIT AGREEMENT -43- calendar year (or portion thereof) against the income statement projections for the preceding calendar year (or portion thereof); (e) concurrently with the delivery of the financial statements referred to in SECTION 8.1.1(b), and on each Quarterly Payment Date on which the Borrower intends to make any capital expenditure pursuant to SECTION 8.2.8 or any Restricted Payment pursuant to CLAUSE (b) of the proviso contained in SECTION 8.2.7 and, commencing January 1, 2000, 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 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, (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 and (iv) the Debt to Capital Ratio as at the last day of the immediately preceding 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; (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 any Loan Party is a party or any termination thereof, in each case, together with 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 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 7.9, 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 CREDIT AGREEMENT -44- 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 or notice of the occurrence 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; (k) within ten Business Days after each anniversary of the Effective Date, a certificate from Midwest's insurers or insurance agents setting forth, in reasonable detail, each of the Borrower's insurance policies currently in place and confirming that such insurance policies satisfy the requirements of SECTION 8.1.5(b); (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 thereof, notice of any casualty, damage or loss to the Generating Assets, whether or not insured, through fire, theft, other hazard or casualty, involving a probable loss of $5,000,000 or more; or (ii) knowledge of (A) the occurrence, notice of any cancellation, notice of threatened or potential cancellation or (B) any material change in the terms, coverage or amounts of any policy of insurance which would result in such policy deviating from Prudent Industry Practice; (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 thereof, notice that any Governmental Authority may revoke, or refuse to grant or renew, or materially modify, any material Governmental Approval described in SECTION 7.4; (n) concurrently with the delivery of the financial statements referred to in SECTION 8.1.1(b), the Borrower shall cause to be delivered to the Administrative Agent, letters from each of S&P and Moody's ("RATING LETTERS") setting forth, as of the date of such letters, each Debt Rating; and (o) from time to time, with reasonable promptness, such other information regarding the Borrower or any other Loan Party as the Administrative Agent or any Lender may reasonably request. SECTION 8.1.2 CONTINUATION OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Borrower shall cause Midwest to continue to engage in the business of owning and operating the Generating Assets and the sale and marketing of wholesale electric power and other products and services related thereto. The Borrower shall not, and shall cause each of the other Loan Parties not to, engage in any business other than owning and operating electrical generating assets and selling and marketing wholesale electric power and other products and services related thereto or investing in entities that engage in the foregoing. The Borrower shall, and shall cause each of the other Loan Parties to, preserve, renew and keep in full force and effect its corporate, limited liability company 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. 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. CREDIT AGREEMENT -45- SECTION 8.1.4 MAINTENANCE OF GENERATING ASSETS. The Borrower shall, and shall cause Midwest to, (a) maintain the Generating Assets 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 and (iii) 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 Assets as in the reasonable judgment of the Borrower and Midwest are necessary so that the Generating Assets may be operated in accordance with their intended purpose. SECTION 8.1.5 INSURANCE. (a) The Borrower shall cause Midwest 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 Assets, subject to the availability of such coverage on commercially reasonable terms, all on terms and conditions which are in accordance with Prudent Industry Practice and shall include business interruption insurance with a deductible not to exceed 60 days and a tenor no shorter than one year; (b) All such policies of casualty, third party liability and business interruption insurance shall: (i) provide that, with respect to third party liability insurance, the Secured Parties shall be named as additional insureds; (ii) provide that (A) no cancellation or termination of such insurance and (B) no reduction in the limits of liability of such insurance shall be effective until 30 days after written notice is given by the insurers to the Administrative Agent and the Holdings Collateral Agent of such cancellation, termination, reduction or change; (iii) waive all claims for insurance premiums or commissions or additional premiums or assessments against the Secured Parties; and (iv) 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. 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 and, 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 information 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. CREDIT AGREEMENT -46- 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 and obtain, comply with and maintain all necessary Governmental Approvals required under any applicable Environmental Law, in each case, except where such noncompliance or failure, 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 or its Subsidiaries; and sampling and analyzing soil, air, surface water, groundwater, and/or other media in or about property owned or leased by the Borrower or its Subsidiaries, or on which operations of the Borrower or its Subsidiaries otherwise take place). Such environmental assessment shall be in form, scope and substance reasonably satisfactory to the Administrative Agent. The Borrower shall, and shall cause its Subsidiaries to, 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 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 written 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 Holdings Collateral Agent, for the benefit of the Secured Parties, Liens on the Holdings Collateral that are duly perfected in accordance with all applicable Requirements of Law. SECTION 8.1.10 FINANCIAL COVENANTS. The Borrower shall maintain (i) a Debt to Capital Ratio no greater than 0.60 to 1.00 and (ii) a Debt Service Coverage Ratio for the 12-month period ended on the last day of the immediately preceding Fiscal Quarter of at least 1.50 to 1.00 while the ComEd Agreements represent 50% or more of the Borrower's and its Consolidated Subsidiaries' Revenues and (iii) once the ComEd Agreements no longer represent 50% or more of the Borrower's and its Consolidated Subsidiaries' Revenues, Debt Service Coverage Ratio for the 12-month period ended on the last day of the immediately preceding Fiscal Quarter of at least 1.75 to 1.00. SECTION 8.1.11 USE OF PROCEEDS. (a) The Borrower shall use the proceeds of the Tranche A Loans and the Tranche B Loans (i) on the Effective Date, in an aggregate principal amount of $1,679,000,000, together with $2,650,000,000 received by the Borrower from EME to (x) contribute to EMOC $3,679,000,000 (and EMOC will subsequently loan a like CREDIT AGREEMENT -47- amount to Midwest (such loans to be evidenced by the EMOC Loan Documents) and (y) contribute $650,000,000 to Midwest and (ii) after the Effective Date for general corporate purposes, including without limitation, to provide liquidity support for the Borrower's commercial paper program. (b) The Borrower shall use the proceeds of the Tranche C Loans for general corporate and 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 written notice thereof to the Administrative Agent and the Holdings Collateral Agent and follow the procedures indicated below as applicable: (a) if the settlement or payment related to such Recovery Event is under $100,000,000, the Borrower shall, or shall cause Midwest 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 Holdings Collateral Agent receive from the Borrower, within 45 days of the Recovery Event, a written 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 Midwest, 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 Fixed Charges and Senior Debt 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 $100,000,000 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 Holdings 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 SECTION 8.1.12(a)(i) and (ii)(b) above. 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 in addition to Indebtedness under this Agreement and the other Loan Documents, other than: CREDIT AGREEMENT -48- (a) Capitalized Lease Liabilities and Operating Lease Liabilities outstanding (or anticipated to be outstanding) on the Effective Date and set forth on SCHEDULE 8.2.1(a) and other Capitalized Lease Liabilities and Operating Lease Liabilities entered into in the ordinary course of business not to exceed at any time an aggregate principal amount equal to $50,000,000; (b) Indebtedness of the Borrower under Interest Rate Hedging Transactions; (c) Indebtedness between the Loan Parties incurred pursuant to SECTION 8.1.11; (d) Subject to SECTION 8.2.8, Indebtedness of the Loan Parties incurred to finance the acquisition, construction or improvement of any fixed or capital assets in accordance with and subject to SCHEDULE 8.2.1(d) hereto; (e) Indebtedness consisting of reimbursement obligations of any Loan Party with respect to (i) letters of credit, surety bonds and performance bonds (other than the Midwest Letters of Credit) used by such Loan Party in the ordinary course of business in an aggregate amount not to exceed $40,000,000 at any time, and (ii) the Midwest Letters of Credit. (f) Indebtedness of the Borrower incurred to refinance (i) the Tranche A Loans and/or the Tranche B Loans, (ii) any other existing Indebtedness of the Borrower or (iii) the Funding LLC Loans (in part to the extent of amortization of the Lessor Notes or in whole in the event that the Facility Leases and the Facility Subleases are terminated (each such refinancing of the Funding LLC Loans, a "FUNDING LLC REFINANCING")), PROVIDED that : (A) the average life of such Indebtedness shall not be less than, in the case of Indebtedness incurred to refinance the Tranche A Loans and/or the Tranche B Loans, five (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 the amount of fees and expenses incurred in connection with such issuance; (g) Indebtedness (including guarantees thereof by Midwest) in the form of commercial paper in an amount, which, when added to the sum of (i) the aggregate outstanding principal amount of Tranche A Loans and the Tranche B Loans and (ii) the outstanding principal amount of any Indebtedness incurred pursuant to SECTION 8.2.1(f) does not exceed the sum of (A) $1,679,000,000 PLUS (B) the aggregate principal amount of Funding LLC Refinancings by the Borrower; (h) Indebtedness in the form of subordinated, unsecured intercompany loans between the Loan Parties that are subject to the EMOC Loan Documents; (i) Indebtedness in the form of guarantees made by and reimbursement obligations with respect to stand-by letters of credit issued for the account of the Borrower in the ordinary course of business related to the Generating Assets in connection with (i) fuel procurement, sales, transportation or management, (ii) purchases, sales or exchanges made by Affiliates of the Borrower related to physical capacity and energy from the Generating Assets and financial instruments related thereto and (iii) purchases, sales or exchanges of energy or emissions credits; (j) other Indebtedness of the Borrower; 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, had the maximum amount of CREDIT AGREEMENT -49- Indebtedness available to be drawn under the Tranche C Loan Commitments been outstanding during such period and, if the sum of (A) the aggregate principal amount of the Tranche A Loans and the Tranche B Loans, (B) the outstanding principal amount of any Indebtedness incurred pursuant to SECTION 8.2.1(f)(i) PLUS (C) all Indebtedness of Holdings in the form of commercial paper is less than $1,679,000,000, had an additional amount been drawn under the Tranche A Loan Commitments and the Tranche B Loan Commitments such that the sum of sub-clauses (A), (B) PLUS (C) above equals $1,679,000,000, the Debt Service Coverage Ratio for such period would have been equal to or greater than 2.50 to 1.00, (ii) the most recently delivered Ratings Letters confirm that the Debt Ratings are at least BBB- and Baa3 by S&P and Moody's respectively and (iii) to the extent that such Indebtedness incurred since the most recently delivered Ratings Letters would exceed $200,000,000 in the aggregate, the Borrower shall have received written confirmation that the incurrence of such Indebtedness would not result in a downgrade of the Borrower's Debt Rating below BBB- or Baa3 from S&P and Moody's, respectively; (k) Indebtedness of the Borrower under the Lease Obligations Guarantee; (l) Indebtedness of the Borrower under the Letter of Credit Guarantee; and (m) Indebtedness of Midwest under the Midwest Lease Guarantees. 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; (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 so long as no enforcement, levy, collection or foreclosure proceeding has commenced 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; CREDIT AGREEMENT -50- (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) purchase money Liens securing Indebtedness permitted by SECTION 8.2.1(d); PROVIDED that such Liens do not encumber any assets other than those acquired or constructed with the proceeds of such Indebtedness; (j) Liens on cash collateral securing investments and guarantee obligations permitted by SECTION 8.2.1(d), (i) OR (l); (k) Liens created pursuant to the Loan Documents; and (l) Liens on the Holdings Collateral securing Indebtedness permitted by SECTION 8.2.1(b), (f), (j) or (g); PROVIDED that such Indebtedness shall be secured on a PRO RATA basis with the Secured Obligations. 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 in one or any series of transactions (or of any division thereof), UNLESS (i) no Default, Event of Default or Maturity Event is then continuing or would occur after giving effect thereto (including, without limitation, a Change in Control), (ii) the Borrower or such Loan Party is the surviving corporation and (iii) no Rating Event shall occur and be continuing after giving effect thereto. 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 (each such event, an "ASSET DISPOSITION"), unless the aggregate net book value of all such assets, together with the net book value of all other assets sold, transferred, leased, contributed or conveyed by any Loan Party pursuant to this SECTION 8.2.4 since the Effective Date, does not exceed the Permitted Percentage; PROVIDED, HOWEVER, that notwithstanding anything to the contrary contained herein, any Loan Party may (i) sell or otherwise dispose of assets as and to the extent necessary to comply with Requirements of Law; PROVIDED, HOWEVER, that if after giving effect to any Asset Dispositions required to be made under this CLAUSE (i) the aggregate net book value of sales made under this SECTION 8.2.4 would exceed the Permitted Percentage, the Borrower shall make a prepayment of all Net Cash Proceeds therefrom pursuant to SECTION 3.1.2(c), (ii) sell or otherwise dispose of Cash Equivalent Investments, (iii) enter into the Ground Leases and (iv) transfer certain railcars or rights to railcars as part of the Transco Transaction; PROVIDED, FURTHER, that any Asset Disposition pursuant to CLAUSES (i), (ii), (iii) and (iv) 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 INVESTMENTS. The Borrower shall not, and shall not permit any other Loan Party to, create or acquire, make, incur, assume or suffer to exist any Investment in any other Person, except: CREDIT AGREEMENT -51- (a) Investments existing on the Effective Date; (b) Investments in Midwest, PROVIDED that no Default, Event of Default or Maturity Event shall be in existence or shall occur after giving effect to the making of such Investment; (c) Investments in the form of payments made under the Facility Subleases; and (d) 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. (a) The Borrower shall not, and shall not permit any other Loan Party to, enter into, or cause, suffer or permit to exist, any Transaction with an Affiliate unless such arrangement or contract is 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 other Loan Party with a Person which is not one of its Affiliates. (b) The Borrower shall not, and shall not permit any of its Affiliates to (i) terminate or amend, supplement or otherwise modify any ComEd Agreement (x) in any materially adverse manner with respect to its term, off-take requirement or payments or (y) otherwise in a manner which would result or could reasonably be expected to result in a Material Adverse Effect without the written consent of the Required Lenders, which consent shall not be unreasonably withheld or delayed. 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 other Subsidiary of the Borrower; and (b) the Borrower may make Restricted Payments in respect of its capital stock on any Quarterly Payment Date if: (i) the Borrower has paid all amounts then due and payable in respect of the Senior Debt; (ii) no Default, Event of Default or Maturity Event shall have occurred and be continuing or will occur after giving effect to the making of such payment; and (iii) (A) the Debt Service Coverage Ratio for the 12-month period ended on the last day of the immediately preceding Fiscal Quarter (or, in respect of any Quarterly Payment Date prior to January 1, 2001, the Debt Service Coverage Ratio for the period commencing on January 1, 2000 and ending 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 1.75 to 1.00 PROVIDED FURTHER, that (i) on any Quarterly Payment Date on which any Debt Rating falls into Level 2 of the Cashflow Recapture Grid, 50% of any Excess Cashflow shall be deposited into the Cashflow Recapture Fund until the CREDIT AGREEMENT -52- amount on deposit in such Cashflow Recapture Fund equals the amount of the Fixed Charges payable in the next six months, calculated as of such Quarterly Payment Date; (ii) on any Quarterly Payment Date on which any Debt Rating falls into Level 3 of the Cashflow Recapture Grid, 100% of any Excess Cashflow shall be deposited into the Cashflow Recapture Fund; and (iii) at any time any Debt Rating falls into Level 4 of the Cashflow Recapture Grid all Excess Cashflow generated by the Borrower, if any, and all amounts on deposit in the Cashflow Recapture Fund will be used to make prepayments pursuant to SECTION 3.1.2(d). SECTION 8.2.8 CAPITAL EXPENDITURES. The Borrower shall not, and shall not permit any other Loan Party to, make any capital expenditures, except Necessary Capital Expenditures, or other asset purchases in excess of $5,000,000 per annum if (a) the Debt Service Coverage Ratio for the 12-month period ended on the last day of the immediately preceding Fiscal Quarter is less than 1.75 to 1.00 (to be computed for the first time on the date which is 12 months after the Effective Date), (b) the projected Debt Service Coverage Ratio for the 12-month period commencing on the first day of the then current Fiscal Quarter is less than 1.75 to 1.00, (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 is less than 1.75 to 1.00 or (d) any Debt Rating falls into Level 2, Level 3 or Level 4 of the Cashflow Recapture Grid. 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, any Lease Finance 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): (a) expressly restricting the ability of the Borrower to amend or otherwise modify any Loan Document; (b) restricting the ability of any Loan Party to make any payments, directly or indirectly, to the Borrower by way of dividends or make distributions on its capital stock or member or other ownership interests or to pay any Indebtedness owed to any Loan Party; or (c) restricting the ability of any Loan Party to make loans or advances to any other Loan Party. 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 except as permitted by SECTION 8.2.3, change its Fiscal Year or engage in any business other than the construction, ownership, maintenance and operation of Generating Assets, 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 LIMITATION ON ELECTRICITY MARKET RISK EXPOSURE. The Borrower shall not, and shall not permit any other Loan Party to, directly or indirectly, engage in transactions for (or incur Indebtedness under SECTION 8.2.1(i) in connection with) 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 Assets or financial instruments related thereto or (iii) purchases, sales or exchanges of energy or emissions credits. ARTICLE 9 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". CREDIT AGREEMENT -53- 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 of interest on any Loan, 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. Any representation or warranty of any Loan Party or MGE 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 or MGE to the Administrative Agent, the Holdings Collateral 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. 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)(i), 8.1.10 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, of at least $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 9.1.6 DEFAULT ON LEASE OBLIGATIONS. A Lease Default, Lease Event of Default, Sublease Default or Sublease Event of Default shall have occurred and be continuing. SECTION 9.1.7 BANKRUPTCY, INSOLVENCY. Any Loan Party or MGE 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 MGE or a substantial portion of a Loan Party's or MGE'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 Loan Party or MGE 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 Holdings 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 or MGE, as the case may be, shall not object to any such appearance); CREDIT AGREEMENT -54- (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 or MGE, and, if any such case or proceeding is not commenced by the Loan Party or MGE, as the case may be, such case or proceeding shall be consented to or acquiesced in by the Loan Party or MGE 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, Holdings 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 9.1.8 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 $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 or Section 412 of the Code. SECTION 9.1.9 JUDGMENTS. Any judgment or order for the payment of money in excess of $20,000,000 individually or in the aggregate (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 or effectively stayed or bonded within 60 days from the entry thereof. SECTION 9.1.10 REGULATORY VIOLATION. Any Regulatory Violation shall have occurred and be continuing. SECTION 9.1.11 LOAN DOCUMENTATION. This Agreement or any Loan Document is declared unenforceable or is terminated or any Lien purported to be created by any Security Document shall at any time fail to constitute a valid and perfected Lien on the Holdings Collateral intended to be covered thereby in favor of the Holdings Collateral Agent, free and clear of all other Liens (other than Permitted Liens), or any Loan Party shall assert that any of the Security Documents to which it is a party shall no longer be in full force and effect. SECTION 9.1.12 CHANGE IN CONTROL. Any Change in Control shall have occurred and be continuing. SECTION 9.2 ACTION IF BANKRUPTCY. If any Event of Default described in CLAUSES (a) through (e) of SECTION 9.1.7 shall have occurred and be continuing 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 monetary Obligations shall automatically be and become immediately due and payable, without notice or demand. CREDIT AGREEMENT -55- 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 9.1.7) 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 monetary 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 monetary 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 the 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 10 THE AGENT SECTION 10.1 ACTIONS. (a) Each Lender hereby appoints Chase 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 Citibank, N.A. as Holdings 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 CREDIT AGREEMENT -56- 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 Holdings 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 Holdings 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 Holdings 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 Holdings Collateral Agent's, as the case may be, gross negligence or willful misconduct. Neither any Agent-Related Person nor the Holdings 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 Holdings Collateral Agent shall be or become, in its determination, inadequate, the Agent-Related Person or the Holdings 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, 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 CREDIT AGREEMENT -57- 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 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 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 CHASE. Chase 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. Chase 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 Chase 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 CREDIT AGREEMENT -58- 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 such 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 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 each 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 HOLDINGS COLLATERAL. Each Lender hereby acknowledges and consents that such Lender's right or interest in the Holdings Collateral (or any portion thereof) shall be subject to the terms of the Intercreditor Agreement and the other Security Documents, including the requisite level of consent by holders of Senior Debt to enforce upon the Holdings Collateral. ARTICLE 11 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 material portion of the Holdings Collateral from the Liens of the Security Documents or release CREDIT AGREEMENT -59- any Loan Party from its obligations under the Security Documents or amend or modify the definition of "REQUIRED CREDITORS" 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 or reduce 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, 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 all 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 below its name on the signature pages hereof or set forth in the relevant 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 expenses of counsel to the Administrative Agent) in connection with: CREDIT AGREEMENT -60- (i) the syndication of the Loans and 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) Without duplication of the Borrower's obligations under SECTION 4.7, 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 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); CREDIT AGREEMENT -61- (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 ComEd Assets 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 Assets through foreclosure or 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 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. CREDIT AGREEMENT -62- 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, 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. 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 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 Person (an "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 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 Assignee (other than to 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 Tranche A Loans, the Tranche B Loans and the Tranche C Loans. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Lender Assignment Agreement, (x) the 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 Tranche A Loan Commitment, Tranche B Loan Commitment or Tranche C CREDIT AGREEMENT -63- 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 9.1.7 shall have occurred and be continuing with respect to the Borrower. (b) The Administrative Agent shall, on behalf of the Borrower, maintain at the address set forth below its name on its signature page hereof 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 Tranche A Loan Commitment, Tranche B Loan Commitment or Tranche C 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 Assignee. (c) Upon its receipt of a Lender Assignment Agreement executed by an Assignor, an 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 $3,500, 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; CREDIT AGREEMENT -64- (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 SECTION 4.3, 4.4, 4.5, 4.6, 4.7, 11.3 or 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 Tranche A Loan Commitments, Tranche B Loan Commitments or the Tranche C 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 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; CREDIT AGREEMENT -65- (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 below its name on its signature page hereof 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: (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 HOLDINGS COLLATERAL AND GUARANTEE OBLIGATIONS. (a) Notwithstanding anything to the contrary contained in any Loan Document, the Holdings 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 Holdings 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 Holdings Collateral Agent (i) to release the Liens on the Holdings Collateral and to return to the relevant Loan Party all stock certificates and other CREDIT AGREEMENT -66- securities pledged under the Security Documents and (ii) to release Midwest from its obligations under the Midwest Guarantee. 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 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. SECTION 11.19 EFFECTIVENESS. As between the Lenders and the Administrative Agent, Article 10 of this Agreement (and similar provisions in this Agreement establishing the rights and obligations of the Administrative Agent and the Lenders as between themselves) shall become effective as to the Lenders and the Administrative Agent upon the execution and delivery of this Agreement by the Lenders and the Administrative Agent. By virtue of the execution and delivery of this Agreement by the Lenders, the Lenders hereby authorize the Administrative Agent to execute and deliver that certain Funding Agreement dated December 13, 1999 among the parties named therein (including the Administrative Agent). CREDIT AGREEMENT 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 MIDWEST HOLDINGS CO. By: /s/ Fred W. McCluskey -------------------------------- Name: Fred W. McCluskey Title: Vice President Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: General Counsel Telecopier No.: (949) 752-1420 THE CHASE MANHATTAN BANK, as Administrative Agent By: /s/ Thomas L. Casey -------------------------------- Name: Thomas L. Casey Title: Vice President Address for Notices: Tom Casey 270 Park Avenue New York, New York 10017 With a copy to : Loan & Agency Services Group The Chase Manhattan Bank 1 Chase Manhattan Plaza New York, New York 10081 Attention: Michael Cerniglia THE CHASE MANHATTAN BANK, as Initial Lender By: /s/ Thomas L. Casey -------------------------------- Name: Thomas L. Casey Title: Vice President CREDIT AGREEMENT Address for Notices: Tom Casey 270 Park Avenue New York, New York 10017 With a copy to : Loan & Agency Services Group The Chase Manhattan Bank 1 Chase Manhattan Plaza New York, New York 10081 Attention: Janet Belden CITICORP USA, INC., as Initial Lender By: /s/ Anita J. Brickell -------------------------------- Name: Anita J. Brickell Title: Attorney-In-Fact Address for Notices: 399 Park Avenue 4th Floor New York, New York 10043 Attention: David Goldenberg Telecopier No.: SOCIETE GENERALE, as Initial Lender By: /s/ Frank Sacr -------------------------------- Name: Frank Sacr Title: Director, Project Finance Address for Notices: 1221 Avenue of the Americas 11th Floor New York, New York 10020 Attention: Donna Reynolds/Debbie Napoli Telecopier No.: CREDIT AGREEMENT WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch, as Initial Lender By: /s/ Jonathan Berman -------------------------------- Name: Jonathan Berman Title: Managing Director By: /s/ Arminee H. Bowler -------------------------------- Name: Arminee H. Bowler Title: Managing Director Address for Notices: 1211 Avenue of the Americas 25th Floor New York, New York 10036-8701 Attention: Jonathan Berman/Matt Wilson Telecopier No.: BANK OF MONTREAL, as Lender By: /s/ Cahal B. Carmody -------------------------------- Name: Cahal B. Carmody Title: Director Address for Notices: 700 Louisiana Suite 4400 Houston, TX 77002 Attention: Cahal Carmody Telecopier No.: CREDIT AGREEMENT MEESPIERSON CAPITAL CORP., as Lender By: /s/ Hendrik Vroege -------------------------------- Name: Hendrik Vroege Title: Managing Director By: /s/ Eugene Oliva -------------------------------- Name: Eugene Oliva Title: Assistant Vice President Address for Notices: 3 Stamford Plaza 301 Tresser Boulevard 9th Floor Stamford, CT 06901-3239 Attention: Marlene Ellis Telecopier No.: THE ROYAL BANK OF SCOTLAND PLC, as Lender By: /s/ Derek Weir -------------------------------- Name: Derek Weir Title: Vice President Address for Notices: 88 Pine Street Wall Street Plaza 26th Floor New York, New York 10005 Attention: Jeanne DeQuar Telecopier No.: CREDIT AGREEMENT THE BANK OF NOVA SCOTIA, as Lender By: /s/ John Quick -------------------------------- Name: John Quick Title: Managing Director Address for Notices: 600 Peachtree Street Suite 2700 Atlanta, GA 30383 Attention: Kathy Clark Telecopier No.: With a copy to : 580 California Street Suite 2100 San Francisco, CA 94101 Attention: John Quick Telecopier No.: BANK OF AMERICA, N.A., as Lender By: /s/ John Henry Pollock -------------------------------- Name: John Henry Pollock Title: Principal Address for Notices: 101 N. Tryon Street NC1-001-15-04 Charlotte, NC 28255 Attention: Lynne Cole Telecopier No.: CREDIT AGREEMENT ABN AMRO BANK N.V., as Lender By: /s/ David B. Bryant -------------------------------- Name: David B. Bryant Title: Group Vice President By: /s/ Steven L. Bissonnette -------------------------------- Name: Steven L. Bissonnette Title: Group Vice President and Director Address for Notices: 208 South LaSalle Street Suite 1500 Chicago, IL 60604-1003 Attention: Credit Administration With a copy to: 135 South LaSalle Street Suite 710 Chicago, IL 60603 Attention: David Bryant Telecopier No.: (312) 583-6111 LEHMAN COMMERCIAL PAPER INC., as Lender By: /s/ Michele Swanson -------------------------------- Name: Michele Swanson Title: Authorized Signatory Address for Notices: C/o Bankers Trust Company Corporate Trust & Agency Group Loan Services 4 Albany Street 7th Floor New York, New York 10006 Attention: Jason Yoo Telecopier No.: CREDIT AGREEMENT With a copy to: 3 World Financial Center 10th Floor New York, New York 10285 DRESDNER BANK AG, New York and Grand Cayman Branches, as Lender By: /s/ Andrew Schroeder -------------------------------- Name: Andrew Schroeder Title: Vice President By: /s/ Kirk Edelman -------------------------------- Name: Kirk Edelman Title: Vice President Address for Notices: 75 Wall Street New York, New York 10005-2889 Attention: Annabelle Librojo Telecopier No.: BAYERISCHE LANDESBANK GIROZENTRALE, as Lender By: /s/ Christopher Stolarski -------------------------------- Name: Christopher Stolarski Title: Vice President By: /s/ Peter Obermann -------------------------------- Name: Peter Obermann Title: Senior Vice President CREDIT AGREEMENT Address for Notices: 560 Lexington Avenue New York, New York 10094 Attention: Patricia Sanchez Telecopier No.: BARCLAYS BANK PLC, as Lender By: /s/ Sydney G. Dennis -------------------------------- Name: Sydney G. Dennis Title: Director Address for Notices: 222 Broadway New York, New York 10038 Attention: Marsha Hamlette Telecopier No.: NATIONAL WESTMINSTER BANK Plc, New York Branch as Lender By: /s/ Maria Amaral-LeBlanc -------------------------------- Name: Maria Amaral-LeBlanc Title: Vice President NATIONAL WESTMINSTER BANK Plc, Nassau Branch as Lender By: /s/ Maria Amaral-LeBlanc -------------------------------- Name: Maria Amaral-LeBlanc Title: Vice President CREDIT AGREEMENT Address for Notices: 65 East 55th Street New York, New York 10022 Attention: Sattie Chinapen UNION BANK OF CALIFORNIA, N.A., as Lender By: /s/ Robert J. Cole -------------------------------- Name: Robert J. Cole Title: Vice President Address for Notices: Commercial Loan Operations 1980 Saturn Street Monterey Park, CA 91755 Attention: Ruby Gonzales Telecopier No.: BANK ONE, NA (Chicago Branch), as Lender By: /s/ Jane A. Bek -------------------------------- Name: Jane A. Bek Title: Vice President Address for Notices: 1 Bank One Plaza Suite 0634 Chicago, IL 60670 Attention: Claudia Kich Telecopier No.: CREDIT AGREEMENT TORONTO DOMINION (TEXAS) INC., as Lender By: /s/ Lynn Chasin -------------------------------- Name: Lynn Chasin Title: Vice President Address for Notices: 909 Fannin Street 17th Floor Houston, TX 77010 Attention: Lynn Chasin Telecopier No.: BANQUE NATIONALE DE PARIS, as Lender By: /s/ Gordon R. Cook -------------------------------- Name: Gordon R. Cook Title: Vice President By: /s/ James P. Culhane, CFA -------------------------------- Name: James P. Culhane, CFA Title: Assistant Vice President Address for Notices: Treasury Department 180 Montgomery Street San Francisco, CA 94101 Attention: Don Hart Telecopier No.: With a copy to: 725 S. Figueroa Street Suite 2090 Los Angeles, CA 90017 Attention: James Culhane Telecopier No.: CREDIT AGREEMENT COMMERZBANK AKTIENGESELLSCHAFT, New York Branch, as Lender By: /s/ Christian Jagenberg -------------------------------- Name: Christian Jagenberg Title: SVP and Manager By: /s/ Steven F. Larsen -------------------------------- Name: Steven F. Larsen Title: Vice President Address for Notices: 2 World Financial Center New York, New York 10281-1050 Attention: Christine Hunermund Telecopier No.: SANPAOLO IMI S.p.A., as Lender By: /s/ Robert Wurster -------------------------------- Name: Robert Wurster Title: First Vice President By: /s/ Bitore Vidoco -------------------------------- Name: Bitore Vidoco Title: Vice President Address for Notices: 245 Park Avenue 35th Floor New York, New York 10167 Attention: Gerardo Suarez/John Ferrante Telecopier No.: CREDIT AGREEMENT CREDIT LOCAL DE FRANCE, New York Agency as Lender By: /s/ James R. Miller -------------------------------- Name: James R. Miller Title: General Manager CLF NY Agency By: /s/ Thomas A. Brownsword -------------------------------- Name: Thomas A. Brownsword Title: Vice President Address for Notices: 450 Park Avenue New York, New York 10022 Attention: Aida Slabotzky Telecopier No.: THE FUJI BANK, LIMITED, as Lender By: /s/ Yoshiaki Inoue -------------------------------- Name: Yoshiaki Inoue Title: Senior Vice President & Manager Address for Notices: Two World Trade Center 79th Floor New York, New York 10048 Attention: Tina Catapano/Betty Ali Telecopier No.: CREDIT AGREEMENT KBC BANK N.V., as Lender By: /s/ Robert Snauffer -------------------------------- Name: Robert Snauffer Title: First Vice President By: /s/ Francis X. Payne -------------------------------- Name: Francis X. Payne Title: Vice President Address for Notices: 125 West 55th Street 10th Floor New York, New York 10019 Attention: Michael Curran Telecopier No.: CREDIT LYONNAIS, New York Branch as Lender By: /s/ Michael F Grup -------------------------------- Name: Michael F Grup Title: First Vice President Address for Notices: 1301 Avenue of the Americas New York, New York 10019 Attention: Justine Ventrelli Telecopier No.: CREDIT AGREEMENT MB FINSTRUTTURE, S.p.A. as Lender By: /s/ M. Di Carlo -------------------------------- Name: M. Di Carlo Title: By: /s/ Mauro Maia -------------------------------- Name: Mauro Maia Title: Address for Notices: Via Filodrammatici 10 Milano, Italy 20121 Attention: Simonpietro Felice Telecopier No.: ABBEY NATIONAL TREASURY SERVICES plc, as Lender By: /s/ Derek Gordon -------------------------------- Name: Derek Gordon Title: Head of Project Finance By: -------------------------------- Name: Title: Address for Notices: 26-28 Dorset Square London, NW1 6QC United Kingdom Attention: Sue Hawkins Telecopier No.: CREDIT AGREEMENT AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED, as Lender By: /s/ Elizabeth M. Waters -------------------------------- Name: Elizabeth M. Waters Title: Vice President Address for Notices: 1177 Avenue of the Americas New York, New York 10036-2798 Attention: Tessie Amante/Doreen Klingenbeck Telecopier No.: CIBC INC., as Lender By: /s/ Denis P. O'Meara -------------------------------- Name: Denis P. O'Meara Title: Executive Director CIBC World Markets Corp. As Agent Address for Notices: Two Paces West 2727 Paces Ferry Raod Suite 1200 Atlanta, GA 30309 Attention: Beverly Bowman/Miriam McCart Telecopier No.: CREDIT AGREEMENT NORDDEUTSCHE LANDESBANK GIROZENTRALE New York/Grand Cayman Islands Branches, as Lender By: /s/ Stephanie Finnen -------------------------------- Name: Stephanie Finnen Title: VP By: /s/ Stephen K. Hunter -------------------------------- Name: Stephen K. Hunter Title: SVP Address for Notices: 1114 Avenue of the Americas New York, New York 10036 Attention: Stefanie Scholz Telecopier No.: THE INDUSTRIAL BANK OF JAPAN, LIMITED, as Lender By: /s/ Carl-Eric Benzinger -------------------------------- Name: Carl-Eric Benzinger Title: Senior Vice President Address for Notices: 1251 Avenue of the Americas New York, New York 10020-1104 Attention: Richard Emmich Telecopier No.: CREDIT AGREEMENT NATIONAL AUSTRALIA BANK LIMITED, (A.C.N. 004044937) as Lender By: /s/ Thomas R. Cronin -------------------------------- Name: Thomas R. Cronin Title: Vice President Address for Notices: 200 Park Avenue 34th Floor New York, New York 10166 Attention: Lidia Saniuk/Geraldine Harper Telecopier No.: BAYERISCHE HYPO-UND VEREINSBANK AG, New York Branch, as Lender By: /s/ Alexander M. Blodi -------------------------------- Name: Alexander M. Blodi Title: Director By: /s/ Pamela J. Gillons -------------------------------- Name: Pamela J. Gillons Title: Associate Director Address for Notices: 150 East 42nd Street New York, New York 10017 Attention: Arelis Cepeda Telecopier No.: CREDIT AGREEMENT BANK HAPOALIM B.M., as Lender By: /s/ Shaun Breidbart -------------------------------- Name: Shaun Breidbart Title: Vice President By: /s/ Laura Anne Raffa -------------------------------- Name: Laura Anne Raffa Title: First Vice President & Corporate Manager Address for Notices: 1177 Avenue of the Americas New York, New York 10036 Attention: Donna Gindoff/Ivelis Cruz Telecopier No.: COBANK, ACB, as Lender By: /s/ Teresa L. Fountain -------------------------------- Name: Teresa L. Fountain Title: Assistant Corporate Secretary Address for Notices: 5500 South Quebec Street Englewood, CO 80111 Attention: Ryan Spearman Telecopier No.: CREDIT AGREEMENT BANKGESELLSCHAFT BERLIN AG, London Branch, as Lender By: /s/ H. Van Wyk -------------------------------- Name: H. Van Wyk Title: Director By: /s/ Philip J. Nias -------------------------------- Name: Philip J. Nias Title: Director Address for Notices: 1 Crown Court Cheapside London E2C2V 6LR England Attention: Penny Neville-Park/ Collette Hayden Telecopier No.: NATEXIS BANQUE, as Lender By: /s/ Anadi Jauhari -------------------------------- Name: Anadi Jauhari Title: Vice President & Group Manager Project Finance Group By: /s/ Anthony Perna -------------------------------- Name: Anthony Perna Title: A.V.P. Address for Notices: 645 Fifth Avenue 20th Floor New York, New York 10022 Attention: Endina Barletta Telecopier No.: (212) 872-5045 CREDIT AGREEMENT COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE, as Lender By: /s/ Muriel Girardot -------------------------------- Name: Muriel Girardot Title: Vice President By: /s/ Daniel Staffelbach -------------------------------- Name: Daniel Staffelbach Title: Associate Address for Notices: 4 Rue Gaillon F-75002 Paris France Attention: Annick Merard Telecopier No.: MELLON BANK, N.A., as Lender By: /s/ Mark W. Rogers -------------------------------- Name: Mark W. Rogers Title: Vice President Address for Notices: Three Mellon Bank Center Rom 1203 Pittsburgh, PA 15259-0003 Attention: Loan Administration Dept. Telecopier No.: CHANG HWA COMMERCIAL BANK, LTD., as Lender By: /s/ James Lin -------------------------------- Name: James Lin Title: Vice President & General Manager CREDIT AGREEMENT Address for Notices: 333 South Grand Avenue Suite 600 Los Angeles, CA 90071 Attention: Jean Luu Telecopier No.: BANK OF CHINA, NEW YORK, as Lender By: /s/ Li Chuanjie -------------------------------- Name: Li Chuanjie Title: General Manager Address for Notices: 410 Madison Avenue New York, New York 10017 Attention: Kevin Cheung Telecopier No.: CREDIT AGREEMENT EX-10.108-1 59 a2031364zex-10_1081.txt EXHIBIT 10.108.1 Exhibit 10.108.1 EXECUTION COUNTERPART AMENDMENT ONE AMENDMENT ONE (this "Amendment") dated as of May 9, 2000 by and among EDISON MISSION MIDWEST HOLDINGS CO. (the "BORROWER") and, each of certain commercial lending institutions party hereto. WHEREAS, the Borrower, The Chase Manhattan Bank as Administrative Agent, and certain commercial lending institutions party thereto entered into a Credit Agreement dated as of December 15, 1999 (the "CREDIT AGREEMENT"); WHEREAS, the Borrower is permitted to incur Indebtedness pursuant to Section 8.2.1(d) of the Credit Agreement to finance the acquisition, construction or improvement of any fixed or capital assets in accordance with and subject to SCHEDULE 8.2.1(d) to the Credit Agreement; WHEREAS, the Borrower desires to secure the financing referred to above with the Holdings Collateral on a ratable basis with the other Secured Obligations; and WHEREAS, the Borrower has requested that Administrative Agent and the Lenders party to the Credit Agreement and the Administrative Agent and the Lenders party hereto have agreed to amend certain provisions of the Credit Agreement. ACCORDINGLY, the parties hereto agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment, terms defined in the Credit Agreement are used herein (and in the introductions and recitals hereto) as defined therein. Section 2. AMENDMENT TO THE CREDIT AGREEMENT. Subject to the satisfaction of the conditions precedents specified in Section 4 below, but effective as of the Amendment Effective Date, the Credit Agreement shall be amended as follows: (a) SECTION 1.1 of the Credit Agreement shall be amended by adding the following definitions: ""2000 CAPEX CREDIT AGREEMENT" means the Credit Agreement dated as of May 9, 2000 by and among the Borrower, Societe Generale and Bayerische Landesbank Girozentrale. "2000 CAPEX LOANS" means loans made to the Borrower pursuant to the 2000 Capex Credit Agreement.". (b) SECTION 8.1.1(c) of the Credit Agreement shall be amended by inserting the following phrase after the phrase "concurrently with the delivery of financial statements referred to in SECTION 8.1.1(b),": "commencing with the 2000 Fiscal Year,". (c) SECTION 8.1.1(e) of the Credit Agreement shall be amended by deleting the reference to "SECTION 8.1.1(b)" and replacing it with the following reference: "SECTION 8.1.1(a)". (d) SECTION 8.2.1(d) of the Credit Agreement shall be amended by inserting after, "Subject to SECTION 8.2.8," at the beginning of SECTION 8.2.1(d) of the Credit Agreement, the following phrase: "the 2000 Capex Credit Agreement and other". (e) SECTION 8.2.1(f) of the Credit Agreement shall be amended by inserting the following phrase at the beginning of clause (ii) of SECTION 8.2.1(f) of the Credit Agreement and before the phrase "any other existing Indebtedness": "2000 Capex Loans and". (f) SECTION 8.2.1(g) of the Credit Agreement shall be amended deleting clause (i) in it entirety and replacing it with the following clause: "(i) the aggregate outstanding principal of Tranche A Loans, Tranche B Loans and 2000 Capex Loans and". (g) Section 8.2.1(g)(ii)(A) of the Credit Agreement shall be amended by deleting the reference to "$1,679,000,000" and replacing it with "$1,750,000,000". (h) SECTION 8.2.1(j) Of the Credit Agreement shall be amended by deleting clause (i) in its entirety and replacing it with the following clause: "(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, had the maximum amount of Indebtedness available to be drawn under the Tranche C Loan Commitments been outstanding during such period and, if the sum of (A) the aggregate principal amount of the Tranche A Loans, the Tranche B Loans and the 2000 Capex Loans, (B) the outstanding principal amount of any Indebtedness incurred pursuant to SECTION 2 8.2.1(f)(i) PLUS (C) all Indebtedness of Holdings in the form of commercial paper is less than $1,750,000,000, had an additional amount been drawn under the Tranche A Loan Commitments, the Tranche B Loan Commitments and commitments under the 2000 Capex Credit Agreement such that the sum of sub-clauses (A), (B) PLUS (C) above equals $1,750,000,000, the Debt Service Coverage Ratio for such period would have been equal to or greater than 2.50 to 1.00,". (i) SECTION 8.2.2(l) of the Credit Agreement shall be amended by deleting clause (l) in its entirety and replacing it with the following clause: "(l) Liens on Holdings Collateral securing Indebtedness permitted by SECTION 8.2.1(b), (d), (f), (g) or (j); provided that such Indebtedness shall be secured on a PRO RATA basis with the Secured Obligations.". Section 3. AUTHORIZATION OF ADMINISTRATIVE AGENT. The Lenders party hereto hereby authorize the Administrative Agent to execute Amendment One To The Intercreditor Agreement dated as of May 9, 2000 by and among the Administrative Agent, the Holder Representatives and the Midwest LC Issuer. Section 4. CONDITIONS PRECEDENT. This Amendment shall not become effective until the date (the "AMENDMENT EFFECTIVE DATE") on which each of the following condition precedents have been satisfied: (a) Delivery to the Administrative Agent of (i) this Amendment duly executed and delivered by the Borrower, and the Lenders constituting the Required Lenders and (ii) Amendment One To The Intercreditor Agreement duly executed and delivered by each party thereto. (b) The representations and warranties of the Borrower as set forth in the Credit Agreement and each Loan Party in each of the Loan Documents to which such Loan Party is a party, shall be true and correct as of the Amendment Effective Date after giving effect to the amendments contemplated hereby (unless stated to be given as of an earlier date, in which case such representation and warranty shall be true and correct only as of such earlier date); and (c) As of the Amendment Effective Date, no Default shall have occurred and be continuing. Section 5. MISCELLANEOUS. Except as expressly amended hereby, all of the terms and provisions of the Credit Agreement are and shall remain in full force and effect. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers as of the day and year first above written. EDISON MISSION MIDWEST HOLDINGS CO. By: ------------------------------------ Name: Title: Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: General Counsel Telecopier No.: (949) 752-1420 THE CHASE MANHATTAN BANK, as Lender By: /s/ Robert W. Mathews ------------------------------------ Name: Robert W. Mathews Title: Vice President Address for Notices: Tom Casey 270 Park Avenue New York, New York 10017 With a copy to: Loan & Agency Services Group The Chase Manhattan Bank 1 Chase Manhattan Plaza New York, New York 10081 Attention: Janet Belden CITICORP USA, INC., as Lender By: /s/ Sandip Sen ------------------------------------ Name: Sandip Sen Title: Managing Director 4 Address for Notices: 399 Park Avenue 4th Floor New York, New York 10043 Attention: David Goldenberg Telecopier No.: SOCIETE GENERALE, as Lender By: /s/ David Bird ------------------------------------ Name: David Bird Title: Vice President Address for Notices: 1221 Avenue of the Americas 11th Floor New York, New York 10020 Attention: Donna Reynolds/Debbie Napoli Telecopier No.: WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch, as Lender By: ------------------------------------ Name: Title: By: ------------------------------------ Name: Title: Address for Notices: 1211 Avenue of the Americas 25th Floor New York, New York 10036-8701 Attention: Jonathan Berman/Matt Wilson Telecopier No.: 5 BANK OF MONTREAL, as Lender By: /s/ Cahal B. Carmody -------------------------------- Name: Cahal B. Carmody Title: Director Address for Notices: 700 Louisiana Suite 4400 Houston, TX 77002 Attention: Cahal Carmody Telecopier No.: MEESPIERSON CAPITAL CORP., as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 3 Stamford Plaza 301 Tresser Boulevard 9th Floor Stamford, CT 06901-3239 Attention: Marlene Ellis Telecopier No.: 6 THE ROYAL BANK OF SCOTLAND PLC, as Lender By: -------------------------------- Name: Title: Address for Notices: 88 Pine Street Wall Street Plaza 26th Floor New York, New York 10005 Attention: Jeanne DeQuar Telecopier No.: THE BANK OF NOVA SCOTIA, as Lender By: -------------------------------- Name: Title: Address for Notices: 600 Peachtree Street Suite 2700 Atlanta, GA 30383 Attention: Kathy Clark Telecopier No.: With a copy to : 580 California Street Suite 2100 San Francisco, CA 94101 Attention: John Quick Telecopier No.: 7 BANK OF AMERICA, N.A., as Lender By: -------------------------------- Name: Title: Address for Notices: 101 N. Tryon Street NC1-001-15-04 Charlotte, NC 28255 Attention: Lynne Cole Telecopier No.: ABN AMRO BANK N.V., as Lender By: /s/ David B. Bryant -------------------------------- Name: David B. Bryant Title: Senior Vice President By: /s/ Gregory B. Babaya -------------------------------- Name: Gregory B. Babaya Title: Assistant Vice President Address for Notices: 208 South LaSalle Street Suite 1500 Chicago, IL 60604-1003 Attention: Credit Administration With a copy to: 135 South LaSalle Street Suite 710 Chicago, IL 60603 Attention: David Bryant Telecopier No.: (312) 583-6111 8 LEHMAN COMMERCIAL PAPER INC., as Lender By: -------------------------------- Name: Title: Address for Notices: C/o Bankers Trust Company Corporate Trust & Agency Group Loan Services 4 Albany Street 7th Floor New York, New York 10006 Attention: Jason Yoo Telecopier No.: With a copy to: 3 World Financial Center 10th Floor New York, New York 10285 DRESDNER BANK AG, New York and Grand Cayman Branches, as Lender By: /s/ Andrew Schroeder -------------------------------- Name: Andrew Schroeder Title: Vice President By: /s/ Fred C. Thurston -------------------------------- Name: Fred C. Thurston Title: Assistant Vice President Address for Notices: 75 Wall Street New York, New York 10005-2889 Attention: Annabelle Librojo Telecopier No.: 212 429 2130 9 BAYERISCHE LANDESBANK GIROZENTRALE, as Lender By: /s/ C. Stolarski -------------------------------- Name: C. Stolarski Title: Vice President By: /s/ Dietmar Rieg -------------------------------- Name: Dietmar Rieg Title: First Vice President Address for Notices: 560 Lexington Avenue New York, New York 10094 Attention: Patricia Sanchez Telecopier No.: BARCLAYS BANK PLC, as Lender By: -------------------------------- Name: Title: Address for Notices: 222 Broadway New York, New York 10038 Attention: Marsha Hamlette Telecopier No.: 10 NATIONAL WESTMINSTER BANK Plc, New York Branch as Lender By: -------------------------------- Name: Title: NATIONAL WESTMINSTER BANK Plc, Specialised Finance Group, London as Lender By: /s/ Dave Walton -------------------------------- Name: Dave Walton Title: Senior Corporate Manager Address for Notices: Funding Office- 65 East 55th Street New York, New York 10022 Attention: Sattie Chinapen Controlling/Credit Office Specialised Finance Group PO Box 12264, 5th Floor 1 Princes Street, London EC2R 8PB Attnetion: Martin Vesey/ Dave Walton UNION BANK OF CALIFORNIA, N.A., as Lender By: /s/ Susan K. Johnson -------------------------------- Name: Susan K. Johnson Title: Vice President 11 Address for Notices: Commercial Loan Operations 1980 Saturn Street Monterey Park, CA 91755 Attention: Ruby Gonzales Telecopier No.: BANK ONE, NA (Chicago Branch), as Lender By: /s/ Jane A. Bek -------------------------------- Name: Jane A. Bek Title: Vice President Address for Notices: 1 Bank One Plaza Suite 0634 Chicago, IL 60670 Attention: Claudia Kich Telecopier No.: TORONTO DOMINION (TEXAS) INC., as Lender By: /s/ Lynn Chasin -------------------------------- Name: Lynn Chasin Title: Vice President Address for Notices: 909 Fannin Street 17th Floor Houston, TX 77010 Attention: Lynn Chasin Telecopier No.: 713 951 9921 12 BANQUE NATIONALE DE PARIS, as Lender By: /s/ James P. Culhane, CFA -------------------------------- Name: James P. Culhane Title: Assistant Vice President By: /s/ Christophe Bernard -------------------------------- Name: Christophe Bernard Title: Assistant Vice President Address for Notices: Treasury Department 180 Montgomery Street San Francisco, CA 94101 Attention: Don Hart Telecopier No.: With a copy to: 725 S. Figueroa Street Suite 2090 Los Angeles, CA 90017 Attention: James Culhane Telecopier No.: COMMERZBANK AKTIENGESELLSCHAFT, New York Branch, as Lender By: /s/ Christian Jagenberg -------------------------------- Name: Christian Jagenberg Title: Senior Vice President and Manager By: /s/ Steven F. Larsen -------------------------------- Name: Steven F. Larsen Title: Vice President 13 Address for Notices: 2 World Financial Center New York, New York 10281-1050 Attention: Christine Hunermund Telecopier No.: SANPAOLO IMI S.p.A., as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 245 Park Avenue 35th Floor New York, New York 10167 Attention: Gerardo Suarez/John Ferrante Telecopier No.: CREDIT LOCAL DE FRANCE, New York Agency as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: 14 Address for Notices: 450 Park Avenue New York, New York 10022 Attention: Aida Slabotzky Telecopier No.: THE FUJI BANK, LIMITED, as Lender By: -------------------------------- Name: Title: Address for Notices: Two World Trade Center 79th Floor New York, New York 10048 Attention: Tina Catapano/Betty Ali Telecopier No.: KBC BANK N.V., as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 125 West 55th Street 10th Floor New York, New York 10019 Attention: Michael Curran Telecopier No.: 15 CREDIT LYONNAIS, New York Branch as Lender By: -------------------------------- Name: Title: Address for Notices: 1301 Avenue of the Americas New York, New York 10019 Attention: Justine Ventrelli Telecopier No.: MB FINSTRUTTURE, S.p.A. as Lender By: /s/ Mauro Maia -------------------------------- Name: Mauro Maia Title: By: /s/ Massimo Di Carlo -------------------------------- Name: Massimo di Carlo Title: Address for Notices: Via Filodrammatici 10 Milano, Italy 20121 Attention: Gianfranco Amoroso Telecopier No.: 39 02 8829 945 16 ABBEY NATIONAL TREASURY SERVICES plc, as Lender By: /s/ Derek Gordon -------------------------------- Name: Derek Gordon Title: Head of Project Finance By: -------------------------------- Name: Title: Address for Notices: 26-28 Dorset Square London, NW1 6QC United Kingdom Attention: Sue Hawkins Telecopier No.: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED, as Lender By: /s/ R. Scott Mcinnis -------------------------------- Name: R. Scott Mcinnis Title: Head of Structured Finance & Relationship Management - Americas Address for Notices: 1177 Avenue of the Americas New York, New York 10036-2798 Attention: Tessie Amante/Doreen Klingenbeck Telecopier No.: 17 CIBC INC., as Lender By: -------------------------------- Name: Title: Address for Notices: Two Paces West 2727 Paces Ferry Raod Suite 1200 Atlanta, GA 30309 Attention: Beverly Bowman/Miriam McCart Telecopier No.: NORDDEUTSCHE LANDESBANK GIROZENTRALE New York/Grand Cayman Islands Branches, as Lender By: /s/ Bruno J-M Mejean -------------------------------- Name: Bruno J-M Mejean Title: Senior Vice President By: /s/ Stephen K. Hunter -------------------------------- Name: Stephen K. Hunter Title: Senior Vice President Address for Notices: 1114 Avenue of the Americas New York, New York 10036 Attention: Stefanie Scholz Telecopier No.: 18 THE INDUSTRIAL BANK OF JAPAN, LIMITED, as Lender By: -------------------------------- Name: Title: Address for Notices: 1251 Avenue of the Americas New York, New York 10020-1104 Attention: Richard Emmich Telecopier No.: NATIONAL AUSTRALIA BANK LIMITED, (A.C.N. 004044937) as Lender By: -------------------------------- Name: Title: Address for Notices: 200 Park Avenue 34th Floor New York, New York 10166 Attention: Lidia Saniuk/Geraldine Harper Telecopier No.: 19 BAYERISCHE HYPO-UND VEREINSBANK AG, New York Branch, as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 150 East 42nd Street New York, New York 10017 Attention: Arelis Cepeda Telecopier No.: BANK HAPOALIM B.M., as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 1177 Avenue of the Americas New York, New York 10036 Attention: Donna Gindoff/Ivelis Cruz Telecopier No.: 20 COBANK, ACB, as Lender By: -------------------------------- Name: Title: Address for Notices: 5500 South Quebec Street Englewood, CO 80111 Attention: Ryan Spearman Telecopier No.: BANKGESELLSCHAFT BERLIN AG, London Branch as Lender By: /s/ H. Van Wyk -------------------------------- Name: H. Van Wyk Title: Director By: /s/ Philip J. Nias -------------------------------- Name: Philip J. Nias Title: Director Address for Notices: 1 Crown Court Cheapside London E2C2V 6LR England Attention: Penny Neville-Park/ Collette Hayden Telecopier No.: 21 NATEXIS BANQUE, as Lender By: /s/ Anadi Jauhari -------------------------------- Name: Anadi Jauhari Title: Vice President & Group Manager Project Finance Group By: /s/ Anthony Perna -------------------------------- Name: Anthony Perna Title: Assistant Vice President Address for Notices: 645 Fifth Avenue 20th Floor New York, New York 10022 Attention: Connie Moy Telecopier No.: 212 872 5045 CREDIT INDUSTRIEL ET COMMERCIAL (formerly Compagnie Financiere de CIC et de l'Union Europeene) as Lender By: /s/ Daniel Staffelbach -------------------------------- Name: Daniel Staffelbach Title: Associate By: /s/ Mark D. Palin -------------------------------- Name: Mark D. Palin Title: Vice President Address for Notices: DGC - Credit Financiers 95091 Cergy Pontosse Cedex, France Attention: Annick Merard Telecopier No.: 331 45 96 49 43/44 22 MELLON BANK, N.A., as Lender By: /s/ Mark W. Rogers -------------------------------- Name: Mark W. Rogers Title: Vice President Address for Notices: Three Mellon Bank Center Rom 1203 Pittsburgh, PA 15259-0003 Attention: Loan Administration Dept. Telecopier No.: CHANG HWA COMMERCIAL BANK, LTD., as Lender By: -------------------------------- Name: Title: Address for Notices: 333 South Grand Avenue Suite 600 Los Angeles, CA 90071 Attention: Jean Luu Telecopier No.: BANK OF CHINA, NEW YORK, as Lender By: /s/ Jin Chuon -------------------------------- Name: Jin Chuon Title: Manager of Project Finance Department Address for Notices: 410 Madison Avenue New York, New York 10017 Attention: Kevin Cheung Telecopier No.: 23 ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG, New York Branch as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 280 Park Avenue, West Building New York, NY 10017 Attention: Patrick Kunkel Telecopier No.: 24 EX-10.108-2 60 a2031364zex-10_1082.txt EXHIBIT 10.108.2 Exhibit 10.108.2 EXECUTION COUNTERPART AMENDMENT TWO AMENDMENT TWO (this "Amendment") dated as of June 23, 2000 by and among EDISON MISSION MIDWEST HOLDINGS CO. (the "BORROWER"), THE CHASE MANHATTAN BANK as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT") and each of certain commercial lending institutions party hereto. WHEREAS, the Borrower, the Administrative Agent and certain commercial lending institutions party thereto (the "LENDERS") entered into a Credit Agreement dated as of December 15, 1999 (as heretofore amended, modified and supplemented, the "CREDIT AGREEMENT"); WHEREAS, the Borrower desires to enter into the Synthetic Lease Transaction; WHEREAS, the Borrower has requested, and the Administrative Agent and the Lenders party hereto have agreed, to amend and waive certain provisions of the Credit Agreement so as to permit the Synthetic Lease Transaction; WHEREAS, the Borrower has requested, and the Administrative Agent and the Lenders party thereon have agreed, to clarify the definitions of Fixed Charges and Operating Expenses; ACCORDINGLY, the parties hereto agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment, terms defined in the Credit Agreement are used herein (and in the introductions and recitals hereto) as defined therein. Section 2. AMENDMENT TO THE CREDIT AGREEMENT. Subject to the satisfaction of the conditions precedents specified in Section 3 below, but effective as of the Amendment Effective Date, the Credit Agreement shall be amended as follows: (a) SECTION 1.1 of the Credit Agreement shall be amended by adding the following definitions: "COMED SYNTHETIC LEASE CONSENT" means the Consent to Sale of Assets between Midwest and ComEd referred to in the Synthetic Lease Basic Documents. "INCREMENTAL SYNTHETIC LEASE ENVIRONMENTAL INDEMNITY PAYMENTS" mean Synthetic Lease Environmental Indemnity Obligations paid to Indemnitees that would not otherwise would have been borne by Midwest had the Synthetic Lease Transaction not been consummated and Midwest been both the owner and the operator of Synthetic Lease Assets. "SYNTHETIC LEASE" means the Lease Agreement dated as of June 23, 2000 between Midwest and Synthetic Lease Trust. "SYNTHETIC LEASE ASSETS" mean certain electric generating turbines further described in the Synthetic Lease Participation Agreement as the "Leased Equipment". "SYNTHETIC LEASE BASIC DOCUMENTS" means the Basic Documents as defined in the Synthetic Lease Participation Agreement. "SYNTHETIC LEASE ENVIRONMENTAL INDEMNITY OBLIGATIONS" mean Synthetic Lease Liabilities consisting of liabilities or obligations with respect to Section 6.2 or 6.7 of the Synthetic Lease Participation Agreement that by virtue of Section 6.8 of the Synthetic Lease Participation Agreement and the Synthetic Lease Guarantee are not liabilities or obligations of Edison Mission Energy. "SYNTHETIC LEASE GUARANTEE" means the Guaranty Agreement dated as of June 23, 2000 made by Edison Mission Energy in favor of the Synthetic Lease Trust that, among other things, guarantees the payment by Midwest of all Synthetic Lease Liabilities other than Synthetic Lease Environmental Indemnity Obligations. "SYNTHETIC LEASE INTERCOMPANY NOTE" means the Intercompany Note dated the Closing Date (as defined in the Synthetic Lease Participation Agreement) evidencing the loan by Midwest to Edison Mission Energy of the proceeds of the Synthetic Lease Transaction (net of transaction expenses paid by Midwest in connection with the Synthetic Lease Transaction). "SYNTHETIC LEASE INTERCOMPANY NOTE PAYMENTS" mean the payments by Edison Mission Energy to Midwest under or in respect of the Synthetic Lease Intercompany Note. "SYNTHETIC LEASE LIABILITIES" mean the basic rent, the supplemental rent or any other amount, liability or obligation that Midwest is obligated to pay under the Synthetic Lease or the other Synthetic Lease Basic Documents, including, without limitation, Synthetic Lease Environmental Indemnity Obligations. "SYNTHETIC LEASE PARTICIPATION AGREEMENT" means the Participation Agreement dated as of June 23, 2000 by and among Midwest, Edison Mission Energy, the Synthetic Lease Trust, investors party thereto, noteholders party thereto, Wilmington Trust Company, and Citicorp North America, Inc., as Agent. 2 "SYNTHETIC LEASE TRANSACTION" means the transaction pursuant to the Synthetic Lease Participation Agreement and the Synthetic Lease Basic Documents whereby Midwest sells the Synthetic Lease Assets to the Synthetic Lease Trust and the Synthetic Lease Trust leases the Synthetic Lease Assets to Midwest under the Synthetic Lease. "SYNTHETIC LEASE TRUST" means EME/CDL Trust, a Delaware statutory business trust.". (b) SECTION 1.1 of the Credit Agreement shall be further amended by deleting the definitions of "CASHFLOW AVAILABLE FOR FIXED CHARGES", "DEBT TO CAPITAL RATIO", "FIXED CHARGES" and "OPERATING EXPENSES" in their entirety and replacing them with the following definitions: "CASHFLOW AVAILABLE FOR FIXED CHARGES" means, in respect of any period, the excess, if any, of Revenues (excluding (i) proceeds of any permitted asset sale, (ii) amounts available in the Cashflow Recapture Fund and (iii) Synthetic Lease Intercompany Note Payments) during such period OVER Operating Expenses during such period. "DEBT TO CAPITAL RATIO" means, with respect to the Borrower and its Consolidated Subsidiaries, the ratio as of the end of the last Fiscal Quarter for which financial statements referred to in SECTION 8.1.1 are available of (i) the aggregate principal amount of Indebtedness of the Borrower and its Consolidated Subsidiaries (other than Indebtedness of the Borrower incurred pursuant to SECTION 8.2.1(a)(iii) and SECTION 8.2.1(i)) then outstanding to (ii) Total Capitalization (excluding, to the extent included, the Synthetic Lease Intercompany Note and payments by Edison Mission Energy pursuant to the Synthetic Lease Guarantee). "FIXED CHARGES" 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, including (A) all capitalized interest and (B) the interest portion of any deferred payment obligation, (ii) amounts due and payable under SECTIONS 3.3.1 and 3.3.2 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, (iv) the interest portion of any deferred payment obligation due and payable during such period, (v) the aggregate amount of the Lease Obligations due and payable during such period, and (vi) all other amounts due and payable by the Loan Parties with respect to Indebtedness (other than (x) Designated Lease Liabilities and Synthetic Lease Liabilities) permitted under SECTION 8.2.1 during such period. 3 "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, Necessary Capital Expenditures and all other fees and expenses necessary for the continued operation and maintenance of the Generating Assets and the conduct of the business of the Loan Parties. Operating Expenses shall exclude (to the extent included) Lease Obligations and Synthetic Lease Liabilities (other than payments of Synthetic Lease Environmental Indemnity Obligations) and shall include (to the extent excluded) Designated Lease Liabilities (other than Lease Obligations).". (c) SECTION 8.2.1(a) of the Credit Agreement shall be deleted and replaced in its entirety with the following: "(a)(i) Capitalized Lease Liabilities and Operating Lease Liabilities outstanding (or anticipated to be outstanding) on the Effective Date and set forth on SCHEDULE 8.2.1(a), (ii) Capitalized Lease Liabilities and Operating Lease Liabilities entered into after the Effective Date in the ordinary course of business not to exceed at any time an aggregate principal amount equal to $50,000,000 and (iii) Synthetic Lease Liabilities;". (d) SECTION 8.2.2 of the Credit Agreement shall be amended by (i) deleting the period at the end of SECTION 8.2.2(l) of the Credit Agreement and replacing it with the following: "; and"; and (ii) adding SECTION 8.2.2(m) to SECTION 8.2.2 of the Credit Agreement as follows: "(m) Liens created pursuant to the Synthetic Lease Basic Documents.". (e) SECTION 8.2.4 of the Credit Agreement shall be amended by deleting SECTION 8.2.4(iv) of the Credit Agreement and replacing it in its entirety with the following subsections: "(iv) transfer certain railcars or rights to railcars as part of the Transco Transaction and (v) sell the Synthetic Lease Assets to Synthetic Lease Trust pursuant to the Synthetic Lease Basic Documents; PROVIDED, FURTHER, that any Asset Disposition pursuant to CLAUSES (i), (ii), (iii), (iv) and (v) 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.". 4 (f) SECTION 8.2.5 of the Credit Agreement shall be amended by (i) deleting the period at the end of SECTION 8.2.5(d) of the Credit Agreement and replacing it with the following: "; and"; and (ii) adding SECTION 8.2.5(e) to SECTION 8.2.5 of the Credit Agreement as follows: "(e) Investments evidenced by the Synthetic Lease Intercompany Note.". (g) SECTION 8.2.6(a) of the Credit Agreement shall be amended by adding the following sentence at the end of the section: "Notwithstanding the foregoing, the Synthetic Lease Transaction and the transactions contemplated by the Synthetic Lease Basic Documents shall be deemed not to be a Transaction with an Affiliate for the purposes of this SECTION 8.2.6.". (h) SECTION 8.2.7 of the Credit Agreement shall be amended by adding the following sentence at the end of Section 8.2.7 of the Credit Agreement: "Notwithstanding the foregoing, so long as no Default, Event of Default or Maturity Event shall have occurred and be continuing, the Borrower or any other Loan Party may make a Restricted Payment to Edison Mission Energy on or within 30 days after the date any Synthetic Lease Intercompany Note Payment is received by Midwest in an amount not exceeding such Synthetic Lease Intercompany Note Payment (to the extent that the same was not included in any Restricted Payment theretofore made in accordance with this Section 8.2.7); PROVIDED that, in the event that Midwest pays Incremental Synthetic Lease Environmental Indemnity Payments, the aggregate amount of Restricted Payments payable in accordance with this sentence (but not otherwise in accordance with this Section 8.2.7) shall be reduced by a like amount.". (i) SECTION 8 of the Credit Agreement shall be amended by adding SECTION 8.2.12 to the Credit Agreement as follows: "Section 8.2.12 SYNTHETIC LEASE BASIC DOCUMENTS. The Borrower shall not, and shall not permit any other Loan Party to agree or consent to any termination, amendment, modification or waiver of (a) Section 6.8 or 7.2 of the Synthetic Lease Participation Agreement, (b) the definition of "Free Cashflow" set forth in the Synthetic Lease Basic Documents or (c) or any other provision of the Synthetic Lease Basic Documents that increases or is reasonably 5 likely to increase the liability, or the obligations, of Midwest (or decreases or is reasonably likely to decrease the liability, or the obligations, of Edison Mission Energy) with respect to the Synthetic Lease Basic Documents in any material respect.". (j) SECTION 9.1.5 of the Credit Agreement shall be amended by inserting the following phrase inside the parenthetical after, "(OTHER THAN Indebtedness described in SECTION 9.1.1" on the third line of Section 9.1.5 of the Credit Agreement: "and Synthetic Lease Liabilities". (k) SECTION 9 of the Credit Agreement shall be amended by adding SECTION 9.1.13 to the Credit Agreement as follows: "Section 9.1.13 SYNTHETIC LEASE. The Synthetic Lease Trust should have commenced to exercise remedies in accordance with Section 15 of the Synthetic Lease to terminate the Synthetic Lease and repossess any of the Synthetic Lease Assets.". Section 3. CONDITIONS PRECEDENT. This Amendment shall not become effective until the date (the "AMENDMENT EFFECTIVE DATE") on which each of the following conditions precedent have been satisfied: (a) Delivery to the Administrative Agent of this Amendment duly executed and delivered by the Borrower and the Lenders constituting the Required Lenders; (b) Delivery to the Administrative Agent of the Synthetic Lease Basic Documents in form and substance satisfactory to the Administrative Agent; (c) All conditions precedent to effectuate the Synthetic Lease Transaction have been satisfied (including delivery of the ComEd Synthetic Lease Consent) or waived; (d) The Administrative Agent shall have received opinions, dated the Amendment 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 counsel to the Loan Parties and (iii) Federal Energy Regulatory Commission counsel to the Loan Parties. Each such opinion shall be in form and substance reasonably satisfactory to the Administrative Agent; (e) The representations and warranties of the Borrower as set forth in the Credit Agreement and each Loan Party as set forth in each of the Loan Documents to which such Loan Party is a party, shall be true and correct as of the Amendment Effective Date after giving effect to the amendments contemplated hereby (unless stated to be given as of an earlier date, in which case such 6 representation and warranty shall be true and correct only as of such earlier date); and (f) As of the Amendment Effective Date, no Default shall have occurred and be continuing. Section 4. MISCELLANEOUS. Except as expressly amended hereby, all of the terms and provisions of the Credit Agreement are and shall remain in full force and effect. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers as of the day and year first above written. EDISON MISSION MIDWEST HOLDINGS CO. By: /s/ John P. Finneran, Jr. -------------------------------- Name: John P. Finneran, Jr. Title: Vice President Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: General Counsel Telecopier No.: (949) 752-1420 THE CHASE MANHATTAN BANK, as Administrative Agent and as Lender By: /s/ Thomas L. Casey -------------------------------- Name: Thomas L. Casey Title: Vice President Address for Notices: Tom Casey 270 Park Avenue New York, New York 10017 With a copy to : Loan & Agency Services Group The Chase Manhattan Bank 1 Chase Manhattan Plaza New York, New York 10081 Attention: Janet Belden 8 CITICORP USA, INC., as Lender By: /s/ Cecilia Leyden -------------------------------- Name: Cecilia Leyden Title: Vice President Address for Notices: 399 Park Avenue 4th Floor New York, New York 10043 Attention: David Goldenberg Telecopier No.: SOCIETE GENERALE, as Lender By: /s/ David Bird -------------------------------- Name: David Bird Title: Vice President Address for Notices: 1221 Avenue of the Americas 11th Floor New York, New York 10020 Attention: Donna Reynolds/Debbie Napoli Telecopier No.: 9 WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch, as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 1211 Avenue of the Americas 25th Floor New York, New York 10036-8701 Attention: Jonathan Berman/Matt Wilson Telecopier No.: BANK OF MONTREAL, as Lender By: /s/ Cahal B. Carmody -------------------------------- Name: Cahal B. Carmody Title: Director Address for Notices: 700 Louisiana Suite 4400 Houston, TX 77002 Attention: Cahal Carmody Telecopier No.: 10 FORTIS CAPITAL CORP. (FORMERLY MEESPIERSON CAPITAL CORP.,) as Lender By: /s/ Christopher McCall -------------------------------- Name: Christopher McCall Title: Assistant Vice President By: /s/ C. Purton -------------------------------- Name: C. Purton Title: Managing Director Address for Notices: 3 Stamford Plaza 301 Tresser Boulevard 9th Floor Stamford, CT 06901-3239 Attention: Marlene Ellis Telecopier No.: THE ROYAL BANK OF SCOTLAND PLC, as Lender By: -------------------------------- Name: Title: Address for Notices: 88 Pine Street Wall Street Plaza 26th Floor New York, New York 10005 Attention: Jeanne DeQuar Telecopier No.: 11 THE BANK OF NOVA SCOTIA, as Lender By: -------------------------------- Name: Title: Address for Notices: 600 Peachtree Street Suite 2700 Atlanta, GA 30383 Attention: Kathy Clark Telecopier No.: With a copy to : 580 California Street Suite 2100 San Francisco, CA 94101 Attention: John Quick Telecopier No.: BANK OF AMERICA, N.A., as Lender By: -------------------------------- Name: Title: Address for Notices: 101 N. Tryon Street NC1-001-15-04 Charlotte, NC 28255 Attention: Lynne Cole Telecopier No.: 12 ABN AMRO BANK N.V., as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 208 South LaSalle Street Suite 1500 Chicago, IL 60604-1003 Attention: Credit Administration With a copy to: 135 South LaSalle Street Suite 710 Chicago, IL 60603 Attention: David Bryant Telecopier No.: (312) 583-6111 LEHMAN COMMERCIAL PAPER INC., as Lender By: /s/ Michele Swanson -------------------------------- Name: Michele Swanson Title: Authorized Signatory Address for Notices: C/o Bankers Trust Company Corporate Trust & Agency Group Loan Services 4 Albany Street 7th Floor New York, New York 10006 Attention: Jason Yoo Telecopier No.: 13 With a copy to: 3 World Financial Center 10th Floor New York, New York 10285 DRESDNER BANK AG, New York and Grand Cayman Branches, as Lender By: /s/ Michael E. Higgins -------------------------------- Name: Michael E. Higgins Title: Vice President By: /s/ Fred C. Thurston -------------------------------- Name: Fred C. Thurston Title: Assistant Vice President Address for Notices: 75 Wall Street New York, New York 10005-2889 Attention: Annabelle Librojo Telecopier No.: BAYERISCHE LANDESBANK GIROZENTRALE, as Lender By: /s/ C. Stolarski -------------------------------- Name: C. Stolarski Title: Vice President By: /s/ D. Rieg -------------------------------- Name: D. Rieg Title: First Vice President 14 Address for Notices: 560 Lexington Avenue New York, New York 10094 Attention: Patricia Sanchez Telecopier No.: BARCLAYS BANK PLC, as Lender By: /s/ Nicholas A. Bell -------------------------------- Name: Nicholas A. Bell Title: Director Lease Transaction Management Address for Notices: 222 Broadway New York, New York 10038 Attention: Marsha Hamlette Telecopier No.: NATIONAL WESTMINSTER BANK Plc, New York Branch as Lender By: /s/ D.M. Walton -------------------------------- Name: D.M. Walton Title: Manager NATIONAL WESTMINSTER BANK Plc, Nassau Branch as Lender By: /s/ D.M. Walton -------------------------------- Name: D.M. Walton Title: Manager 15 Address for Notices: 65 East 55th Street New York, New York 10022 Attention: Sattie Chinapen UNION BANK OF CALIFORNIA, N.A., as Lender By: /s/ Dennis G. Blank -------------------------------- Name: Dennis G. Blank Title: Vice President Address for Notices: Commercial Loan Operations 1980 Saturn Street Monterey Park, CA 91755 Attention: Ruby Gonzales Telecopier No.: BANK ONE, NA (Chicago Branch), as Lender By: /s/ Jane A. Bek -------------------------------- Name: Jane A. Bek Title: Vice President Address for Notices: 1 Bank One Plaza Suite 0634 Chicago, IL 60670 Attention: Claudia Kich Telecopier No.: 16 TORONTO DOMINION (TEXAS) INC., as Lender By: -------------------------------- Name: Title: Address for Notices: 909 Fannin Street 17th Floor Houston, TX 77010 Attention: Lynn Chasin Telecopier No.: BANQUE NATIONALE DE PARIS, as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: Treasury Department 180 Montgomery Street San Francisco, CA 94101 Attention: Don Hart Telecopier No.: With a copy to: 725 S. Figueroa Street Suite 2090 Los Angeles, CA 90017 Attention: James Culhane Telecopier No.: 17 COMMERZBANK AKTIENGESELLSCHAFT, New York Branch, as Lender By: /s/ Christian Jagenberg -------------------------------- Name: Christian Jagenberg Title: SVP and Manager By: /s/ Steven F. Larsen -------------------------------- Name: Steven F. Larsen Title: Vice President Address for Notices: 2 World Financial Center New York, New York 10281-1050 Attention: Christine Hunermund Telecopier No.: SANPAOLO IMI S.p.A., as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 245 Park Avenue 35th Floor New York, New York 10167 Attention: Gerardo Suarez/John Ferrante Telecopier No.: 18 CREDIT LOCAL DE FRANCE, New York Agency as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 450 Park Avenue New York, New York 10022 Attention: Aida Slabotzky Telecopier No.: THE FUJI BANK, LIMITED, as Lender By: -------------------------------- Name: Title: Address for Notices: Two World Trade Center 79th Floor New York, New York 10048 Attention: Tina Catapano/Betty Ali Telecopier No.: 19 KBC BANK N.V., as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 125 West 55th Street 10th Floor New York, New York 10019 Attention: Michael Curran Telecopier No.: CREDIT LYONNAIS, New York Branch as Lender By: -------------------------------- Name: Title: Address for Notices: 1301 Avenue of the Americas New York, New York 10019 Attention: Justine Ventrelli Telecopier No.: 20 MB FINSTRUTTURE, S.p.A. as Lender By: /s/ Mauro Maia -------------------------------- Name: Mauro Maia Title: Head of Project Finance Department By: /s/ Giulio Rolandiano -------------------------------- Name: Giulio Rolandiano Title: Address for Notices: Via Filodrammatici 10 Milano, Italy 20121 Attention: Simonpietro Felice Telecopier No.: ABBEY NATIONAL TREASURY SERVICES plc, as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 26-28 Dorset Square London, NW1 6QC United Kingdom Attention: Sue Hawkins Telecopier No.: 21 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED, as Lender By: -------------------------------- Name: Title: Address for Notices: 1177 Avenue of the Americas New York, New York 10036-2798 Attention: Tessie Amante/Doreen Klingenbeck Telecopier No.: CIBC INC., as Lender By: /s/ M. Sanjeeva Senanayake -------------------------------- Name: M. Sanjeeva Senanayake Title: Executive Director CIBC World Markets Corp. As Agent Address for Notices: Two Paces West 2727 Paces Ferry Raod Suite 1200 Atlanta, GA 30309 Attention: Beverly Bowman/Miriam McCart Telecopier No.: 22 NORDDEUTSCHE LANDESBANK GIROZENTRALE New York/Grand Cayman Islands Branches, as Lender By: /s/ Bruno J-M. Mejean -------------------------------- Name: Bruno J-M. Mejean Title: Senior Vice President By: /s/ Stephanie Finnen -------------------------------- Name: Stephanie Finnen Title: VP Address for Notices: 1114 Avenue of the Americas New York, New York 10036 Attention: Stefanie Scholz Telecopier No.: THE INDUSTRIAL BANK OF JAPAN, LIMITED, as Lender By: /s/ Michael C. Jones -------------------------------- Name: Michael C. Jones Title: Vice President Address for Notices: 1251 Avenue of the Americas New York, New York 10020-1104 Attention: Richard Emmich Telecopier No.: 23 NATIONAL AUSTRALIA BANK LIMITED, (A.C.N. 004044937) as Lender By: /s/ Frank J. Campiglia -------------------------------- Name: Frank J. Campiglia Title: Vice President Address for Notices: 200 Park Avenue 34th Floor New York, New York 10166 Attention: Lidia Saniuk/Geraldine Harper Telecopier No.: BAYERISCHE HYPO-UND VEREINSBANK AG, New York Branch, as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 150 East 42nd Street New York, New York 10017 Attention: Arelis Cepeda Telecopier No.: 24 BANK HAPOALIM B.M., as Lender By: /s/ James P. Surless -------------------------------- Name: James P. Surless Title: Vice President By: /s/ Laura Anne Raffa -------------------------------- Name: Laura Anne Raffa Title: First Vice President & Corporate Manager Address for Notices: 1177 Avenue of the Americas New York, New York 10036 Attention: Donna Gindoff/Ivelis Cruz Telecopier No.: COBANK, ACB, as Lender By: -------------------------------- Name: Title: Address for Notices: 5500 South Quebec Street Englewood, CO 80111 Attention: Ryan Spearman Telecopier No.: 25 BANKGESELLSCHAFT BERLIN AG, London Branch as Lender By: /s/ H. Van Wyk -------------------------------- Name: H. Van Wyk Title: Director By: /s/ Philip J. Nias -------------------------------- Name: Philip J. Nias Title: Director Address for Notices: 1 Crown Court Cheapside London E2C2V 6LR England Attention: Penny Neville-Park/ Collette Hayden Telecopier No.: NATEXIS BANQUE, as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 645 Fifth Avenue 20th Floor New York, New York 10022 Attention: Endina Barletta Telecopier No.: 26 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE, as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 4 Rue Gaillon F-75002 Paris France Attention: Annick Merard Telecopier No.: MELLON BANK, N.A., as Lender By: -------------------------------- Name: Title: Address for Notices: Three Mellon Bank Center Rom 1203 Pittsburgh, PA 15259-0003 Attention: Loan Administration Dept. Telecopier No.: 27 CHANG HWA COMMERCIAL BANK, LTD., as Lender By: -------------------------------- Name: Title: Address for Notices: 333 South Grand Avenue Suite 600 Los Angeles, CA 90071 Attention: Jean Luu Telecopier No.: BANK OF CHINA, NEW YORK, as Lender By: -------------------------------- Name: Title: Address for Notices: 410 Madison Avenue New York, New York 10017 Attention: Kevin Cheung Telecopier No.: 28 ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG, New York Branch as Lender By: /s/ Bryan J. Lynch -------------------------------- Name: Bryan J. Lynch Title: First Vice President By: /s/ Patrick W. Kunkel -------------------------------- Name: Patrick W. Kunkel Title: Assistant Vice President Erste Bank New York Branch Address for Notices: 280 Park Avenue, West Building New York, NY 10017 Attention: Patrick Kunkel Telecopier No.: 29 EX-10.108-3 61 a2031364zex-10_1083.txt EXHIBIT 10.108.3 Exhibit 10.108.3 EXECUTION COUNTERPART AMENDMENT THREE AMENDMENT THREE (this "AMENDMENT") dated as of August 17, 2000 by and among EDISON MISSION MIDWEST HOLDINGS CO. (the "BORROWER"), THE CHASE MANHATTAN BANK as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT") and each of certain commercial lending institutions party hereto. WHEREAS, the Borrower, the Administrative Agent and certain commercial lending institutions party thereto (the "LENDERS") entered into a Credit Agreement dated as of December 15, 1999 (as heretofore amended, modified and supplemented, the "CREDIT AGREEMENT"); WHEREAS, the Borrower desires to enter into the Powerton/Joliet Lease Transaction; WHEREAS, the Lenders are willing to permit the Borrower to enter into the Powerton/Joliet Lease Transaction on the terms and conditions of this Amendment; WHEREAS, Midwest and ComEd have entered into Amendment No. 1 To The Power Purchase Agreement dated as of December 15, 1999 attached as Exhibit C, (the "AMENDMENT NO.1 TO THE COLLINS PPA") in order to provide gas price protection to Midwest and an adjustment to the maximum power purchase requirement of ComEd in connection with Midwest's sale of energy from the Collins Facility; WHEREAS, the consent of the Lenders is a condition to the execution and delivery of the Amendment No. 1 to the Collins PPA, the Borrower has requested and the Lenders party hereto consent to Midwest's execution and delivery of the Amendment No.1 to the Collins PPA; ACCORDINGLY, the parties hereto agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment, terms defined in the Credit Agreement are used herein (and in the introductions and recitals hereto) as defined therein. Section 2. AMENDMENT TO THE CREDIT AGREEMENT. Subject to the satisfaction of the conditions precedents specified in Section 5 below, but effective as of the Amendment Effective Date, the Credit Agreement shall be amended as follows: (a) SECTION 1.1 of the Credit Agreement shall be amended by adding the following definitions: ""ComEd JOLIET LEASE CONSENT I" means the Consent to Sale of Assets between Midwest, ComEd and Joliet Trust I referred to in the Joliet Lease Operative Documents. "ComEd JOLIET LEASE CONSENT II" means the Consent to Sale of Assets between Midwest, ComEd and Joliet Trust II referred to in the Joliet Lease Operative Documents. "ComEd POWERTON LEASE CONSENT I" means the Consent to Sale of Assets between Midwest, ComEd and Powerton Trust I referred to in the Powerton Lease Operative Documents. "ComEd POWERTON LEASE CONSENT II" means the Consent to Sale of Assets between Midwest, ComEd and Powerton Trust II referred to in the Powerton Lease Operative Documents. -2- "ComEd POWERTON/JOLIET LEASE CONSENTS" means, collectively, ComEd Joliet Lease Consent I, ComEd Joliet Lease Consent II, ComEd Powerton Lease Consent I and ComEd Powerton Lease Consent II. "JOLIET EQUITY FINANCING PARTIES I" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each as defined in the Joliet Lease Participation Agreement (T1)). "JOLIET EQUITY FINANCING PARTIES II" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each as defined in the Joliet Lease Participation Agreement (T2)). "JOLIET FACILITY" means the Joliet Station, Units 7 and 8, 1044 megawatts of the 1358 megawatt coal-fired electric generating facility and certain related assets located in Will County, Illinois and more fully described in Exhibit B to each of Joliet Leases. "JOLIET GUARANTEE (T1)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of Joliet Trust I that, among other things, guarantees the payment by Midwest of all Joliet Lease Liabilities (T1) payable to Joliet Trust I. "JOLIET GUARANTEE (T2)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of Joliet Trust II that, among other things, guarantees the payment by Midwest of all Joliet Lease Liabilities (T2) payable to Joliet Trust II. "JOLIET GUARANTEE (T1: EQUITY FINANCING PARTIES)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of the Joliet Equity Financing Parties I that, among other things, guarantees the payment by Midwest of certain Joliet Lease Liabilities (T2) payable to Joliet Equity Financing Parties I. "JOLIET GUARANTEE (T2: EQUITY FINANCING PARTIES)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of the Joliet Equity Financing Parties II that, among other things, guarantees the payment by Midwest of certain Joliet Lease Liabilities (T2) payable to Joliet Equity Financing Parties II. "JOLIET GUARANTEES" means, collectively, the Joliet Guarantee (T1), the Joliet Guarantee (T2), the Joliet Guarantee (T1: Equity Financing Parties), the Joliet Guarantee (T2: Equity Financing Parties), the Joliet Reimbursement Agreement (T1) and the Joliet Reimbursement Agreement (T2). "JOLIET INTERCOMPANY NOTE PLEDGE AGREEMENT (T1)" means the Pledge Agreement (T1) dated as of August 17, 2000 between Midwest and the Holdings Collateral Agent relating to the pledge of the Joliet Lease Intercompany Note (T1). "JOLIET INTERCOMPANY NOTE PLEDGE AGREEMENT (T2)" means the Pledge Agreement (T2) dated as of August 17, 2000 between Midwest and the Holdings Collateral Agent relating to the pledge of the Joliet Lease Intercompany Note (T2). "JOLIET LEASE (T1)" means the Facility Lease Agreement (T1) dated as of August 17, 2000 between Midwest and Joliet Trust I. "JOLIET LEASE (T2)" means the Facility Lease Agreement (T2) dated as of August 17, 2000 between Midwest and Joliet Trust II. -3- "JOLIET LEASE INTERCOMPANY NOTE (T1)" means the EME Note (as defined in the Joliet Lease Participation Agreement (T1)) dated the Closing Date (as defined in the Joliet Lease Participation Agreement (T1)) evidencing the loan by Midwest to Edison Mission Energy of the proceeds of the Joliet Lease Transaction (T1). "JOLIET LEASE INTERCOMPANY NOTE (T2)" means the EME Note (as defined in the Joliet Lease Participation Agreement (T2)) dated the Closing Date (as defined in the Joliet Lease Participation Agreement (T2)) evidencing the loan by Midwest to Edison Mission Energy of the proceeds of the Joliet Lease Transaction (T2). "JOLIET LEASE INTERCOMPANY NOTES" means, collectively, the Joliet Lease Intercompany Note (T1) and the Joliet Intercompany Note (T2). "JOLIET LEASE LIABILITIES" means, collectively, the Joliet Lease Liabilities (T1) and the Joliet Lease Liabilities (T2). "JOLIET LEASE LIABILITIES (T1)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Joliet Lease (T1) or the other Joliet Lease Operative Documents (T1). "JOLIET LEASE LIABILITIES (T2)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Joliet Leases (T2) or the other Joliet Lease Operative Documents (T2). "JOLIET LEASE OPERATIVE DOCUMENTS" means, collectively, the Joliet Lease Operative Documents (T1) and the Joliet Lease Operative Documents (T2). "JOLIET LEASE OPERATIVE DOCUMENTS (T1)" means, collectively, the Operative Documents as defined in the Joliet Lease Participation Agreement (T1). "JOLIET LEASE OPERATIVE DOCUMENTS (T2)" means, collectively, the Operative Documents as defined in the Joliet Lease Participation Agreement (T2). "JOLIET LEASE PARTICIPATION AGREEMENT (T1)" means the Participation Agreement (T1) dated as of August 17, 2000 by and among Midwest, Edison Mission Energy, Joliet Trust I, Wilmington Trust Company, Joliet Generation I, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. "JOLIET LEASE PARTICIPATION AGREEMENT (T2)" means the Participation Agreement (T2) dated as of August 17, 2000 by and among Midwest, Edison Mission Energy, Joliet Trust II, Wilmington Trust Company, Joliet Generation II, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. "JOLIET LEASE PARTICIPATION AGREEMENTS" means, collectively, the Joliet Lease Participation Agreement (T1) and the Joliet Lease Participation Agreement (T2). "JOLIET LEASE TRANSACTION (T1)" means the transactions pursuant to the Joliet Lease Participation Agreement (T1) and the Joliet Lease Operative Documents (T1) whereby Midwest sells a 63.6% undivided interest in the Joliet Facility to Joliet Trust I and Joliet Trust I leases such undivided interest to Midwest pursuant to the Joliet Lease (T1). "JOLIET LEASE TRANSACTION (T2)" means the transactions pursuant to the Joliet Lease Participation Agreement (T2) and the Joliet Lease Operative Documents (T2) whereby Midwest sells a 36.4% undivided interest in the Joliet Facility to Joliet Trust II and Joliet Trust II leases such undivided interest to Midwest pursuant to the Joliet Lease (T2). "JOLIET LEASE TRANSACTION" means, collectively, the Joliet Least Transaction (T1) and the Joliet Lease Transaction (T2). -4- "JOLIET LEASE TRUSTS" means, collectively, Joliet Trust I and Joliet Trust II. "JOLIET LEASES" means, collectively, the Joliet Lease (T1) and Joliet Lease (T2). "JOLIET REIMBURSEMENT AGREEMENT (T1)" means the Reimbursement Agreement (T1) dated as of August 17, 2000 between Edison Mission Energy and Midwest. "JOLIET REIMBURSEMENT AGREEMENT (T2)" means the Reimbursement Agreement (T2) dated as of August 17, 2000 between Edison Mission Energy and Midwest. "JOLIET SUBORDINATION AGREEMENT (T1)" means the Subordination Agreement dated as of August 17, 2000 between Joliet Trust I, the Owner Participant (as defined in the Joliet Participation Agreement (T1)), the Lease Indenture Trustee (as defined in the Joliet Participation Agreement (T1)) and the Holdings Collateral Agent. "JOLIET SUBORDINATION AGREEMENT (T2)" means the Subordination Agreement dated as of August 17, 2000 between Joliet Trust II, the Owner Participant (as defined in the Joliet Participation Agreement (T2)), the Lease Indenture Trustee (as defined in the Joliet Participation Agreement (T2)) and the Holdings Collateral Agent. "JOLIET TRUST I" means Joliet Trust I, a Delaware business trust. "JOLIET TRUST II" means Joliet Trust II, a Delaware business trust. "POWERTON EQUITY FINANCING PARTIES I" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each as defined in the Powerton Lease Participation Agreement (T1)). "POWERTON EQUITY FINANCING PARTIES II" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each as defined in the Powerton Lease Participation Agreement (T2)). "POWERTON FACILITY" means the Powerton Station, 1,538 Megawatt Coal Fired Electric Generating Plant and certain related assets located in Tazewell County, Illinois and more fully described in Exhibit B to each of Powerton Leases. "POWERTON GUARANTEE (T1)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of Powerton Trust I that, among other things, guarantees the payment by Midwest of all Powerton Lease Liabilities (T1) payable to Powerton Trust I. "POWERTON GUARANTEE (T2)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of Powerton Trust II that, among other things, guarantees the payment by Midwest of all Powerton Lease Liabilities (T2) payable to Powerton Trust II. "POWERTON GUARANTEE (T1: EQUITY FINANCING PARTIES)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of the Powerton Equity Financing Parties I that, among other things, guarantees the payment by Midwest of certain Powerton Lease Liabilities (T2) payable to Powerton Equity Financing Parties I. "POWERTON GUARANTEE (T2: EQUITY FINANCING PARTIES)" means the Guaranty Agreement dated as of August 17, 2000 made by Edison Mission Energy in favor of the Powerton Equity Financing Parties II that, among other things, guarantees the payment by Midwest of certain Powerton Lease Liabilities (T2) payable to Powerton Equity Financing Parties II. -5- "POWERTON GUARANTEES" means, collectively, the Powerton Guarantee (T1), the Powerton Guarantee (T2), the Powerton Guarantee (T1: Equity Financing Parties), the Powerton Guarantee (T2: Equity Financing Parties), the Powerton Reimbursement Agreement (T1) and the Powerton Reimbursement Agreement (T2). "POWERTON INTERCOMPANY NOTE PLEDGE AGREEMENT (T1)" means the Pledge Agreement (T1) dated as of August 17, 2000 among Midwest and the Holdings Collateral Agent relating to the pledge of the Powerton Lease Intercompany Note (T1). "POWERTON INTERCOMPANY NOTE PLEDGE AGREEMENT (T2)" means the Pledge Agreement (T2) dated as of August 17, 2000 among Midwest and the Holdings Collateral Agent relating to the pledge of the Powerton Lease Intercompany Note (T2) . "POWERTON LEASE (T1)" means the Facility Lease Agreement (T1) dated as of August 17, 2000 between Midwest and Powerton Trust I. "POWERTON LEASE (T2)" means the Facility Lease Agreement (T2) dated as of August 17, 2000 between Midwest and Powerton Trust II. "POWERTON LEASE INTERCOMPANY NOTE (T1)" means the EME Note (as defined in the Powerton Lease Participation Agreement (T1)) dated the Closing Date (as defined in the Powerton Lease Participation Agreement (T1)) evidencing the loan by Midwest to Edison Mission Energy of the proceeds of the Powerton Lease Transaction (T1). "POWERTON LEASE INTERCOMPANY NOTE (T2)" means the EME Note (as defined in the Powerton Lease Participation Agreement (T2)) dated the Closing Date (as defined in the Powerton Lease Participation Agreement (T2)) evidencing the loan by Midwest to Edison Mission Energy of the proceeds of the Powerton Lease Transaction (T2). "POWERTON LEASE INTERCOMPANY NOTES" means, collectively, the Powerton Lease Intercompany Note (T1) and the Powerton Intercompany Note (T2). "POWERTON LEASE LIABILITIES" means, collectively, the Powerton Lease Liabilities (T1) and the Powerton Lease Liabilities (T2). "POWERTON LEASE LIABILITIES (T1)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Powerton Lease (T1) or the other Powerton Lease Operative Documents (T1). "POWERTON LEASE LIABILITIES (T2)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that Midwest is obligated to pay under the Powerton Leases (T2) or the other Powerton Lease Operative Documents (T2). "POWERTON LEASE OPERATIVE DOCUMENTS" means, collectively, the Powerton Lease Operative Documents (T1) and the Powerton Lease Operative Documents (T2). "POWERTON LEASE OPERATIVE DOCUMENTS (T1)" means, collectively, the Operative Documents as defined in the Powerton Lease Participation Agreement (T1). "POWERTON LEASE OPERATIVE DOCUMENTS (T2)" means, collectively, the Operative Documents as defined in the Powerton Lease Participation Agreement (T2). "POWERTON LEASE PARTICIPATION AGREEMENT (T1)" means the Participation Agreement (T1) dated as of August 17, 2000 by and among Midwest, Edison Mission -6- Energy, Powerton Trust I, Wilmington Trust Company, Powerton Generation I, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. "POWERTON LEASE PARTICIPATION AGREEMENT (T2)" means the Participation Agreement (T2) dated as of August 17, 2000 by and among Midwest, Edison Mission Energy, Powerton Trust II, Wilmington Trust Company, Powerton Generation II, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein. "POWERTON LEASE PARTICIPATION AGREEMENTS" means, collectively, the Powerton Lease Participation Agreement (T1) and the Powerton Lease Participation Agreement (T2). "POWERTON LEASE TRANSACTION (T1)" means the transactions pursuant to the Powerton Lease Participation Agreement (T1) and the Powerton Lease Operative Documents (T1) whereby Midwest sells a 63.6% undivided interest in the Powerton Facility to Powerton Trust I and Powerton Trust I leases such undivided interest to Midwest pursuant to the Powerton Lease (T1). "POWERTON LEASE TRANSACTION (T2)" means the transactions pursuant to the Powerton Lease Participation Agreement (T2) and the Powerton Lease Operative Documents (T2) whereby Midwest sells a 36.4% undivided interest in the Powerton Facility to Powerton Trust II and Powerton Trust II leases such undivided interest to Midwest pursuant to the Powerton Lease (T2). "POWERTON LEASE TRANSACTION" means, collectively, the Powerton Least Transaction (T1) and the Powerton Lease Transaction (T2). "POWERTON LEASE TRUSTS" means, collectively, Powerton Trust I and Powerton Trust II. "POWERTON LEASES" means, collectively, the Powerton Lease (T1) and Powerton Lease (T2). "POWERTON REIMBURSEMENT AGREEMENT (T1)" means the Reimbursement Agreement (T1) dated as of August 17, 2000 between Edison Mission Energy and Midwest. "POWERTON REIMBURSEMENT AGREEMENT (T2)" means the Reimbursement Agreement (T2) dated as of August 17, 2000 between Edison Mission Energy and Midwest. "POWERTON SUBORDINATION AGREEMENT (T1)" means the Subordination Agreement dated as of August 17, 2000 between Powerton Trust I, the Owner Participant (as defined in the Powerton Participation Agreement (T1)), the Lease Indenture Trustee (as defined in the Powerton Participation Agreement (T1)) and the Holdings Collateral Agent. "POWERTON SUBORDINATION AGREEMENT (T2)" means the Subordination Agreement dated as of August 17, 2000 between Powerton Trust II, the Owner Participant (as defined in the Powerton Participation Agreement (T2)), the Lease Indenture Trustee (as defined in the Powerton Participation Agreement (T2)) and the Holdings Collateral Agent. "POWERTON TRUST I" means Powerton Trust I, a Delaware business trust. "POWERTON TRUST II" means Powerton Trust II, a Delaware business trust. "POWERTON/JOLIET INTERCOMPANY NOTE PLEDGE AGREEMENTS" means, collectively, the Powerton Intercompany Note Pledge Agreement (T1), the Powerton -7- Intercompany Note Pledge Agreement (T2), the Joliet Intercompany Note Pledge Agreement (T1) and the Joliet Intercompany Note Pledge Agreement (T2). "POWERTON/JOLIET LEASE ASSETS" means, collectively, the Powerton Facility and the Joliet Facility. "POWERTON/JOLIET LEASE GUARANTEES" means, collectively, the Powerton Guarantees and the Joliet Guarantees. "POWERTON/JOLIET LEASE INTERCOMPANY NOTES" means, collectively, the Powerton Lease Intercompany Notes and the Joliet Lease Intercompany Notes. "POWERTON/JOLIET LEASE INTERCOMPANY NOTE PAYMENTS" mean the payments by Edison Mission Energy to Midwest under or in respect of the Powerton/Joliet Lease Intercompany Notes. "POWERTON/JOLIET LEASE LIABILITIES" means, collectively, the Powerton Lease Liabilities and the Joliet Lease Liabilities. "POWERTON/JOLIET LEASE OPERATIVE DOCUMENTS" means, collectively, the Powerton Lease Operative Documents and the Joliet Lease Operative Documents. "POWERTON/JOLIET LEASE PARTICIPATION AGREEMENTS" means, collectively, the Powerton Lease Participation Agreement (T1), Powerton Lease Participation Agreement (T2), Joliet Lease Participation Agreement (T1) and Joliet Lease Participation Agreement (T2). "POWERTON/JOLIET LEASE TRANSACTION" means, collectively, the Powerton Lease Transaction and the Joliet Lease Transaction. "POWERTON/JOLIET LEASES" means, collectively, Powerton Leases and Joliet Leases. "POWERTON/JOLIET SUBORDINATION AGREEMENTS" means, collectively, the Powerton Subordination Agreement (T1), the Powerton Subordination Agreement (T2), the Joliet Subordination Agreement (T1) and the Joliet Subordination Agreement (T2). "POWERTON/JOLIET LEASE TRUSTS" means, collectively, the Powerton Lease Trusts and the Joliet Lease Trusts.". (b) SECTION 1.1 of the Credit Agreement shall be further amended by deleting the definitions of "CASHFLOW AVAILABLE FOR FIXED CHARGES", "DEBT TO CAPITAL RATIO", "FIXED CHARGES", "OPERATING EXPENSES" and "SECURITY DOCUMENTS" in their entirety and replacing them with the following definitions: ""CASHFLOW AVAILABLE FOR FIXED CHARGES" means, in respect of any period, the excess, if any, of Revenues (excluding, without duplication, (i) proceeds of any permitted asset sale, (ii) amounts available in the Cashflow Recapture Fund, (iii) Synthetic Lease Intercompany Note Payments and (iv) Powerton/Joliet Intercompany Note Payments) during such period OVER Operating Expenses during such period. "DEBT TO CAPITAL RATIO" means, with respect to the Borrower and its Consolidated Subsidiaries, the ratio as of the end of the last Fiscal Quarter for which financial statements referred to in SECTION 8.1.1 are available of (i) the aggregate principal amount of Indebtedness of the Borrower and its Consolidated Subsidiaries (other than Indebtedness of the Borrower incurred pursuant to SECTION 8.2.1(a)(iii), SECTION 8.2.1(a)(iv) and SECTION 8.2.1(i)) then outstanding to (ii) Total Capitalization (excluding, to the extent included, the Synthetic Lease Intercompany Note, payments by Edison Mission Energy pursuant to the Synthetic Lease Guarantee, the Powerton/Joliet -8- Intercompany Notes and payments by Edison Mission Energy pursuant to the Powerton/Joliet Guarantees). "FIXED CHARGES" 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, including (A) all capitalized interest and (B) the interest portion of any deferred payment obligation, (ii) amounts due and payable under SECTIONS 3.3.1 and 3.3.2 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, (iv) the interest portion of any deferred payment obligation due and payable during such period, (v) the aggregate amount of the Lease Obligations due and payable during such period, and (vi) all other amounts due and payable by the Loan Parties with respect to Indebtedness (other than Designated Lease Liabilities, Synthetic Lease Liabilities and Powerton/Joliet Lease Liabilities) permitted under SECTION 8.2.1 during such period. "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, Necessary Capital Expenditures and all other fees and expenses necessary for the continued operation and maintenance of the Generating Assets and the conduct of the business of the Loan Parties. Operating Expenses shall exclude (to the extent included) Lease Obligations, Synthetic Lease Liabilities (other than payments of Synthetic Lease Environmental Indemnity Obligations) and Powerton/Joliet Lease Liabilities and shall include (to the extent excluded) Designated Lease Liabilities (other than Lease Obligations). "SECURITY DOCUMENTS" means (i) the Intercreditor Agreement, (ii) the Midwest Guarantee, (iii) each Pledge Agreement, (iv) the Powerton/Joliet Intercompany Note Pledge Agreements, (v) the Powerton/Joliet Subordination Agreements and (vi) any other agreement or instrument hereafter entered into by the Borrower or any other Person which, directly or indirectly, guarantees or secures payment of the indebtedness evidenced by the Notes or payment or performance of any other Obligation.". (c) SECTION 8.1 of the Credit Agreement shall be amended by adding SECTION 8.1.13 as follows: "Section 8.1.13. POWERTON/JOLIET INTERCOMPANY NOTES. As soon as possible after the end of each Fiscal Quarter, the Borrower shall provide to the Administrative Agent an Officer's Certificate stating the outstanding principal amounts of each of the Powerton/Joliet Intercompany Notes and a statement of transactions reconciling such amounts to the previous Fiscal Quarter end.". (d) SECTION 8.2.1 of the Credit Agreement shall be amended by deleting SECTION 8.2.1(a) of the Credit Agreement and replacing it in its entirety with the following: "(a)(i) Capitalized Lease Liabilities and Operating Lease Liabilities outstanding (or anticipated to be outstanding) on the Effective Date and set forth on -9- SCHEDULE 8.2.1(a), (ii) Capitalized Lease Liabilities and Operating Lease Liabilities entered into after the Effective Date in the ordinary course of business not to exceed at any time an aggregate principal amount equal to $50,000,000, (iii) Synthetic Lease Liabilities and (iv) Powerton/Joliet Lease Liabilities;". (e) SECTION 8.2.2 of the Credit Agreement shall be amended by deleting SECTION 8.2.2(m) of the Credit Agreement and replacing it in its entirety with the following: "(m) Liens created pursuant to the Synthetic Lease Basic Documents, Powerton/Joliet Lease Operative Documents and the Powerton/Joliet Intercompany Note Pledge Agreement.". (f) SECTION 8.2.4 of the Credit Agreement shall be amended by deleting SECTION 8.2.4(iv) and SECTION 8.2.4(v) of the Credit Agreement and replacing them in their entirety with the following subsections: "(iv) transfer certain railcars or rights to railcars as part of the Transco Transaction, (v) sell the Synthetic Lease Assets to Synthetic Lease Trust pursuant to the Synthetic Lease Basic Documents and (vi) sell the Powerton/Joliet Assets and lease the associated Ground Interests (as defined in the Powerton/Joliet Operative Documents) to the Powerton/Joliet Lease Trusts pursuant to the Powerton/Joliet Lease Operative Documents; PROVIDED, FURTHER, that any Asset Disposition pursuant to CLAUSES (i), (ii), (iii), (iv), (v) and (vi) 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.". (g) SECTION 8.2.5 of the Credit Agreement shall be amended by deleting SECTION 8.2.5(e) of the Credit Agreement and replacing it in its entirety with the following: "(e) Investments evidenced by the Synthetic Lease Intercompany Note and the Powerton/Joliet Lease Intercompany Notes.". (h) SECTION 8.2.6(a) of the Credit Agreement shall be amended by deleting the last sentence and replacing it with the following sentence: "Notwithstanding the foregoing, the Synthetic Lease Transaction, the transactions contemplated by the Synthetic Lease Basic Documents, the Powerton/Joliet Lease Transaction and the transactions contemplated by the Powerton/Joliet Lease Operative Documents shall be deemed not to be a Transaction with an Affiliate for the purposes of this SECTION 8.2.6.". (i) SECTION 8.2.7 of the Credit Agreement shall be amended by deleting the last sentence and replacing it with the following sentence: "Notwithstanding the foregoing, so long as no Default, Event of Default or Maturity Event shall have occurred and be continuing, the Borrower or any other Loan Party may make a Restricted Payment to Edison Mission Energy on or within 30 days after the date (A) any Powerton/Joliet Lease Intercompany Note Payment is received by Midwest in an amount not exceeding such Powerton/Joliet Lease Intercompany Note Payment (to the extent that the same was not included in any Restricted Payment theretofore made in accordance with this Section 8.2.7 or used to pay Powerton/Joliet Lease Liabilities) and (B) any Synthetic Lease Intercompany Note Payment is received by Midwest in an amount not exceeding such Synthetic Lease Intercompany Note Payment (to the extent that the same was not included in any Restricted Payment theretofore made in accordance with this Section 8.2.7); PROVIDED that, in the event that Midwest pays Incremental -10- Synthetic Lease Environmental Indemnity Payments, the aggregate amount of Restricted Payments payable in accordance with this sentence (but not otherwise in accordance with this Section 8.2.7) shall be reduced by a like amount.". (j) SECTION 8.2 of the Credit Agreement shall be amended by adding SECTION 8.2.13 to the Credit Agreement as follows: "Section 8.2.13 POWERTON/JOLIET LEASE OPERATIVE DOCUMENTS. The Borrower shall not, and shall not permit any other Loan Party to agree or consent to any termination, amendment, modification or waiver of (a) Section 18.19 of each of the Powerton/Joliet Lease Participation Agreements, (b) the definition of "Free Cashflow" set forth in the Powerton/Joliet Operative Documents, (c) the Powerton/Joliet Lease Intercompany Notes, or (d) or any other provision of the Powerton/Joliet Lease Operative Documents that increases or is reasonably likely to increase the liability, or the obligations, of Midwest (or decreases or is reasonably likely to decrease the liability, or the obligations, of Edison Mission Energy) with respect to the Powerton/Joliet Lease Operative Documents in any material respect.". (k) SECTION 9.1.5 of the Credit Agreement shall be amended by deleting the following parenthetical, "(OTHER THAN Indebtedness described in SECTION 9.1.1 and Synthetic Lease Liabilities)" on the third line of Section 9.1.5 of the Credit Agreement and replacing it with the following parenthetical: "(OTHER THAN Indebtedness described in SECTION 9.1.1, Synthetic Lease Liabilities and Powerton/Joliet Lease Liabilities)". (l) SECTION 9.1 of the Credit Agreement shall be amended by adding SECTION 9.1.14, SECTION 9.1.15 and SECTION 9.1.16 to the Credit Agreement as follows: "Section 9.1.14 POWERTON/JOLIET LEASES. Any of the Powerton/Joliet Lease Trusts (or the related Lease Indenture Trustee (under, and as defined in the related, Powerton/Joliet Lease Operative Documents) should have commenced to exercise remedies in accordance with Section 17 of each of the Powerton/Joliet Leases to terminate any of the Powerton/Joliet Leases and repossess any of the Powerton/Joliet Lease Assets. Section 9.1.15 EDISON MISSION ENERGY OBLIGATIONS . Edison Mission Energy shall fail to make payment or fail to perform its obligations under any Powerton/Joliet Lease Guarantee or any Powerton/Joliet Lease Intercompany Note within five Business Days after any such payment becomes due in accordance with the terms thereof or hereof. Section 9.1.16 POWERTON/JOLIET DOCUMENTATION. Any of the Powerton/Joliet Lease Guarantees or the Powerton/Joliet Lease Intercompany Notes is declared unenforceable or is terminated, or Edison Mission Energy or any Powerton/Joliet Trust shall assert that any of the Powerton/Joliet Lease Guarantees or the Powerton/Joliet Intercompany Notes to which it is a party shall no longer be in full force and effect.". Section 3. AUTHORIZATION OF ADMINISTRATIVE AGENT. The Lenders party hereto hereby authorize the Administrative Agent to authorize the Holdings Collateral Agent to execute (i) the Powerton/Joliet Intercompany Note Pledge Agreement and (ii) the Powerton/Joliet Subordination Agreements. Section 4. CONSENT. Pursuant to SECTION 8.2.6(b) of the Credit Agreement, the Lenders party hereto hereby consent to the execution and delivery by Midwest and ComEd of Amendment No.1 to the Collins PPA. -11- Section 5. CONDITIONS PRECEDENT. This Amendment shall not become effective until the date (the "AMENDMENT EFFECTIVE DATE") on which each of the following conditions precedent have been satisfied or will be satisfied contemporaneously with this Amendment becoming effective: (a) Delivery to the Administrative Agent of this Amendment duly executed and delivered by the Borrower and the Lenders constituting the Required Lenders; (b) Delivery to the Administrative Agent of the Powerton/Joliet Lease Operative Documents in form and substance satisfactory to the Administrative Agent; (c) All conditions precedent to effectuate the Powerton/Joliet Lease Transaction have been satisfied (including delivery of the ComEd Powerton/Joliet Lease Consents) or waived; (d) Delivery to the Administrative Agent of (i) the Powerton/Joliet Intercompany Note Pledge Agreements and (ii) the Powerton/Joliet Subordination Agreements, each in form and substance satisfactory to the Administrative Agent. (e) Delivery to the Holdings Collateral Agent of each of the Powerton/Joliet Lease Intercompany Notes in pledge under the Powerton/Joliet Intercompany Note Pledge Agreements, each accompanied by a duly executed blank bond power. (f) The Administrative Agent shall have received opinions, dated the Amendment 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 counsel to the Loan Parties, (iii) the special Illinois counsel to the Loan Parties, and (iv) Federal Energy Regulatory Commission counsel to the Loan Parties. Each such opinion shall be in form and substance reasonably satisfactory to the Administrative Agent; (g) The Borrower shall have received written confirmation from S&P and Moody's that after giving effect to the Powerton/Joliet Lease Transaction, no Debt Rating shall fall below the Debt Rating in effect prior to giving effect to the Powerton/Joliet Lease Transaction; (h) The representations and warranties of the Borrower as set forth in the Credit Agreement and each Loan Party as set forth in each of the Loan Documents to which such Loan Party is a party, shall be true and correct as of the Amendment Effective Date after giving effect to the amendments contemplated hereby (unless stated to be given as of an earlier date, in which case such representation and warranty shall be true and correct only as of such earlier date); and (i) As of the Amendment Effective Date, no Default shall have occurred and be continuing. (j) Contemporaneously with this Amendment becoming effective, the Administrative Agent shall have received confirmation that Edison Mission Energy has used the proceeds of the Powerton/Joliet Intercompany Notes to repay in full Indebtedness of Edison Mission Energy (including, without limitation, the repayment in full of its obligations under the Credit Agreement dated as of December 15, 1999 among Edison Mission Energy, the commercial lending institutions party thereto and The Chase Manhattan Bank, as Administrative Agent and the termination of related commitments). Section 6. MISCELLANEOUS. Except as expressly amended hereby, all of the terms and provisions of the Credit Agreement are and shall remain in full force and effect. This -12- Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers as of the day and year first above written. EDISON MISSION MIDWEST HOLDINGS CO. By:/s/ Maria P. Litos ---------------------------------------- Name: Maria P. Litos Title: Vice President and Assistant Secretary Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: General Counsel Telecopier No.: (949) 752-1420 THE CHASE MANHATTAN BANK, as Administrative Agent and as Lender By:/s/ Thomas L. Casey ---------------------------------------- Name: Thomas L. Casey Title: Vice President Address for Notices: Tom Casey 270 Park Avenue New York, New York 10017 With a copy to : Loan & Agency Services Group The Chase Manhattan Bank 1 Chase Manhattan Plaza New York, New York 10081 Attention: Janet Belden CITICORP USA, INC., as Lender By:/s/ Sandip Sen ---------------------------------------- Name: Sandip Sen Title: Managing Director Attorney-In-Fact Address for Notices: 399 Park Avenue 4th Floor New York, New York 10043 Attention: David Goldenberg Telecopier No.: SOCIETE GENERALE, as Lender By:/s/ David Bird ---------------------------------------- Name: David Bird Title: Vice President Address for Notices: 1221 Avenue of the Americas 11th Floor New York, New York 10020 Attention: Donna Reynolds/Debbie Napoli Telecopier No.: WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch, as Lender By:/s/ Jonathan Berman ---------------------------------------- Name: Jonathan Berman Title: Managing Director By:/s/ Cyril Derueloy ---------------------------------------- Name: Cyril Derueloy Title: Manager Address for Notices: 1211 Avenue of the Americas 25th Floor New York, New York 10036-8701 Attention: Jonathan Berman/Matt Wilson Telecopier No.: 2 BANK OF MONTREAL, as Lender By:/s/ Cahal B. Carmody ---------------------------------------- Name: Cahal B. Carmody Title: Director Address for Notices: 700 Louisiana Suite 4400 Houston, TX 77002 Attention: Cahal Carmody Telecopier No.: FORTIS CAPITAL CORP., as Lender By:/s/ Chris McCall ---------------------------------------- Name: Chris McCall Title: Vice President By: /s/ John T. Connors ---------------------------------------- Name: John T. Connors Title: President and Chief Operating Officer Address for Notices: 3 Stamford Plaza 301 Tresser Boulevard 9th Floor Stamford, CT 06901-3239 Attention: Marlene Ellis Telecopier No.: THE ROYAL BANK OF SCOTLAND PLC, as Lender By:/s/ Siobhan Smyth ---------------------------------------- Name: Siobhan Smyth Title: Vice President 3 Address for Notices: 88 Pine Street Wall Street Plaza 26th Floor New York, New York 10005 Attention: Jeanne DeQuar Telecopier No.: THE BANK OF NOVA SCOTIA, as Lender By: ---------------------------------------- Name: Title: Address for Notices: 600 Peachtree Street Suite 2700 Atlanta, GA 30383 Attention: Kathy Clark Telecopier No.: With a copy to : 580 California Street Suite 2100 San Francisco, CA 94101 Attention: John Quick Telecopier No.: BANK OF AMERICA, N.A., as Lender By: ---------------------------------------- Name: Title: Address for Notices: 101 N. Tryon Street NC1-001-15-04 Charlotte, NC 28255 Attention: Lynne Cole Telecopier No.: 4 ABN AMRO BANK N.V., as Lender By:/s/ David B. Bryant ---------------------------------------- Name: David B. Bryant Title: Senior Vice President & Managing Director By:/s/ Gregory Babaya ---------------------------------------- Name: Gregory Babaya Title: Assistant Vice President Address for Notices: 208 South LaSalle Street Suite 1500 Chicago, IL 60604-1003 Attention: Credit Administration With a copy to: 135 South LaSalle Street Suite 710 Chicago, IL 60603 Attention: David Bryant Telecopier No.: (312) 583-6111 LEHMAN COMMERCIAL PAPER INC., as Lender By:/s/ Michele Swanson ---------------------------------------- Name: Michele Swanson Title: Authorized Signatory Address for Notices: c/o Bankers Trust Company Corporate Trust & Agency Group Loan Services 4 Albany Street 7th Floor New York, New York 10006 Attention: Jason Yoo Telecopier No.: With a copy to: 3 World Financial Center 10th Floor New York, New York 10285 5 DRESDNER BANK AG, New York and Grand Cayman Branches, as Lender By:/s/ Michael E. Higgins ---------------------------------------- Name: Michael E. Higgins Title: Vice President By:/s/ Andrew Cullinan ---------------------------------------- Name: Andrew Cullinan Title: Assistant Treasurer Address for Notices: 75 Wall Street New York, New York 10005-2889 Attention: Annabelle Librojo Telecopier No.: BAYERISCHE LANDESBANK GIROZENTRALE, as Lender By:/s/ Thomas von Kistowsky ---------------------------------------- Name: Thomas von Kistowsky Title: Senior Vice President & Branch Manager By: /s/ Cornelia Wintergerst ---------------------------------------- Name: Cornelia Wintergerst Title: Vice President Address for Notices: 560 Lexington Avenue New York, New York 10094 Attention: Patricia Sanchez Telecopier No.: BARCLAYS BANK PLC, as Lender By: ---------------------------------------- Name: Title: 6 Address for Notices: 222 Broadway New York, New York 10038 Attention: Marsha Hamlette Telecopier No.: NATIONAL WESTMINSTER BANK Plc, New York Branch as Lender By: ---------------------------------------- Name: Title: NATIONAL WESTMINSTER BANK Plc, Nassau Branch as Lender By: ---------------------------------------- Name: Title: Address for Notices: 65 East 55th Street New York, New York 10022 Attention: Sattie Chinapen UNION BANK OF CALIFORNIA, N.A., as Lender By:/s/ Dennis G. Blank ---------------------------------------- Name: Dennis G. Blank Title: Vice President Address for Notices: Commercial Loan Operations 1980 Saturn Street Monterey Park, CA 91755 Attention: Ruby Gonzales Telecopier No.: 7 BANK ONE, NA (Chicago Branch), as Lender By:/s/ Jane A. Bek ---------------------------------------- Name: Jane A. Bek Title: Vice President Address for Notices: 1 Bank One Plaza Suite 0634 Chicago, IL 60670 Attention: Claudia Kich Telecopier No.: TORONTO DOMINION (TEXAS) INC., as Lender By:/s/ Lynn Chasin ---------------------------------------- Name: Lynn Chasin Title: Vice President Address for Notices: 909 Fannin Street 17th Floor Houston, TX 77010 Attention: Lynn Chasin Telecopier No.: BANQUE NATIONALE DE PARIS, as Lender By: ---------------------------------------- Name: Title: By: ---------------------------------------- Name: Title: 8 Address for Notices: Treasury Department 180 Montgomery Street San Francisco, CA 94101 Attention: Don Hart Telecopier No.: With a copy to: 725 S. Figueroa Street Suite 2090 Los Angeles, CA 90017 Attention: James Culhane Telecopier No.: COMMERZBANK AG, New York and Cayman Island Branches, as Lender By: ---------------------------------------- Name: Title: By: ---------------------------------------- Name: Title: Address for Notices: 2 World Financial Center New York, New York 10281-1050 Attention: Christine Hunermund Telecopier No.: SANPAOLO IMI S.p.A., as Lender By:/s/ Carlo Persico ---------------------------------------- Name: Carlo Persico Title: Deputy General Manager By:/s/ Robert Wurster ---------------------------------------- Name: Robert Wurster Title: First Vice President 9 Address for Notices: 245 Park Avenue 35th Floor New York, New York 10167 Attention: Gerardo Suarez/John Ferrante Telecopier No.: CREDIT LOCAL DE FRANCE, New York Agency as Lender By: -------------------------------------- Name: Title: By: -------------------------------------- Name: Title: Address for Notices: 450 Park Avenue New York, New York 10022 Attention: Aida Slabotzky Telecopier No.: THE FUJI BANK, LIMITED, as Lender By: /s/ THOMAS W. BOYLAN -------------------------------------- Name: Thomas W. Boylan Title: Vice President & Team Leader Address for Notices: Two World Trade Center 79th Floor New York, New York 10048 Attention: Tina Catapano/Betty Ali Telecopier No.: 10 KBC BANK N.V., as Lender By: /s/ ROBERT SNAUFFER -------------------------------------- Name: Robert Snauffer Title: First Vice President By: /s/ PATRICK A. JANSSENS -------------------------------------- Name: Patrick A. Janssens Title: Vice President Address for Notices: 125 West 55th Street 10th Floor New York, New York 10019 Attention: Michael Curran Telecopier No.: CREDIT LYONNAIS, New York Branch as Lender By: -------------------------------------- Name: Title: Address for Notices: 1301 Avenue of the Americas New York, New York 10019 Attention: Justine Ventrelli Telecopier No.: MB FINSTRUTTURE, S.p.A. as Lender By: -------------------------------------- Name: Title: By: -------------------------------------- Name: Title: 11 Address for Notices: Via Filodrammatici 10 Milano, Italy 20121 Attention: Simonpietro Felice Telecopier No.: ABBEY NATIONAL TREASURY SERVICES plc, as Lender By: -------------------------------------- Name: Title: By: -------------------------------------- Name: Title: Address for Notices: 26-28 Dorset Square London, NW1 6QC United Kingdom Attention: Sue Hawkins Telecopier No.: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED, as Lender By: -------------------------------------- Name: Title: Address for Notices: 1177 Avenue of the Americas New York, New York 10036-2798 Attention: Tessie Amante/Doreen Klingenbeck Telecopier No.: 12 CIBC INC., as Lender By: /s/ JOHN P. BURKE ---------------------------------------- Name: John P. Burke Title: Executive Director CIBC World Markets Corp., As Agent Address for Notices: Two Paces West 2727 Paces Ferry Road Suite 1200 Atlanta, GA 30309 Attention: Beverly Bowman/Miriam McCart Telecopier No.: NORDDEUTSCHE LANDESBANK GIROZENTRALE New York/Grand Cayman Islands Branches, as Lender By: -------------------------------------- Name: Title: By: -------------------------------------- Name: Title: Address for Notices: 1114 Avenue of the Americas New York, New York 10036 Attention: Stefanie Scholz Telecopier No.: THE INDUSTRIAL BANK OF JAPAN, LIMITED, as Lender By: -------------------------------------- Name: Title: 13 Address for Notices: 1251 Avenue of the Americas New York, New York 10020-1104 Attention: Richard Emmich Telecopier No.: NATIONAL AUSTRALIA BANK LIMITED, (A.C.N. 004044937) as Lender By: -------------------------------------- Name: Title: Address for Notices: 200 Park Avenue 34th Floor New York, New York 10166 Attention: Lidia Saniuk/Geraldine Harper Telecopier No.: BAYERISCHE HYPO-UND VEREINSBANK AG, New York Branch, as Lender By: -------------------------------------- Name: Title: By: -------------------------------------- Name: Title: Address for Notices: 150 East 42nd Street New York, New York 10017 Attention: Arelis Cepeda Telecopier No.: 14 BANK HAPOALIM B.M., as Lender By: -------------------------------------- Name: Title: By: -------------------------------------- Name: Title: Address for Notices: 1177 Avenue of the Americas New York, New York 10036 Attention: Donna Gindoff/Ivelis Cruz Telecopier No.: COBANK, ACB, as Lender By: -------------------------------------- Name: Title: Address for Notices: 5500 South Quebec Street Englewood, CO 80111 Attention: Ryan Spearman Telecopier No.: BANKGESELLSCHAFT BERLIN AG, London Branch as Lender By: -------------------------------------- Name: Title: By: -------------------------------------- Name: Title: 15 Address for Notices: 1 Crown Court Cheapside London E2C2V 6LR England Attention: Penny Neville-Park/Collette Hayden Telecopier No.: NATEXIS BANQUES POPULAIRES, as Lender By: /s/ ROGER UTTLEY -------------------------------------- Name: Roger Uttley Title: VP & Manager Latin America Group By: /s/ ANADI JAUHARI -------------------------------------- Name: Anadi Jauhari Title: Vice President & Group Manager Project Finance Group Address for Notices: 645 Fifth Avenue 20th Floor New York, New York 10022 Attention: Endina Barletta Telecopier No.: CREDIT INDUSTRIEL ET COMMERCIAL, as Lender By: /s/ MARC BARADUC -------------------------------------- Name: Marc Baraduc Title: Assistant Vice President By: /s/ MARK D. PALIN -------------------------------------- Name: Mark D. Palin Title: Vice President 16 Address for Notices: 4 Rue Gaillon F-75002 Paris France Attention: Annick Merard Telecopier No.: MELLON BANK, N.A., as Lender By: /s/ MARK W. ROGERS -------------------------------------- Name: Mark W. Rogers Title: Vice President Address for Notices: Three Mellon Bank Center Rom 1203 Pittsburgh, PA 15259-0003 Attention: Loan Administration Dept. Telecopier No.: CHANG HWA COMMERCIAL BANK, LTD., as Lender By: -------------------------------------- Name: Title: Address for Notices: 333 South Grand Avenue Suite 600 Los Angeles, CA 90071 Attention: Jean Luu Telecopier No.: BANK OF CHINA, NEW YORK, as Lender By: -------------------------------------- Name: Title: 17 Address for Notices: 410 Madison Avenue New York, New York 10017 Attention: Kevin Cheung Telecopier No.: ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG, New York Branch as Lender By: /s/ ROBERT SVEHNHOLZ -------------------------------------- Name: Robert Svehnholz Title: First Vice President By: /s/ PATRICK W. KUNKEL -------------------------------------- Name: Patrick W. Kunkel Title: Assistant Vice President Erste Bank New York Branch Address for Notices: 280 Park Avenue, West Building New York, NY 10017 Attention: Patrick Kunkel Telecopier No.: 18 EX-10.108-4 62 a2031364zex-10_1084.txt EXHIBIT 10.108.4 Exhibit 10.108.4 EXECUTION COUNTERPART AMENDMENT FOUR AMENDMENT FOUR (this "AMENDMENT") dated as of December 12, 2000 by and among EDISON MISSION MIDWEST HOLDINGS CO. (the "BORROWER"), THE CHASE MANHATTAN BANK as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT") and each of certain commercial lending institutions party hereto (the "LENDERS"). WHEREAS, the Borrower, the Administrative Agent and certain of the Lenders entered into a Credit Agreement dated as of December 15, 1999 (as heretofore amended, modified and supplemented, the "CREDIT AGREEMENT"); WHEREAS, the Borrower entered into a $71 million Credit Agreement dated of May 8, 2000 with certain commercial lending institutions arranged by Societe Generale and Bayerische Landesbank Girozentrale (as heretofore amended, modified and supplemented, the "2000 CAPEX CREDIT AGREEMENT"). WHEREAS, the Borrower desires to increase its Tranche A Loan Commitments by $71 million dollars in order to replace the 2000 Capex Credit Agreement. WHEREAS, the Borrower desires to renew the Tranche A Loan Commitments for an additional 364-day period pursuant to SECTION 2.6 of the Credit Agreement; WHEREAS, pursuant to SECTION 2.6 of the Credit Agreement, each Lender party to the Credit Agreement may elect to renew its Tranche A Loan Commitment for an additional 364-day period or allow its Tranche A Loan Commitment to expire on the Existing Tranche A Loan Commitment Termination Date; WHEREAS, the Borrower has the right to accept Tranche A Loan Commitments from third party financial institutions acceptable to the Administrative Agent (the "NEW LENDERS") to replace Tranche A Loan Commitments of any Lender who elects not to renew its Tranche A Loan Commitments pursuant to SECTION 2.6 of the Credit Agreement; WHEREAS, the New Lenders wish to become parties to the Credit Agreement as "Lenders" thereunder, the Borrower, the Administrative Agent and the Lenders party hereto intend to (i) increase the aggregate amount of Tranche A Loan Commitments from $840 million to $911 million and (ii) extend the Tranche A Loan Termination Date for an additional 364-day period pursuant to SECTION 2.6 of the Credit Agreement; WHEREAS, Midwest and ComEd have entered into an Amended and Restated Power Purchase Agreement dated as of September 13, 2000 attached as Exhibit A hereto, ("AMENDED AND RESTATED COLLINS PPA") in order to provide gas price protection to Midwest and an adjustment to the maximum power purchase requirement of ComEd in connection with Midwest's sale of energy from the Collins Facility; WHEREAS, the consent of the Required Lenders is required in connection with the execution and delivery of the Amended and Restated Collins PPA, the Borrower has requested and the Lenders party hereto consent to Midwest's execution and delivery of the Amended and Restated Collins PPA; ACCORDINGLY, the parties hereto agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment, terms defined in the Credit Agreement are used herein (and in the introductions and recitals hereto) as defined therein. -2- Section 2. AMENDMENT TO THE CREDIT AGREEMENT. Subject to the satisfaction of the conditions precedents specified in Section 6 below, but effective as of the Amendment Effective Date, the Credit Agreement shall be amended as follows: (a) Each of the New Lenders shall be deemed to be a "Lender" under and for all purposes of the Credit Agreement and each reference therein to "Lender" shall be deemed to include the New Lenders. References in the Credit Agreement to "this Agreement" shall be deemed to be references to the Credit Agreement as amended hereby. (b) SECTION 1.1 of the Credit Agreement shall be amended by deleting the definition of "LENDERS", in its entirety and replacing it with the following definition: "LENDERS" means, (a) on the date hereof, the certain commercial lending institutions party hereto and (b) thereafter, the Lenders from time to time holding Commitments after giving effect to any assignments thereof permitted BY SECTION 11.11.1." (c) SCHEDULES 1.1(a) and (b) of the Credit Agreement shall be deleted and replaced in their entirety with Exhibit B hereto. Section 3. FACILITY FEE. For purposes of calculating the amount of Facility Fees payable under SECTION 3.3.1 of the Credit Agreement, the increase of the Tranche A Commitments contemplated by Section 2 hereof shall be deemed to have been increased (and the Tranche A Commitments of the New Lenders shall be deemed to have become effective) immediately upon the satisfaction of the conditions precedents specified in Section 6 hereof. Section 4. EXTENSION OF TRANCHE A COMMITMENTS. The Lenders holding Tranche A Loan Commitments as specified in SCHEDULE 1.1(a) to the Credit Agreement (attached as Exhibit B hereto) as of the Amendment Effective Date agree to extend the Tranche A Loan Commitment Termination Date for an additional 364 days as specified in SECTION 2.6 of the Credit Agreement. Section 5. CONSENT. Pursuant to SECTION 8.2.6(b) of the Credit Agreement, the Lenders party hereto hereby consent to the execution and delivery by Midwest and ComEd of the Amended and Restated Collins PPA (and waive any default under SECTION 8.2.6(b) of the Credit Agreement which may exist as a consequence of Midwest executing and delivering the Amended and Restated Collins PPA in advance of such consent). Section 6. CONDITIONS PRECEDENT. This Amendment shall not become effective until the date (the "AMENDMENT EFFECTIVE DATE") on which each of the following conditions precedent have been satisfied or will be satisfied contemporaneously with this Amendment becoming effective: (a) Delivery to the Administrative Agent of this Amendment duly executed and delivered by the Borrower, the Administrative Agent, the New Lenders and each of the Lenders who will hold Tranche A Loan Commitments immediately after the Amendment Effective Date (such Lenders constituting Required Lenders); (b) The Administrative Agent shall have received opinions, dated the Amendment Effective Date and addressed to the Administrative Agent and the Lenders, from (i) the general counsel to the Loan Parties and (ii) the special New York counsel to the Loan Parties. Each such opinion shall be in form and substance reasonably satisfactory to the Administrative Agent; (c) The representations and warranties of the Borrower as set forth in the Credit Agreement and each Loan Party as set forth in each of the Loan Documents to -3- which such Loan Party is a party, shall be true and correct as of the Amendment Effective Date after giving effect to the amendments contemplated hereby (unless stated to be given as of an earlier date, in which case such representation and warranty shall be true and correct only as of such earlier date); and (d) As of the Amendment Effective Date, no Default shall have occurred (excluding any default waived pursuant to Section 5 hereof) and be continuing after giving effect to this Amendment. Section 6. MISCELLANEOUS. Except as expressly amended hereby, all of the terms and provisions of the Credit Agreement are and shall remain in full force and effect. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers as of the day and year first above written. EDISON MISSION MIDWEST HOLDINGS CO. By: /s/ Maria P. Litos -------------------------------- Name: Maria P. Litos Title: Vice President Address for Notices: 18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: General Counsel Telecopier No.: (949) 752-1420 THE CHASE MANHATTAN BANK, as Administrative Agent and as Lender By: /s/ Thomas L. Casey -------------------------------- Name: Thomas L. Casey Title: Vice President Address for Notices: Tom Casey 270 Park Avenue New York, New York 10017 With a copy to : Loan & Agency Services Group The Chase Manhattan Bank 1 Chase Manhattan Plaza New York, New York 10081 Attention: Janet Belden CITIBANK, N.A., as Lender By: /s/ Jonathan B. Lindenberg -------------------------------- Name: Jonathan B. Lindenberg Title: Managing Director Address for Notices: 399 Park Avenue 4th Floor New York, New York 10043 Attention: David Goldenberg Telecopier No.: SOCIETE GENERALE, as Lender By: /s/ Francis Sacr -------------------------------- Name: Francis Sacr Title: Director, Project Finance Address for Notices: 1221 Avenue of the Americas 11th Floor New York, New York 10020 Attention: Donna Reynolds/Debbie Napoli Telecopier No.: WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch, as Lender By: /s/ Cyril Derueloy -------------------------------- Name: Cyril Derueloy Title: Manager By: /s/ Michael D. Peist -------------------------------- Name: Michael D. Peist Title: Associate Director Address for Notices: 1211 Avenue of the Americas 25th Floor New York, New York 10036-8701 Attention: Jonathan Berman/Matt Wilson Telecopier No.: 2 BANK OF MONTREAL, as Lender By: /s/ Cahal B. Carmody -------------------------------- Name: Cahal B. Carmody Title: Director Address for Notices: 700 Louisiana Suite 4400 Houston, TX 77002 Attention: Cahal Carmody Telecopier No.: FORTIS CAPITAL CORP., as Lender By: /s/ Chris McCall -------------------------------- Name: Chris McCall Title: Vice President By: /s/ Svein Engh -------------------------------- Name: Svein Engh Title: Managing Director Address for Notices: 3 Stamford Plaza 301 Tresser Boulevard 9th Floor Stamford, CT 06901-3239 Attention: Marlene Ellis Telecopier No.: THE ROYAL BANK OF SCOTLAND PLC, as Lender By: /s/ Brian Mcinnes -------------------------------- Name: Brian Mcinnes Title: Senior Vice President Address for Notices: 65 E. 55th Street 21st Floor New York, New York 10022 Attention: Helaine Griffin Telecopier No.: (212) 401-1336 3 THE BANK OF NOVA SCOTIA, as Lender By: /s/ John Quick -------------------------------- Name: John Quick Title: Managing Director Address for Notices: 600 Peachtree Street Suite 2700 Atlanta, GA 30383 Attention: Kathy Clark Telecopier No.: With a copy to : 580 California Street Suite 2100 San Francisco, CA 94101 Attention: John Quick Telecopier No.: BANK OF AMERICA, N.A., as Lender By: /s/ Raymond Gagne -------------------------------- Name: Raymond Gagne Title: Managing Director Address for Notices: 101 N. Tryon Street NC1-001-15-04 Charlotte, NC 28255 Attention: Lynne Cole Telecopier No.: 4 ABN AMRO BANK N.V., as Lender By: /s/ Miguel Pachicano -------------------------------- Name: Miguel Pachicano Title: Group Vice President By: /s/ Sonny K. Tran -------------------------------- Name: Sonny K. Tran Title: Assistant Vice President Address for Notices: 208 South LaSalle Street Suite 1500 Chicago, IL 60604-1003 Attention: Credit Administration With a copy to: 135 South LaSalle Street Suite 710 Chicago, IL 60603 Attention: David Bryant Telecopier No.: (312) 583-6111 LEHMAN COMMERCIAL PAPER INC., as Lender By: -------------------------------- Name: Title: Address for Notices: c/o Bankers Trust Company Corporate Trust & Agency Group Loan Services 4 Albany Street 7th Floor New York, New York 10006 Attention: Jason Yoo Telecopier No.: With a copy to: 3 World Financial Center 10th Floor New York, New York 10285 5 DRESDNER BANK AG, New York and Grand Cayman Branches, as Lender By: /s/ Fred C. Thurston -------------------------------- Name: Fred C. Thurston Title: Vice President By: /s/ Andrew Schroeder -------------------------------- Name: Andrew Schroeder Title: Vice President Address for Notices: 75 Wall Street New York, New York 10005-2889 Attention: Annabelle Librojo Telecopier No.: BAYERISCHE LANDESBANK GIROZENTRALE, as Lender By: /s/ Dietmar Rieg -------------------------------- Name: Dietmar Rieg Title: First Vice President By: /s/ Cornelia Wintergerst -------------------------------- Name: Cornelia Wintergerst Title: Vice President Address for Notices: 560 Lexington Avenue New York, New York 10094 Attention: Patricia Sanchez Telecopier No.: BARCLAYS BANK PLC, as Lender By: /s/ Sydney G. Dennis -------------------------------- Name: Syndey G. Dennis Title: Director 6 Address for Notices: 222 Broadway New York, New York 10038 Attention: Marsha Hamlette Telecopier No.: 212 412 5306 UNION BANK OF CALIFORNIA, N.A., as Lender By: /s/ Robert J. Cole -------------------------------- Name: Robert J. Cole Title: Vice President Address for Notices: Commercial Loan Operations 1980 Saturn Street Monterey Park, CA 91755 Attention: Ruby Gonzales Telecopier No.: BANK ONE, NA (Chicago Branch), as Lender By: /s/ Jane Bek -------------------------------- Name: Jane Bek Title: Vice President Address for Notices: 1 Bank One Plaza Suite 0634 Chicago, IL 60670 Attention: Claudia Kich Telecopier No.: TORONTO DOMINION (TEXAS) INC., as Lender By: /s/ Debbie A. Greene -------------------------------- Name: Debbie Greene Title: Vice President Address for Notices: 7 909 Fannin Street 17th Floor Houston, TX 77010 Attention: Lynn Chasin Telecopier No.: BNP PARIBAS, as Lender By: /s/ Ralph E. Scholtz -------------------------------- Name: Ralph E. Scholtz Title: Managing Director By: /s/ Tim Vincent -------------------------------- Name: Tim Vincent Title: Vice President Address for Notices: Treasury Department 180 Montgomery Street San Francisco, CA 94101 Attention: Don Hart Telecopier No.: With a copy to: 787 Seventh Avenue New York, NY 10019 Attention: Sean Finnegan Telecopier No.: COMMERZBANK AG, New York and Cayman Island Branches, as Lender By: /s/ Christian Jagenberg -------------------------------- Name: Christian Jagenberg Title: Senior Vice President and Manager By: /s/ Steven F. Larsen -------------------------------- Name: Steven F. Larsen Title: Vice President 8 Address for Notices: 2 World Financial Center New York, New York 10281-1050 Attention: Christine Hunermund Telecopier No.: SANPAOLO IMI S.p.A., as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 245 Park Avenue 35th Floor New York, New York 10167 Attention: Gerardo Suarez/John Ferrante Telecopier No.: DEXIA PUBLIC FINANCE BANK, as Lender By: /s/ Marc Brugiere -------------------------------- Name: Marc Brugiere Title: General Manager By: /s/ Robert N. Sloan, Jr. -------------------------------- Name: Robert N. Sloan, Jr. Title: Vice President Address for Notices: 450 Park Avenue New York, New York 10022 Attention: Aida Slabotzky Telecopier No.: 9 THE FUJI BANK, LIMITED, as Lender By: -------------------------------- Name: Title: Address for Notices: Two World Trade Center 79th Floor New York, New York 10048 Attention: Tina Catapano/Betty Ali Telecopier No.: KBC BANK N.V., as Lender By: /s/ Robert Snauffer -------------------------------- Name: Robert Snauffer Title: First Vice President By: /s/ Patrick A. Janssens -------------------------------- Name: Patrick A. Janssens Title: Vice President Address for Notices: 125 West 55th Street 10th Floor New York, New York 10019 Attention: Michael Curran Telecopier No.: CREDIT LYONNAIS, New York Branch as Lender By: /s/ Michael Foren -------------------------------- Name: Michael Foren Title: First Vice President Address for Notices: 1301 Avenue of the Americas New York, New York 10019 Attention: Justine Ventrelli Telecopier No.: 10 MB FINSTRUTTURE, S.p.A. as Lender By: /s/ Massimo di Carlo -------------------------------- Name: Massimo di Carlo Title: By: /s/ Mauro Maia -------------------------------- Name:Mauro Maia Title: Address for Notices: Piazzetta Enrico Cuccia, 1 Milano, Italy 20121 Attention: Maria Teresa Iardella Telecopier No.: 39 02 8829 945 ABBEY NATIONAL TREASURY SERVICES plc, as Lender By: /s/ Richard Silva -------------------------------- Name: Richard Silva Title: Senior Manager By: -------------------------------- Name: Title: Address for Notices: 26-28 Dorset Square London, NW1 6QC United Kingdom Attention: Sue Hawkins Telecopier No.: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED, as Lender By: /s/ Roy J. Marsden -------------------------------- Name: Roy J. Marsden Title: Executive Vice President 11 Address for Notices: 1177 Avenue of the Americas New York, New York 10036-2798 Attention: Tessie Amante/Doreen Klingenbeck Telecopier No.: CIBC INC., as Lender By: /s/ Dennis P. O'Meara -------------------------------- Name: Dennis P. O'Meara Title: Executive Director Address for Notices: Two Paces West 2727 Paces Ferry Raod Suite 1200 Atlanta, GA 30309 Attention: Beverly Bowman/Miriam McCart Telecopier No.: NORDDEUTSCHE LANDESBANK GIROZENTRALE New York/Grand Cayman Islands Branches, as Lender By: /s/ Stephanie Finnen -------------------------------- Name: Stephanie Finnen Title: Vice President By: /s/ Stephen K. Hunter -------------------------------- Name: Stephen K. Hunter Title: Senior Vice President 12 Address for Notices: 1114 Avenue of the Americas New York, New York 10036 Attention: Stefanie Scholz Telecopier No.: THE INDUSTRIAL BANK OF JAPAN, LIMITED, as Lender By: /s/ Michael C. Jones -------------------------------- Name: Micheal C. Jones Title: Vice President Address for Notices: 1251 Avenue of the Americas New York, New York 10020-1104 Attention: Richard Emmich Telecopier No.: NATIONAL AUSTRALIA BANK LIMITED, (A.C.N. 004044937) as Lender By: /s/ Paul R. Morrison -------------------------------- Name: Paul R. Morrison Title: Vice President Address for Notices: 200 Park Avenue 34th Floor New York, New York 10166 Attention: Lidia Saniuk/Geraldine Harper Telecopier No.: 13 BAYERISCHE HYPO-UND VEREINSBANK AG, New York Branch, as Lender By: /s/ Steven Atwell -------------------------------- Name: Steven Atwell Title: Director By: /s/ Shannon Batchman -------------------------------- Name: Shannon Batchman Title: Director Address for Notices: 150 East 42nd Street New York, New York 10017 Attention: Arelis Cepeda Telecopier No.: BANK HAPOALIM B.M., as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 1177 Avenue of the Americas New York, New York 10036 Attention: Donna Gindoff/Ivelis Cruz Telecopier No.: COBANK, ACB, as Lender By: /s/ Jason D. Bauer -------------------------------- Name: Jason D. Bauer Title: Assistant Vice President 14 Address for Notices: 5500 South Quebec Street Englewood, CO 80111 Attention: Ryan Spearman Telecopier No.: BANKGESELLSCHAFT BERLIN AG, London Branch as Lender By: /s/ Simon Middleton -------------------------------- Name: Simon Middleton Title: Associate Director By: /s/ Philip Nias -------------------------------- Name: Philip Nias Title: Director Address for Notices: 1 Crown Court Cheapside London E2C2V 6LR England Attention: Penny Neville-Park/ Collette Hayden Telecopier No.: NATEXIS BANQUES POPULAIRES, as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: 15 Address for Notices: 645 Fifth Avenue 20th Floor New York, New York 10022 Attention: Endina Barletta Telecopier No.: COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE, as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 4 Rue Gaillon F-75002 Paris France Attention: Annick Merard Telecopier No.: MELLON BANK, N.A., as Lender By: /s/ Mark W. Rogers -------------------------------- Name: Mark W. Rogers Title: Address for Notices: Three Mellon Bank Center Rom 1203 Pittsburgh, PA 15259-0003 Attention: Loan Administration Dept. Telecopier No.: 16 CHANG HWA COMMERCIAL BANK, LTD., as Lender By: /s/ James Lin -------------------------------- Name: James Lin Title: Senior Vice President and General Manger Address for Notices: 333 South Grand Avenue Suite 600 Los Angeles, CA 90071 Attention: Jean Luu Telecopier No.: BANK OF CHINA, NEW YORK, as Lender By: -------------------------------- Name: Title: Address for Notices: 410 Madison Avenue New York, New York 10017 Attention: Kevin Cheung Telecopier No.: ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG, New York Branch as Lender By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: Address for Notices: 280 Park Avenue, West Building New York, NY 10017 Attention: Patrick Kunkel Telecopier No.: 17 EX-12.1 63 a2031364zex-12_1.txt EXHIBIT 12.1 Exhibit 12.1 EDISON MISSION ENERGY RATIO OF EARNINGS TO FIXED CHARGES (000S)
2000 1999 1998 1997 1996 ------------------------------------------------------------- Earnings: Income before taxes and accounting change $ 180,098 $ 103,705 $202,579 $185,515 $174,110 Adjustments: Fixed charges, as below 797,891 439,300 260,439 275,426 261,885 Interest capitalized (14,281) (27,471) (26,300) (15,000) (64,400) Equity in earnings of equity method investments (100,569) (79,433) (45,984) (76,694) (72,272) Dividends from equity method investments 121,463 80,891 49,208 82,576 72,787 ------------------------------------------------------------- Earnings as adjusted $ 984,602 $ 516,992 $439,942 $451,823 $372,110 ============================================================= Fixed Charges: Interest on indebtedness (expense and capitalized) $ 729,201 $ 413,811 $245,220 $260,249 $246,895 Dividends on preferred securities 32,075 22,375 13,149 13,167 13,100 Interest portion of rental expense 36,615 3,114 2,070 2,010 1,890 ------------------------------------------------------------- $ 797,891 $ 439,300 $260,439 $275,426 $261,885 ============================================================= Ratio of Earnings to Fixed Charges 1.23 1.18 1.69 1.64 1.42
EX-12.2 64 a2031364zex-12_2.txt EXHIBIT 12.2 Exhibit 12.2 MIDWEST GENERAITON LLC COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES (In Thousands)
Twelve months ended Inception to December 31, December 31 2000 1999 ------------------------------- EARNINGS: Income before taxes and extraordinary item $ (158,071) $ (20,086) Adjustments: Fixed charges, as below 369,802 14,339 ------------------------------- Earnings as adjusted $ 211,731 $ (5,747) =============================== FIXED CHARGES: Interest on indebtedness $ 361,203 $ 14,335 Interest portion of rent expense 8,599 4 ------------------------------- $ 369,802 $ 14,339 =============================== Ratio of Earnings to Fixed Charges 0.57 (0.40) ===============================
EX-23.1 65 a2031364zex-23_1.txt EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report on the financial statements of Midwest Generation, LLC as of December 31, 2000 and 1999 and for the year ended December 31, 2000 and the period from inception (July 12, 1999) to December 31, 1999, dated March 28, 2001, included in this registration statement and to the incorporation by reference of our report on the consolidated financial statements of Edison Mission Energy, dated March 28, 2001, included in Edison Mission Energy's Annual Report on Form 10-K for the year ended December 31, 2000 and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN LLP Orange County, California April 19, 2001 EX-25.1 66 a2031364zex-25_1.txt EX-25.1 Exhibit 25.1 FORM T-1 ------------------------------------ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------------------------ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) ------------------------------------ UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-3818954 (Jurisdiction of incorporation (I.R.S. employer if not a U.S. national bank) identification No.) 114 West 47th Street 10036-1532 New York, NY (Zip Code) (Address of principal executive offices) ------------------ MIDWEST GENERATION, LLC (Exact name of obligor as specified in its charter) Delaware 33-0868558 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) One Financial Place 440 South LaSalle St., Suite 3500 Chicago, IL 60605 (Address of principal executive offices) (Zip Code) ------------------------------------ 8.30% Pass-Through Certificates, Series A, due 2009 8.56% Pass-Through Certificates, Series B, due 2016 (Title of the indenture securities) ----------------------------------------------------------------------- GENERAL 1. GENERAL INFORMATION Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System) Federal Deposit Insurance Corporation, Washington, D.C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH THE OBLIGOR If the obligor is an affiliate of the trustee, describe each such affiliation. None 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15: Midwest Generation, LLC currently is not in default under any of its outstanding securities for which United States Trust Company of New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General Instruction B. 16. LIST OF EXHIBITS T-1.1 -- Organization Certificate, as amended, issued by the State of New York Banking Department to transact business as a Trust Company, is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.2 -- Included in Exhibit T-1.1. T-1.3 -- Included in Exhibit T-1.1. 2 16. LIST OF EXHIBITS (CONT'D) T-1.4 -- The By-Laws of United States Trust Company of New York, as amended, is incorporated by reference to Exhibit T-1.4 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33- 97056). T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990. T-1.7 -- A copy of the latest report of condition of the trustee pursuant to law or the requirements of its supervising or examining authority. NOTE As of December 31, 2000, the trustee had 2,999,029 shares of Common Stock outstanding, all of which are owned by its parent company, U.S. Trust Corporation. The term "trustee" in Item 2, refers to each of United States Trust Company of New York and its parent company, U. S. Trust Corporation. In answering Item 2 in this statement of eligibility as to matters peculiarly within the knowledge of the obligor or its directors, the trustee has relied upon information furnished to it by the obligor and will rely on information to be furnished by the obligor and the trustee disclaims responsibility for the accuracy or completeness of such information. ------------------------------------ Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 20th day of April, 2001. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: /s/ Christopher J. Grell --------------------------- Christopher J. Grell Assistant Vice President 3 EXHIBIT T-1.6 The consent of the trustee required by Section 321(b) of the Act. United States Trust Company of New York 114 West 47th Street New York, NY 10036 April 20, 2001 Securities and Exchange Commission 450 5th Street, N.W. Washington, DC 20549 Gentlemen: Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the limitations set forth therein, United States Trust Company of New York ("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. Very truly yours, UNITED STATES TRUST COMPANY OF NEW YORK By: /s/ H. William Weber ---------------------------------------------- H. William Weber Vice President 4 EXHIBIT T-1.7 UNITED STATES TRUST COMPANY OF NEW YORK CONSOLIDATED STATEMENT OF CONDITION SEPTEMBER 30, 2000 ($ IN THOUSANDS) ASSETS Cash and Due from Banks $ 60,744 Short-Term Investments 61,956 Securities, Available for Sale 687,786 Loans 2,866,204 Less: Allowance for Credit Losses 17,858 ----------------- Net Loans 2,848,346 Premises and Equipment 65,105 Other Assets 264,387 ----------------- TOTAL ASSETS $ 3,988,324 ----------------- LIABILITIES Deposits: Non-Interest Bearing $ 635,939 Interest Bearing 2,338,442 ----------------- Total Deposits 2,974,381 Short-Term Credit Facilities 383,958 Accounts Payable and Accrued Liabilities 300,828 ----------------- TOTAL LIABILITIES $ 3,659,167 ----------------- STOCKHOLDER'S EQUITY Common Stock 14,995 Capital Surplus 208,551 Retained Earnings 123,254 Unrealized Loss on Securities Available for Sale (Net of Taxes) (17,643) ----------------- TOTAL STOCKHOLDER'S EQUITY 329,157 ----------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 3,988,324 -----------------
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do hereby declare that this Statement of Condition has been prepared in conformance with the instructions issued by the appropriate regulatory authority and is true to the best of my knowledge and belief. /s/ Richard E. Brinkmann --------------------------- Name: Richard E. Brinkmann Title: Managing Director & Comptroller April 16, 2001 5 EX-99.1 67 a2031364zex-99_1.txt EXHIBIT 99.1 Exhibit 99.1 LETTER OF TRANSMITTAL MIDWEST GENERATION, LLC OFFER FOR ALL OUTSTANDING $333,500,000 8.30% SERIES A PASS-THROUGH CERTIFICATES AND $813,500,000 8.56% SERIES B PASS-THROUGH CERTIFICATES IN EXCHANGE FOR IDENTICAL PRINCIPAL AMOUNTS OF 8.30% SERIES A PASS-THROUGH CERTIFICATES AND 8.56% SERIES B PASS-THROUGH CERTIFICATES WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO THE PROSPECTUS, DATED , 2001 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON , 2001, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. - -------------------------------------------------------------------------------- Delivery To: United StatesTrust Company of New York, EXCHANGE AGENT BY HAND BEFORE 4:30 P.M.: BY REGISTERED OR CERTIFIED MAIL: United States Trust Company of NewYork United States Trust Company of NewYork 30 Broad Street P.O. Box 112 B-Level Bowling Green Station New York, NY 10004 New York, New York 10274 Attention: Corporate Trust Services
BY HAND OR OVERNIGHT DELIVERY AFTER 4:30 P.M. ON THE EXPIRATION DATE: United States Trust Company of New York 30 Broad Street, 14th Floor New York, New York 10004 FOR INFORMATION CALL: (800) 548-6565 BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY): (212) 422-0183 Attention: Customer Service CONFIRM BY TELEPHONE: (800) 548-6565 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges that he or she has received the Prospectus, dated , 2001 (the "Prospectus"), of Midwest Generation, LLC (the "Company"), a Delaware limited liability company and wholly-owned subsidiary of Edison Mission Energy, a California corporation and guarantor of lease payment obligations of the Company, and this Letter of Transmittal (the "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange up to $333,500,000 aggregate principal amount of new 8.30% Series A Pass-Through Certificates and up to $813,500,000 aggregate principal amount of new 8.56% Series B Pass-Through Certificates(the "Exchange Certificates"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for an equal aggregate principal amount of the Company's issued and outstanding 8.30% Series A Pass-Through Certificates and 8.56% Series B Pass-Through Certificates (the "Original Certificates") from the registered holders thereof (the "Holders"). For each Original Certificate accepted for exchange, the Holder of such Original Certificate will receive an Exchange Certificate having a principal amount equal to that of the surrendered Original Certificate. The Exchange Certificates will bear interest from the most recent date to which interest has been paid on the Original Certificates. Accordingly, registered Holders of Exchange Certificates on the relevant record date for the first interest payment date following the consummation of the Exchange Offer will receive interest accruing from the most recent date to which interest has been paid. Original Certificates accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Original Certificates whose Original Certificates are accepted for exchange will not receive any payment in respect of accrued interest on such Original Certificates otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. This Letter is to be completed by a holder of Original Certificates either if certificates are to be forwarded herewith or if a tender of certificates for Original Certificates, if available, is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Exchange Agent and forming a part of a Book-Entry Confirmation (as defined below), which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by this Letter and that the Company may enforce this Letter against such participant. Holders of Original Certificates whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Original Certificates into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Original Certificates according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. List below the Original Certificates to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Original Certificates should be listed on a separate signed schedule affixed hereto.
- ------------------------------------------------------------------------------------------------------ DESCRIPTION OF ORIGINAL CERTIFICATES 1 2 3 - ------------------------------------------------------------------------------------------------------ AGGREGATE PRINCIPAL NAME(S) AND ADDRESS(ES) OF REGISTERED AMOUNT OF PRINCIPAL HOLDER(S) CERTIFICATE ORIGINAL AMOUNT (PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) TENDERED** - ------------------------------------------------------------------------------------------------------ ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- TOTAL - ------------------------------------------------------------------------------------------------------ * Need not be completed if Original Certificates are being tendered by book-entry transfer. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Original Certificates represented by the Original Certificates indicated in column 2. See Instruction 2. Original Certificates tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1. - ------------------------------------------------------------------------------------------------------
/ / CHECK HERE IF TENDERED ORIGINAL CERTIFICATES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution ______________________________________________ Account Number __________________ Transaction Code Number __________________ By crediting the Original Certificates to the Exchange Agent's account at the Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer, including transmitting to the Exchange Agent a computer-generated Agent's Message in which the holder of the Original Certificates acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter, the participant in the Book-Entry Transfer Facility confirms on behalf of itself and the beneficial owners of such Original Certificates all provisions of this Letter (including all representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter to the Exchange Agent. / / CHECK HERE IF TENDERED ORIGINAL CERTIFICATES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) ____________________________________________ Window Ticket Number (if any) ______________________________________________ Date of Execution of Notice of Guaranteed Delivery _________________________ Name of Institution Which Guaranteed Delivery ______________________________ IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING: Account Number __________________ Transaction Code Number __________________ / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ______________________________________________________________________ Address: ___________________________________________________________________ ____________________________________________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Certificates. If the undersigned is a broker-dealer that will receive Exchange Certificates for its own account in exchange for Original Certificates that were acquired as a result of market-making activities or other trading activities, it acknowledges that such Original Certificates were acquired by such broker-dealer as a result of market-making or other trading activities and, that it must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, including the delivery of a prospectus that contains information with respect to any selling holder required by the Securities Act in connection with any resale of the Exchange Certificates; however, by so acknowledging and by delivering such a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. If the undersigned is a broker-dealer that will receive Exchange Certificates, it represents that the Original Certificates to be exchanged for the Exchange Certificates were acquired as a result of market-making activities or other trading activities. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of Original Certificates indicated above. Subject to, and effective upon, the acceptance for exchange of the Original Certificates tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Original Certificates as are being tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the undersigned's true and lawful agent and attorney-in-fact with respect to such tendered Original Certificates, with full power of substitution, among other things, to cause the Original Certificates to be assigned, transferred and exchanged. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Original Certificates, and to acquire Exchange Certificates issuable upon the exchange of such tendered Original Certificates, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned hereby further represents that any Exchange Certificates acquired in exchange for Original Certificates tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Certificates, whether or not such person is the undersigned, that neither the Holder of such Original Certificates nor any such other person is participating in, intends to participate in or has an arrangement or understanding with any person to participate in the distribution of such Exchange Certificates and that neither the Holder of such Original Certificates nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. The undersigned acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the Exchange Certificates issued pursuant to the Exchange Offer in exchange for the Original Certificates may be offered for resale, resold and otherwise transferred by Holders thereof (other than any such Holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Certificates are acquired in the ordinary course of such Holders' business and such Holders have no arrangement with any person to participate in the distribution of such Exchange Certificates. However, the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Certificates and has no arrangement or understanding to participate in a distribution of Exchange Certificates. If any Holder is an affiliate of the Company, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the Exchange Certificates to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If the undersigned is a broker-dealer that will receive Exchange Certificates for its own account in exchange for Original Certificates, it represents that the Original Certificates to be exchanged for the Exchange Certificates were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Certificates; however, by so acknowledging and by delivering a prospectus meeting the requirements of the Securities Act, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Original Certificates tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section of the Prospectus. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the Exchange Certificates (and, if applicable, substitute certificates representing Original Certificates for any Original Certificates not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Original Certificates, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the Exchange Certificates (and, if applicable, substitute certificates representing Original Certificates for any Original Certificates not exchanged) to the undersigned at the address shown above in the box entitled "Description of Original Certificates." THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL CERTIFICATES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE ORIGINAL CERTIFICATES AS SET FORTH IN SUCH BOX ABOVE. - ------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Original Certificates not exchanged and/or Exchange Certificates are to be issued in the name of and sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above, or if Original Certificates delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue Exchange Certificates and/or Original Certificates to: Name(s) ____________________________________________________________________ (PLEASE TYPE OR PRINT) __________________________________________________________________________ (PLEASE TYPE OR PRINT) Address ____________________________________________________________________ ____________________________________________________________________________ (ZIP CODE) (COMPLETE SUBSTITUTE FORM W-9) / / Credit unexchanged Original Certificates delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. ______________________________________________________________________________ BOOK-ENTRY TRANSFER FACILITY (ACCOUNT NUMBER, IF APPLICABLE) - ------------------------------------------------------ - ------------------------------------------------------ SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Original Certificates not exchanged and/or Exchange Certificates are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above or to such person or persons at an address other than shown in the box entitled Description of Original Certificates on this Letter above. Mail Exchange Certificates and/or Original Certificates to: Name(s) ____________________________________________________________________ (PLEASE TYPE OR PRINT) __________________________________________________________________________ (PLEASE TYPE OR PRINT) Address ____________________________________________________________________ ____________________________________________________________________________ (ZIP CODE) - ----------------------------------------------------- IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU THEREOF (TOGETHER WITH THE CERTIFICATES FOR ORIGINAL CERTIFICATES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE. - -------------------------------------------------------------------------------- PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 BELOW) X _________________________________ _________________________________, 2001 X _________________________________ _________________________________, 2001 (SIGNATURE(S) OF OWNER) (DATE) Area Code and Telephone Number _________________________________________ If a holder is tendering any Original Certificates, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Original Certificates or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s): ___________________________________________________________________ (PLEASE TYPE OR PRINT) Capacity: __________________________________________________________________ Address: ___________________________________________________________________ ____________________________________________________________________________ (INCLUDING ZIP CODE) SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 3) Signature(s) Guaranteed by an Eligible Institution: ___________________________________________________ (AUTHORIZED SIGNATURE) ____________________________________________________________________________ (TITLE) ____________________________________________________________________________ (NAME AND FIRM) Dated: _______________________________________________________________, 2001 - -------------------------------------------------------------------------------- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE OUTSTANDING $333,500,000 8.30% SERIES A PASS-THROUGH CERTIFICATES AND $813,500,000 8.56% SERIES B PASS-THROUGH CERTIFICATES IN EXCHANGE FOR IDENTICAL PRINCIPAL AMOUNTS OF 8.30% SERIES A PASS-THROUGH CERTIFICATES AND 8.56% SERIES B PASS-THROUGH CERTIFICATES WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED 1. DELIVERY OF THIS LETTER AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter is to be completed by holders of Original Certificates either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal and that the Company may enforce the Letter of Transmittal against such participant. Certificates for all physically tendered Original Certificates, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof or Agent's Message in lieu thereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Original Certificates tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. Holders whose certificates for Original Certificates are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Original Certificates pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined below), (ii) prior to 5:00 P.M., New York City time, on the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Original Certificates and the amount of Original Certificates tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Original Certificates, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Original Certificates, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and all other documents required by this Letter, are received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. The method of delivery of this Letter, the Original Certificates and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Original Certificates are sent by mail, it is suggested that the mailing be registered mail, properly insured, with return receipt requested, made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration Date. See "The Exchange Offer" section of the Prospectus. 2. PARTIAL TENDERS (NOT APPLICABLE TO CERTIFICATEHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If less than all of the Original Certificates evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Original Certificates to be tendered in the box above entitled "Description of Original Certificates--Principal Amount Tendered. "A reissued certificate representing the balance of nontendered Original Certificates will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. ALL OF THE ORIGINAL CERTIFICATES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED. 3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter is signed by the registered holder of the Original Certificates tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever. If any tendered Original Certificates are owned of record by two or more joint owners, all of such owners must sign this Letter. If any tendered Original Certificates are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder or holders of the Original Certificates specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the Exchange Certificates are to be issued, or any untendered Original Certificates are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s) and signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. Endorsements on certificates for Original Certificates or signatures on bond powers required by this Instruction 3 must be guaranteed by a firm that is a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program (each an "Eligible Institution"). Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Original Certificates are tendered: (i) by a registered holder of Original Certificates (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Original Certificates) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter, or (ii) for the account of an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders of Original Certificates should indicate in the applicable box the name and address to which Exchange Certificates issued pursuant to the Exchange Offer and/or substitute certificates evidencing Original Certificates not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Certificateholders tendering Original Certificates by book-entry transfer may request that Original Certificates not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such certificateholder may designate hereon. If no such instructions are given, such Original Certificates not exchanged will be returned to the name and address of the person signing this Letter. 5. TAXPAYER IDENTIFICATION NUMBER. Federal income tax law generally requires that a tendering holder whose Original Certificates are accepted for exchange must provide the Company (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Company is not provided with the current TIN or an adequate basis for an exemption from backup withholding, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, the Exchange Agent may be required to withhold 31% of the amount of any reportable payments made after the exchange to such tendering holder of Exchange Certificates. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders of Original Certificates (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines of Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. To prevent backup withholding, each tendering holder of Original Certificates must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying, under penalties of perjury, that the TIN provided is correct (or that such holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, or (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the tendering holder of Original Certificates is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Exchange Agent a completed Form W-8, Certificate of Foreign Status. These forms may be obtained from the Exchange Agent. If the Original Certificates are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report. If such holder does not have a TIN, such holder should consult the W-9 Guidelines for instructions on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note: Checking this box and writing "applied for" on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. If the box in Part 2 of the Substitute Form W-9 is checked, the Exchange Agent will retain 31% of reportable payments made to a holder during the sixty (60) day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with his or her TIN within sixty (60) days of the Substitute Form W-9, the Exchange Agent will remit such amounts retained during such sixty (60) day period to such holder and no further amounts will be retained or withheld from payments made to the holder thereafter. If, however, such holder does not provide its TIN to the Exchange Agent within such sixty (60) day period, the Exchange Agent will remit such previously withheld amounts to the Internal Revenue Service as backup withholding and will withhold 31% of all reportable payments to the holder thereafter until such holder furnishes its TIN to the Exchange Agent. 6. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the transfer of Original Certificates to it or its order pursuant to the Exchange Offer. If, however, Exchange Certificates and/or substitute Original Certificates not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Original Certificates tendered hereby, or if tendered Original Certificates are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Original Certificates to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE ORIGINAL CERTIFICATES SPECIFIED IN THIS LETTER. 7. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus. 8. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Original Certificates, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Original Certificates for exchange. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Original Certificates nor shall any of them incur any liability for failure to give any such notice. 9. MUTILATED, LOST, STOLEN OR DESTROYED ORIGINAL CERTIFICATES. Any holder whose Original Certificates have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. WITHDRAWAL RIGHTS. Tenders of Original Certificates may be withdrawn at any time prior to 5:00 P.M., New York City time, on the Expiration Date. For a withdrawal of a tender of Original Certificates to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth above prior to 5:00 P.M., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having tendered the Original Certificates to be withdrawn (the "Depositor"), (ii) identify the Original Certificates to be withdrawn (including certificate number or numbers and the principal amount of such Original Certificates), (iii) contain a statement that such Holder is withdrawing his election to have such Original Certificates exchanged, (iv) be signed by the Holder in the same manner as the original signature on the Letter by which such Original Certificates were tendered (including any required signature guarantees) or be accompanied by documents of transfer to have the Trustee with respect to the Original Certificates register the transfer of such Original Certificates in the name of the person withdrawing the tender and (v) specify the name in which such Original Certificates are registered, if different from that of the Depositor. If Original Certificates have been tendered pursuant to the procedure for book-entry transfer set forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Original Certificates and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Original Certificates so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer and no Exchange Certificates will be issued with respect thereto unless the Original Certificates so withdrawn are validly retendered. Any Original Certificates that have been tendered for exchange but which are not exchanged for any reason will be returned to the Holder thereof without cost to such Holder (or, in the case of Original Certificates tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures set forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus, such Original Certificates will be credited to an account maintained with the Book-Entry Transfer Facility for the Original Certificates) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Original Certificates may be retendered by following the procedures described above at any time on or prior to 5:00 P.M., New York City time, on the Expiration Date. 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, and requests for Notices of Guaranteed Delivery and other related documents may be directed to the Exchange Agent, at the address and telephone number indicated above. TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 5) PAYOR'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK - --------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1--PLEASE TIN: ------------------------ FORM W-9 PROVIDE YOUR TIN IN SOCIAL SECURITY NUMBER OR DEPARTMENT OF THE TREASURY THE BOX AT RIGHT AND EMPLOYER IDENTIFICATION NUMBER INTERNAL REVENUE SERVICE CERTIFY BY SIGNING AND DATING BELOW. ------------------------------------------------------------------ PART 2--TIN Applied For / / ------------------------------------------------------------------ PAYOR'S REQUEST FOR CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: TAXPAYER (1) the number shown on this form is my correct TIN (or I am IDENTIFICATION NUMBER waiting for a number to be issued to me), (TIN) AND CERTIFICATION (2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding and (3) any other information provided on this form is true and correct. SIGNATURE -------------------------- DATE -------- - --------------------------------------------------------------------------------------------------------------- You must cross out item(2) of the above certification if you have been notified by the IRS that you are subject to backup witholding because of underreporting of interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. - ---------------------------------------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. SIGNATURE _____________________________________________________ DATE __________ - -------------------------------------------------------------------------------- EX-99.2 68 a2031364zex-99_2.txt EXHIBIT 99.2 Exhibit 99.2 NOTICE OF GUARANTEED DELIVERY FOR MIDWEST GENERATION, LLC This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Midwest Generation, LLC (the "Company") made pursuant to the Prospectus, dated, 2001 (the "Prospectus"), if certificates for the outstanding $333,500,000 aggregate principal amount of 8.30% Series A Pass-Through Certificates and $813,500,000 aggregate principal amount of 8.56% Series B Pass-Through Certificates of the Company (the "Original Certificates") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the United States Trust Company of New York, as exchange agent (the "Exchange Agent") prior to 5:00 P.M., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by facsimile transmission, mail or hand delivery to the Exchange Agent as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Original Certificates pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof) must also be received by the Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration Date. Capitalized terms not defined herein are defined in the Prospectus. DELIVERY TO: United States Trust Company of New York, EXCHANGE AGENT BY REGISTERED OR CERTIFIED MAIL: BY HAND BEFORE 4:30 P.M.: United States Trust Company of New York United States Trust Company of New York P.O. Box 112 30 Broad Street Bowling Green Station B-Level New York, New York 10274 New York, NY 10004 Attention: Corporate Trust Services
BY HAND OR OVERNIGHT DELIVERY AFTER 4:30 P.M. ON THE EXPIRATION DATE: United States Trust Company of New York 30 Broad Street, 14th Floor New York, New York 10004 FOR INFORMATION CALL: (800) 548-6565 BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY): (212) 422-0183 Attention: Customer Service CONFIRM BY TELEPHONE: (800) 548-6565 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of Original Certificates set forth below pursuant to the guaranteed delivery procedure described in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Principal Amount of Original Certificates Tendered:* - -------------------------------- Certificate Nos. (if available): If Original Certificates will be delivered by book-entry transfer to The Depository Trust Company, provide account number. - --------------------------------- Total Principal Amount Represented by Original Certificate(s): $ Account Number - -------------------------------- ------------------------------------
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED. PLEASE SIGN HERE X --------------------------------------------------------- ----------------------------- --------------------------------------------------------- ----------------------------- Signature(s) of Owner(s) Date or Authorized Signatory
Area Code and Telephone Number: ____________________________________________ Must be signed by the holder(s) of Original Certificates as their name(s) appear(s) on the Original Certificates or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): _______________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ Capacity: ______________________________________________________________________ Address(es): ___________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ - ------------------------ * Must be in denominations of principal amount of $1,000 and any integral multiple thereof. GUARANTEE (Not to be used for signature guarantee) The undersigned, a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program, hereby guarantees that the certificates representing the principal amount of Original Certificates tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Original Certificates into the Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus, together with any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than three New York Stock Exchange trading days after the Expiration Date. ____________________________________ ____________________________________ Name of Firm Authorized Signature ____________________________________ ____________________________________ Address Title ____________________________________ Name: ____________________________ Zip Code (Please Type or Print) Area Code and Tel. No. ______________ Dated: ____________________________
NOTE: DO NOT SEND THE ORIGINAL CERTIFICATES WITH THIS FORM. ORIGINAL CERTIFICATES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. EX-99.3 69 a2031364zex-99_3.txt EXHIBIT 99.3 EXHIBIT 99.3 MIDWEST GENERATION, LLC OFFER FOR ALL OUTSTANDING $333,500,000 8.30% SERIES A PASS-THROUGH CERTIFICATES AND $813,500,000 8.56% SERIES B PASS-THROUGH CERTIFICATES IN EXCHANGE FOR IDENTICAL PRINCIPAL AMOUNTS OF 8.30% SERIES A PASS-THROUGH CERTIFICATES AND 8.56% SERIES B PASS-THROUGH CERTIFICATES WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED TO OUR CLIENTS: Enclosed for your consideration is a Prospectus, dated , 2001 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of Midwest Generation, LLC (the "Company") to exchange up to $333,500,000 aggregate principal amount of new 8.30% Series A Pass-Through Certificates and up to $813,500,000 aggregate principal amount of new 8.56% Series B Pass-Through Certificates, which have been registered under the Securities Act of 1933, as amended (the "Exchange Certificates"), for an equal principal amount of its outstanding 8.30% Series A Pass-Through Certificates and 8.56% Series B Pass-Through Certificates (the "Original Certificates"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated August 17, 2000, by and among Edison Mission Energy, the Company and Credit Suisse First Boston Corporation and Lehman Brothers Inc., as representatives of the initial purchasers referred to therein. This material is being forwarded to you as the beneficial owner of the Original Certificates held by us for your account but not registered in your name. A TENDER OF SUCH ORIGINAL CERTIFICATES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Original Certificates held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Original Certificates on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 P.M., New York City time, on , 2001, unless extended by the Company. Any Original Certificates tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Original Certificates. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer--Conditions to the Exchange Offer." 3. Any transfer taxes incident to the transfer of Original Certificates from the holder to the Company will be paid by the Company, except as otherwise provided in the Instructions in the Letter of Transmittal. 4. The Exchange Offer expires at 5:00 P.M., New York City time, on , 2001, unless extended by the Company. If you wish to have us tender your Original Certificates, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER ORIGINAL CERTIFICATES. INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by Midwest Generation, LLC with respect to its Original Certificates. This will instruct you to tender the Original Certificates held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. The undersigned expressly agrees to be bound by the enclosed Letter of Transmittal and that such Letter of Transmittal may be enforced against the undersigned. Please tender the Original Certificates held by you for my account as indicated below: 8.30% Series A Pass-Through Certificates $________ (Aggregate Principal Amount of Original Certificates) 8.56% Series B Pass-Through Certificates $________ (Aggregate Principal Amount of Original Certificates) / / Please do not tender any Original Certificates held by you for my account. Dated: ___________, 2001 Signature(s): __________________________________________________________________ Print Name(s) here: ____________________________________________________________ (Print Address(es)): ___________________________________________________________ (Area Code and Telephone Number(s)): ___________________________________________ (Tax Identification or Social Security Number(s)): _____________________________ None of the Original Certificates held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Original Certificates held by us for your account. 2 EX-99.4 70 a2031364zex-99_4.txt EXHIBIT 99.4 EXHIBIT 99.4 MIDWEST GENERATION, LLC OFFER FOR ALL OUTSTANDING $333,500,000 8.30% SERIES A PASS-THROUGH CERTIFICATES AND $813,500,000 8.56% SERIES B PASS-THROUGH CERTIFICATES IN EXCHANGE FOR IDENTICAL PRINCIPAL AMOUNTS OF 8.30% SERIES A PASS-THROUGH CERTIFICATES AND 8.56% SERIES B PASS-THROUGH CERTIFICATES WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED To: BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES:
Midwest Generation, LLC (the "Company") is offering, upon and subject to the terms and conditions set forth in the Prospectus, dated , 2001 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer") up to $333,500,000 aggregate principal amount of new 8.30% Series A Pass-Through Certificates and up to $813,500,000 aggregate principal amount of new 8.56% Series B Pass-Through Certificates, which have been registered under the Securities Act of 1933, as amended (the "Exchange Certificates"), for an equal principal amount of its outstanding 8.30% Series A Pass-Through Certificates and 8.56% Series B Pass-Through Certificates (the "Original Certificates"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated August 17, 2000, by and among Edison Mission Energy, the Company and Credit Suisse First Boston Corporation and Lehman Brothers Inc., as representatives of the initial purchasers referred to therein. We are requesting that you contact your clients for whom you hold Original Certificates regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Original Certificates registered in your name or in the name of your nominee, or who hold Original Certificates registered in their own names, we are enclosing the following documents: 1. Prospectus dated , 2001; 2. The Letter of Transmittal for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Original Certificates are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose account you hold Original Certificates registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. Return envelopes addressed to United States Trust Company of New York, the Exchange Agent for the Exchange Offer. YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2001, UNLESS EXTENDED BY THE COMPANY (THE "EXPIRATION DATE"). ORIGINAL CERTIFICATES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and Original Certificates should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If a registered holder of Original Certificates desires to tender, but such Original Certificates are not immediately available, or time will not permit such holder's Original Certificates or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Original Certificates held by them as nominee or in a fiduciary capacity. The Company will pay or cause to be paid all stock transfer taxes applicable to the exchange of Original Certificates pursuant to the Exchange Offer, except as set forth in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to the United States Trust Company of New York, the Exchange Agent for the Exchange Offer, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, MIDWEST GENERATION, LLC NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures 2 -----END PRIVACY-ENHANCED MESSAGE-----